Do 97% of Day Traders Lose Money in Stock and Option Trading?
Many people say that 97% of day traders lose money. But is this number really correct? The 97% figure comes from a real study in Brazil, but it does not mean that 97% of all traders lose money.
Studies in India have also found that many individual traders lose money. However, the numbers are different for stock intraday trading and futures and options trading. Let us look at what the studies actually found.
What Is Day Trading?
Day trading means buying and selling on the same trading day. It is also called intraday trading.
For example, you buy a share at ₹500 and sell it later at ₹510. You make ₹10 per share before trading costs. If you sell it at ₹490, you lose ₹10 per share.
Day trading can be done in shares, futures and options. The risk is different in each one.
Where Did the 97% Number Come From?
The 97% figure comes from a study of day traders in Brazil. The study looked at people who started day trading in the Brazilian equity futures market between 2013 and 2015. It also looked at traders who continued for more than 300 days.
Among these traders, 97% lost money after trading costs. But this was one group of traders in one market. The study did not say that 97% of all stock and option traders around the world lose money.
So, the 97% figure should not be applied to every trader.
What Does SEBI Data Say About Indian Traders?
SEBI has also studied individual traders in India. One study looked at intraday trading in the equity cash market, which means normal buying and selling of shares. It found that around 7 out of 10 individual intraday traders made losses.
SEBI has also studied individual traders in the futures and options market, commonly called F&O. For FY22 to FY24, 93% of individual F&O traders lost money.
These numbers are different because the studies looked at different types of trading and different groups of traders. But they show one clear thing: many individual traders lose money in short-term trading.
Why Do So Many Day Traders Lose Money?
There is no single reason why day traders lose money. Fast price movements, trading costs, poor risk control and emotional decisions can all lead to losses. Let us look at some common reasons.
1. Prices Can Move Quickly
Prices can change very quickly during the day, especially in options. An option bought at ₹100 can fall to ₹80 or lower. If the trader keeps waiting for the price to recover, the loss can become bigger.
Beginners may not always realise how quickly option prices can change.
2. Trading Costs Add Up
Trading involves costs such as brokerage, taxes and other charges. The cost of one trade may look small, but if you trade many times, these costs can add up.
This reduces the profit you actually keep.
3. Small Losses Can Become Bigger
A trader may plan to exit at a small loss but decide to wait for the price to recover. For example, a trader buys at ₹200 and plans to exit at ₹190. But instead of exiting, the trader keeps waiting while the price falls further.
A small loss can then become much bigger.
4. Too Much Confidence Can Increase Risk
A few profitable trades can make a beginner feel too confident. The trader may start using more money or taking bigger risks.
If the next trade goes wrong, one large loss can wipe out the profit from several earlier trades.
5. Trying to Recover Losses Can Make Things Worse
After losing money, some traders immediately take another trade to recover the loss. If that trade also goes wrong, they may take an even bigger risk.
This can turn a small loss into a much larger one.
6. Emotions Can Affect Decisions
Trading involves real money, so emotions can affect decisions. Fear may make a trader exit too early, while greed may make a trader stay in a trade for too long. Anger after a loss may also lead to another rushed trade.
Having a trading plan can help reduce these emotional decisions.
Why Cheap Options Are Not Always Safe
An option trading at ₹10 may look cheap, but that does not mean it is safe. Options are normally traded in lots, so you are not buying only one unit. The price can also fall very quickly.
An option worth ₹10 can fall to ₹5, ₹2 or even close to zero. So, a cheap option can still carry a high risk.
A Profitable Trade Is Not Always a Good Trade
A risky trade can sometimes make money. A trader may take a trade without a proper plan and still make a profit, but that does not make it a good decision.
If the trader keeps taking the same kind of risk, a future trade may lead to a large loss. One profitable trade does not prove that a trading method works.
A Few Good Days Do Not Prove Much
A beginner may make money for a few days and start thinking that trading is easy. But market conditions keep changing.
A method that works when prices are moving strongly may not work in a sideways market, where prices are not moving clearly up or down. A few profitable days do not tell you whether the same method will work over a long period.
Does This Mean Nobody Can Make Money From Day Trading?
No. Some traders do make money. The studies show that many individual traders lose money, but they do not say that everyone loses.
Profitable traders do exist, but making money regularly from day trading can be much harder than it looks on social media or in profit screenshots.
Is Stock Intraday Trading Safer Than Option Trading?
Stock intraday trading and option trading have different risks. In stock intraday trading, you are mainly dealing with changes in the share price.
Options are different because their prices can be affected by several things. For example, an option can lose value as expiry gets closer. Expiry is the date when the option ends. Option prices can also move very quickly.
This is why beginners should first understand how options work. Simply knowing whether the market may go up or down is not enough.
What Should a Beginner Learn From This?
Trading should not be treated as easy money. A screenshot showing a ₹10,000 profit does not show the full story. You do not know how much the trader lost earlier, how much money was at risk or whether the trader has been making money regularly.
Before day trading, understand what you are trading, how much you can lose and what costs you may have to pay. If you want to trade options, also understand basic things such as lot size and expiry.
Final Thoughts
So, do 97% of day traders lose money? Not exactly.
The 97% figure comes from a Brazilian study. Among the traders who continued day trading for more than 300 days, 97% lost money after trading costs.
Indian studies have found different numbers. SEBI found that around 7 out of 10 individual intraday traders in the equity cash market made losses. It also found that 93% of individual F&O traders lost money during FY22 to FY24.
The percentage can change depending on the type of trading, the market and the period being studied. But one thing is clear: a large number of individual traders lose money in short-term trading.
For beginners, the first step should be to understand the market, trading costs and risk. Trading more often does not automatically mean making more money.
Day trading is not easy money. Understand the risks, control your losses, manage trading costs, and focus on disciplined decisions instead of quick profits.
