May 29, 2025 • 12 mins
Day trading is sold as the modern path to wealth, fast money, freedom, and financial independence, all from your laptop. But behind the flashy screenshots and influencer hype lies a hard truth: most day traders lose. In this episode of The Wealth Effect, the dream turns into a nightmare for the vast majority.
We explore the psychology behind the rush, the sobering statistics no one shares, the hidden costs, emotional, financial, and mental, and why most "trading gurus" profit more from selling hope than stocks. You'll hear about survivorship bias, the rise of machines, and the brutal reality of competing against algorithms in milliseconds.
Is day trading worth it? For 95% of people, the answer is no.
This episode is a must-listen for anyone tempted by the allure of quick gains and a cautionary tale for those chasing freedom through fast trades.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to
(00:00):
The Wealth Effect.
I'm your host,
Green Moon.
And today, we're talking about a topic
that's glamorized and marketed as a dream.
But for most, it turns
into a nightmare.
Today, we're talking
about day trading.
Day trading might make you think of
fast-paced decision-making, financial
freedom, and the thrill of beating
(00:21):
the market, all from a laptop.
But behind the glamour
is a harsh reality.
The vast majority of
day traders lose money.
We'll talk about the psychology, the
statistics, and by the end of the
episode, you'll walk
away with an answer.
Let's fill
your pocket.
The fantasy of
day trading.
Imagine it.
You wake up, make a few trades, and
(00:43):
by lunch, you've made more money than
most people
do in a week.
Day trading appeals to
people because of autonomy.
No boss, no 9-to-5 schedule, scalability,
the potential for large returns,
the technology, saying that it's easy
to access these trading platforms.
Media and influencers, YouTube and
(01:04):
TikTok, are flooded with success stories.
The appeal is often sold via social
media, but most influencers earn more from
selling courses than they
actually do from trading.
That's the dream.
That gets sold.
And it's powerful.
It appeals to
something deep in us.
The gambler, the rebel,
(01:25):
the freedom seeker.
But like all dreams sold online,
it comes with fine print.
Understanding
day trading.
Day trading refers to buying and selling
financial instruments such as stocks,
futures, cryptos, and options within
the same trading day, often closing out
positions before the market closes,
(01:47):
sometimes a few times a day or more
depending on
the person.
The goal?
To profit off the small
price movements each day.
And only basic tools are needed to day
trade, such as a decently fast computer or
honestly a phone, high-speed internet,
and some type of trading platform such as
Robinhood, Webull, or honestly most
(02:09):
banks offer this service as well.
Now here's the
statistical reality.
Now here's the data
behind day trading.
Because while social media shows
wins, the stats tell the truth.
In one U.S.-based study conducted by
North American Securities Administration
Association, it found that 80% of day
(02:30):
traders quit within the first two years.
And it gets worse.
Only 1% of day traders are consistently
profitable after fees, commission,
and slippage.
A similar study done by Brad Barber
and Terrence Oden, professors at the
University of California, analyzed trading
(02:50):
behavior from large brokerage databases.
They found that the top 10% of active
traders earned positive abnormal returns.
But the bottom 90% lost money with net
losses increasing the more
frequently they traded.
And here's the thing.
(03:11):
The more confident a trader
was, the worse they performed.
Why?
Because day trading preys
on the illusion of control.
You're up
$500 today.
Great.
But what happens when volatility
spikes tomorrow and you're down $2,000?
The reason 80% of traders
quit isn't just financial.
(03:33):
It's emotional.
Day trading is a high-stakes,
high-stress, attention-draining task.
It demands constant monitoring,
intense decision-making, and emotional
neutrality that very
few people possess.
Especially in environments driven
by dopamine and social pressure.
(03:55):
Many traders
chase losses.
They over-leverage.
They believe that their next big
win will make it all worth it.
But statistically speaking, only
a fraction of 1% beat the market
consistently.
The rest, they become cautionary
tales and not success stories.
(04:16):
Even if you're good, even if you're
lucky, day trading is mentally exhausting.
Every tick of the
market can cost you.
Every second you're
watching the charts.
Your heart
rate spikes.
Day trading isn't
just about strategy.
It's about
psychology.
Stress and burnout are affected by
every tick you see your capital drop.
(04:38):
Beginners often
overestimate their edge.
New traders often chase losses,
leading to even more losses.
Let's talk
about the gurus.
The ones selling you
the freedom lifestyles.
The Lamborghinis.
The private jets.
The daily profit
screenshots.
(04:59):
But if you look closer, most of them
don't make their money from trading.
They make their money from
selling courses about trading.
There's a
word for that.
It's called grift.
What they're selling is
not a path to freedom.
It's a loop
of false hope.
Success stories usually
follow a survivalship bias.
(05:20):
You rarely hear from traders
that blew up their account.
Those who quit only after six months
or even a week after starting.
People who got into deep debt from
trying to fund their investment accounts.
Comparing day trading to long-term
investing, the S&P 500 has averaged 7-10%
(05:41):
returns annually over
the last 50 years.
It's compounded, it's
passive, and it's boring.
But it works.
Warren Buffett once said, the stock market
is a device for transferring money from
the inpatient
to the patient.
And day traders
are the inpatient.
And there are also regulatory and tax
(06:02):
considerations when day trading that most
people might
overlook.
Some must maintain a $25,000 minimum
balance on their account if they execute
four trades a day within
a five-day period.
And when it comes to tax treatment,
short-term gains are treated as regular
income and can be
taxed up to 27%.
(06:22):
There is no capital gains discount,
unlike long-term investing
where the max tax rate
would be 20%.
Frequent trading also complicates your
tax filings and can incur more costs when
filing your taxes at
the end of the year.
And sure, some
people succeed.
You've got people who turned a few
thousand dollars into millions,
(06:42):
but traded 10 hours a day, tracked every
pattern, and treated it like a business.
And now, most of their money comes from
teaching and selling
courses, not day trading.
On the other side, there are thousands of
stories on YouTube, Reddit, and forums of
people losing their life savings,
houses, and maxing out credit cards,
(07:03):
all to chase
a fantasy.
And it all comes at
an opportunity cost.
If you would have spent those six to
eight hours, instead of day trading,
you put it towards learning a new skill,
starting a business, building something
more sustainable, where
would you be in five years?
It's not just
about the money.
It's about time, health,
(07:25):
and peace of mind.
Wealth is more
than just dollars.
It's options.
It's time.
It's freedom.
It's energy for the people and
passions that matter to you the most.
In the past, day trading was
reserved for those professionals.
In suits, in skyscrapers, in
banks, phones ringing off.
(07:45):
But now, anyone with a Wi-Fi connection
and a smartphone can become a trader.
The market is more
accessible than never before.
But that's why it's
also more dangerous.
Why?
Because the opponent
has changed.
You're no longer
trading against people.
You're trading
against machines.
High-frequency
trading, HFT?
(08:05):
High-frequency trading is
the game behind the game.
It's not talked about in YouTube
thumbnails or finance TikToks.
But it quietly
dominates the market.
These are trades
executed in microseconds.
Run by hedge funds and institutions,
these systems do not rely on intuition or
(08:27):
chart patterns.
They rely on math, physics,
and proximity to servers.
If you're late by a
millisecond, you're out.
These firms spend millions to gain a
millisecond edge by buying physical space
closer to exchanges
to reduce latency.
And let that sink in while you're waiting
for a candlestick pattern to confirm
(08:48):
there's an algorithm that had
already made thousands in trading.
That's the retail
disadvantage.
Even if you're smart, ambitious, and
maybe read a few books or taken some
courses, you're still at
a structural disadvantage.
And you need to know that before
risking your life savings.
Because what you're up
(09:09):
against is execution speed.
Because retail orders are seconds behind
institutional orders, behind institutional
orders that are
milliseconds ahead of you.
Retail traders also rely
on public data feeds.
Institutions pay priority for low latency
feeds that show up before the market even
(09:29):
gets to see it.
There's also
spread costs.
High frequency trades often
profit by scalping the spread.
The difference between
the bid and ask price.
Making it more expensive for retail
traders to get in and out of positions.
And perhaps most importantly, you're
making decisions based on emotions.
(09:50):
While the
machines aren't.
You can't outspeed
the machines.
You can't out-analyze any algorithm that
reads the market in-depth in nanoseconds.
You cannot beat the system that
was never built for you to win.
But you can change
your approach.
For instance, if you're trying to
out-trade machines, build a strategy that
(10:13):
machines don't
care about.
like long-term investing, asset
allocation, business building,
real estate
acquisition.
These are strategies that have generated
wealth for such a long time that no
trading cycle
would ever disrupt.
So, is day trading worth
(10:34):
it for 95% of people?
No.
For beginners,
absolutely not.
But here's a nuance.
If you treat it like a profession
with years of education, discipline,
and capital, and you have the
psychology of a stoic monk, maybe.
But don't confuse trading for freedom and
definitely don't confuse
(10:55):
it for wealth building.
Real wealth comes from consistent action,
long-term thinking, and minimizing
mistakes, not
hitting home runs.
At The Wealth Effect, we're
not about crushing dreams.
But for 95% to 97% of listeners,
it's a losing position.
It promises autonomy but often delivers
(11:16):
stress, losses, and disillusion.
While a rare few achieve profitability,
their success is often tied to rigorous
discipline, experience, and
data, not institutions or luck.
If your goal is long-term wealth,
peace of mind, financial freedom,
consider alternatives like long-term
(11:37):
investing, building businesses,
and acquiring skills that help
you build the wealth you want.
The cost of day trading
is not just financial.
It's time, energy, and
emotional stability.
For most people, that's
too steep of a price.
So is day
trading worth it?
For almost everyone?
No.
(11:57):
For a few?
Maybe.
But only if they're treating it
like a profession and not a game.
Thank you for
listening.
Until next time.
Welcome back to
(00:00):
The Wealth Effect.
I'm your host,
Green Moon.
And today, we're talking about a topic
that's glamorized and marketed as a dream.
But for most, it turns
into a nightmare.
Today, we're talking
about day trading.
Day trading might make you think of
fast-paced decision-making, financial
freedom, and the thrill of beating
(00:21):
the market, all from a laptop.
But behind the glamour
is a harsh reality.
The vast majority of
day traders lose money.
We'll talk about the psychology, the
statistics, and by the end of the
episode, you'll walk
away with an answer.
Let's fill
your pocket.
The fantasy of
day trading.
Imagine it.
You wake up, make a few trades, and
(00:43):
by lunch, you've made more money than
most people
do in a week.
Day trading appeals to
people because of autonomy.
No boss, no 9-to-5 schedule, scalability,
the potential for large returns,
the technology, saying that it's easy
to access these trading platforms.
Media and influencers, YouTube and
(01:04):
TikTok, are flooded with success stories.
The appeal is often sold via social
media, but most influencers earn more from
selling courses than they
actually do from trading.
That's the dream.
That gets sold.
And it's powerful.
It appeals to
something deep in us.
The gambler, the rebel,
(01:25):
the freedom seeker.
But like all dreams sold online,
it comes with fine print.
Understanding
day trading.
Day trading refers to buying and selling
financial instruments such as stocks,
futures, cryptos, and options within
the same trading day, often closing out
positions before the market closes,
(01:47):
sometimes a few times a day or more
depending on
the person.
The goal?
To profit off the small
price movements each day.
And only basic tools are needed to day
trade, such as a decently fast computer or
honestly a phone, high-speed internet,
and some type of trading platform such as
Robinhood, Webull, or honestly most
(02:09):
banks offer this service as well.
Now here's the
statistical reality.
Now here's the data
behind day trading.
Because while social media shows
wins, the stats tell the truth.
In one U.S.-based study conducted by
North American Securities Administration
Association, it found that 80% of day
(02:30):
traders quit within the first two years.
And it gets worse.
Only 1% of day traders are consistently
profitable after fees, commission,
and slippage.
A similar study done by Brad Barber
and Terrence Oden, professors at the
University of California, analyzed trading
(02:50):
behavior from large brokerage databases.
They found that the top 10% of active
traders earned positive abnormal returns.
But the bottom 90% lost money with net
losses increasing the more
frequently they traded.
And here's the thing.
(03:11):
The more confident a trader
was, the worse they performed.
Why?
Because day trading preys
on the illusion of control.
You're up
$500 today.
Great.
But what happens when volatility
spikes tomorrow and you're down $2,000?
The reason 80% of traders
quit isn't just financial.
(03:33):
It's emotional.
Day trading is a high-stakes,
high-stress, attention-draining task.
It demands constant monitoring,
intense decision-making, and emotional
neutrality that very
few people possess.
Especially in environments driven
by dopamine and social pressure.
(03:55):
Many traders
chase losses.
They over-leverage.
They believe that their next big
win will make it all worth it.
But statistically speaking, only
a fraction of 1% beat the market
consistently.
The rest, they become cautionary
tales and not success stories.
(04:16):
Even if you're good, even if you're
lucky, day trading is mentally exhausting.
Every tick of the
market can cost you.
Every second you're
watching the charts.
Your heart
rate spikes.
Day trading isn't
just about strategy.
It's about
psychology.
Stress and burnout are affected by
every tick you see your capital drop.
(04:38):
Beginners often
overestimate their edge.
New traders often chase losses,
leading to even more losses.
Let's talk
about the gurus.
The ones selling you
the freedom lifestyles.
The Lamborghinis.
The private jets.
The daily profit
screenshots.
(04:59):
But if you look closer, most of them
don't make their money from trading.
They make their money from
selling courses about trading.
There's a
word for that.
It's called grift.
What they're selling is
not a path to freedom.
It's a loop
of false hope.
Success stories usually
follow a survivalship bias.
(05:20):
You rarely hear from traders
that blew up their account.
Those who quit only after six months
or even a week after starting.
People who got into deep debt from
trying to fund their investment accounts.
Comparing day trading to long-term
investing, the S&P 500 has averaged 7-10%
(05:41):
returns annually over
the last 50 years.
It's compounded, it's
passive, and it's boring.
But it works.
Warren Buffett once said, the stock market
is a device for transferring money from
the inpatient
to the patient.
And day traders
are the inpatient.
And there are also regulatory and tax
(06:02):
considerations when day trading that most
people might
overlook.
Some must maintain a $25,000 minimum
balance on their account if they execute
four trades a day within
a five-day period.
And when it comes to tax treatment,
short-term gains are treated as regular
income and can be
taxed up to 27%.
(06:22):
There is no capital gains discount,
unlike long-term investing
where the max tax rate
would be 20%.
Frequent trading also complicates your
tax filings and can incur more costs when
filing your taxes at
the end of the year.
And sure, some
people succeed.
You've got people who turned a few
thousand dollars into millions,
(06:42):
but traded 10 hours a day, tracked every
pattern, and treated it like a business.
And now, most of their money comes from
teaching and selling
courses, not day trading.
On the other side, there are thousands of
stories on YouTube, Reddit, and forums of
people losing their life savings,
houses, and maxing out credit cards,
(07:03):
all to chase
a fantasy.
And it all comes at
an opportunity cost.
If you would have spent those six to
eight hours, instead of day trading,
you put it towards learning a new skill,
starting a business, building something
more sustainable, where
would you be in five years?
It's not just
about the money.
It's about time, health,
(07:25):
and peace of mind.
Wealth is more
than just dollars.
It's options.
It's time.
It's freedom.
It's energy for the people and
passions that matter to you the most.
In the past, day trading was
reserved for those professionals.
In suits, in skyscrapers, in
banks, phones ringing off.
(07:45):
But now, anyone with a Wi-Fi connection
and a smartphone can become a trader.
The market is more
accessible than never before.
But that's why it's
also more dangerous.
Why?
Because the opponent
has changed.
You're no longer
trading against people.
You're trading
against machines.
High-frequency
trading, HFT?
(08:05):
High-frequency trading is
the game behind the game.
It's not talked about in YouTube
thumbnails or finance TikToks.
But it quietly
dominates the market.
These are trades
executed in microseconds.
Run by hedge funds and institutions,
these systems do not rely on intuition or
(08:27):
chart patterns.
They rely on math, physics,
and proximity to servers.
If you're late by a
millisecond, you're out.
These firms spend millions to gain a
millisecond edge by buying physical space
closer to exchanges
to reduce latency.
And let that sink in while you're waiting
for a candlestick pattern to confirm
(08:48):
there's an algorithm that had
already made thousands in trading.
That's the retail
disadvantage.
Even if you're smart, ambitious, and
maybe read a few books or taken some
courses, you're still at
a structural disadvantage.
And you need to know that before
risking your life savings.
Because what you're up
(09:09):
against is execution speed.
Because retail orders are seconds behind
institutional orders, behind institutional
orders that are
milliseconds ahead of you.
Retail traders also rely
on public data feeds.
Institutions pay priority for low latency
feeds that show up before the market even
(09:29):
gets to see it.
There's also
spread costs.
High frequency trades often
profit by scalping the spread.
The difference between
the bid and ask price.
Making it more expensive for retail
traders to get in and out of positions.
And perhaps most importantly, you're
making decisions based on emotions.
(09:50):
While the
machines aren't.
You can't outspeed
the machines.
You can't out-analyze any algorithm that
reads the market in-depth in nanoseconds.
You cannot beat the system that
was never built for you to win.
But you can change
your approach.
For instance, if you're trying to
out-trade machines, build a strategy that
(10:13):
machines don't
care about.
like long-term investing, asset
allocation, business building,
real estate
acquisition.
These are strategies that have generated
wealth for such a long time that no
trading cycle
would ever disrupt.
So, is day trading worth
(10:34):
it for 95% of people?
No.
For beginners,
absolutely not.
But here's a nuance.
If you treat it like a profession
with years of education, discipline,
and capital, and you have the
psychology of a stoic monk, maybe.
But don't confuse trading for freedom and
definitely don't confuse
(10:55):
it for wealth building.
Real wealth comes from consistent action,
long-term thinking, and minimizing
mistakes, not
hitting home runs.
At The Wealth Effect, we're
not about crushing dreams.
But for 95% to 97% of listeners,
it's a losing position.
It promises autonomy but often delivers
(11:16):
stress, losses, and disillusion.
While a rare few achieve profitability,
their success is often tied to rigorous
discipline, experience, and
data, not institutions or luck.
If your goal is long-term wealth,
peace of mind, financial freedom,
consider alternatives like long-term
(11:37):
investing, building businesses,
and acquiring skills that help
you build the wealth you want.
The cost of day trading
is not just financial.
It's time, energy, and
emotional stability.
For most people, that's
too steep of a price.
So is day
trading worth it?
For almost everyone?
No.
(11:57):
For a few?
Maybe.
But only if they're treating it
like a profession and not a game.
Thank you for
listening.
Until next time.
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