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Do Day Traders Make Money?

No. They. Do. Not.

Study after study shows that the large majority do not make money. By large majority I mean more than 90% of day traders do not make money.

Even the <10% that do make money, only make a little bit of money.

But we all hear about the 1% that make a lot of money.

And we hear that (within the day trading industry) over and over and over.

Day trading is similar to gambling (varies by game) when it comes to your probability of making money.

  • Day Trading = Trying to make money off the market based on short-term swings.

  • So what's the opposite: Trying to make money off the market based on long-term swings = Investors.

Long-Term investors are optimistic and believe that the best companies in the world will continue to figure out how to make a profit. They also believe that the short-term is unpredictable. Over the span of years the best companies will grow. However, Long-Term investors also know that it is very difficult to know which companies will grow and which ones will not. So they will invest in hundreds of different well established companies. Long-term investors don't go throw in money at hundreds of penny stocks. They focus on the largest companies across the world in order to diversify.

You see the chart below which displays the likelihood of losing money based on time in the stock market:

  • 1 Year: 26% of your investment at a loss

  • 5 Year: 13% of your investment at a loss

  • 15 Year: 0.001% of your investment at a loss

Don't be fooled. Don't go day trade unless you see it as a game to spend a small portion of your money on. Charles Barkley is a good example. He doesn't go broke and bet all his money on gambling. He goes because he enjoys the game. The thrill of winning and the thrill of not knowing if he will win or not.

Day trading is a game, not an income producing activity. Nor is it a investment.

Day Trading 'University's' make money based off selling 'education.' That education does not lead to being a better day trader. I have prepared a few hundred day trader tax returns over the years and maybe five of them made money. My own experience is that the probability of earning money from day trading is <5%!

Don't trust those Day Trader Education courses.

A diversified portfolio with time substantially increases the probability of a gain in your investments.

Day trading is the opposite of that. It's not a diversified set of investments and it focuses on the smalles amount of time. It's a zero sum game when you only have seconds or minutes or a day to make a trade. You either lost or you won.

Long-term investing can lead to multiple 'losses' and 'wins,' but you have time so you can make a decision now, in a year, five years, or twenty!

The wise financial planner who helps you stay in the market based on your goals is the one who is looking out for your best interest.

The Day Trader Advisor/Mentor/University is just looking to get you trading and using their software for as long as possible whether you make money or not. They know you are almost guaranteed to lose money. They know you will get frustrated and want to stop. They will not want you to stop because then they don't get paid by you. In my opinion, day trading schools are as close to a legal scam as possible. At least in gambling you know it is illegal in some states, that they try to make it addictive, and that you are more likely to lose money.

I've made mistakes too. Fortunately I haven't day traded and lost money. But in March 2022 my savings was at a great place. I decided to take a bit more risk with about $5k of my emergency fund (this was the back end or what I call my 5th or 6th month portion of my emergency fund). The market had gone down 5-10% so I put the $5k in to see if over the next few months or year I could get a bit more return (buy low/sell high).

But, as we know, the market did not rebound. It kept going down in 2022 until my $5k was worth $4,115 in October of 2022. I was down 17%! I had some high unexpected expenses in July/August and October that I had not planned on. I needed to use those funds. Fortunately, I came up with other ways (see other blogs posts) so that I wouldn't take out the $4,115 and instead kept it invested.

I waited and waited and used other strategies for my financial needs until December 2023 when my original $5k was now slightly above $5k! Patience led to getting my $5k back, but it did cost me 3% and a bit of a lower credit score along with stress and time!

The lesson of the my blunder is: don't take unnecessary risk with your emergency fund. It's not there for risk, it's not there to earn a return, it's there for when you need it. And you don't know when you will need it. It's not wise to try to time the market just to earn a little extra money.

Don't take unncessary risk with any of your money.

A helpful question you can ask yourself is: if I earned 20% on this investment in a month or this year - will it really make that much of a difference for me?

If I put this $5k in to try to earn $500 more, then will that make much of a difference for my finances? For me, my answer has been no, it doesn't really change my life much. Yet, it's easy to forget like I did and take the risk.

Be a Long-Term Investor, not a Day Trader.

Blake Jones

(385) 398-4015

Pomegranate Financial LLC is an Investment Adviser registered with the State of Utah. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets, or developments mentioned. From time to time, we may have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Please contact us at (385) 398-4015 if there is any change in your financial situation, needs, goals, or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions. Additionally, we recommend you compare any account reports from PF with the account statements from your Custodian. Please notify us if you do not receive statements from your Custodian on at least a quarterly basis. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.

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