For those researching day trading and looking for some interesting data on the market, check out the statistics, charts, facts and trends below.

What is Day Trading?

Day trading is a trading style that involves buying and selling a tradeable asset within the time span of a single trading day. In short, this means that all positions opened within one trading day are also closed out that same day. Day trading can take place in any financial or commodity market, although day traders tend to prefer highly liquid markets like the forex and stock markets. Day traders also tend to be well funded and to trade on margin whenever possible, as using leverage allows day traders to make money from relatively small intraday market movements.

The most successful day traders study the market they plan to trade in thoroughly, as well as developing a trading plan prior to trading with any significant amount of money. Day traders often use technical analysis to inform their trading activities while also providing trade signals. However, as you will see, day trading is an extremely difficult market to profit from. 

Day Trader Performance

  1. Over a 12-month period, approximately 5% of day traders are profitable.
  2. The ‘vast majority’ of day traders are unprofitable.
  3. Many unprofitable traders continue to trade, despite an ‘extensive experience’ of losses.

Day Trader Persistence1

  1. Roughly 80 percent of day traders stop trading within two years after starting.
  2. Within a studied group of day traders, almost 40 percent only day trade for one month.
  3. After three years, just 13 percent of them continued to day trade.
  4. After five years, a mere seven percent of the day traders remained active.
  5. Traders who have as much as a ten-year track record of losses still continue to day trade.

Day Trader Risk Taking

  1. Investors who have a substantial differential between their current economic state and their desired economic state tend to hold riskier stocks in their investment portfolios. 
  2. As traders, gamblers tend to underperform those who are not gamblers inside each income range group.2
  3. The prevalence of trading in dropped by roughly 25% in Taiwan when a lottery became available for playing in April of 2002.
  4. Trading among individuals falls during times when an especially large lottery jackpot is available.

Common Day Trader Behaviour Patterns

  1. Even if day traders get a negative feedback event regarding their trading prowess, they continue to trade.1
  2. Traders who operate profitably tend to raise their trading activity more than those who do not operate profitably.1
  3. Investors often tend to hold on to their losing investments while selling their winning investments.
  4. If an investor has sold a stock for a profit, then they are more likely to repurchase that stock again than a stock they previously took a loss on.
  5. Traders tend to fail to learn from their mistakes when trading.1

Best Markets to Day Trade

The forex market is the most liquid market in the world, which makes it very suitable for day traders, with many available sellers and buyers with relatively low transaction costs. As our article on forex trading stats and trends shows, in terms of transaction volume, the forex market is twelve times larger than the futures market and 27 times larger than the equities or stock market.

Daily transaction volumes in U.S. dollars in the forex, futures and equities markets. Source: Brokernotes

Trends in Day Trading Compared to Other Trading Styles

When it comes to studying trading trends, the fast-moving nature of the market can make anticipating changes in the market difficult. However, one method of analysing general market sentiment can be studying the number of people who have searched for a particular trading term online. 

For example, as Google reveals, for the year prior to July 2019 there were far more searches performed worldwide for day trading than for other popular trading styles, including scalping, news trading or trend trading. In comparison to day trading, scalping and news trading were roughly comparable in interest, while trend trading consistently remained the trading style with the lowest search engine popularity of those compared. 

Worldwide web search interest for 12 months prior to July 13, 2019, relative to the highest point on the chart. Source: Google Trends

In contrast, the data from the United Kingdom shows that day trading and news trading fluctuate in having the top search engine popularity. Scalping is less popular, while trend trading is the least commonly searched for trading style of those compared. 

References

  1. https://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trading%20and%20Learning%20110217.pdf
  2. http://www.econ.yale.edu/~shiller/behfin/2005-04/kumar.pdf
  3. https://faculty.haas.berkeley.edu/odean/Papers%20current%20versions/JustHowMuchDoIndividualInvestorsLose_RFS_2009.pdf
  4. http://scholar.rhsmith.umd.edu/sites/default/files/xiaohui/files/rfs_2015_gao_lin_individual_investor_trading_0.pdf
  5. https://dash.harvard.edu/bitstream/handle/1/2617031/Campbell_FightorFlight.pdf
  6. https://www.psychologytoday.com/files/attachments/92349/jmrinvesting.pdf
  7. https://staging.brokernotes.co/forex-trading-industry-statistics/