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A group of professors from the University of California conducted research on day trading, analyzing 3.7 billion trades on the Taiwan Stock Exchange between 1992-2006. Their study, titled “Do Day Traders Rationally Learn About Their Ability?” and published in 2014, found that only 9.81% of day trading volume was generated by predictably profitable traders, and that these traders make up less than 3% of all day traders on an average day. (Barber et al., 2014)
A 2005 article in the Journal of Applied Finance, titled “The Profitability of Active Stock Traders,” researched by professors from the University of Oxford and the University College Dublin found that out of 1,146 brokerage accounts day trading in the US markets between March 8, 2000, and June 13, 2000, only 50% were profitable, with an average net profit of $16,619. (Garvey and Murphy, 2005)
In another study, conducted by professors at the University of Texas and published in the Financial Analysts Journal in 2003, 334 brokerage accounts day trading in the US markets between February 1998 and October 1999 were analyzed. The study, titled “The Profitability of Day Traders,” found that only 35% were profitable, and only 14% generated profits in excess of $10,000. (Jordan and Diltz, 2003)
The range of results in these three studies underscores the challenge of determining a definitive success rate for day traders. However, these studies suggest that at least 50% of aspiring day traders will not be profitable. This reinforces the notion that consistently making money trading stocks is not an easy task. It's worth noting that day trading is a high-risk activity that could lead to the loss of your entire investment, and any trade or investment is made at your own risk.
It is essential to understand that all information discussed is purely for educational and informational purposes. None of the information should be considered tax, legal, or investment advice, and any referral to a stock or commodity is not an indication to buy or sell that stock or commodity.
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References: Barber, B., Lee, Y. I., Liu, Y. J., & Odean, T. (2014). Do Day Traders Rationally Learn About Their Ability? SSRN Electronic Journal. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535636
Garvey, R., & Murphy, A. (2005). The Profitability of Active Stock Traders. Journal of Applied Finance, 15(2), 44-56. https://ssrn.com/abstract=908615
Jordan, D. J., & Diltz, J. D. (2003). The Profitability of Day Traders. Financial Analysts Journal, 59(6), 85-94. https://www.tandfonline.com/doi/abs/10.2469/faj.v59.n6.2578
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