Coming from Dr. Steenbarger, these findings are hard to dismiss as the ravings of someone with an ax to grind against trading.
From the study:
In the average year, 360,000 individuals engage in day trading. While about 13% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders (less than 1,000 out of 360,000) are able to outperform consistently.
Trading Is Not For Me
Disclaimer: I studied technical analysis and trading several years ago and decided that I had neither the skill nor the temperament for it. It also seemed to me like a zero-sum game that had a winner-take-all dynamic about it, with a bunch of people donating their capital or slogging along near breakeven to finance a few big winners.
I had informally figured 5% to 10% of traders made real money, so it shocked even me that the figure is less than 1%.
Maybe you figure you will be part of the lucky 0.28%. Good luck, but the upset stomach and 24/7 nature of the endeavor wouldn’t be worth it for me even if the odds of success were 50/50.
Don’t Trade, Invest
I suggest instead a lengthened time horizon and thinking like a partner in a business. Focus on intrinsic value and buying with a margin of safety.
I also suggest dropping everything to read Risk Revisited, the latest memo from Howard Marks. It is a master tour of the world of risk from one of the world’s great investors.
Associate With the Right People
So try to socialize — in the real world and in online social media — only with investors who are calm and methodical. After all, whatever your peers pay attention to, you will also concentrate on — so following more-sensible people will help inoculate you against panic.
Other Links of Interest:
Video: Howard Marks on Risk Assessment, Market Strategy