Day trading: 82% lose money, and the only reliable business is the course

The people who really make money from day trading sell the course

Can you make a living from day trading? The short answer: yes, but almost never from intraday trades. The long answer starts with a number that changes everything: 82% of very short-term traders end up losing money, according to the figures available when this question was first examined. 77% according to the other major reference. Some people do win, of course. The irony is that, judging by the numbers, the consistent winners sell the course rather than opening and closing positions before lunch.

The data against the myth: between 77% and 82% lose

The available literature was damning. A study by the North American Securities Administrators, cited by Forbes, put the rate of day traders losing money at 77%; Bloomberg BusinessWeek raised the figure to 82%. Even sharper was the analysis of 66,400 Wall Street accounts carried out by the universities of Taipei and California: its conclusion, simplified, is that the more you trade, the less you earn. And the share of day traders with solid gains sustained over years, not just a lucky streak, was estimated at below 5%.

It is not hard to see why. Every trade pays a commission, short-term noise dominates over signal, and the learning curve is paid for with real capital. Those who try, pay; those who persist, pay more.

Who really wins: brokers, algorithms and a few serious trades

The list of real winners is short and very different from the day-trader-in-a-tracksuit fantasy. There are the brokers, who charge on every execution. There are the high-frequency funds, which according to the data at the time executed close to 80% of market orders. And there are the firms with an ETF arbitrage business, such as Jane Street, able to exploit differences between the value of the basket of shares and the ETF itself, with a structural advantage no individual can replicate from home.

Among the retail traders who did manage to make a living from it, the cases that circulated looked nothing like a quick course: one operator with positions of 60,000-70,000 euros on the IBEX in 2007 scraped 80-100 euros a day, about 1,000 euros net a month, and described the paperwork with the Spanish tax authority as a disproportionate mess. Another, seasoned at a hedge fund, exploited inefficiencies in electricity futures by buying weather data to estimate the daily auction. Skilled professional work, not a miracle trick.

The business is not on the screen: it is in the course

There is an uncomfortable consensus among those who have been through it: the easy money in day trading is not made by trading, but by teaching others to trade. Courses, signals and conferences are the most reliable source of recurring income for many "traders". The joke doing the rounds was brutal: "I know a guy who made a million from day trading; he started with two." A way of saying that, with enough capital, intraday returns do not justify the time or the risk.

In the long run, the alternative needs no defending: index investing and letting compound interest do the work remains, for 95% of people, more profitable and far less painful. Those who insist on hunting one-minute inefficiencies are competing against machines with access to data that costs thousands of euros a month. Some people do win. If you have two million, maybe you can afford to try.