Day Trading For Fast Cash? Here’s The Reality For Most Who Try

The emergence of a large number of online platforms over the past decade has boosted the attraction of day trading. Additionally, the success stories of such traders, shared on social media platforms, have played a key role in increasing the popularity of day trading.

Day trading is the practice of buying and selling securities within the same trading session. For most new entrants in the securities market, the idea of being able to generate daily profits is very compelling compared to the standard practice of remaining invested for long, which requires immense patience to avail of the benefit of compounding.

Most Day Traders Suffer Losses

However, studies done by various agencies indicate that most individual traders in the short-term trading segment suffered losses because of inherited structural and behavioural factors associated with such trading strategies.

Says Ajay Kejriwal, executive director at Choice International, a broking firm: “Despite depicting such a rosy picture, the truth is somewhat different, and a vast majority of individuals have suffered losses. Various industry studies and market research reports have revealed that only a fraction of people among the vast number of daily traders remain profitable in the long run.”

What Makes Day Trading Risky

Market Volatility: One of the major reasons why most intra-day traders incur losses is the market’s unpredictable and volatile nature. Price movements in a given trading session are governed by several factors, such as news, institutional flows, and technical factors, that are difficult for an individual trader to anticipate.

“Emotional decision-making by individual traders is another important cause of losses. Sometimes, swings in the market spark stronger emotions such as fear and greed, and these emotions can easily prompt traders to take decisions by overriding rational strategies, thereby leading to premature exits, excessive risk-taking, or chasing losses,” adds Kejriwal.

Lack of Information: Additionally, because of a lack of information, individual traders are at a clear disadvantage. Most of them rely on limited tools compared to institutional participants, who have access to advanced computing, algorithms, and deep research.

Unrealistic Expectations of Quick Returns: Unrealistic expectations by individual traders, particularly from newcomers who step into the market chasing quick and high returns, are another major cause for the losses in the day-trading segment. Discipline, training, and a robust risk-management framework are essential for ensuring long-term profitability in the capital market, which many retail traders lack.

Conclusion

Most individual traders in the day-trading segment begin their journey with lots of optimism and enthusiasm, and some of them do book early profits. However, as soon as markets start behaving differently, they start incurring losses. Their attempts to recover losses further deepen their setback and drag them further into a vicious cycle of losses.

For many individuals, this path ultimately leads to a significant reduction in capital and a complete disillusionment from trading.

Despite inherent challenges associated with this type of trading, a small number of skilled and disciplined traders do succeed. But their examples can’t be followed by everyone, and the interest of the majority of investors will be better served by following long-term and well-researched investment strategies.

Adds Kejriwal: “One should remember that investing in comprehensively reviewed companies, mutual funds, or index-based products across a long time-frame will allow them to benefit from compounding, diversification, and reduced stress. This approach aligns better with wealth-building goals and financial security.”

Despite showing glittering promises, day-trading often leads most participants to substantial losses rather than consistent income. One should always keep in mind that sustained wealth creation is rarely achieved through speed; it is built through patience, discipline, and a focus on long-term financial planning.