only 11.5% day traders make money

Discussion in 'Trading' started by richardyu301, Oct 20, 2006.

  1. I hv heard that only 10% of traders can hv profits but it is also interesting to know that in avg the annual expenses equal 56% of starting capital....

    Day Trading Is Harmful to Your Net Worth - Brief Article

    Why do the overwhelming majority of day traders trade themselves into the red? One not-too-surprising clue: They trade too much. At one Massachusetts day-trading firm, the average trader completely turned over his portfolio 278 times a year. Annual expenses for the average trader (brokerage commissions plus the cost of margin loans) equaled 56% of starting capital. "That means you have to make 56% a year just to break even," says Ronald Johnson, an investment consultant who conducted a computerized analysis of accounts at the firm for the North American Securities Administrators Association, which is highly critical of day-trading firms.

    Johnson found that 70% of the traders at the firm--which recently closed--were losing money. Only 11.5% showed promise of making money. At another Massachusetts day-trading firm, only one of 68 accounts was profitable.

    Harvey Houtkin, CEO of the All-Tech Investment Group, describes day trading as no riskier than any other business. "I've said for years that approximately three people in ten will make it as a day trader," he says. Houtkin suggests that the poor performance Johnson found was due to the market decline in the summer of 1998.

    The day-trading effect also extends to frequent traders--mainly trigger-happy investors armed with low-commission online-brokerage accounts. The long-running bull market has concealed from many frequent traders just how badly they are doing, says Terrance Odean, a finance professor at the University of California at Davis. Odean is co-author of new research that found that people who stop trading over the phone and begin trading online tend to trade more often, to trade more speculatively, and to underperform those who don't trade as often.

    "Frequent traders are confusing brains with a bull market," he says.
  2. hey, how could it be with current 0.5-0.8 cents per share comissions?
  3. Arnie


    That article is from Oct 1999
  4. i think it's 0.000000.....1%
    if the time is long enough
  5. tradethetrade

    tradethetrade Vendor

    Excellent point Arnie!

  6. Buy1Sell2


  7. Isnt Harvey Houtkin the original Soes Bandit? One of the guys who started it all?