Day Trading: Its for SUCKERS. Here’s the proof.

Yeah, I know this headline is going to piss you off. But it’s true — day trading Futures (and stocks) is for suckers. And I have proof.

We often hear through rumor and internet chatter that “90% of day traders fail.” But these have been just that — rumors. And innuendo, that courses through the veins of a ‘faultless’ internet.

But we also know that the internet is a great fountain of disillusionment, fantasy, misinformation, and “fake news.” The internet makes it hard to believe anything. Yet, we cannot live without it.

I have a lot of friends that are Futures brokers. And I don’t use the word “friend” lightly. In fact, a good deal of my review subjects come directly from the brokers themselves. And these conversations go something like this:

Emmett, you have got to write about that YouTube scammer selling his bullshit trading indicators and courses! My clients got burned real bad.

Or,

That scammer swindled an 88 year old grandma with a magic trading system. Do something!

Too often I tell the broker, “Fool, you knew it was a scam and you could have warned your clients months ago!”

It’s not easy for a broker to call out a trading educator as a fraud or a phony. You must understand, they rely upon each other. It is a symbiotic relationship. The broker, although he hates the scammers, he also relies upon them for the opening of new trading accounts. The grinding wheel always needs grease.

The honest brokers, that have been in the business for many years — they all know the truth. Yet they will never admit it. And the truth is very simple: the higher the frequency and shorter the duration of your trading, the higher the likelihood that you will lose everything.

Let me repeat, and as simply as possible. The more you trade, and the shorter your time frame, the less likely you will earn a profit. Doesn’t that sound so harsh? It hurts to read.

But many will say, “Where is the evidence!” And, “Lambo Boy and Warrior Boy are making millions from $500 dollar trading accounts.” Sorry folks, Lambo Boy and Warrior Boy are making millions from selling hyped up magical trading indicators and front running your trades. Let’s be clear, I am not accusing anyone of committing a crime. The real crime is the self-inflicted stupidity that consumers inflict upon themselves because they willingly swallow the BS.

Regardless, let’s look at the most comprehensive and current data that suggests that ‘day trading’ is a scam.

Brazilian Futures Traders

Many of my readers might be surprised to read that Brazil is really, really into Futures day trading. In fact, most readers might be even more surprised to read that the Brazilian Emini Futures contract is 300% more popular (in terms of daily trading volume) than the ultra-popular Emini SP500 Futures contracts. Yet, the population of Brazil is approximately 38% of the US population. (320 million vs 120 million).

Just like in the United States, and other English speaking countries, the Brazilian Futures industry is filled with nearly identical quacks and whack-a-doodles peddling all manner of indicator insanity, amazing trading systems, and social media day trading hucksters. In fact, many of the people I write about also have websites in Brazil, displaying both the Portuguese and Spanish language versions.

Same bullshit — different language.

People really are the same. It doesn’t matter the color of skin, the language used, or the minor differences in weight, height or appearance. We are all the same. Our motivations are especially similar. We all need resources to survive. And we all labor the same, eat the same proteins, study the same math books, and dream the same dreams. We all want an opportunity.

Why am I making such a pointed effort to draw comparisons of Americans to Brazilians? Because some readers might be biased into believing that “American exceptionalism” or anything American must be better than anything Brazilian. But this is false. The English speakers are no different than the Spanish and Portuguese speakers — we are the same in every imaginable way.

In Brazil, day trading is a national pastime. Even more popular than in the United States. But until recently, nobody in Brazil had performed a credible study that analyzed a large pool of investor data that specifically analyzed Futures day traders.

Day Trading For A Living?

On August 19, 2019, the Sao Paulo School of Economics published a highly controversial study about Futures day traders in Brazil. This published study made front-page news across the country. Literally, nearly everyone in Brazilian society was talking about the study. Day trading in Brazil is extremely popular, and extremely controversial. Its like soccer.

On one end of the spectrum were the brokers, the educators, the software providers, the soothsayers, and indicator gypsies that have been hyping (and profiting from) the industry for years. On the other end of the spectrum were the scientific community, including social scientists, economists, and data scientists. Let’s just say that the scientific community was in the extreme minority.

The scientific community was extremely skeptical of many of the claims of “people getting rich quick” and the constant television and internet ads that promised “day trading” glory and “work from home” opportunities.

And so, the Sao Paulo School of Economics commissioned a study that tracked a total of 19,646 day traders from 2013 through 2015. The data was broken down into bite-sized chunks to better understand the data.

The first group of day traders totaled 1,111 individuals that day traded only a single day. Of this group, 29.8% achieved a profit.

The second group of day traders totaled 9,978 individuals that day traded between 2 to 50 days. Of this group, 15.5% achieved a profit.

The third group of day traders totaled 3,100 individuals that day traded between 51 to 100 days. Of this group, 8.9% achieved a profit.

The fourth group of day traders totaled 2,738 individuals that day traded between 101 to 200 days. Of this group, 6.8% achieved a profit.

The fifth group of day traders totaled 1,168 individuals that day traded between 201 to 300 days. Of this group, 5.4% achieved a profit.

The sixth group of day traders totaled 1,151 individuals that day traded greater than 300 days. Of this group, 3.0% achieved a profit.

What does this data suggest? Ironically, the data suggests that the odds of achieving day trading success is nearly identical to playing roulette at a casino. The more you play, the greater the likelihood that you will lose everything.

The social scientists were particularly surprised to discover that ‘learning’ played nearly no part in the results. For instance, it was assumed that if a person had traded 6-months and 200+ trades, that they would learn to trade better or improve upon their trading strategies to achieve greater success because they were “learning from experience.”

And this is just what the trading educators want us to believe…that we need to “learn” and over time, this “learning” will improve our results. But the data absolutely destroyed these assumptions. In fact, the more a person “learned” to trade, the worse their performance became. It seems like “practice makes perfect” does not work in day trading Futures markets.

The Brazilian traders that actually earned an income

We all know that some folks, through luck or skill, are going to achieve success. Let’s take a look at those figures now…

The first group of successful day traders totaled 17 individuals that earned an average of $16 per day.

The second group of successful day traders totaled 8 individuals that earned an average of $54 per day.

The third group of successful day traders totaled 1 individual that earned an average of $310 per day.

But here is the sad part…of these successful Futures day traders, the standard deviation of their daily profit ranged from $632 to $3,308. What does that mean? In other words, in order to consistently earn $80 per day, you would also have to experience massive daily fluctuations of between $632 and $3,308.

And based upon the data, only one person was able to earn more than a minimum wage job.

It gets worse

For those 1,151 day traders that persisted 300 days, 97% lost all of their money once commission was factored in.

Even the highest performing trader that earned an average of $310 per day ended up barely profitable once the commissions were factored in. How sad are these numbers?

In conclusion, the study stated that “It is virtually impossible for an individual to day trade for a living, contrary to what the brokerage specialists and course providers often claim.”

So what should you do?

If you are stuck in that sad wheel of constantly funding a day trading account, and constantly looking for a new ‘Guru,’ then perhaps its time to put the mouse away. At least for a while.

The sad and sorry truth is that day trading is mostly a scam. Yes, some can pull it off successfully. Just like how some people will be cured of cancer by drinking apple cider vinegar. But the overall scientific data put the odds at roughly equivalent of playing roulette. The more you play, the greater the likelihood that you will lose everything.

For those that want to take a deeper dive into the data, I have included the study below. Also, you can read the report on a full page here. Thanks for reading.

Day Trading Study

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Soullfire
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The problem with this study is that it only goes up to two years in recording performance of traders. Learning to day trade well is an extremely difficult will take much longer than two years. This study makes the wrong assumption that learning to trade is an incremental process of time, whereas it’s more like a mental breakthrough in thought on how price action works. Any successful retail day trader I’ve talked to said it took them at least a decade if not longer to learn the ropes and start profiting. Using the same logic, one could do a study… Read more »

Longshot
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Longshot

“Using the same logic, one could do a study on how many people could make a living playing the violin at top concert halls” The problem here is that playing violin, or soccer, or most any other skill (including many business and career skills) have clear steps to master and learning curves. It’s true that only a tiny handful make it to the upper echelon of sports, music, etc. But there are objective skills you can master. Trading is different. You can learn chart patterns, programming languages, so-called principles (“cut your losses and let your winners run”) etc., but there’s… Read more »

Patrick Nalletamby
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Patrick Nalletamby

Great analogy with the violin. I have meditated seriously since 1997 and have to say that the regular exercise of meditation is the key to becoming a successful day trader. You must master fear and greed and also develop very strict discipline. Try a 10 day silent meditation retreat – and you will see what I am talking about…. Ive done 7

Luke
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Luke

Is it possible to day trade though? I mean, aren’t there people out there who actually do it? Like Tim Gratanni and Steven Dux? And other people who possibly haven’t made DVDs hyping themselves up? Or are all these people scammers and it’s the same as playing a roulette wheel? I want to know if there are any REAL day traders who actually make their income from day trading.

Patrick Nalletamby
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Patrick Nalletamby

The way I have experienced a degree of success day trading is by working out what product you want to trade, find a (few) reasonable indicator(s) that works , back test the hell out of them, and just stick to the one product. Whatever product you choose must have good liquidity. And you can never enter a trade without engaging an automatic stop loss of 1%. Dont stop reading and watching Youtube videos. Its not glamorous, but it works. My strategy is just under 50% success rate. Work with both leading and lagging indicators. Just keep at it. Daily meditation… Read more »

Truth Crusader
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Truth Crusader

.. nice, now they want to impeach Trump on a rumor ..oh yea, like Russia Burning down the house/Pelosi wants to bring the house down like it’s 2016? .. *drum crash :p .. Dems actually wrote to Ukraine in 2018 to investigate Trump ..1) how is (would) this be any different? 2) Investigate that (if actually) ..but they hate him so much that they still want, in their DC statehood schemes, Trump’s hotel in :p for tax revenue, lol .. ya, i mean besides alleged whistleblower has a bias , oh , lol whose lawyers also worked for ..hillary and… Read more »

Scottiee
Guest

But day trading is so much fun!! Actually, I have been close a few times but always end up red. Last mo w Suretrader was Gross +$1700 on 3500 equity. Of course commissions killed me. traderequity.co m has super low commissions https://youtu.be/VN_J15rmtEcbut alas, No US Residents! Chasing the dream….and they know it

Robert Henningsgard
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Robert Henningsgard

I have a sure-fire day trading scheme that’s worked 100% of the days where I’ve tried it. One was in the summer of 2004, when a “price exceeds” alert on my cell phone went off on TZOO. I whipped on my screen, and saw TZOO inexorably climbing up over about fifteen minutes, then hitting a new round-dollar high, then falling back maybe forty cents, then again climbing up to the *next* round dollar, then again falling back maybe forty cents. I realized it was a combination of a short squeeze and GTC sell orders causing a sawtooth pattern up dollar… Read more »

Patrick
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Patrick

The same is true of chess players, movie actors, novelists, basketball players, racing drivers, and fashion designers. Millions of people want to be those and hardly anyone succeeds. The odds are so stacked against you in all unusual careers that it’s better not to bother. Forget your dreams. Get a job as a bus driver. The training is a few days and virtually everyone passes. Consequently, it’s one of the best career decisions you can make.

Adam Frumoff
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Adam Frumoff

Interesting article and discussion. As others have eluded to, replace ‘Day trading’ with any desirable high paying career and you can run the same analogous study with virtually the same results. Or another way to look at is, name ANY career with freedom, high pay, and great hours, that you can have after a couple years. Only about 2% of American adults will achieve a doctoral degree in there lives. Does that mean when you walk in a hospital those guys performing surgery, consulting and writing prescriptions are liars and scammers (well some people may think so but nevertheless)? A… Read more »

Longshot
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Longshot

“Interesting article and discussion. As others have eluded to, replace ‘Day trading’ with any desirable high paying career and you can run the same analogous study with virtually the same results.” No, that’s a myth. Most any reasonably intelligent person with a good work ethic can become a pilot, doctor, engineer, etc. with enough effort. There’s no such guarantee with trading. You can put in 10,000 (or 100,000) hours, but may never have success…or maybe worse, have temporary success (due to “fooled by randomness” or being in a bull market at the right time)…then fail miserably. Look at all the… Read more »

Rob
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Rob

Soulfire and Longshot are both right. The thing is, the definition of success in trading and the proper education of it is nebulous. You can make a killing for a while and then your edge can either go away for an extended period of time or permanently. Will you be able to adapt and sit through the drawdown or find another edge? The reality of professional trading is you don’t make constant consistent money month after month. Successful trading means you have been able to weather these ups and downs and come out ahead over the long haul. It is… Read more »

Tom
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Tom

1 people who trade wildly successfully would never open a trading room 2 -people who have robust system would never sell it for few 100 or few 1000 dollars 3 it takes years blood sweat tears (10 to 20 years) To become successful..u think they will sell the system !!?? 4 u can not call a person who opened account yesterday for a first time a trader——same way u can not call kid at first day in college doctor /lawyer if that’s what they want to be in 10 to 12 years of studying Yes there are planty of successful… Read more »

Guest
Guest
Guest

Being under-capitalised is a recipe for disaster for one endeavouring futures day trading. And then again, if one happened to have enough funds to sit through elevated volatility periods (like in 2008, or 2015), why bother to day trade anyway? I mean one would be better off financially AND mentally to buy emini or emicro SP 500 future contract(s) and hold it for whatever time horizon, the longer the better, of course. Do your self a favour, find and read a book by Gary Smith How I trade for a living – this is the only dude I know of… Read more »