The facts about day trading and stock picking

In this post we will explore the facts about day trading and stock picking.

Day Trading:

· A staggering 75% of day traders exit the scene within the first two years.

· A mere 13% of these traders turn a profit after six months.

· Only 1% manage to sustain profitability over a span of five years.

Thoughts:

· Even if you find yourself among the elite 1%, it's crucial to measure your performance against the market's consistent risk premium (or at least the risk free rate) over time, rather than merely breaking even.

· The small fraction of traders who earn profits consistently usually comprise highly skilled quants equipped with state-of-the-art technology, dedicating their full-time efforts to chase alpha (excess returns).

Stock Picking:

· Dedication of over 500 hours annually is required to make well-informed investment decisions.

· Less than 10% of active fund managers outperform their benchmarks over the long term (remember: these are the professionals!)

Thoughts:

· The silver lining is that, despite the challenges, you're likely to earn a risk premium over time, albeit probably less than what the market offers as a whole.

Investing in ETFs:

· By choosing ETFs, you earn the risk premium associated with the market you're investing in.

When might day trading or picking individual stocks be worth considering?

· If you find joy in the process, consider most hobbies come with a price tag!

· The journey offers a profound learning experience about your emotions and personal growth.

· Engaging in stock selection or daily trading keeps you up to date with regards to political, economic, and corporate news.

On QUINETICS, you can eliminate your emotions by following algorithmic trading strategies and automatically or semi-automatically execute AI based trading strategies via a broker of your choice.

Posted by Fabian on 2024-04-04