What's the Day Trading Success Rate? The Thorough Answer | Invezz (2024)

What is the real success rate in day trading? Learn if day trading is the real alternative for you by reading this in-depth article where we go through statistics, data and personal trading experience.

Consideringhow to day trade, and wondering what the day trading success rate is? Here’s the thorough answer. Not general or contrived statistics, but rather the success (and failure) rates I witnessedwhile working at day trading firms from 2005 to 2010. I’ve also conversed with several other trading firm owners/managers on their success rates between 2005 and 2015.Numbers varied slightlybut were in line with the day trading successrates I discuss below. In total, about 2000 people who attempted day trading were looked at.

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Below Idiscuss:

• Of all the traders who passed the interview process for the firm and started training/trading, how many became profitable.
• Of those that become profitable, how many are consistently profitable (enough to make an income).
• Problems with my numbers, factors we need to consider, and some revisions which may be more accurate.
• How a mentor may increase (or not increase) the odds of success.
• Isthere a difference in the success rate of men and woman (OH YES!).
• Is time a factor? Of those who wereunprofitablein theirfirst full year, how many of those who kept at it (practicing for more than a year) ultimately became successful.
• Why I think these numbers are applicable to anyone who wants to start trading at home, with a mentor, or for a firm.

The actual failure/success rate isn’t really what matters. What you need to know is how to be part of the successful traders, and avoid being in the unsuccessful category. How to do this is intertwinedthroughout the article.

These stats are not perfect, and are based on my experience with traders. They are averages and cannot be used to ascertain whether aparticularindividual will be a successful trader. As individuals, we control which of these groups we fall into. We can choose to fall into the losing group and give up, or we can put in more work, research more, and practice more to put ourselves in the winner’s circle. We have choices, and those choices determine our success. The statistics just let us know how hard it will be.

Analyzing the Day Trading Success Rate: The Day Trading Revolving Door

While anyone can be successful, most people who enter the trading world don’t have the discipline and patience to practice a strategy (or set of strategies) until those strategies produce a consistent profit. While people are told they won’t be successful overnight, most new traders don’t actually believe that. They have an idea in their head that they’re smarter than everyone else and will make money quickly.Nope. You may make the “standard” 10% per year or so…but it’s pretty tough to make a living on a $30,000 account making 10% a year.We Day traders need more.

You may have heard90% or 95% of traders lose money, or some other seemingly highstatistic. From what I’ve personally seen, this isaccurate. While I traded for a day trading firm, about 10 peoplecame in every couple months for trader training, or about 60per year. For a five-year period that means about 300 people came to the trading firm and took (or at least started) the training program. Some traders I talked with think the actual number is higher; that is was closer to 400people.

Only 14 (women and men, including myself) moved on to become regular traders, producing consistent profits for at least several years. That’s about a 3.5% to 4.5% success rate. Approximately another 10 made money, but not enough to keep them trading. If success is defined as just being negligibly profitable (for at least a couple months) the success rate is about 6% to 8%. But who wants to trade to just break even?

Traders should also consider what’s the best day trading platforms. Also, consider that (stock market) day trading firms in Canada don’t necessarily require a deposit from traders. None of these traders put up their own money to trade. They were able to trade firm capital; more firm capital would be allocated to each trader based on performance. This is a much more favorable model than what most day traders have at home, trading their own money, which usually ranges from$2,000 to$30,000 (although if trading futures or forex, $10,000 can produce a good monthly income…but you will need more to day trade stocks). In other words, conditions were very favorable–oh, and because we had more capital, we traded bigger positions, providing for greatly reduced commissions compared to what a normal stock day trader would face.

Favorable indeed, and yet only 3.5% to 4.5% were successful.

Women, this stat doesn’t really apply to you since most of these day traders were male and this stat applies to ALL people who came trade. The day trading success rate for women, specifically, is discussedin a bit.

Day Trading Success Rate…only 4.5%? Things to Consider

We need to consider some things when looking at a 3.5% to 4.5% success rate. Day trading wasn’tsomething the firm wanted you to do part-time, so you had to show up and trade during market hours. Many day traders who only wanted to trade part-time may have takenthe training then left(these contribute to the large 95.5% failure rate)–some may have gone on to be successful elsewhere. We can’t know. Even one trader that left and went on to become successful at day trading elsewhere would increase the successpercentage. It’s likely some of those that came to the firm and left did go on to become successful day traders, so we need to assume that the actual success rate is slightly higher.

Also, I live in an affluent city, so trading for no pay until profitable likely didn’t sit well with somepeople. Some peoplelured away by other jobscouldhave been successful had they stayed. You need a “hunger” to day trade, and to be profitable. You have to really want to do it so you can stick it out through the long initial learning curve. Many people who came through the doors of the firm lacked that hunger.

The firmdidn’t provide a lot of strategy guidance. They left it up to the trader to decide how they would trade. Training was mostly order types, market basics, and software related. Therefore the training would be similar to what most people would getfrom a high-levelintroduction to the stock/forex market course.

Regardless of the reason, very few people who wanted to trade actually become successful.Whether they took other jobs, didn’t feel they got adequate training, or just didn’t make enough money isn’t really the point. They came to trade, but ultimately left with nothing in their pockets while people sitting next to them continued to make money. To me, that is the real statistic. Whether you’re lured away, your spouse convinces you not to do it, success doesn’t happen as quickly as you want it, you hit a string of bad luck…the excuse doesn’t matter;the cold hard number is that only about 4.5% of traders who start day tradingwill end up being able to make something of it.

If you put inlittletime and practice into your trading, your success rate is close to0%.

The4.5% stat is forpeople whogive it a valiant effort, put in time and practice, and start with areasonable amount of capital.

Day Trading Success Rate with a Mentor

With a mentor, the success rate will increase, but it still ultimatelydependents on the individual’s drive to become successful and to put in the work required. With a good mentor, I estimate the successful ratemaycreep up to 8% to 10%…but I don’t actually have enough data to say definitively.

8% to 10% may seem low for having someone mentor you, but think of it this way: that mentor has doubled your chances of success over going at it alone.

I am still leery about the (up to) 10% success rate with a mentor, though. While potential day traders didn’t get a lot of strategy guidance at the firms I was at, the new traders did have full access to sit and trade beside successful traders. Traders at the firm would help out new traders (mentoring them), but you can tell someone what to do yet you can’t force them to do it. Then again, being a good mentor is more than just being a successful trader. Some of my greatest trading lessons have come from non-traders; they were just good teachersand understood whatIneeded.

Arguably, you don’t need strategy guidance either. I have developed my own strategies, and often input from others has actually hindered that objective personal strategy development. A bit of guidance is fine, but since you must ultimately trade on your own anyway (someone else can’t trade for you), starting off with ado-it-yourself-trading-approachis a good thing.

That said, with a good mentor,the day trading success rate creeps up to a likely 9% (halfway between the 8% and 10% discussed above). Now some mentors are better than others. Some may offer absolutely no benefit, and you have the same 4.5% chance at success as everyone else. Other mentors may be very good, pushing your possible success rate up 25%. Also, if a mentor is highly selective about who they mentor, only taking on traders with specific personality traits and aptitudes, then the success rate goes up even more.

Not everyone can land a great mentor, so the averagesuccess rate (with a mentor) is still about 9%for those that give it some effort.

The mentor can’t help you if you don’t help yourself.

Day Trading Success Rate: Men Vs. Women

Women make much better traders than men. The top women who traded at the firm didn’t make as much money as the top male traders, but overall the women were consistent and had a 40% success rate.

Only 10 women came to trade (smaller sample size) while I was at the firm. Four were able to make aliving off the markets.The high success rate of women actually droveup the overall success rate discussed above.

If we just look at males, the successful rate drops to 3.4% (10 out of 290…because 290 of the 300 total traders were males), and a 40% success rate for women (4 out of 10).

That’s a huge difference. 3.4% success rate for men. 40% success rate for women, but because so few women came to trade, the overall success statistic remains low.

I verified these stats with multiple current or former trading firm managers. Their stats were very close to those mentioned above, creating a larger woman-trader sample size.

That said, since the sample size is still smaller–subject to greater variation–I will keep the 40%statistic, and say that with a solid mentor it’s quite likely about 4 out of 10 women who want to day trade, and give it a good shot, practice and work at it, could be successful at it.

In a male-dominated industry, the women who came to trade typically really wanted to do it, and were serious about it. Many of the men who try day trading are doing so with a “I will give it a shot…” attitude. Not a good start. Be serious and commit to the process–just as if you were starting any other business.

Womensimply don’t seem to have the mental blocks and ego barriers that most males do. Women are more readily able to learn from their mistakes. A man will repeat the same mistake over and over again, unable to admit to himself he is wrong because of his ego. Women also listen to those they consider experts. Men usually consider themselves experts at everything already, so while they may listen to what a real expert says, they typically don’tdo what is taught. These are general statements. There are of course women who have lots of internal blocks and barriers, and there are men who don’t.

Trading firms and brokerswould be well advised to actively recruit women traders. As an additional perk, of the males who arealready successful, the presence of ladies on the trading floor tends to increase their performance.

Day Trading Success Rate: Is Time a Factor?

Very few people who were unprofitable for several months continued to trade. For most of those that became successful, about6 to 7 months of approximate full-time hours (about 800 hours)seemed to be the magic number where they flipped the switch and began making money. If a trader continued to put in a lot of hours beyond 6 months, because they still weren’t successful, how did they ultimately fair?

Only 7 traders from the firm who were unsuccessful within the first year continued to trade beyond the 12 month mark. 1 of those 7 ultimately became consistently profitable. Since leaving the firm, I know of about 5 people who have traded a full year or more without seeing success. 3 of them have become successful.

Determination does improve odds. Putting in a year of hard work and self-reflection on your trading strategies pushing the success rate up to between 14% and 33% in my experience. Discussions with other firm managersreveal stats between 10% and 30%. The true statistic is probably somewhere in the middle, around 20%.

That may seem disappointing. A trader only has a 20% shot of being successful if they put in year or more of work. But, that is about 4x better odds than if you only try it for a few months. Also, as we will discuss below, how hard we work is abig determinant as to whether we make it into that 20%.

Unfortunately, time put in isn’t the same aspractice. Most of these traders simply continued to make the same mistakes over and over again, failing to learn from their mistakes. Following that model, they could have traded for 10 years and things wouldn’t improve. Some people do learn from their mistakes, it just may take them a year or more to figure it out.

If you don’t see initial success, keep at it for more than a year, and your success rate is equal to what you would expect working with a mentor.

The Odds of Day Trading Success: What it Takes

Want be in the 4.5% of the day trading success stories? Here’s a taste of what it takes.

You will definitely need to put in time and practice if you want to become successful. At least a few hours a day. As we will learn later though, it is up to you to practice the right way. You can tell someone what to do, as the firm did, but unless they are willing to do it no amount of practice will improve their skill.

I constantly see this on the golf course. Guys have played for thirty years–lots of practice on the course and on the range–yet are no better than the day they started (and they bitch about it).Practice doesn’t make perfect. Instead, perfect practice only leads to improvement. These guys aren’t putting in the right type of practice, and mostwant-to-be-day-traders aren’t either.

It is only later on–often a year or more–when trading becomes a truly part-time gig. You may only trade for 1 to 3 hours a day if day trading (because those are thebest day trading hours), or20minutes if swing trading(since you can leave once your orders are set), but when you start outthere is so much to learn and practice that putting in another couple hours of going over trades and refining methods is required. Or, if only putting 1 to 3 hours a day during the week, then you will probably need to put in some hours on the weekend as well.

As discussed above, many people (men) come to trading with an “I will give it a shot…” attitude. This will very likely lead you to lose whatever capital you have deposited in yourbrokerage account. The odds of day trading success are heavily against you. The lure of making money each day in only a couple hours gets people’s minds spinning with possibilities.They imagine stoppingeverything and just trading on a beach somewhere.

Well, sand, water, sun glare, and laptops don’t mix. Trading is a job. The difference is that you don’t get a paycheck unless you’re absolutely on the top of your game. Day trading isoftenboring, which surprises many people. Without the required stimulus from themarket, they create their own, making trades which are outside of what was practiced. Other days, an hour or two of trading can leave you mentally, and physically, exhausted. There is so much information to process in such a short amount of time…and you need to stay totally focused in such conditions as a mistake could cost you dearly.

Day trading is serious business, and the peoplewho do it for a livingdon’t mess around. Day trading is a negative sum game (due to commissions). Your profits have to come from someone else losing or giving up a profit. Successful traders have been doing this a long time, and have wiped out many small and new traders.

Practiced at taking money, the pro is coming after your orders if he/she thinks he came make a profit on it. Be prepared. Know how you will handle every single situation which may arise, and have a plan for it. Without this sort of preparation, you are a sitting duckand will join the approximately 96% of unsuccessful men, and about 60% of unsuccessful women day traders.

The type of planning required for day trading is what I call “trading beyond the hard right edge.” Thisconcept is outlined in this article:How to Day Trade the Forex Market In Hours per Day. While it uses examples from the forex market, the concepts apply to day trading stocks and futures as well.

Strategies are important, but so is learning how and when to implement them. For more on strategies and interpreting changing market conditions, you can visit our Forex Strategies course.

Day Trading Success Rate: Final Word

The overall figures indicate that if you are male, you have about a 3.5% chance of success, and with a solid mentor or putting in at least 1 year of (nearly) full-time effort that average could push up to 10 to 20%. Choices and work ethic determine whether we end up falling on the winning or losing side.

If you are serious about trading, andcommit six months to a year of really self-evaluating your performance and practicing, I believe your odds of success are high. The day trading success rate is low because most people simply don’t give themselves enough time to learn, or they just keep repeating the same mistakes forever and never improve.

In my experience and opinion, women have a higher chance of becoming successful traders than men. Based on personal experience and discussions with other trading firm managers,40% of women can likely become successful traders if they are serious, determined and willing to put in the time and practice.

Are these stats perfect? Absolutely not. They are averages and cannot be used to ascertain whether aparticularindividual will be a successful trader. In talking with other successful traders, most of them thought my numbers were high…because they know how hard it isto find consistency, and keep it. Yet there are successful traders who obviously have overcome the odds. They choose to succeed and do what it takes.

Stay disciplined, focused, and have patience on your journey andyour chance of success is much higher…just like in any field. That said, not everyone who practices really hard at basketball gets to play in the NBA. The nice thing about trading is that you decide how much you are comfortable with making. While there are guys making millions a year, if you can make a comfortable living doing what you love, and that is what matters. You can learn more in this article: Why Day Traders Make Big Returns, But Aren’t Millionaires.