Did you know that Asia is home to the most online traders, but the UK takes the top spot in Europe? Or, have you ever wondered how many female day traders there are?
Well, here is our list of 15 day trading statistics that may surprise you.
#15. Successful day traders are consistently profitable
It’s no surprise that successful day traders continue to achieve great results in the future. This shows that trading is more than just a game of luck. If you get the basics right and stick to a good trading plan, you’ll likely remain profitable in the future.
Nevertheless, only a small percentage of traders achieve consistent results in the markets. It takes hours of screen time and months of experience before you can expect positive results with trading.
#14. Nearly 40% of day traders quit within one month. After three years, only 13% of day traders remain.
In the first month of day trading, around 40% of traders quit. They either realise that they are not cut out to be traders, or they blow their account because of overtrading and poor risk management.
After two years, around 80% of traders quit. Two years is enough time to learn how to trade and how to become a successful trader, so the 20% that have remained have likely shown a passion for trading, discipline, and patience.
After three years, only 13% of day traders remain active. So, around one in 10 day traders make it. Do you have what it takes to become a profitable day trader?
#13. One in seven online traders are female
According to the Modern Trader report by BrokerNotes.co, there were around 13.9 million online traders in 2017. The report also showed that the number of female traders was constantly growing. Over the course of one year, the number of female traders increased from 1 in 10 to 1 in 7. At the time the report was published, there were 2.7 million female traders worldwide.
#12. Day traders account for around 12% of all trading volume
In the vast universe of traders and investors, successful day traders account for a relatively small percentage of the total number of active market participants. However, given their fast-paced trading style, they account for a large percentage of the total day trading volume. According to a report published in 2010, active day traders account for around 12% of the daily trading volume.
#11. Less than 5% of traders live in a major financial city
The boom of online trading made it possible for anyone with internet access to trade the financial markets. Today, only 5% of all online traders live in a major financial city, like New York, London, Tokyo, or Singapore. The remaining 95% of traders come from all over the world, with around 50% of all traders living in Asia. Europe comes second, and Africa third.
#10. Gamblers underperform non-gamblers
Although some might compare trading with gambling, the truth is that successful traders don’t rely solely on luck. Of course, a certain amount of luck is needed with every trade, but traders who are consistently profitable rely more on their trading tools, daily analysis, and controlling risk.
So, it’s no surprise that traders who are approaching the market from a gambler’s standpoint underperform disciplined and experienced traders. The markets attract impulsive personalities who want to feel the thrill and excitement of placing a trade, but there are also numerous opportunities to self-destruct.
#9. Day traders are more active when their most recent trades were winners
The average day trader tends to be more active in the markets and increase his or her position sizes after a winning streak. That’s normal human behaviour since our brains are wired to extrapolate our most recent experiences in the future. Unfortunately, markets don’t always play by normal rules. After a winning streak, when traders feel invincible and are convinced that they’ve cracked the market code, that’s usually the time when the largest losses occur.
#8. The most online traders in Europe are located in the UK
The UK is home to the most online traders in Europe. In 2017, there were an estimated 730,000 traders in the UK, which is almost twice as many online traders as in any other country. The UK has also been the fifth fastest-growing European country by the number of active traders. Although London is home to the most online traders in the UK, the majority of traders (around 75%) live and work outside of London.
#7. Millennials account for 58% of all online traders
The number of millennials who are active in the financial markets has been gradually growing over the last few years. Traders between the ages of 25 and 34 represent around 58% of all online traders, according to The Modern Trader report. There are many reasons for this, such as lower entry barriers.
With the growing number of retail and discount brokers, almost anyone can open an account and start trading. In addition, many brokers offer social trading platforms and copy trading where less experienced traders can follow (or copy) the signals of more experienced and profitable traders. This means that less trading knowledge is needed nowadays to become a retail trader.
#6. The average British trader earns around £35,000 per year
The average trader in the UK earns a household income of around 35,000 pounds, which is likely the result of younger traders joining the market. Around 39% of traders fall within an income bracket of £20,000-£24,999, while less than 1% of active traders in the UK have a household income of above £75,000.
#5. The number of traders who prefer cryptocurrencies over traditional instruments has increased over the last few years
The rising popularity of cryptocurrencies and their exponential growth in price keeps attracting new traders every day. Many traders, especially millennials, are now actively day trading cryptocurrencies like Bitcoin, Ethereum, and Ripple. The rising demand for trading cryptocurrencies also urged retail brokers to include the most popular currencies to their list of tradeable assets.
#4. 90% of day traders lose 90% of their capital within 90 days
A popular saying in the online trading community has been that 90% of day traders lose 90% of their capital within the first 90 days of trading. The most common mistake new traders make is overtrading and neglecting the importance of risk management, which boils down to the general lack of trading knowledge.
The best way to avoid large losses and blow up your account is to control risk. Risk only a small percentage of your trading account per trade, and aim for your winners to be larger than your average losing positions.
#3. Traders who trade with a higher reward-to-risk ratio are more successful
In the previous point, we briefly touched on the importance of the reward-to-risk ratio. The reward-to-risk ratio compares the potential profit and the potential loss of a trade and expresses it as a ratio. For example, if the potential loss of your trade is $100 (based on your stop-loss), and the potential profit is $300 (based on your profit-target), then the reward-to-risk ratio of that trade would the 3:1, i.e. you’re risking $1 to make $3.
The Traits of Successful Traders report has shown that traders who aim for a reward-to-risk ratio of at least 1:1 achieve better results over the long run than traders who take trades with an R/R ratio of below 1. Keep that in mind when placing your next trade.
#2. Retail traders aren’t good at trading trends
An interesting fact about day trading is that retail traders are generally not good at trading trends. The majority of retail traders will be shorting during uptrends and buying during downtrends, as they often believe that the price or trend is overextended during trends.
Look at any broker’s statistic about the positioning of their clients (many brokers provide those charts for free), and you’ll always see the same happening: Retail traders trading against the trend, hoping for an upcoming reversal.
They have also learned to “buy low, and sell high”, and while this works when the market is sideways trading, it can lead to large losses when markets are trending.
#1. Trading education and market knowledge improves a day trader’s performance
While this last point shouldn’t come as a surprise for you, it’s important to emphasise the importance of a trading education. Many of the points listed above wouldn’t make it to the list if day traders knew how to control their risk, how to find high-probability trade setups, how to ride a trend, or how to properly apply the “buy low, sell high” principle.
At My Trading Skills, we strive to deliver the most complete trading education for aspiring and experienced traders. Check out our Trading for Beginners course if you haven’t already. Learn how to become a better trader.
Credit: My Trading Skills