Considering day trading, 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 witnessed while working at a day trading firm from 2005 to 2010*. I’ve also conversed with several other trading firm owners/managers on their success rates between 2005 and 2015 (about 2000 traders total). Numbers varied slightly, but were inline with the day trading success rates I discuss below.
While the article focuses on day trading, because I have the most data on it, I assume the same stats (approximately) hold true for swing traders or any short-term speculative trading endeavor.
Below I discuss:
- 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.
- Is there a difference in the success rate of men and woman (OH YES!).
- Is time a factor? Of those who were unprofitable in their first 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.
This is a long article, but I suggest reading it all. 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 intertwined throughout the article.
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, have it worked out, and will be able to make money quite 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 expect more (see How Much a Day Trader Can Make…but read it later).
You may have heard 90% or 95% of trades lose money (see Why trader Lose and Why the Market Requires It), or some other seemingly high statistic. From what I’ve personally seen this is accurate. While I traded for a day trading firm, about 10 people came in ever couple months for trader training, or about 60 per 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 400 people.
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?
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 $2000 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 discussed in 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 though. Day trading wasn’t something 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 taken the training then left (these contribute to the large 95.5% failure rate)–some may have gone on to be successful. Even one trader that left and went on to become successful at day trading would increase the success percentage. 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 a city with lots of high paying (oil-related) jobs, so trading for no pay until profitable likely didn’t sit well with some people. Some people lured away by other jobs could have been successful had they stayed. Therefore, we have some blind spots in my statistic. For those willing to give it a valiant effort though, we can estimate the chance of success (consistent profitability) is between about 4% and 5%.
The firm didn’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 get from a high level introduction to the stock/forex market course. Therefore, I believe the 4% to 5% day trading success rate is representative of all traders who attempt trading without a mentor (discussed next).
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% (the half way point of 4% and 5% concluded above) of traders who start day trading will end up being able to make something of it.
If you put in little time, practice or capital into your trading, your success rate is close to 0%. The 4.5% stat is for people who give it a valiant effort, put in time and practice, and start with a reasonable amount of capital–all which the firm required/gave.
Day Trading Success Rate with a Mentor
With a mentor, the success rate will increase, but it still ultimately dependents on the individual’s drive to become successful and to put in the work required. With a good mentor (here’s who I recommend), I estimate the successful rate may creep 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. Be careful how statistics are used. Someone trying to solicit you could say “We can increase your chance of success by 167%!” Sounds impressive, but you originally had a 4% chance at success, you now you have about a 10.68% chance. This latter statement gives you much more information than the sales pitch statement.
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 firm, 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, but 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 teachers, and understood what I needed.
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 a do-it-yourself-trading-approach isn’t a bad thing.
That said, with a good mentor, the day trading success rate creeps up to a likely 9% (half way 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%.
But not everyone can land a great mentor, so the average success rate (with a mentor) is still about 9% for those that give it some effort. The mentor can’t help you though if you don’t help yourself.
Day Trading Success Rate: Men Vs. Women
If there is one thing I can definitively say, it is that women make much better traders than men. The women who traded at the firm didn’t make as much as the top male traders, but overall the women were consistent and had a staggering 40% success rate.
Only 10 women came to trade (smaller sample size) while I was at the firm. Four were able to make a living off the markets. The high success rate of women actually drove up the overall success rate discussed above. If we just look at males, the successful rate drops to 3.4% . So we have a 3.4% success rate for males (10 out of 290…because 290 of the 300 total traders were males), and a 40% success rate for women (4 out of 10). So the overall success rate is still useful to men (still in the 4.5% range), but not as useful for a woman…since a woman’s success rate is likely to be higher than the overall day trading success rate indicates.
I verified these stats with multiple current or former trading firm managers; their stats were very close to those mentioned above, creating a larger and viable 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, could be successful at it. In a male-dominate 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 a brick-and-mortar business–if you want to have good odds of day trading success.
Women simply don’t seem to have the mental blocks and ego barriers that males have (some do). They 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’t do what is taught (most, not all men).
Trading firms and brokers would be well advised to more actively recruit women traders. They’re pretty, smell nicer, and for some strange reason male performance (and behavior) tends to improve when there are some ladies on the trading floor.
Day Trading Success Rate: Is Time a Factor?
Very few people who were unprofitable for even several months continued to trade. For most of those that became successful, about 6 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, but was still unsuccessful, how did they ultimately fair?
Only 7 traders who were unsuccessful within the first year, continued to trade beyond the 12 month mark. 1 of those 7 ultimately became consistently profitable. Determination does improve odds, in this case up to about 14% (discussions with other firm managers reveals stats between 10% and 20%–sample sizes are small because very few people put in the hours required for more than a year).
Unfortunately, time put in isn’t the same as practice. 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. I should note, the one successful trader out of this seven, traded unsuccessfully for slightly more than 2 years before becoming consistently (and sizably) profitable.
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.
All these people who failed, and who were successful, were putting in 6 to 7 hours a day of practice and learning. So you will definitely need to put in time and practice if you want to become successful. 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 most want-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 the best day trading hours), or 20 minutes if swing trading (since you can leave once your orders are set), but when you start out there 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. That’s what this new day trader did for several months, and is showing promise after several weeks of live trading. You need to put in the work if you expect it to payoff.
As discussed above, many people (men) come to trading with a “I will give it a shot…” attitude. This will very likely lead you to lose whatever capital you have deposited in your brokerage 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 stopping everything 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 is often boring, which surprises many people. Without the required stimulus from the market, 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 isn’t a walk in the park fairy tale. It’s serious business, and the people who do it for a living don’t f*ck around. Day trading is a negative sum game (zero sum if you don’t factor commissions…but commissions and costs exists, making it a negative sum game). If you trade, 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 of 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 duck, and 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.” This concept is outlined in this article: How to Day Trade the Forex Market In Hours or Less a Day. While it uses examples from the forex market, the concepts apply to day trading stocks or futures as well.
Strategies are important to, but so is learning how and when to implement them. For more on strategies and interpreting changing market conditions, see my Forex Strategies Guide for Day and Swing Traders eBook.
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%. As discussed though most men come in with the wrong attitude…they are gambling with their time and money, not really committing to the process and hoping they will hit it big quickly (not likely). If you are serious about trading, and commit 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 simple don’t give themselves enough time to learn, or they just keep repeating the same mistakes (often in slightly different ways) forever and never improve.
In my experience, and opinion, women have a much 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 wiling to put in the time and practice.
Are these stats perfect, absolutely not. They are averages and cannot be used to ascertain whether a particular individual 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 is to find consistency, and keep it. Yet there are successful traders who obviously have overcome the odds. Stay disciplined, focused, and have patience on your journey and your 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, that is what matters.
Best wishes on your journey.
Check out the Forex Strategies Guide for Day and Swing Traders eBook.
Over 300 pages of Forex basics and 20+ Forex strategies for profiting in the 24-hours-a-day Forex market. This isn’t just an eBook, it’s a course to build your trading skill step by step.
*The firm I worked for has been bought/sold and switched names a few times. All firms from which these stats were derived will remain anonymous.