Although my experience isn’t directly with day trading, I’ll post it because it still applies somewhat.
13 years ago I helped start up a new Mutual Fund called Rydex. (www.rydexinvestments.com) They were the first fund ever with a 100% inverse S&P 500 index… they shorted the S&P 500 with a -1 beta. It was called Ursa (latin for Bear) It was hot, and it grew like wildfire. They also had a 1.5 beta long S&P fund to match, called Nova. They were also the first fund to allow unlimited trades. So money managers, and professional portfolio advisers, flocked to the fund group because it allowed them to be 100% short one day and 150% long the next day, and back and forth as much as they wanted, using safe, protected Mutual Fund assets – retirement funds, etc.
Rydex grew quickly… but as the IT Manager, I was tasked with developing databases that tracked results. Over the time frame of 94-96, a period of some instability in the markets, about 90% of the clients lost money, and the other 10% did very well. It wasn’t intra day trading, but it was daily trades, sometimes weekly, and I found the better investors were generally going on a monthly or quarterly transaction cycle. The ones who traded every day were unanimous losers. And these were all supposed professional money managers, our minimum investment back then was $10K and our typical client size was more like $2M. Many of them used complicated technical analysys schemes and software, none of it worked reliably well.
My point is this – Day traders mostly lose money. A very few of them make good money over a long term. Day Trading from 1996-2000 was easy – just pick something and go with it. In uncertain times, it becomes nearly the same gamble as roulette or craps. And as mentioned above, it takes utter 100% concentration at all times to avoid massive losses and to maximize the gains. If you miss the top 5 gain days over a year, your ability to make a good return dwindles down to nearly nil.
All of the grissly portfolio managers at Rydex, even while managing the daily trading funds, all said the same thing. There is no substiture for buying good quality invesments and holding them for the long term. 5% annually is miles better than 50% one day, -50% the next, and 50% up the third day, etc.
