Is Day Trading Really A Sucker’s Game?

I am a big fan of the financial blog Crossing Wall Street written by Eddy Elfenbein.  In addition to being a great writer, Eddy knows the world of investing backwards and forwards and has one of the few Twitter streams that can actually make me laugh out loud. But last week I came across a post he wrote entitled Day Trading Is A Sucker’s Game than made me twitch. Well to be honest, it may have been a “twinge” instead of a twitch, but either way it provoked a reflexive response from me, the type you get when you hear something that just goes against your core beliefs.  Like if you heard one of your drinking buddies tell the bartender, “I really don’t want a beer tonight.  Can you get me a white wine spritzer instead?”


Eddy’s argument against day trading is based on the fact that with the increased technology and talent that now exists in the world of High-Frequency Trading (HFT), the average retail trader doesn’t stand a chance.  Which leads him to this conclusion…

What all this means for you is that now more than ever, day trading is a fool’s errand. If you were ever tempted to enter the fray, recognize once and for all that those banks of computers chugging away at their algorithms have you hopelessly outclassed. There’s simply no way an individual human being can compete against a fleet of CPUs that rivals NASA’s. Do not, I repeat, do not try it. You will lose.

The only problem with this statement is that it is wrong.  Well, kinda wrong.

When I think of something or some endeavor that is a “sucker’s game” or a “fool’s errand,” I think of something in which, due to its nature, you cannot win at; like three-card Monte or an argument with your wife.  Something where the “fix is in.”  Where you’re operating in a “clip joint.”  That you’re just some rube with a chalk mark on his back destined to get “hustled,” “bamboozled,” “grifted,” “flim-flammed,” or any other number of terms I remember hearing in The Sting.

However, this not an accurate portrayal of the realities of day trading.

With the advantage of having been on both sides of this activity; trading and broker dealer, I can tell you that it is true that HFT’s do impact your ability to day trade.  For example, I regularly see execution reports come back from the exchanges denominated six places to the right of the decimal point (.000001), which allows automated, high volume trading to squeeze profits out of nano moves.

I also often see stocks trade in a tight range, then experience very “suspicious” spikes that take price through obvious stop/limit order levels, only to return to the previous range in a matter of seconds. This too is the footprint of the aforementioned Al Qaeda-like HFT firms at work.

But here is what I also see.  I see a lot of people who make money consistently by day trading.  These are not Johnny-come-lately types jumping on a fad fueled by the bullish tape.  They bear no resemblance to the secretaries, used car salesmen, and dentists who showed up on the covers of Forbes and Fortune in the late 90’s boasting of four-hour workdays, trading on the beach in the Bahamas, and giving up their “day jobs” due to the cash they were pulling out of the markets on a daily basis.

No, the successful day traders I know have been doing it for years. They all trade through retail brokers that everyone has access to, and some of them even do it with as little as five-thousand dollars in their account.  (And before you ask, “but how can they…..,” just read my post How To Day Trade With Less Than $25,000).

These are very highly skilled, disciplined traders, who use risk based methodologies and continually adapt their trading to overcome the latest threat du jour, the one always destined to sound the death knell of day trading.  The current one being HFT’s.  In fact, most successful day traders will quietly say (or sometimes not so quietly say) “there’s the cry of the loser,” when they hear someone complain that they lost money because of HFT’s.

I won’t go into all the ways the effects of HFT’s can be minimized when day trading, as I have written extensively about this topic before in posts like 5 Ways You Can Combat High Frequency And Algorithmic Trading and How To Place More Effective Stops, but instead let me tell you why someone would want to day trade in the first place

In terms of the retail participant, successful day traders are the most elite group in the markets.  They make money based on their own actions.  They are not beholden to analysts, CEO’s, the financial press, Fed governors and heads of Central Banks, false accounting scams, or earnings announcements.  They don’t have to “wait” to make their money.  They make it today, and tomorrow, and the day after that.  And best of all, since they are always actively watching the markets and by definition are flat at the close, they are largely insulated from “acts of God” like earthquakes and hurricanes, as well as the more dangerous “acts of Man” like 9/11.

So is day trading easy?  No!

Do most people lose at it?  Of course they do!

But day trading is not an investment style or philosophy, it is a level of financial mastery that most will never achieve, but millions desire.  Trust me, dig into the deepest, darkest fantasies of even the most hardcore value investor and you will find someone who wishes they could be a successful day trader. And in that context I feel the same about a post entitled “Is Day Trading A Sucker’s Game?” as I do about one called “Is Trying To Become A Professional Actor A Sucker’s Game?”

Or “Is Trying To Play Pro Football A Sucker’s Game?”

Or “Is Trying To Be A Full-Time Musician A Sucker’s Game?”

Or astronaut?  Or Olympian?  Or neurosurgeon?  Or professional poker play.  Or hedge fund manager? Or Billionaire?

You get the point.

Anything that requires focus, drive, discipline, specific skill sets, and yes, even at times luck, is hard to do successfully, but because the vast majority can’t do it doesn’t mean it can’t be done.  Nor does it mean it shouldn’t be attempted, as long as you do it the right way.

That means starting off only risking small amounts that you can afford to lose.  This will get you familiar with the mechanics of the markets and give you time to develop both a solid methodology as well as learn how your emotions come into play, not only when you lose, but when you win as well.

If you find that you have the stomach for it and are becoming consistently profitable, then you can gradually increase your size and decide if day trading is something you really want to try to get serious at, remembering that it is not an “either/or” activity.  For example, even if you are a swing trader, day trading skills are what will get you optimal entries.

What you should NOT DO however is treat day trading as a hobby, something that you undertake lightly, with minimal preparation and in an ad hoc fashion.  If you do that then you probably are better off finding a game of three-card Monte.

At the end of the day, participating in the markets is only about one thing……making money.  And you should try to make money in the way that is not only the easiest, but historically has the highest chance of success.  But life is more complex than the markets and one compelling component of life is the desire to achieve that which most cannot and which sets you apart from the rest.  Becoming a successful day trader will bring you rewards that far surpass the majority of market participants, but it is not without risk.

If you try it and find, like most will, that day trading is not your cup of tea or that you can’t make any money at it, then you can position trade, value invest, intelligently invest, or invest with whatever passive method you are most comfortable with.  But at least you will be able to say that you didn’t let the HFT boogeyman scare you away and that you took a shot at greatness.


  • Extrader

    In the long run, at best, You can break even trading a fair market, minus commissions cost. So You have 100% chances to loose money trading stocks.

  • Shelley_B

    Learn market profile.

  • Jon Ryder

    I can’t tell you where I worked, but I can tell you that I never saw an account that was consistently profiting, let alone in figures that would make ends meet. What I DID see was a LOT of people who had real jobs play the market and feed their losses with their main income. Eventually they come to a crossroads. Either they go long and stay long, or they sit back and wait for the divorce papers. I’m sure there was a time where it was profitable, but today computers will wipe you out. Imagine trying to outsmart 100 people with PhD’s from MIT, Harvard, and Stanford combined, who can access pattern algorithms as they publish, make decisions in nanoseconds, AND know what will happen before you can. They say there is no such thing as negative time, but that’s not true. HFT operates in that world because of…location, location, location.

  • Asado Independiente

    Mister, a very good post ! Of course only a small percentage of day traders can succeed.

  • As long as you only trade with risk money and preferably have money/other business on the side it is a great business. But rule 1 is only trade with risk money and have no stress. If you are relying on profits from day trading i do not think you will last nor enjoy it.

    As long as you day trade with money you can afford to risk, do not rely just on that to pay the bills and realize successful day trading does not mean trading every day for the sake of trading. It’s a pretty good way to make money.

    I wouldn’t like tom make this my only way of making money. Then it would be stressful and lonely.

  • Trade Alerts

    i’ve been a trader for a short 3 months, built a blog and make some extra as an affiliate. It works, surprised only a few people do it.
    thnx for the informative post

  • Jeff Watson

    When I was in the pit, I was able to day trade because of the edge off the order flow.. I can still make a market in wheat because I am an exchange member and can buy at the bid and sell at the offer and get the member’s price feed which is different than the retail feed. That being said, if I were a retail trader, I wouldn’t be good enough to day trade. The vig, the slippage, the commissions, the market friction, the bid/ask etc, would be too tough of an obstacle for me to overcome. And the mention of one with 50K in their account pulling down 2-3K per day, every day, that’s just pure fantasy. Nobody makes 20% per week in the markets, every week.

    • 20% a week…..No one makes 20% per month often. Realistically work on 6% to 10% per month. Which is outstanding

  • speerothekid

    you have to say the word ‘spritzer’ with like 7 extra s’s at front.


  • Robin Johnston

    For me, even IF you were successful at Day Trading, who wants to be strapped to a PC all day and shredding whatever wits you have left? Can you say heart attack? If you can manage risk, have a system that works* and still make over 40% annually while working from anywhere for only 2hrs a day, that is the way to go! Check out

  • todd scott

    I have been involved in the markets for close to twenty years and in my opinion the stock market is little more than a casino. Wall Street has and always will be a good old boys network. Read Nicholas Darvis’ book , “Wall Street the other Casino.” for insight into the worlds biggest Ponzi scheme. Most of the hucksters and gurus claiming they make money trading are deriving the majority of their income from newsletters and selling pipe dreams. Nassim Taleb’s , “Fooled by Randomness,” is another great book that provides a realistic view of the pure randomness of the stock market. I appreciate the authors view, however, having worked in both retail and institutional brokerage my experience leads me to believe Day Trading is a suckers game.

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  • scott

    It’s so lucrative in fact,that no one needs to supplement that income with subscription services…..

    • Wolf Guzman

      Following your logic, there would be no pensions or funds. Investments are subscriptions. Also, what’s wrong with growing your business and expanding?

  • HMS – Futures Trader

    Great blog post. Just to help you prove your point, I am a futures day trader and my Sharpe Ratio over the last 12 months is 6.38.


  • JohnJ

    it does work. been doing it for almost 10 years now. you have to know when to stop and when to press. it is not for everyone.

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  • GEAR

    Does not work, unless you’re able to predict the future (with historycal data? I do not think so.. Connecting the dots is possible when they have happened, not before); discipline is out of the ecuation. You’re not watching the whole pic (when they lose)

  • Marko Barisic

    I really cannot comprehend why anybody would like to undertake such endeavor as day-trading, aside for plain amusement. It is extremely nerve-wrecking and you deprive yourself from overnight movements which often bear greatest point-wise significance. It is often said that big money is made by sitting, not by acting. Why to fight for pennies and not aim for dollars?

    • kunal00

      the reason is if you have say 50k and your the best swingtrader around maybe you make 50k for the year. A great daytrader takes that 50k and makes 2-3k a day or whatever he feels like as he is taking 2-10% gains constantly all day everyday. YOu also have considerable amount of control most great daytraders have bad trades but very rarely do they even have bad weeks as if conditions are not right they just sit around. Your not really fighting for pennies vs dollars you can still take the dollars its just about using your money efficiently and picking inflection points in stocks. Why sit in a stock for 15 days to let it move 10% when you can hit the right spot and accomplish the meat of the move in 1-2 days!

      • i have never met a successful day trader that trades every day. The long term success stories are traders that only trade high probability set ups.

    • if it’s nerve racking…..then you are overtrading son. It should be fun..even when you lose. If you are hitting the bottle at the end of a bad week then lower your risk.

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Brian C. Lund

Brian C. Lund

Great father. Good friend. Decent trader/writer. Lacking husband. Solid drummer. Sometimes funny. Often A-hole. Terrible poker player. Too smart. Punk rock. Work in an ice cream shop.

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