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I've heard multiple times that the vast majority of day traders, sometimes given as "over 99%", lose money. What's a realistic number? For specificity, use a one year time-frame.

For example, here are references to two such claims:

Do Individual Day Traders Make Money? Evidence from Taiwan

Moreover, in the typical six month period, more than eight out of ten day traders lose money

What It Takes to be A Successful Day Trader

Ninety-two percent of day traders trying to scalp loose money. Only eight percent are successful. Out of the eight percent, only two percent of the day trading public make money on a consistent basis. Why do 92 percent of day traders fail and what makes eight percent successful?

Oddthinking
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ike
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  • From my experience working in investment banking I know, that day traders are *obliged* to hedge on any risky operation. It's common misconception thinking that objective of professional day trading is to score big, while in fact it is to have (on average) slow and steady growth. – vartec Dec 16 '13 at 10:48
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    You might want to edit the question title: "99%"? ""most"? "more than 80%"? "the vast majority"? If you're sure you want to keep "99%" then perhaps you should find a reference to show that "99%" is a 'notable claim'. – ChrisW Dec 16 '13 at 10:57
  • @vartec: I think your experience points out another issue apart from the percentage. Is the claim about institutional or retail day-traders? On a per-day basis, or a lifetime basis? – Oddthinking Dec 16 '13 at 11:56
  • @Transmissionfrom Yes the second reference does say, "only two percent of the day trading public make money on a consistent basis", which is in the same ballpark as "99% lose". – ChrisW Dec 16 '13 at 14:03
  • @Transmissionfrom Let's use a time-frame of one year. – ike Dec 16 '13 at 17:58
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    @Transmissionfrom Can we assume that the claim is simply that, "most day traders lose on average and/or in the long run"? I supplied the references to demonstrate that that kind of advice ('most day traders lose money') is given (is notable). IMO any related studies would be welcome. – ChrisW Dec 16 '13 at 18:20
  • How about, all day traders that started at least a year ago, regardless of how long they lasted? – ike Dec 16 '13 at 18:33
  • We don't need absolute clarity. If there are two ways of looking at it, we can have two answers, or one answer that tackles both viewpoints. –  Dec 16 '13 at 19:28
  • Used to work in the trading industry (on the analysis/data supply side, not the actual trading side). Day traders need to react very quickly to minute changes in price in order to cash in. They also need (as a result) high volume or the transaction fees are higher than the profit on the transaction. Many SMALL daytraders (amateurs...) have neither access to near instant course data (what you read on the website of the financial papers is at least 15 minutes out of date, too long for day trading purposes) or the finances to buy millions of dollars of stock per transaction. – jwenting Dec 17 '13 at 07:14
  • (ctd). They're in the majority in numbers of people involved (many small investment clubs, mom and dad at night on the couch), not in trading volume. And the vast majority of them indeed lose a lot (relative to their total) of money. Whether that's 80%+ of all day traders I can't say (and I doubt anyone knows for sure), but could very well be. – jwenting Dec 17 '13 at 07:16
  • Losing money under which definition? On risk adjusted return basis? Relative to benchnmark? Absolute? In a year when all asset classes rise? In a year when all asset classes drop? In a year with high volatility? low? How do you count "day traders"? It's not like you have to register with FINRA to daytrade from one's PC as it was in vogue circa 2000 – user5341 Dec 28 '13 at 04:01

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