A study was recently published about the performance of new Brazil Day Traders. They looked at traders who just started trading on their first day, to those who have traded for up to two years.
Performance levels were noted based on the amount of days traded, and the concluded from the results that day trading to be “virtually impossible”.
Here is part of the data they tabulated:
Number of Days Trading: Percent Profitable:
1 day: 29.8%
2 – 50 days: 15.5%
51 – 100 days: 8.9%
101 – 200 days: 6.8%
201 – 300 days: 5.4%
Over 300 days: 3.0%
Of the persistent day traders who exceeded the 300 day mark:
1.1% earned profits exceeding Brazilian minimum wage (US $16/day)
0.5% earned profits exceeded starting salary of Bank Teller (US $54/day)
Highest earning person made US $310/day on average
From all their data they came to the conclusion that day trading is nearly impossible to learn, which contradicts the claims made by the brokerage and trading course providers.
I believe the main point the study failed to consider is day trading is not a “linear learned” skill, meaning gradual, incremental improvement over time. It requires a completely different way of thinking. One gains insights in “stair step” jumps rather than a gradual climb.
In addition, it can take several years of study and research before any true insights are achieved, so the study made wasn’t long enough to allow for an extended look over several years.
So yes, day trading can be concluded to be very hard to learn within a period of two years, but that doesn’t mean it remains that way over an extended time.
Here’s what they got right:
Brokerages, authors, and companies flood the market with ads claiming one can become wealthy through day trading in a relatively short period of time without much work involved. Pictures of tropical islands, exotic travel, and luxury cars are shown as being within ones reach with the “right” trading course or book. This study shows you what a SCAM those ads are. Day trading mastery is NOT a “get rich quick” endeavor and requires a massive amount of time and commitment.
Next, a key insight is the fact that trading success rates went DOWN over time rather than up, which is counter intuitive. How could it be that the more time one spends on trading, the worse the performance?
The answer is what I said earlier- trading success requires a different way of thinking. You have to essentially reprogram your mind to properly understand price action.
The data shows that a trader at their most “ignorant” level (one day experience) is much more likely to succeed than their more experienced counterparts over time. In the beginning one knows little and acts more by natural instinct to price action. Then “thinking” starts kicking in and one tries to “out analyze” the market and loses those initial natural instincts. The mind needs to be reprogrammed to allow those natural instinctive solutions to guide your way. The natural mind can’t do this which is why performance grows worse over time.
This is the main reason why mastering trading is so difficult, it requires a new way of thinking as opposed to just standard rote learning attempts over time.
Study Link: Link