Is Day Trading Profitable?
This post looks at the available data, statistics, and financial literature on the feasibility of profitable day trading, and the results are awful. The overwhelming majority of day traders lose money, particularly after accounting for fees and other trading costs. Very few individuals are able to consistently profit over time, and those that do appear to be extremely experienced and sophisticated—not beginners.
There is also a remarkably consistent finding across the literature: for ordinary individual investors, more trading generally does not lead to better results. In several large studies, investors who trade more frequently earn lower net returns, and the probability that a new day trader finishes profitable actually falls as the trader persists for more days.
Key Takeaways: Success Rates in Day Trading
- Only a very small percentage of day traders are able to consistently earn positive abnormal returns after trading costs.
- In a study of roughly 450,000 Taiwanese day traders per year, fewer than 1% were able to predictably and reliably earn positive abnormal returns net of fees.
- Among 66,465 U.S. brokerage households, the investors who traded the most earned substantially lower net returns than investors who traded the least.
- Among 19,646 new Brazilian day traders, the percentage finishing with a positive net profit fell steadily from 29.8% for people who traded for only one day to just 3.0% for those who persisted for more than 300 days.
- Of the Brazilian traders who persisted for more than 300 days, 97% lost money, and the researchers found no evidence that continued day trading improved performance.
- A small group of highly skilled traders does appear to exist. This is important: profitable day trading is not literally impossible. The problem is that the consistently successful group is extraordinarily small.
The data is very clear that day trading is a very poor proposition for the typical individual investor. It is extraordinarily difficult to outperform a diversified, low-cost index fund through repeated short-term trading, and many day traders fail to earn positive returns at all. The evidence is particularly damaging to the common claim that unsuccessful traders simply need more practice: repeated trading does not reliably turn losing traders into profitable ones.
Below are individual academic papers that have studied day trading and frequent individual trading, along with their summarized findings.
Trading More Does Not Mean Earning More
Before looking at the individual studies, two datasets are particularly useful because they directly address the relationship between how much someone trades and how well that person performs.
U.S. Investors: Portfolio Turnover vs. Performance
Barber and Odean studied 66,465 U.S. brokerage households and divided them into five groups based on portfolio turnover. This was not specifically a study of day traders; it was a broader study of individual investors. But the result is highly relevant to day trading: as trading activity increased, net performance steadily deteriorated.
| Turnover Group | Mean Monthly Turnover | Net Monthly Return | Fama-French Alpha / Month |
|---|---|---|---|
| 1 — Lowest | 0.19% | 1.470% | -0.061% |
| 2 | 1.24% | 1.411% | -0.130% |
| 3 | 2.89% | 1.361% | -0.269% |
| 4 | 5.98% | 1.267% | -0.464% |
| 5 — Highest | 21.49% | 1.009% | -0.864% |
Source: Barber & Odean (2000), Table V. Fama-French alpha is risk-adjusted monthly performance; a more negative number indicates worse performance.
The distinction between gross and net performance is important. The most-active investors were not necessarily finding dramatically worse stocks before costs; rather, the amount of trading they did created a large performance drag. The highest-turnover households ultimately earned an annualized net return of only 11.4%, compared with 18.5% for the lowest-turnover households and 17.9% for the market.
New Day Traders: Persistence vs. Probability of Profit
The Brazilian research is even more direct. Researchers followed 19,646 individuals who began day trading mini-Ibovespa futures and calculated the total net profit for each trader. They then grouped the traders according to how many days each person continued day trading:
| Days Spent Day Trading | Number of Traders | Finished With Positive Net Profit |
|---|---|---|
| 1 day | 1,111 | 29.8% |
| 2–50 days | 9,978 | 15.5% |
| 51–100 days | 3,100 | 8.9% |
| 101–200 days | 2,738 | 6.8% |
| 201–300 days | 1,168 | 5.4% |
| More than 300 days | 1,551 | 3.0% |
Source: Chague, De-Losso & Giovannetti (2020). Profit is measured net of exchange and estimated brokerage fees.
The relationship is monotonic: every group that traded for longer had a lower percentage of profitable traders than the group before it. This does not prove that each additional trade mechanically causes losses—traders choose how long to continue, and the groups are not randomly assigned—but it provides powerful evidence against the idea that simply continuing to trade reliably creates skill.
The Studies
Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors
by , and published in ,The paper examines the performance of individual investors in the stock market using 66,465 household brokerage records from January 1991 through December 1996. It is important to note that these investors were not all day traders. Instead, the study provides broader evidence about what happens to individual-investor returns as portfolio turnover increases.
The study concludes that individual investors would generally have performed better with a more passive investment strategy. Most importantly for this page, the investors who traded the most realized the lowest net returns.
- The average household turned over approximately 75% of its stock portfolio annually.
- The highest-turnover households had annual turnover above 250%.
- Net monthly returns declined steadily from the lowest-turnover quintile to the highest-turnover quintile.
- After accounting for risk factors, the performance gap became even more pronounced.
- The highest-turnover households earned an annualized net return of 11.4%, compared with 18.5% for the lowest-turnover households and 17.9% for the market.
The paper summarizes its main finding bluntly: those who trade the most are hurt the most. The authors argue that overconfidence provides one explanation: investors may overestimate the quality of their information and consequently trade more than is justified by their actual investment advantage.
The Cross-Section of Speculator Skill: Evidence From Day Trading
by , , , and published in ,This paper seeks to understand the differentiating factors between successful and unsuccessful day traders in Taiwan. The authors received comprehensive trading data from the Taiwan Stock Exchange from 1992 through 2006. They defined day trading as the purchase and sale of the same security, by the same individual, on the same day, which accounts for approximately 17% of the overall volume on the Taiwan Stock Exchange. On average there were roughly 450,000 individual day traders during each year. The key findings were:
- Only about 20% of the heavier day traders earned positive abnormal returns net of fees in an average year.
- Only about 4,000 individuals—less than 1% of the day-trader population—were able to predictably and reliably earn positive abnormal returns net of fees in the following year.
- The top 500 traders were remarkably consistent and generated outsized profits, earning net +37.9 basis points per day in the following year.
- Previously bottom-ranked traders went on to earn net -28.9 basis points per day.
- Trader performance was statistically persistent. The profitable traders were not simply getting lucky, and unsuccessful traders also tended to remain unsuccessful.
- Profitable day traders appear to possess genuine skill, superior information, or a superior ability to process public information quickly.
This study provides an important qualification: day trading is not literally impossible to do profitably. A tiny group of investors appears to possess genuine and persistent skill. However, that group accounts for fewer than 1% of all day traders. The vast majority of day traders lose money, while the very small group that consistently wins appears fundamentally different from the ordinary novice trader.
Interestingly, among this tiny group of demonstrated high-skill traders, highly active traders can perform better than occasional traders. This is not inconsistent with the broader finding that ordinary investors generally hurt themselves by trading more. Trading activity does not create skill; instead, a very small number of already-skilled traders appear to rationally trade more because they possess an actual advantage.
Learning, Fast or Slow
by , , , , and published in ,This paper is by the same research group, studying the same Taiwanese day-trading market, this time trying to understand why losing traders continue to participate and whether experience eventually allows them to learn their way into profitability.
- Around 1% of the adult Taiwanese population day traded in an average month.
- The average day trader traded on 43 days of the year.
- Aggregate day-trader performance was negative.
- Previously profitable traders with at least 50 days of experience had a 96.4% probability of day trading again in the following 12 months. Previously unprofitable traders with similar experience had a 95.3% probability of doing so.
- 65% of day traders and 74% of day-trading volume came from experienced traders with a history of losses.
- 97% of day traders were expected, based on their past experience and performance, to lose money in future day trading.
- Only the profitable and most experienced traders predictably earned future profits net of trading costs. They represented less than 3% of day traders on an average day and less than 10% of day-trading volume.
The key lesson is that losing traders do not reliably learn their way into profitability. Unprofitable traders are somewhat more likely to quit than profitable traders, but the difference is surprisingly small. Large numbers of losing traders continue for long periods even after accumulating evidence that their strategy is not working.
The authors argue that this persistence is more consistent with overconfidence, biased learning, or non-financial motives such as entertainment and gambling than with a rational process of paying early losses in order to acquire profitable trading skill.
Day Trading for a Living?
by , , and published on ,This study is an analysis of all new day traders in Brazil's mini-Ibovespa futures market who began between 2013 and 2015, using data supplied by the Brazilian securities regulator. Futures are particularly compelling for day traders in the U.S. as well because they are highly liquid and are not subject to FINRA's pattern-day-trader margin rule that applies to securities traded in margin accounts.
The distinction here of only using new day traders is interesting, since it reduces the influence of long-established professionals. Rather, this study is probably a more realistic view of what an 'everyday' person can expect if they quit their day job and start day trading. Highlights and findings from the study:
- The study covers 19,646 individual investors who began day trading in 2013, 2014, and 2015.
- The probability of finishing with positive net profit declines monotonically with the number of days spent day trading: 29.8% for one day, 15.5% for 2–50 days, 8.9% for 51–100 days, 6.8% for 101–200 days, 5.4% for 201–300 days, and 3.0% for more than 300 days.
- Of the 1,551 traders who persisted for more than 300 days, 97% lost money net of exchange and brokerage fees.
- Average daily net profit among these persistent traders was -$48.81; median daily net profit was -$23.21.
- Only 17 individuals (1.1%) earned more than the Brazilian minimum wage.
- Only eight individuals (0.5%) earned more than the starting salary of a Brazilian bank teller.
- The researchers found no evidence that continued day trading improved performance.
The evidence on learning is particularly important. For traders who persisted beyond 300 days, average daily net profit was -$47.34 over their first 250 trading days and -$51.65 thereafter. Their results did not improve with experience.
Overall, the paper concludes that it is extraordinarily difficult for an individual to day trade for a living, contrary to the message often promoted by trading courses and brokerage specialists.
This study examines day trading in South Korea's KOSPI 200 futures market. The data identifies different categories of investors and allows the researcher to compare the results of domestic individuals with more sophisticated market participants.
- Domestic individual day traders suffered substantial losses.
- Individual day traders who traded more frequently were more likely to suffer losses.
- Individual day traders who traded more heavily were also more likely to suffer losses.
- Institutional participants generally performed much better than individual traders.
This study is particularly useful because it independently reaches the same basic result seen elsewhere: for ordinary individual investors, increased trading intensity is associated with worse, not better, performance.
The Profitability of Day Traders
by , and published in ,This is a brief study done during the first internet bubble, when online brokerages gained popularity and day trading first became a viable option for regular people. The intent of the study was to determine the overall profitability of day trading in light of its contemporary rising popularity.
The researchers were able to study the trades of 324 day traders from February 1998 to October 1999. Note that this was a time period where the S&P 500 gained approximately 30%, and the Nasdaq was up more than 100%. Findings and highlights:
- Of the 324 traders for whom they had data, 36% made a profit over the period of the study, while 64% made a loss.
- Only 20% of the traders in the study made more than $5,000 over the time period.
- Total commissions for each round-trip trade were $30. Researchers determined that on average day trades were profitable gross, before fees, but negative net after fees.
- Researchers found a statistically significant correlation between day-trader performance and movement in the Nasdaq, indicating a preference for long positions in technology stocks.
The study is especially interesting because it occurred during an extraordinarily strong market for the securities day traders favored. Even under those conditions, nearly two-thirds of the sampled traders lost money.
Just How Much Do Individual Investors Lose by Trading?
by , , , and published in ,This study examines the complete trading history of investors in Taiwan from 1995 through 1999. It is broader than day trading alone, but it helps explain why frequent individual trading can be so costly.
- The aggregate portfolio of individual investors suffered an annual performance penalty of 3.8 percentage points from trading.
- The aggregate losses of individual investors were economically enormous, exceeding 2% of Taiwan's GDP.
- Virtually all individual-investor trading losses were attributable to aggressive orders.
- Institutional investors, by contrast, earned positive performance from trading.
This is an important reminder that commissions are not the only cost of active trading. Investors can also lose through bid-ask spreads, adverse execution, demanding liquidity from better-informed counterparties, and simply buying securities that subsequently perform worse than the securities they sell.
Retail FX Day Trading: Comments on SEC Release No. 34–64874
by published by ,In 2011 the SEC was seeking industry comment on whether and how it should further regulate firms and processes that allow retail investors to trade foreign exchange. Included in the comments was the linked report above by Philadelphia Financial Management of San Francisco, compiled from disclosures made by retail FX trading firms.
The report is especially damning of the retail FX trading firms of the era, although it is an industry comment letter rather than a peer-reviewed academic study. Much of the data is nevertheless useful context for understanding the costs and incentives surrounding highly active retail trading.
- Around 70% of retail FX traders lost money each quarter across the firms examined.
- The average retail FX trader had an account balance of less than $5,000 and traded roughly twice per day.
- Many new accounts were funded using credit cards.
- Retail FX trading costs were substantially higher than those faced by buy-and-hold investors at conventional brokerage firms.
- Institutional participants often received materially better execution than retail clients.
The COVID-19 and Day-Trade Pandemics in Brazil
by and published in ,This newer study revisits Brazilian day trading during and after the COVID-19 pandemic using all transactions conducted by individuals in futures markets on the Brazilian exchange. It is particularly useful because it shows that the poor results documented in older studies did not disappear with newer trading platforms, greater market access, or the explosion in retail participation during the pandemic.
- Day-trading participation surged during the pandemic, reaching roughly 100,000 active individuals per day at its peak.
- 968,512 different individuals day traded futures between March 2020 and the end of 2023.
- Individual traders accumulated R$9.9 billion in gross trading losses during that period.
- That equals an average gross loss of approximately R$10,200 per participant.
- These are gross trading losses, before brokerage costs, trading-platform costs, courses, and taxes—meaning actual economic losses were even larger.
The importance of this newer study is that it addresses a possible objection to much of the older literature. Day trading changed substantially during the 2010s and 2020s: commissions fell, technology improved, and retail market access became easier. Yet the aggregate outcome for nearly one million new and existing participants remained strongly negative.
Final Takeaway
Day trading is not literally impossible to do profitably. The research identifies a tiny group of traders with genuine, persistent skill. But that group is exceptionally rare, and the broader evidence is remarkably consistent: the overwhelming majority of individual day traders lose money, and simply trading more does not make the typical trader more successful.
For ordinary investors, the relationship often runs in the opposite direction. U.S. investors with higher portfolio turnover earn lower net returns. New Brazilian day traders become progressively less likely to finish profitable as the number of days they trade increases. Korean individual futures traders who trade more frequently and heavily are more likely to lose. Taiwanese data shows that the majority of day-trading volume comes from experienced traders who already have a history of losses.
The reason is straightforward. Every additional trade creates another opportunity to pay a spread or fee, suffer slippage, demand liquidity from a better-informed counterparty, or simply make the wrong decision. A day trader must possess enough genuine skill or informational advantage to overcome those repeated costs. The evidence suggests that very few individuals do.
Most investors would be better served by a diversified, low-cost, long-term investment strategy. The danger of day trading is not that nobody can succeed at it. The danger is that an enormous number of people believe they will be part of the tiny minority who can.