Here is the real answer on the odds of becoming a successful day trader. This data is based on the success rate I witnessed while day trading for a propriety trading firm for 6 years, and also from conversations with other proprietary trading firm operators. A proprietary trading firm is one that fully or partially supplies traders with capital, and in exchange, the firm takes a cut of their profits (business models vary, but that is the basic idea).
Given training, money, and experienced traders to help them out, the day trading success rate for trainees becoming consistently profitable traders was extremely low. For traders with little money, little help, or little time, the odds would likely be even lower or the journey will be longer.
While the statistics you are about to read about may seem grim, I don’t look at it that way. To be good at anything takes work, and most people don’t really work that hard at trading (or they focus on the wrong things…discussed below in How to Become a Successful Day Trader). If you do put in the amount and type of work required, you’re more likely to succeed.
This article will look at:
- The day trader success rate based on seeing hundreds of traders come and go.
- Some misinterpreted statistics and biases that hide how hard successful trading is.
- How to have a better chance at being a part of the small group (small relative to all who try) that is consistently successful.
- Sprinkled throughout are stories of my journey, trading for a living since 2005.
Here’s the one-page quick read, with additional details below.
And here is a video discussing the differences between those who succeeded at day trading, and those who failed.
The Day Trader Success Rate
Time is limited, so here is a quick breakdown of the statistics:
- 4% of people were able to make a living with adequate capital, access to mentors, and practicing multiple hours every day during the week.
- Roughly 10% to 15% could make some money, but not enough to make it worth their while to continue trying to do it for a career.
- Of the 4% who make a living, that doesn’t necessarily mean a good living. If you want to rich you’ll need to be in the top tier of that 4%.
- Women tended to be much better traders than men, on average. Females had a much higher success rate than men at the proprietary trading firm.
During my time at the proprietary trading firm, before moving on to trade independently, I saw loads of want-to-be traders come to the firm to day trade, yet very few made the cut. These were people willing to go through several interviews, sign contracts, and make a commitment to show up every day and adhere to risk management protocols on their way to becoming potentially career day traders. These were, at least on the surface, committed people.
Between the firm I traded at, and from conversations with other proprietary firm operators over the years, about 2,000 traders came through the doors. The success rate—success meaning they could make a living from the markets (that doesn’t necessarily mean a great living)—was about 4%. So out of the approximate. 2,000 people, about 80 were good enough to trade for a living. The other (approximately) 1920 gave up, left, or were fired.
All these people were training and practicing 6 to 8 hours per day, every weekday. They had access to capital and help from successful traders (most didn’t use it). And still, only about 4% managed to make a living from day trading.
The day trading success rate, including people who were slightly profitable, but couldn’t make enough live off, was likely in the vicinity of about 10% to 15% of those who came through the doors. These people may have gone on to trade on their own, as a side gig, but they couldn’t make enough to live off of.
In summary, if you want to make a living from day trading, your odds are probably around 4% with adequate capital and investing multiple hours every day honing your method over six months or more (once you have a method to even work on). Early winning streaks don’t count…that’s actually probably the worst thing that can happen because then you think you’re good without having built the actual trading or mental skills necessary. I am talking about consistent month-after-month profits.
Most of the traders who did make money took five months or more to do it. I lost money (small amounts) for four months. Made a tiny bit in my fifth, equivalent to a part-time job in my sixth, a meager livable amount in my seventh, and then it kept going up from there.
How long it takes you will depend on your income goals, how much capital you have, and your return from your trading strategy. Here are some income scenarios for forex day trading. For stock day trading, you need at least $25,000 in starting capital, and typically get up to 4x leverage. Off that amount of capital, it’s possible to do well. You can also start trading Futures with less capital.
If you don’t have much capital, and don’t have a lot of time to commit, the odds of making a living from day trading are remote. It is possible, but it is going to take a lot of time and discipline to build a small account into something that can produce a living.
If you want to make some money on the side, you’ll still need the same dedication, putting in many months to refine a method and overcoming sabotaging tendencies. The odds of meeting these lower expectations are greater, with a success rate around 10%.
These are not perfect statistics. There are many things to consider. BUT, conditions were very favorable at the trading firm(s), and yet there is no question that most people could not make money as easily, or as quickly, as they assumed.
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Understanding the Day Trader Success Rate
Stats are often quoted, such as “95% of traders lose money” but new traders assume they’ll be in the 5% because they think themselves smarter than most. Trading isn’t about being smart. It is about being disciplined; methodically coming up with a trading plan and sticking to it. And it never ends. We need to learn to adapt to life changes, market changes, rule changes, leverage changes, market cycles, good periods, bad periods…we need to develop rules on how to adapt. We don’t just create a strategy and our work is done. Implementing it is a constant task of methodical discipline and patience.
Many new traders also believe that these stats (only 5%, or less, succeed) are a lie because they see loads of people flaunting how much money they are making in online forums or social media. It seems like many people are doing very well!
This is called availability bias (see The Art of Thinking Clearly on this trading book list). It is believing that what we see most often is representative of all things, including what we don’t see. Look at the dead space. There are likely thousands of members in those groups, and yet only a few are constantly parading profits. There are maybe hundreds or thousands in those groups losing money, but those people aren’t talking. You can’t know a success rate based on success stories without knowing how many people are also failing, and people who lose are typically much less vocal.
The facts in the section above show how many people succeeded out of the total. And yet the firm, of course, didn’t discuss this, they only showed new recruits how well the traders who did succeed were doing. New traders are only seeing one side of the picture, the tiny more glamorous side.
For further reading on why most traders lose, and the reasons behind it, see The Real Reasons Most Traders Lose Money.
What about brokers saying only 70% of people lose money?
In Europe, brokers are required to show how many people lose money while trading with that broker. I typically see figures around 70%, such as “72% of clients lose money trading with this broker.” You will see it on their ads or on their website.
While the regulators likely intended to make this a deterrent by showing how hard trading is, it actually makes it look much easier than it is! 30% of traders winning (70% losing) is way better than the 4% (living) to 10% (side hustle) I’m talking about.
Again, we have an availability bias. The statistic that brokers publish is based on existing clients! It does not include people who lost money and closed their accounts.
For example, let’s say 1,000 people open accounts with a broker over the course of a year.
600 lose some money quite quickly and close their account and tell all their friends to never try day trading.
Of the 400 remaining, 30 are doing well, 70 are profitable, and the other 300 are losing money to various degrees, but still have their account open.
The broker is saying that 100 people (30+70) out of 400 are profitable …about 25%. But this statistic is only based on live accounts, it doesn’t factor in people who lost heavily or closed their account in the negative (or positive). The real statistic should be that 100 people out of 1,000 (not 400) are profitable. And if 10% are profitable, we of course know that only a portion of that will be people doing very well.
If you start thinking about all the accounts that likely were opened and closed due to losses, which aren’t being counted, well, it becomes pretty obvious they don’t want to publish those statistics.
Also, these figures published by brokers will include longer-term traders and investors as well. They are not isolating only short-term traders.
How to Become a Successful Day Trader
The day trading odds dictate that very few will succeed, yet I believe any individual can choose to be part of the successful group by putting in a lot of efficient work. Efficient means, you aren’t just putting in hours, you have defined steps and protocols for improvement and measuring that improvement.
We also must realize that this hard work must be done ourselves. We can buy courses and read books for ideas on how to do things, but it is still up to us to put in the work to make ourselves consistently profitable. A competitive advantage can’t be bought.
The hard work includes:
- Typically practicing and honing a specific method for at least 6 months or more, five days a week. Distraction and trying out different things will extend that time frame. Part-time trading, or long breaks between trading, will extend the time it takes to get good.
- Honing and refining a method means developing a strategy and taking many trades with it, and then looking over those charts/trades to find any areas of improvement such as shaving a fraction off the stop loss, expanding the profit target, a better configuration for the trailing stop loss, finding ways to improve the entry to help shave a loss or two off the scorecard without missing out on winners. Consider how to improve the reward:risk ratio.
- Improvement may sometimes happen in big leaps, but it is micro-adjustments in refining the strategy that start turning losing days into winning ones. Over 100 trades, it is finding a few extra winners, cutting a few losers, getting better entries so the stop loss can be smaller, or finding a bit of extra profit on the winning trades that starts to make a real difference.
- There is a BIG difference between just putting in hours and taking conscious steps to improve.
- Finding problem areas and then working through them in terms of strategy or psychology.
- For example, missing/skipping trades may be a trading issue in that you aren’t focused and you need to keep yourself better engaged by constantly bringing your focus back to the price action. To help improve this see, see Drastically Improve Day Trading Results with These 4 Practices.
- Or it could be psychological such as a fear to take trades because it could result in a loss. For help with this, see Why We Mess Up Trades, and What To Do About It.
- I also like to work on my mental game regularly. I read psychology books on biases and changing beliefs to align with goals. I also like attending workshops on self-improvement.
- Building a Trading Plan. A trading plan is way more than just a couple of strategies you read about online or in a book. It is a business plan, outlining how you will handle everything related to your trading and yourself. How you will handle losing streaks, big wins, position-sizing, taxes, steps you’ll take to improve, how you’ll review your results, goals, routines, what to do if you keep making the same mistake over and over, how you’ll balance life and trading, and how you will handle it if you get scared or greedy in a trade. There’s a lot to consider. The more you consider and really think about it, the less there is to distract you from trading and the better you will likely trade.
- Developing confidence in the method being used, and in ourselves, to execute it day in and day out when real money is on the line. This confidence must be earned by going through the items discussed above. Confidence is misplaced without a trading plan, loads of practice, and improving problem areas.
Trading for 0.5 to 2 hours and making a living is the end result of this work. Intense work comes prior. Many people see others working 1-2 hours a day and enjoying the good life, and think it is easy and they can do that too. They end up skipping all the steps that the successful trader took to achieve that lifestyle.
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Final Word on the Day Trader Failure Rate
Work hard, and focus on improving your own trading. Don’t listen to others talking about outlandish success or devastating failure. What happens to you is based on what YOU do. Focus on implementing your strategies and improving your problem areas. Find your strengths and capitalize on them.
Trading is hard work, but I do believe it is possible for those who are dedicated to succeeding at it. It’ll have ups and downs, but focusing on ourselves and becoming better is all we have control over.
Cory Mitchell, CMT
