Day trading involves buying and selling securities (stocks, currencies, commodities, cryptocurrencies etc.) for very short periods in order to profit from the fluctuations in prices. The day trading subculture is a die-hard one within the finance community as there are countless practitioners and trainers on the internet who would have you believe you can get rich right from trading in your bedroom.
So, is it true? Is it possible for a trader with a brokerage account working independently to make money from day trading? The answer is YES. Yes, you can. In the same way it is possible for me to beat Usain Bolt in a 100 meter sprint. Everything is possible a few times. Is it probable though? No.
As an independent trader you are hopelessly outmatched. Your hardware, software and internet speeds are a joke compared to the servers and algorithms being used by big investment banks. And where do you get the news for trading? The media? You do know by the time you’ve seen it it’s too late to place the trade? Right? Do you even have a Bloomberg terminal?
Or maybe you paid $1,999.99 for a technical analysis class that will teach you a fool-proof method to be profitable. Congratulations! The dude you just paid has made more money off you than he’s made from trading in his career. You doubt that? Well if he did have the ability to be consistently profitable through trading, why on earth would he waste time to make and edit videos and organize webinars to teach other people? And why not do it for free if he doesn’t need the money?
And that’s not all. Is your trading instructor making youtube videos with flashy cars and not showing any actual trading? Could be that she’s making money out of every single trade you make. Yes, brokerages offer commissions to sales agents who will lure people in.
I used to day trade from my bedroom. Specifically forex. Check out the picture below if you don’t believe me.
So am I bitter because I got a margin call? NO. Never happened. Thankfully even back then (3 or 4 years ago) I practised risk management and never got into trouble of losing more than my capital. Honestly, it was only $100 anyway because I refused the calls from my broker to put in more. It was fun times though. Brexit night and Trump’s election must be up there with the most volatile time in forex markets ever and I was glad to have witnessed it. So basically, I did it for fun and was only about 18% down (but technically up in cedi terms lol) when my broker closed down. One thing though, even as a fun activity, it is very addictive. Like very. That is one reason why I have not taken it up again even for the entertainment value.
Do not listen to me though. A recent study carried out in Brazil which caused waves on reddit & twitter suggested that it is “virtually impossible” to make money day trading. The abstract below is damning.
We show that it is virtually impossible for an individual to day trade for a living, contrary to what course providers claim. We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading.
I think the last sentence is really mind-blowing. Even if you make it through all the minefields, experience counts for nothing. After trading for 300 days, you are still as likely (or unlikely hahaha) to make money as you are on the day of your first trade.
I’m done. Do this for fun, not to try to make money.
Great analysis and the statistics at the brazililian futures market with TRADERS doing Brazilian futures. I could tell your broker was GhanaFx. But I must disagree that you cannot make money as a retail trader. Its absolutely the same when I say your website wouldn’t make it to Bloomberg level reporting (no offence meant pls). You can make money Trading. But the bigger you PP the better your numbers game will be as % risk stays the same! and that is absolutely contrary to what you are telling readers. I’ve been trading since 2016 just after my final year and I can call myself a proffessional trader. As I make money of Currency trading (only ) . and I must disagree even BIGGER on Your ASSESSMENT of Technical Analysis. ( your ASSESSMENT of you meant that technical analysis does not work is totally wrong! It’s ok if you weren’t able to figure trading out in your short time frame of learning and not seeking the best guidance there is( like I mentioned earlier with the example of your website). Efficient market hypothesis works. There are a lot Users of PURE TECHNICAL ANALYSIS IF you didn’t know. And I am one! . I’m so sorry for the guys who are selling the 1000 dollar courses. Of course some of them are GARBAGE! . it doesn’t mean you don’t make money if you are selling a course ??! Have you Readl Warren Buffets book ?? I mean WARREN BUFFET! And his Books Aren’t Free Either . Does that mean he’s not making money (haha) .
Great Website BTW! I was looking for the GSS CI 2018 returns ! When I stumbled across your page and I was planning to send a mail too. Lol. +233571722070 my number. And I really want you to see this when I click the send button. If it doesn’t I’m copying the text and doing the mail thing. Thanks for reading!
Thanks Muftau for reading and leaving a comment, I’m always happy to get feedback. To your points:
1. I did state clearly that it is possible to make money, but not probable. That is contrary to the message that is put out there by many retail trading advocates that anyone can make money with retail trading after learning a few tips & tricks. If there are studies that show people consistently making money after having learnt particular methods, I will be willing to change my mind. Can ceditalk beat Bloomberg? Yes, everything is possible. Should you bet money on that? No, that would be stupid. Get my point?
2. My arguments did not need my personal trading experience. I only put it out there to assure readers that I wasn’t just an outsider talking down on something I had never tried. Whether I made a loss or gain trading is irrelevant because individual cases do not matter when we have large scale studies to learn from.
3. If the efficient market hypothesis is real then that should make trading an even more pointless venture because the opportunity for arbitrage should be almost nonexistent.
4. Congrats if you’ve made money trading. However, that does not mean much because (kindly refer to point 2).
5. The technical analysis course is an example I gave to warn people of the large number of scams associated with retail trading. Warren Buffett did not make his wealth off of selling books or courses. Berkshire Hathaway stock is public for everyone to see. It is wrong to compare it with someone whose earnings are totally in the dark or only self-reported, who wants you to trust him/her enough to pay huge sums to replicate success you have zero evidence of.
6. Here’s a link to stock performance in 2018 if that is the information you are looking for.
Note that I encourage feedback such as yours and public engagement because I believe lots of people will find the information insightful. Cheers!