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The success of day trading as is being advertised is false

Aug 30, 2020 Letters

Dear Editor,

Quite recently, there has been an appearance of advertisements seeking to lure persons into “educational platforms” which will enable attendees to become rich. These advertisements are all extremely similar. A typical advertisement usually begs one provocative question “Do you own a computer or smart phone and want to make money from your home?” This question is both rhetorical and clever – since the ads appear almost solely on Facebook and other social media and virtually all humans want more money.
In addition, these advertisements depict an overly simplified three step plan – LEARN, TRADE, EARN. The major issue with this three-step plan lies within step three; the desired outcome is for the most part times never achieved by actual day trading but by recruiting others to the institution. For example, with IM Academy recruiters are paid USD$150 for recruiting 3 persons, USD$600 for 12 persons, and larger sums for more recruits.
The conclusions of the author are grounded from the facts unearthed in a 2020 comprehensive study titled “Day Trading for a living?” by Fernando Chague, Rodrigo De-Losso and Bruno Giovannetti which can be found with a simple Google search. Essentially, the study evaluated the profitability of day traders in Brazil. Moreover, they assessed all individuals who day traded mini-Ibovespa futures contracts which are the preferred assets by day traders in the country being the third most traded equity index futures and options contracts in the world ahead of the E-mini S&P 500 Futures and S&P 500 Index Options, for example.
It was found that a mere 1% of day traders earned more than the Brazilian minimum wage which is pegged at US$16 dollars per day. This 1% of day traders in real terms amount to just 17 persons. Furthermore, it was also revealed that half of that 1% earned more than the starting salary of a bank teller ($54 per day).
There is also a misconception that the study helps to deal with. There is a thought that the longer you do it, the better you get at it then the more money will be made. However, it was unearthed that the probability of an individual exhibiting a positive profit monotonically decreases with the number of day he/she trades.
“We show that it is virtually impossible for an individual to trade for a living today, contrary to what brokerage specialists and course providers often claim. The previous literature was not so clear about this.” This is the concluding paragraph of the study. Suffice it to say, the only earners from the three step process are the so-called “educational platforms” which require monthly payments between USD$150 to USD$250 per month.
In subsequent letters, I will inform of legitimate, less risky and worthy investment options but until then keep your day jobs.

Yours truly,
John Edghill, MBA

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