Is Day Trading Profitable? Here's What Statistics Say
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Othmane and Maxime, holders of dual master’s degrees and founders of NewTrading, discuss the realities of day trading in this insightful article. Despite the enticing stories of individuals making quick profits off a few trades during the Covid-19 pandemic, they caution that most of these anecdotes are merely stories. Research shows that the overwhelming majority of day traders lose money. Only 3% of day traders make a profit, and that number decreases to 1% when considering those who do so predictably. Many factors contribute to these significant losses, including lack of experience, biased trading, time commitment, cognitive biases, and emotional attachment to trading.
The research studied by the NewTrading team suggests that profitable and unprofitable traders continue to trade at nearly the same rate, indicating an emotional attachment to trading despite financial outcomes. Day trading requires a high level of confidence and patience, emotional control, a clear strategy, good risk management. The article warns that it is critical not to exceed one’s financial limits. New traders should consider using a paper trading simulator to test their strategy in real market conditions without risking real money. There’s also a cautionary note about disagreeing with the crowd and trading out of FOMO which can lead to losses.
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