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Why The Majority Of Day Traders Fail / By: Oliver Krzeczowski


 

All corners of the internet seem to market trading as a get-rich-quick opportunity, with little effort other than buying and selling stocks from your laptop. In reality, successful day trading requires years of training and determination.


A mature day trader Ayan Sayani suggests, “Day trading takes a lot of effort, but from the outside it looks like an easy way to get rich because of these supposed millionaires online.” It turns out that the vast majority of people who set out to successfully day trade don’t do it well. “Studies have shown that more than 97% of day traders lose money over time, and less than 1% of day traders are actually profitable” (Dave Ramsey, 2022). Almost everyone who attempts to day trade fails. This is largely due to three reasons: lack of determination, inadequate education of technical analysis, and not having mastery of trading psychology. A lack of experience and knowledge in technical analysis causes people to fall victim to random reinforcement.


Random reinforcement is the concept of randomness in the market influencing traders. This randomness is harmful when it punishes good habits and rewards bad habits. It changes a trader’s mentality and without correct understanding. A large majority of people will fall into this trap, picking up bad habits along the way. Random reinforcement also affects the psychology of a trader and causes them to make decisions based on emotions like fear and greed. As someone who day trades for a living, Arkadiusz Betlej, says, “Psychology to me is about 80% of winning in the stock market.” It’s also why so many people lose. Inexperienced traders allow emotions such as fear, greed, and desperation to affect their trades and decision making. Uncontrolled emotions cause traders to make illogical mistakes that could have been avoided. A mix of emotions and losses cause about "85% of day traders [to] quit within the first 3 years of trading” (Day Trade Review, 2022). Day trading can take a lot longer than expected to master and the statistics prove that the large majority of people will not be successful. Whenever making any sort of financial decision make sure to do your own research or consult a certified financial advisor.


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