Day Trading – Futures Trading FAQ

July 27, 2008 in Futures Trading FAQ | 2 comments

Fact or Fiction – Do day traders lose money?

Do most day traders lose money? Can day traders make money trading futures and futures options?

“Day trading” futures has often been frowned upon by “traditional” investors. Literature on day trading indicates that up to 90% of day traders render unsuccessful long-term results.

It is important to study the validity of these claims by asking two critical questions: what is the opening account size for the average day trader and what is the drawn down / profit ratio for these accounts?

A fundamental tenet of technical trading is that technical analysts do not concern themselves with time frames. Analysts admit that some markets are more responsive or profitable within certain time frames, however, the basic components of entry signals, exit signals and risk management prevail across all trading time frames and all markets.

If these components are solid and adhered to with strict discipline, then the “myth” of – “90% of day traders are unsuccessful” can be broken down. Day traders can win … they just need to have quicker reflexes :)

Day traders out there – any comments on this?

  1. Shannon’s avatar

    Shannon on July 29, 2008 at 8:17 am

    Is the success rate for day traders, technical traders-wether using technical analysis or fundamental analysis the same or does everyone lose 90 % of the time ??

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  2. Daryl Browdy’s avatar

    Daryl Browdy on July 29, 2008 at 7:54 pm

    Strike 1:
    Day traders have a bad rap. I cannot prove this, however I suspect that day trading can be appealing to individuals seeking to begin trading with a small account balance.

    Strike 2:
    Secondly, because market exposure time for day traders can be very low, day trading appeals to individuals whose primary profession is not trading. Such individuals have not developed and honed the stringent, obligatory risk management plans that must be used in order to succeed at trading futures.

    In summary, day traders may not do as well as longer term traders, however, the population of day traders problem consists of part-time, amature traders. Traders focused on other time frames than day trading are most likely more in tune with risk management and technical analysis. Therefore, they probably do better than the day trader, in terms of historical returns. I believe that any successful trader would succeed in any time frame. Adjustments may be required, but time frame is over-emphasized, in my opinion.

    -Daryl

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