Day trading is a popular form of investment that can be both rewarding and risky but think twice.
This article will provide an overview of the key day trading statistics, including the average return on investment, the success rate and the strategies for risk management in day trading.
General day trading statistics and facts
- Only 13% of day traders were consistently profitable over a six-month period, per a University of California study.
- According to a different survey, only 1% of day traders were able to consistently make money over a period of five years or more.
- Active traders underperform the market by 6.5% annually.
What are the success rates in day trading?
According to Analysts Day Trade Review, the exact proportion at which day traders lose money varies by country and study period, but in most cases, more than 80% lose money within the first year of trading.
According to My Trading Skills nearly 40% of day traders quit within one month. After three years, only 13% of day traders remain.
Another survey showed that traders who held positions for less than a day had a success rate of 47%, while those who held positions for more than a year had a success rate of 73%.
In a study by the brokerage firm Tradeciety, traders who used a breakout trading strategy had a success rate of 30%, while those who used a trend-following strategy had a success rate of 20%.
More facts about day trading
Only 1% of day traders are predicted to be profitable after costs.
It highlights the fact that the vast majority of day traders are likely to incur losses after costs, making it a risky endeavor. It is important to consider this statistic when considering day trading as an investment strategy.
The average individual day trader loses money for six months before giving up.
It takes a significant amount of time and dedication to become successful in the field, and that it is not a get-rich-quick scheme. It also serves as a warning to those who are considering day trading, that it is not a guaranteed path to success and that it requires a great deal of effort and patience.
97% of individual day traders consistently lose money.
This serves as a warning to potential traders that the odds are stacked against them and that they should approach day trading with caution. It also highlights the importance of having a sound trading strategy and understanding the markets before attempting to make a profit.
40% of day traders quit within a month, and 87% quit within 3 years.
Most day traders are unable to sustain their trading activity over the long term, with a high percentage quitting within a short period of time. This is an important statistic to consider when evaluating the potential of day trading as an investment strategy.
Day trading stocks has a success rate of about 1%.
Despite the potential for high returns, the chances of success are slim. As such, it is important for potential day traders to be aware of the risks and to approach the activity with caution.
Day traders who use margin for leverage suffer an average return of -4.53%.
Leveraging margin can amplify gains, but it can also amplify losses. The average return of -4.53% indicates that day traders who use margin for leverage are more likely to experience losses than gains.
Just one fact about long-term investing
P.S – Now you know the truth. Do not trade but invest. Wisely.
Sunday Coffee is a column where I share insights on stock investing and the philosophy of long-term investment, discuss intriguing thoughts and ideas that could benefit you.
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