Has anyone here ever made a living day trading

I like to play around in the markets, but would say I’m far from knowledgeable enough to try and make a decent living on my trading.

Has anyone here made a living doing it?

Experience? Stressful? Fun?

I know someone who claims to do so but his wife works a six-figure job and could easily support him without any of his earnings. I don’t audit his books so I have no idea if he actually makes money.

As a practical matter, I believe that ordinary people with ordinary amounts of money and ordinary computer programming skill can’t reliably make money day-trading. If you have exceptional computer programming skill, solid understanding of how financial markets work, and sufficient capital to commit, I believe that you can go into computerized high-frequency trading with the expectation of making meaningful profits. Margins are getting slimmer and slimmer even for those guys as competition grows.

Start with this article from Investopedia.

First of all, I have never attempted short-term trading, but I used to analyze those who did it.

In the early nineties, I worked for a regional broker in Maryland as a mainframe software developer. Day-trading was going through one of its periodic surges in popularity. I was tasked with writing a few programs that would run daily to identify day-traders based on their trading activity and do some analysis of their success. The results were not pretty.

This brokerage had about 400K individual customers. Among those were a few thousand who fit the short-term trading profile I was given. I don’t remember the details of the criteria, but they involved having a certain number of buys per month that were sold before the trade settled, five business days back then.

Of the several thousand accounts my programs turned up, only a handful made any money at all from short-term trading. The common failing was that small gains were almost always cashed out, while small losses were not. Most of the accounts I looked at had a bunch of small gains wiped out by being too slow to dump a small loser until it became a big loser.

I realized I sounded way more encouraging than I meant to. How about this? I know a guy who lost nearly a million dollars day-trading. It took him close to a lifetime to build it up and less than a year to lose all of it. Part of it was holding on to losers or, worse yet, doubling down as he was losing money.

Taxes and execution costs will eat up a lot of your gains. Once you account for those, you aren’t likely to come out ahead compared to investing in index funds.

To paraphrase an old joke, if you want to make a million dollars day trading, start with three million.

That would be a 33% return, no? Impressive!

Your best odds of leaving Las Vegas with a small fortune is to arrive with a large one.

I’ve made a living as a trader at a proprietary trading firm in Chicago for the past 12 years. My daily activity isn’t focused on day trading, but I have plenty of experience trading intraday.

Is profitable day trading possible? Yes, absolutely. Is it something I would recommend to Joe Schmoe the retail trader? Nope. Markets are not purely efficient. However, the competition to profit from inefficiencies is extreme. Your competition has millions of dollars of infrastructure (software, hardware, connections to exchanges/brokers), better access to information, and many millions of dollars of trading capital. E-Trade and other retail brokers sell their retail client order flow to large market makers. The market makers have figured out that, on average, retail orders are simply more wrong than right. The market makers were willing to pay BILLIONS of dollars for the opportunity to take the other side retail trades.

My activities at work vs. how I invest my personal account have essentially nothing in common. My personal wealth is in index funds.

My business partner started day trading a few years ago and (supposedly) did so well that he discussed dropping out of our business to do it full-time. One day we had lunch and he said, “Lost $28K this morning. Don’t worry about me leaving our company.” It was only a small fraction of his net worth, but it happened so easily that it apparently scared the crap out of him.

Just curious, do you try to remain delta neutral or are you actively taking one side of the market?

My parents have CNBC on all day long and they follow the markets, but don’t buy or sell nearly as frequently as day traders do. One potential problem I see is once Jim Cramer or one of the other talking heads talks about something, the market price for that stock (bond, future or whatever) already reflects the news. So you really need to watch stuff closely to gain any advantage.

I know a guy who has been a full-time day trader for about 20 years now. He and I haven’t discussed his recent performance in any detail, but early indications were that he was making a killing; given that he’s stayed with this path for all that time, I assume he is still satisfied with his performance.

He lives in the Pacific time zone, and his work day is basically from 6:30AM - 1:00PM, the open hours for NYSE. He has no boss to answer to; with zero commute, he can roll out of bed after 6AM, pour a cup of coffee and a bowl of cereal, and sit down at his desk in pajamas - and at 1PM, his afternoons are wide open for recreation. AIUI, he has written some software that sniffs out potentially profitable trades based on criteria that he has developed, and it then automates just about everything except clicking the “execute trade” button; this leaves him with a lot of spare time to do other things ranging from household chores to surfing the internet. Not a bad life, I’d say.

As Trom suggests, this isn’t a career for the average Joe Schmoe. The guy I know has a Ph.D. in a STEM field from a top-level university, and well-above-average aptitudes for finance and computer programming; if you aren’t starting with that kind of brain power, then the odds are strongly against you. Also, working from home like that makes it easy to become socially isolated, especially if your friends are all working regular office jobs from 9-5; this may sound like heaven to hard-core introverts, but just about everyone needs some kind of social engagement, and a lifestyle like this may require deliberate effort to achieve that.

I tried in the early aughts. I had a background in financial services although not involved in trading for my job and I wasn’t an active trader for my personal accounts.

I started in the spring of 2002, the markets were still hungover from the tech bubble and 9/11. Things were unsettled, I had been laid off from a couple of tech jobs in quick succession, hated the job I was in at the time, and looked at trading as way that, if I could master it, I wouldn’t have to worry about job markets again.

My goal was to get good enough to replace most of my salary at the time, which would mean clearing about $1,000 a week profit on average. I got a couple of books and joined a chat room run by a guy who posted trades on one of Cramer’s websites, I had followed his record there for about 9 months and it was good.

I stuck it out for about 4 years, but I never got good enough, I was too risk-averse. I didn’t pull the trigger on all the trades I should have when the patterns set up, and bailed out of trades too early. My prototypical trade, when one set up, would be to buy 1,000 shares, looking for a 20 cent or more move.

I never got anywhere near my profit target and did a lot of kiting credit card promotional checks at low fees (ie. take a $50k advance from Card 1 at 0% for 9 -12 months for a $1,000 fee, when the promo period was up, do the same thing with Card 2 and use the proceeds to pay off Card 1). My wife was working and that, along with savings and some bleed off from the cash raises I did, kept the roof over my head and the lights on.

By the end of 4 years, I wasn’t really making any progress. By then, I was down to about $10k in free cash that wasn’t owed out. By that point, I could make a $75k salary by going back to work, and I just couldn’t justify continuing, especially when I was probably only 3 months away from having to put my house on the market. Luckily, I was able to find an excellent job within about a month.

One thing that definitely changed daytrading was the change from fractions to decimalization - that happened right before I started. And now there’s hardly any humans trading anymore, so the intraday patterns that used to work don’t work as well anymore.

I forget what the statistic was about daytrading success, It had to be something like 80% fail within 4 years, and I’d expect it’s even higher now. The real way to make money daytrading, like it is with a lot of other things, is to get a reputation as an expert and then charge people.

I did learn enough both about trading and my own habits, that I actually do do really well with swing trades now, not for a living, but I probably net an extra $10k a year now with $50k in a brokerage account and probably 80% of my trades have been profitable or break-even over the past 5 years; of course, it’s been a favorable environment for it. Pretty much all of my trades are just basically buying chart support, preferably in a situation where a stock’s gotten whacked out of proportion (in my judgment) and tanks fast right into a support level.

I don’t really recommend trying daytrading in lieu of a job unless you have money to burn and don’t need to live off your profits. I look at various fin twits (like StockTwits) occasionally and just laugh.

I’ve never been a trader, but I’ve worked onsite at brokerage firms which had traders. My main impression of it is that it’s boring as hell. All of the people I’m aware of worked in niche markets; areas such as German energy futures. These traders were experts in the markets they traded in. They’d be aware of dozens, if not hundreds of products, and the prices and price trends for these products. And basically their day consisted of getting up early to get every bit of news and market research they could about the products, and then once the exchange(s) they used opened, they’d spend all day looking at screens showing prices and market feeds. If they saw a product that was undervalued or overvalued, they’d buy or short it. But most of the time, what they did was nothing.
Like I said, I wasn’t involved in the trading, although I did see the downstream results. My impression was that they made several medium-small bets each day and then mostly closed them off a few hours later. They got the bets right more often than not. Occasionally you’d hear a cheer when somebody saw a big opportunity and called it right. A few times, a trader was clapped off the floor when they’d have a really big win, close off their position, and leave before the exchange closed to go celebrate. But mostly, you’d walk by a desk and it was just a bunch of guys staring at a bunch of screens and very little activity. All in all, it seemed like the brokers were having a lot more fun.

That was true of daytrading as well, it’s a lot of sitting around waiting either for a setup to form or a news item to hit and create either a spike or a plunge.

Not necessarily delta neutral, but generally I like to be hedged. I do a lot of relative value/spread trading. There might be some product that is trading at a premium/discount to what I think is fair value. Ideally, there will be a similar product that I can use to hedge out market/sector risk. Overall, though, my portfolio is generally exposed long. I continuously own far OTM puts on the SPX as disaster insurance.

You bring up a point most retail traders never consider. Though I do know professionals that trade directionally, most are spreaders. Eg: long S&P 500/short Nasdaq, long XYZ preferred stock/short XYZ common stock, long GOOGL/short AMZN, etc.

I went back and looked at my results:

2002: $16,640 loss on $12.6 million in trades
2003: $10,500 loss on $11.5 million
2004: $4,700 loss on $8 million
2005: $4,800 loss on $13.6 million
2006: $7,700 loss on $15.6 million

That was my failing as well over the last two years of trying to supplement my income with part-time day/short term trading. I made about $50,000 and lost about $60,000 by, as you say, holding on to high-spec losers that I still had faith in.

I’ve given up short term trading and now just focus on holding dividend-paying stocks. So I’ll never be rich but I won’t be losing sleep either.

There was a period of a few months or so (early 2000’s when I was trading) where Cramer would post something favorable about a stock around mid-day on his paid subscription site, and then sometimes he would mention it again on his TV show that night. And it would always get a short-lived spike from the mention on TV,

The best way to play it was to just monitor what he wrote about during the day.

Then, either right at the beginning of the show or going into a break, he would tease what he was going to mention in the next (or later) segment. He wouldn’t mention it by name in the tease, but you could 99% tell what it was if you knew what he had written that day. So you could grab a position on the tease and unload it into the spike during the actual segment.