Intraday Trading Dangers: Is It Safe?

Today, you’ll learn is intraday trading safe for beginners?

Including:

  • What is intraday trading?
  • Low success Rate
  • The minimum wage is unachievable
  • Only 1% can beat the index

Intraday trading is not safe for beginners because 80% of all traders are not profitable within one year. Most of them lose money the following year.

It is the reason most day traders are not millionaires. It is like a job, however, income is not guaranteed.

This job requires a lot of screens time and it is very stressful.

The stress comes from analyzing several stocks daily and focusing only on lower time frames.

In lower time-frame trading, people must be ready to trade at all times, analyze all charts, and stress all time which is dangerous.

Why is it so dangerous?

Well, the stress of not making any money given the time spent is so frustrating.

The time spent trying to beat other traders is so hard.

It is so hard to compete against other smart people day in and day out.

Every day, intraday traders try to beat big institutions and other institutions, however, they cannot really do it consistently.

What is intraday trading?

According to Investopedia, “Intraday means within the day.” (Source)

Generally, traders settle their trades within the day or within business hours.

During business hours, intraday traders try to make money by opening and closing several positions using lower time-frames.

For example, lower time-frames or periods are usually One hour, Thirty Minute, 15-Minute, down to One Minute.  The lowest period is often the most volatile.

Volatility offers more trading opportunities.

Of course, more trades cost more because of commissions that can drain a trading account.

Some brokers do not charge commissions to day traders, however, they make money from the spread.

Every time day traders buy and sell a stock, they are losing money.

intraday trading also requires more computer screen time.

The time spent in intraday trading is usually not worth it because making money is difficult when the capital is small.

Starting with a small capital is really not optimal.

It is not optimal because making 10% per year on a $10,000 account is only $1,000.

So, people can not actually make a living with that amount of money.

Low Success Rate

Etoro’s study revealed that 80% of all day traders lose money in a year. (source)

The study was based on 83,000 traders who traded extremely lower time-frames, at least three times in a year.

The report showed that day traders lost an average of 36.3% in a year, so the success rate of intraday traders is low. (Source)

Because of the low success rate, the time spent in intraday trading is not really worth it.

Day trading is really difficult to master, and people should not replace their day job with day trading.

A day job is better and more stable. At least with a job, one can earn every day or every month.

People should not replace their monthly income because some unknown gurus said that intraday trading is profitable.

Gurus actually teach because they cannot make money trading. They actually make money from their students.

The Minimum Wage is Unachievable

Another study in the Brazilian Markets shows that only 1.1% of day traders earned more than the minimum wage, and, even worse, only 0.5% earned more than the initial salary of a bank teller. (source)

Living below or within the minimum wage is not really a good life to be in.

Why would people even want to live a life like that?

It is better to get a job than to become a day trader.

Now, some people may disagree because the study was made on Brazil day traders.

However, day traders will always have the same thinking when it comes to trading.

Their thinking is focused only on making money every day because they need it to survive.

The need to survive makes them vulnerable to mistakes. Their mistakes can be betting too much or trading with too much leverage.

When they are losing money, they tend to use higher leverage hoping to recover their losses.

Their losses keep getting bigger until they lost everything.

Only 1% Can Beat The Index

From a 1992 to 2006 study, it was found that only 1% of day traders beat the index. (source)

Beating the index is not really possible for 99% of intraday traders. 

It is not possible because of the high trading costs. The costs are usually commissions, taxes, and spreads.

Higher spreads can add up to the total trading expenses because of too much trading.

The trading expenses can exceed all the profits made by a trader during the year.

Worse, the trader can end up negative during the year despite the stressful experiences he got.