Why Most Day Traders Underperform the Market

Most day traders underperform because, on average, their intraday trades lose money even before costs, lose more after costs, and miss the overnight hours when most of the US stock market's premium was earned from 1993 to 2013. The strongest evidence comes from two large datasets: in Brazil, 97% of people who started day trading index futures in 2013–2015 and kept at it for more than 300 days lost money, and in Taiwan fewer than 1% of day traders earned predictable profits after fees over 15 years. Those samples support the word "most"; how far the exact figures carry over to US traders today is less well measured.

Key takeaways

Of 1,551 Brazilians who day traded mini-index futures for more than 300 days, 97% lost money after fees and 8 (0.5%) earned more than a bank teller's starting pay.
In Taiwan from 1992 to 2006, about 20% of active day traders profited in a given year, but only about 4,000 of roughly 450,000 (under 1%) did so predictably.
From 1993 to 2013, about 59% of the broad US market's monthly premium came overnight, when a day trader holds nothing.
In an illustrative simulation, a zero-edge trader paying 5 basis points per daily round trip turned $10,000 into $8,821 on average in a year, against $10,836 for an assumed buy-and-hold return.

What account-level data show

Day trading means buying and selling the same security within one session. The studies below use trade-by-trade records from regulators, exchanges or brokers, which capture losers as well as the winners who answer surveys and appear in marketing.

Study	Market and period	Sample	Headline finding
Chague, De-Losso and Giovannetti, "Day Trading for a Living?" (working paper, 2019)	Brazil, mini-Ibovespa index futures; traders who started in 2013–2015	19,646 new day traders; 1,551 traded more than 300 days	97% of the persistent group lost money after exchange and brokerage fees; 0.5% beat a bank teller's starting pay
Barber, Lee, Liu and Odean, "The Cross-Section of Speculator Skill" (Journal of Financial Markets, 2014)	Taiwan Stock Exchange, 1992–2006	All individual day traders, about 450,000 in an average year	About 20% of active day traders profit in a typical year; under 1% do so predictably and reliably after fees
Barber, Lee, Liu, Odean and Zhang, "Do Day Traders Rationally Learn About Their Ability?" (working paper, 2017 version)	Taiwan Stock Exchange, 1992–2006	Complete transaction data with trader identities	Day traders as a group lost money after fees in every year; more than 75% quit within two years
Jordan and Diltz, "The Profitability of Day Traders" (Financial Analysts Journal, 2003)	US, seven branches of one day-trading firm, February 1998 to October 1999	324 day traders	64.2% lost money after commissions; profits rose and fell with the Nasdaq Composite
Bryzgalova, Pavlova and Sikorskaya, "Retail Trading in Options and the Rise of the Big Three Wholesalers" (Journal of Finance, 2023)	US equity and ETF options, November 2019 to June 2021	Trades executed through wholesaler price-improvement auctions, used as a proxy for retail orders	Retail traders lost money on average, about $2.1 billion in aggregate at a 10-day holding horizon; not limited to day traders

Brazil: the traders who kept going

Chague, De-Losso and Giovannetti's paper uses data from Brazil's securities regulator, the CVM, covering every individual who started day trading mini-Ibovespa futures, a contract on Brazil's main stock index, in 2013–2015. The share of traders with a net profit fell steadily the longer people traded: 29.8% of those who traded on a single day, 15.5% of those who traded 2 to 50 days, 8.9% at 51 to 100 days, 6.8% at 101 to 200, 5.4% at 201 to 300 and 3.0% above 300 days.

For the 1,551 who traded more than 300 days, the average daily result after fees was a loss of US$48.81 and the median a loss of US$23.21. The best trader averaged US$310 a day. The eight who beat a bank teller's starting wage of US$54 a day did so with daily swings, measured as standard deviation, of US$632 to US$3,308. Costs were not the whole story: before any fees, the group's average result was a loss of US$27.83 a day, and 88.5% were behind.

The authors note that these figures probably flatter the traders, since income tax and the cost of platforms and courses are left out.

Taiwan: fifteen years of complete records

The Taiwan Stock Exchange gave researchers every trade from 1992 to 2006, with an anonymous identifier for each trader. In Barber, Lee, Liu and Odean (2014), whose accepted version is posted on eScholarship, day trading made up almost 17% of the exchange's volume and individuals were over 99% of day traders. In an average year about 450,000 people day traded; 277,000 of them traded more than NT$600,000 (about US$20,000) a year, and about 20% of that group earned positive abnormal returns after fees. An abnormal return here is the return left over after allowing for the trader's exposure to the market index.

The authors then ranked traders on one year's results and followed them into the next. Only the top 4,000 or so, under 1% of all day traders, went on to earn reliably positive abnormal returns after fees; with commissions set at the legal maximum instead of a discounted rate, the number fell to about 1,000. A companion working paper by the same team with Ke Zhang finds that day traders as a group lost about 7 basis points (0.07%) a day before costs and 23.9 after commissions and Taiwan's 0.3% tax on stock sales.

The US evidence is older and smaller

Jordan and Diltz (2003) studied 324 clients of a US day-trading firm during the 1998–1999 technology rally. Nearly two traders lost money for every one who made it: 208 (64.2%) had a net loss after commissions. The average trader made more than $8,000 before commissions and lost about $750 after them, and results tracked the Nasdaq Composite.

No US dataset with comparable coverage turned up in the research for this guide. The closest recent evidence is from options: Bryzgalova, Pavlova and Sikorskaya (2023) found that retail traders favor cheap weekly options with an average quoted bid-ask spread as high as 12.6% and lose money on average. The SEC's long-standing investor publication "Day Trading: Your Dollars at Risk" says day traders typically suffer severe financial losses in their first months.

Why the market is a hard benchmark

Before costs, active trading as a whole is a zero-sum contest against the market: what one trader gains relative to the market, others lose, and fees and spreads make the sum negative. Overconfidence and other biases also play a part; this guide sticks to outcomes.

The overnight share of returns

A day trader also starts behind for a structural reason. Lou, Polk and Skouras (Journal of Financial Economics, 2019), in a copy posted by the authors, split the return of the value-weighted US stock market from 1993 to 2013 into two parts. The overnight part, from one close to the next open, averaged 0.55% a month; the trading-hours part averaged 0.38% a month above cash. For the largest 1% of NYSE stocks, essentially all of the premium came overnight.

A trader who closes every position before the bell owns nothing during the overnight hours, so gives up about 59% of the market's premium by design (0.55 ÷ 0.93). The remaining 41% accrues only to someone who stays long through the session, and day traders switch between long and short. The authors note that the split roughly matches the hours involved (the market is open about 27% of the day and earned roughly 40% of the premium then), so it reflects holding time, not a quirk; some strategies, such as the small-stock premium, earn their returns intraday.

Illustrative simulation: zero edge

The cost drag on a trader with no edge follows a simple formula:

Expected ending value (zero edge) = A × (1 − c)^n
Expected ending value (buy and hold) = A × (1 + μ)

A is the starting account, c the all-in cost of one round trip (commissions, spreads, fees and taxes) as a fraction of the amount traded, n the number of round trips in the year, and μ the expected annual market return. With c = 0.0005 (5 basis points) and n = 252, (1 − 0.0005)^252 = 0.8816, so $10,000 is expected to shrink to about $8,816 even though the trades themselves have no expected gain or loss.

Illustrative example, with these assumptions: a $10,000 account; 252 trading days; one round trip a day using the whole account; a daily trading result with mean zero and a standard deviation of 1%; buy-and-hold with an assumed 8% a year average return and 16% annual volatility (an assumption for the illustration, not a forecast); no taxes and no interest on cash; 100,000 simulated paths (NumPy, seed 42).

Cost per round trip	Mean ending value	Median ending value	Ended above $10,000	Finished ahead of buy-and-hold
0 bps	$10,006	$9,884	47.2%	36.2%
2 bps	$9,514	$9,398	34.8%	28.3%
5 bps	$8,821	$8,713	19.2%	18.1%
10 bps	$7,776	$7,681	4.8%	7.1%
Buy-and-hold	$10,836	$10,701	66.4%	—

"Finished ahead" compares each simulated trader with an independently drawn buy-and-hold path. With no costs, the median sits about $116 below $10,000 because daily swings compound against the account. Each basis point of cost compounds 252 times: at 10 basis points the average trader ends $3,060 behind buy-and-hold, yet at 5 basis points almost one in five (18.1%) still finishes ahead by luck alone. Zero edge is also generous: the Brazilian and Taiwanese traders lost money before costs.

Who is on the other side

FINRA's required day-trading risk disclosure (Rule 2270) states plainly that a day trader must compete with professional, licensed traders employed by securities firms. The data show what that competition looks like.

High-frequency firms. In the Brazilian study, institutions closing more than one deal a second on average (over 23,400 deals a day) went from 11.6% of all deals in 2012 to 39.2% in 2015 and 41.9% in 2017. Days with a higher high-frequency share were associated with larger losses for individual day traders.
Paying for immediacy. An aggressive order is one priced to trade at once against waiting orders, which means paying the spread. Barber, Lee, Liu and Odean (Review of Financial Studies, 2009) found, using every Taiwan trade from 1995 to 1999, that trading cost individuals' aggregate portfolio 3.8 percentage points a year, equal to 2.2% of Taiwan's GDP. Commissions and taxes made up about two-thirds of that; the rest was mostly trading losses, and virtually all of those came from aggressive orders. Institutions gained 1.5 percentage points a year, with foreign institutions taking nearly half of institutional profits.
Day traders demand liquidity. In the 2014 Taiwan study, even the most profitable day traders placed nearly two-thirds of their trades through aggressive orders, so their profits did not come from market making.

Why winners look common

Results that get shared are not a sample of all results. For a pure-luck baseline, take Taiwan's 277,000 active day traders and suppose, for illustration only, that each has a 20% chance of a profitable year and that years are independent.

About 55,400 would show a profit in year one, about 2,216 would show three profitable years in a row (277,000 × 0.2³), and about 89 would show five. Thousands of multi-year records could appear without any skill; the real data show some persistence at the top, yet the Taiwan authors conclude that most successful day traders are merely lucky.

Self-selection does not rescue the averages either. If persistence weeded out the unskilled, the profitable share would rise with experience; in Brazil it fell at every step, which the authors compare to roulette. Nor did traders improve: the persistent group lost US$47.34 a day over its first 250 trading days and US$51.65 a day afterward.

What the evidence does not show

It does not show that nobody can profit. In the 2014 Taiwan study, the top 500 traders by prior-year results earned 61.3 basis points a day before fees and 37.9 after fees the following year. But the group is tiny and hard to identify in advance without a long record.

The samples also have limits. Brazil covers one futures contract and traders who started in 2013–2015; Taiwan covers 1992–2006, with a 0.3% sales tax; the main US sample is 324 clients of one firm during an unusual boom. Today's US market has lower commissions but more automated competition, and these data do not say which effect dominates. The Brazilian study also measures dollar profit and loss, not performance against an index as the Taiwan studies do.

Frequently asked questions

Did zero-commission trading change the picture?

Commissions are only one cost. In the US options study, the gap between trade prices and the bid-ask midpoint cost retail traders about $6.4 billion, roughly seven times the $900 million they paid in commissions. In Brazil, retail brokers cut day-trading fees to zero at the end of 2018 to attract customers to courses and platforms, after the period the study measured, so the paper cannot show the effect.

Do losing day traders usually stop?

Many do, but not as fast as their results would suggest. In the Taiwan learning study, more than 75% quit within two years, poor performers more readily. Yet among traders with 50 or more days of experience, 95.3% of those with past losses day traded again within 12 months, against 96.4% of those with past profits, and traders with a history of losses accounted for 72% of day-trading volume over the sample.

Does Taiwan's trading tax explain the losses?

Costs, mostly the tax, explain about 70% of the net loss, not all of it. The researchers applied Taiwan's 0.3% tax on stock sales and an assumed commission of 5 basis points on each side, so the tax was 30 of the 40 basis points charged on a full round trip. Day traders as a group lost about 7 basis points a day before any costs, and costs added 16.9 more, for a net loss of 23.9 basis points a day.

What does FINRA's day-trading disclosure say?

Under Rule 2270, a firm that promotes a day-trading strategy must give each non-institutional customer a risk statement, or a FINRA-approved alternative, before opening the account, and post it on its website. The standard statement says to be prepared to lose all the money used for day trading and not to fund it with retirement savings, student loans, second mortgages, emergency funds, money set aside for education or a home, or money needed for living expenses. It adds that "certain evidence" indicates an investment under $50,000 significantly impairs a day trader's ability to profit, and that $50,000 or more guarantees nothing.

Did publicity about the Brazil study change behavior?

Possibly. A draft was covered by Brazil's largest financial newspaper on March 7, 2019. In the months that followed, through June 2019 when their extended data end, the authors found a clear break in the upward trend in the number of daily retail day traders. They note that other factors may also have contributed.

Checks before trading intraday

Record every trade net of all costs, including positions that end up held overnight; leaving out losing positions that stay open flatters results.
Compare results with what the same money would have earned in a broad index fund over the same months, not with zero.
Treat a short profitable run with caution, since a good year is common by luck alone.
Before opening an account or buying a course, ask how many clients lost money and how many made a profit, as the SEC's publication suggests.
Set a fixed maximum loss per trade before entering; the Position Size & Risk calculator turns that limit and a stop distance into a share count.
Keep the money the Rule 2270 statement lists, such as retirement savings, student loans and emergency funds, out of the account; FINRA's investor guide to frequent intraday trading (June 2026) likewise says that, given the significant risks, you should never fund this type of trading with essential assets.