Fact Check: What Percentage of Day Traders Actually Make Money?
- Sanzhi Kobzhan
- Jul 24
- 9 min read
Updated: 4 days ago
Table of contents:
Myth: “Most day traders can beat the market and even make a living trading.” On forums and social media, countless retail traders boast about short-term gains, implying that with enough skill or the right strategy, anyone can day-trade profitably. The allure is clear: who wouldn’t want to quit the day job and get rich trading stocks from home?
Reality: The hard truth, supported by extensive research, is that the vast majority of active day traders lose money. Studies have found that 70%–90% of day traders end up unprofitable, and only a tiny fraction (often <1%) achieve sustained success. In other words, nearly all who attempt frequent short-term trading fail to beat the market in the long run. This data-driven analysis will bust the “day trading for a living” myth by examining long-term outcomes for active traders versus simple buy-and-hold investing. We’ll see whether frequent trading is a path to riches or ruin – and whether the odds of success justify the extra risk and effort of day trading.
The Day-Trading Dream vs. Reality
It’s easy to see why the day-trading myth is popular. During hot markets, some traders post eye-popping returns, fueling the idea that anyone can easily profit from rapid trades. For example, amid the 2020 market rebound, a Goldman Sachs basket of stocks popular with retail traders soared 78% from the March lows – far outpacing the S&P 500’s 51% gain in that span. Social media feeds filled with screenshots of huge daily profits, making day trading look like a sure ticket to wealth.
However, these short-term streaks can be misleading. Luck in a few trades or a brief bull run is very different from consistent success. As one researcher put it, “You can get lucky and perform well enough in a few days, but over time it becomes increasingly difficult… Most of the traders, they lost money”. In fact, when you zoom out and study large samples of traders over longer periods, a very sobering reality emerges. Far from beating the market, the average day trader underperforms – often by a wide margin. Below is a look at what the data says about typical outcomes for day traders:
Reference list*
Key outcomes for day traders vs. a simple buy-and-hold index investment. As shown, the odds are overwhelmingly against day traders. Only a minuscule fraction (<1%) manage to profit consistently, whereas a passive investor in the S&P 500 would have enjoyed roughly 8–10% annual returns historically. The data suggests that trying to “beat the market” with rapid trades is far more likely to hurt your wealth than grow it.
Evidence from Academic Research
There is plenty of research debunking the idea that most day traders can succeed. Across different countries and time periods, studies consistently show poor outcomes for active traders:
Brazilian Study (2013–2015): In a detailed study of 1,551 Brazilian day traders, 97% of them lost money over a year of active trading. Only 1.1% of those traders earned a profit higher than a minimum wage salary, and a mere 0.5% earned more than a bank teller’s salary. In other words, 99.5% of day traders in the study couldn’t make a living wage by trading. The authors concluded bluntly that “it is virtually impossible for individuals to day trade for a living”.
Global and U.S. Data: Other studies echo the same theme. Research by professors Brad Barber and Terrance Odean (analyzing thousands of brokerage accounts) found that the vast majority of day traders are unprofitable. In the U.S., brokerage data and analyses suggest 70%–90% of active traders lose money, after factoring in fees and mistakes, while only a tiny sliver consistently profit. Even above-average professional stock pickers are lucky to be right on 60% of their trades, so the typical retail trader with no special edge faces daunting odds.
Taiwan Study: An extensive study of day trading in Taiwan showed similar results – most individual traders underperformed, and the aggregate profits of frequent traders were negative after costs. Many traders continued to trade despite losses, often attributing wins to skill and losses to bad luck. The pattern revealed that only a very small group had any real skill, while the rest lost out to market professionals or trading costs.
Across the board, these studies dismantle the myth of easy day-trading profits. Far from a ticket to quick riches, day trading resembles a rigged game where only a few outliers (or those selling courses on day trading) truly make money. The average trader would likely be better off simply investing in a broad index fund and holding it.
Why Do Most Day Traders Fail?
If day trading is so difficult, why do so many people lose money at it? Researchers and experienced traders point to several key factors:
Higher Risk & Volatility: By definition, day trading means frequent, fast trades in highly volatile stocks or futures. One wrong move can wipe out dozens of small gains. It’s nearly impossible to predict short-term market movements consistently – even one or two big losses can erase weeks of profits. In fact, one analysis found that losing traders (who are on the wrong side of trades) account for 72–80% of all day-trade volume, suggesting that most trades made are actually loss-making moves.
Trading Costs & Capital Requirements: Active trading incurs costs – commissions (or spreads), taxes on short-term gains, and sometimes margin interest. These expenses eat into the already slim profits. U.S. regulations also require a $25,000 minimum account balance for “pattern day traders”. Many small traders either can’t meet this or take on debt (margin loans) to trade – amplifying their risk. It’s a high-cost, high-barrier activity, whereas long-term investing in index funds is cheap or free.
Lack of Skill or Edge: In markets dominated by institutional players, algorithms, and professional traders, a lone retail day trader often has no information edge. They’re competing against seasoned pros and lightning-fast computers. Without years of training, data analysis tools, or unique insight, it’s extremely hard to consistently outsmart the market day in and day out. Luck may favor anyone on a given day, but over hundreds of trades, skill (or lack thereof) shows. As one portfolio manager noted about newbie traders hitting 20%, 30%, 40% weekly gains: “more and more people try that…and it becomes unsuccessful and they end up losing a lot of money” when the luck runs out.
Psychological Pitfalls: Perhaps the biggest reason is human psychology. Day trading often triggers emotions of greed and fear on a daily basis. Many beginners lack the discipline and mental control to stick to a strategy under pressure. They may chase hot tips, double down on losses, or bail out of winning positions too early. According to one veteran trader, “Psychology to me is about 80% of winning in the stock market”. The influence of hope, fear, and overconfidence leads to mistakes. New traders also suffer from “random reinforcement” – occasional lucky wins convince them they’re skilled, so they ignore the larger string of losses. Without mastery of trading psychology, many spiral into bad habits. It’s no surprise that roughly 85% of day traders quit within their first three years of trading due to consistent losses and burnout.
In short, day trading requires expert-level skill, ironclad discipline, sufficient capital, and even a dose of luck – yet even when those are present, market competition and randomness can thwart success. It’s a perfect storm of high difficulty, which explains why only a microscopic few thrive while most fail.
Day Trading vs. Long-Term Investing: A Reality Check
Perhaps the most compelling evidence against the “anyone can beat the market” claim is to compare day trading outcomes with a simple investing approach. Imagine two individuals: one tries to day-trade full-time, and the other just buys an S&P 500 index fund and holds it for years. Who is more likely to come out ahead?
History strongly favors the long-term investor. The U.S. stock market (S&P 500) has delivered roughly ~10% average annual returns for decades. That includes all the ups and downs, recessions and rallies – over the long haul, the market’s trend has been steadily upward. In fact, since 1950, the S&P 500 has finished up in about 75% of all calendar years. Long-term investors who simply stayed in the market have been rewarded with substantial gains (a ~$100 investment in 1957 grew to ~$82,000 by 2025).
Now contrast this with the typical day trader’s results. As we’ve seen, the average active trader ends up with negative returns after enough trades. Instead of enjoying the market’s general growth, frequent traders rack up transaction costs and often mistime their buys and sells. It’s telling that in one study of Brazilian traders, 99% would have been better off taking a normal 9-to-5 job – their trading profits didn’t even match a modest salary. Similarly, U.S. researchers found that almost no day traders reliably beat the simple strategy of buying and holding a diversified index.
In essence, long-term investing lets the market’s growth work for you, whereas day trading is like swimming against a riptide. Unless you’re extraordinarily skilled (and lucky), the broad market’s performance will exceed yours. Legendary investor Warren Buffett has long advocated that most people will do best by using low-cost index funds rather than trying to trade actively – and the statistics strongly back this up.
Using Data and Tools to Invest Smarter
Debunking the day-trader myth isn’t meant to discourage all trading — rather, it’s a call for realism and prudent strategy. If you do choose to trade actively, go in with eyes open: the odds are against you, so education and good tools are vital. Even better, many investors can avoid the day-trading trap by focusing on long-term, data-driven approaches.
For those looking to navigate the markets more intelligently (whether trading or investing), leveraging the right research tools can help tilt the odds slightly more in your favor. For example, the Stocks 2 Buy iOS app is designed to provide clear trading insights and take some guesswork out of stock picking. This app offers short- and mid-term stock recommendations based on key indicators and market patterns. It analyzes factors like price momentum, Japanese candlestick patterns, and even fundamental metrics (such as earnings surprises, analyst ratings, and sentiment) to suggest when a stock might be a good buy or sell. Essentially, Stocks 2 Buy acts as a smart scanner for opportunities – helping identify undervalued stocks and optimal entry/exit points using data-driven signals. It even provides detailed stock analytics (like growth potential vs. target price, recent performance, and quality scores) so that traders and investors can make informed decisions rather than purely speculative bets.
Tip: Whether or not you use an app or screener, always ground your trading decisions in research and evidence. Blindly following hype or “gut feeling” is what gets many day traders in trouble. Tools like Stocks 2 Buy can assist by highlighting rational trade ideas and market trends – but they work best when used as part of a disciplined strategy.
The Long Shots of Day Trading
The notion that “most day traders can beat the market” is, in a word, a myth. While it’s certainly possible to make a living through active trading, the probabilities are extremely low. Roughly 1 out of 100 day traders might achieve consistent success, and an even smaller fraction might earn the kind of life-changing money touted on Reddit or Discord. For the other 99%, frequent trading tends to be a losing proposition, often resulting in financial losses, high stress, and wasted time.
Long-term investors can take solace in the fact that you don’t need to day-trade to build wealth. The data overwhelmingly supports sticking with time-tested approaches: diversify, invest in quality assets or index funds, and hold for the long run. The stock market has historically rewarded patience – whereas it has punished the overconfidence and impatience of day traders.
In investing, as in many fields, slow and steady often wins the race. So the next time someone on a forum brags about turning $5,000 into $50,000 in a month by day trading, remember the bigger picture. Fact check the hype with real data: chances are, that lucky streak will fade, and the long-term winners will be those who respected the odds. By exposing the long-shot odds of consistently timing the market, we can put to rest the false promise that day trading is a reliable path to riches. The bottom line: if you’re considering active trading, be aware that the game is much harder than it looks – and if you’re looking for proven ways to grow your money, you’re likely better off investing, not gambling, in the market.
References:
Barber, B. et al. (2017). “Do Day Traders Rationally Learn About Their Ability?” – Haas School of Business, UC Berkeley (Taiwan market study; vast majority of day traders unprofitable)
Chague, F., De-Losso, R., Giovannetti, B. (2019). “Day Trading for a Living?” – Sao Paulo School of Economics (Brazil study: 97% lost money, 0.5% earned above bank teller).
Bloomberg News (2020). “Day Traders in Brazil Study Would’ve Done Better With 9-to-5 Job.” Investing.com summary (highlights the difficulty of profiting by day trading).
Ramsey Solutions (2022). “What Is Day Trading?” (cites studies: >97% lose money; <1% profitable; most quit within 2 years).
Krzeczowski, O. (2023). “Why The Majority Of Day Traders Fail.” OTM Magazine (outlines reasons 85% quit: lack of education, psychological pitfalls).
Investopedia (2025). “S&P 500 Average Historical Returns” (notes ~10% average annual return since 1950s for broad U.S. market).
Stocks 2 Buy – iOS App Store Description (2025). (Tool for trade ideas: short/mid-term recommendations, candlestick pattern signals, fundamental analysis features).
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