The Institute Trader · The reality of trading
Why Do Retail Traders Lose Money? What the Research Actually Shows
Market access is not the same as an edge. Here is what regulators and researchers actually found about losses, quitting and skill. And what each number does and does not mean.
By Michael, mentored ITPM graduateEducation only. This is not personal or general financial advice, and I do not hold an Australian Financial Services Licence. The studies below look at different groups of people. They cannot be rolled into one global failure rate.
Introduction
Let's be honest. Getting into the market has never been easier.
An app. A few minutes. A deposit. You are in.
But access to the market is not the same as having an advantage in it. Before ITPM, I was trading on my own without a real process. So this topic is personal.
So when I see a headline like "90% of traders lose money", I want to know where that number comes from. Who was studied. What they traded. Over what period.
That is what this article does. I have gone through the regulator and academic research on why retail traders lose money, and I have kept every number tied to the exact group it describes.
Here is the truth. Sustained success in speculative short-term trading is uncommon. The evidence on that is consistent. But the reasons are more useful than the headline.
Key findings
A few more that are worth knowing.
- India. SEBI reported 93% of individual equity futures-and-options traders lost money across FY2022-FY2024. [4]
- Taiwan. One study found more than 75% of day traders quit within two years in its historical population. Another found fewer than 1% earned reliably positive abnormal returns after fees. [10][11]
- United States. Options market research found average net losses in selected retail options activity. [7][12]
Look at those numbers side by side and the picture is pretty clear. But be careful. They are not measuring the same thing.
What the numbers actually mean
This is the part most people skip. And it is the part that matters.
| Study / geography | Finding | Population, period and limitation |
|---|---|---|
| Brazil / Chague et al. [1] | 97% lost money | Individuals who started equity futures day trading in 2013-2015 and persisted over 300 days. Not all retail traders. |
| UK / FCA [2] | Approx. 80% lost | Customers investing in leveraged CFDs. Statement dated 2022. Not stocks or ETFs. |
| Australia / ASIC [3] | 68% lost | Retail CFD investors in FY2024. ASIC states total losses above A$458m including A$73m fees. |
| India / SEBI [4] | 93% lost | Individual equity F&O traders during FY2022-FY2024. Net trading losses inclusive of transaction costs. |
| Australia / SPIVA [5] | 87% underperformed | Actively managed Australian Equity General Funds over 15 years to Dec 2025. Underperformance, not absolute losses. Not retail accounts. |
| US / Barber & Odean [6] | 11.4% vs 17.9% | Annual returns for most-active households vs market, 1991-1996. Both positive. A performance shortfall, not a losing-trader percentage. |
| US / options [7] | Average retail losses | US options proxy data, net of costs, often concentrated in short-term option positions. No universally valid percentage of traders losing. |
"Failure" means different things in these studies.
In Brazil, the UK, Australia and India, it means a net loss after costs. In the SPIVA and Barber & Odean work, it means falling behind a benchmark, while still making money. In the US options research, it is an average loss across activity, not a share of traders.
Net returns include trading costs. Gross returns do not. That gap is where a lot of retail traders bleed.
How many people start trading?
Nobody actually knows the worldwide number. I looked.
Broker account totals, unique people, funded accounts, share ownership, derivatives activity and trade volume all measure different things. Mix them together and you get a number that means nothing.
- Australia. The ASX 2023 Investor Study estimated 10.2 million Australian investors and 7.7 million people with on-exchange investments. Those are investors. Not all day traders. Not new accounts. [8]
- US options. NYSE analysis estimated retail options participation around 45% in July 2023. That is an activity-based measure, not a count of traders. [9]
The honest takeaway. Participation has expanded. A reliable count of how many new retail traders start every year, globally, does not exist.
How many quit?
More than 75% of day traders quit within two years in a Taiwanese day-trading population studied across 1992-2006. Poor performers were more likely to quit. [10]
That number gets thrown around a lot. So let's be precise about it.
It is not 75% of all investors closing their brokerage accounts. And staying in the game does not mean someone is making money. People stop for all kinds of reasons. Losses. Boredom. A new baby. A deliberate switch to longer-term investing. Some keep going while they keep losing.
You will not see a neat one-year, three-year, five-year survival curve here. No study I trust defines the group well enough to draw one.
Is there a small group with real skill?
Yes. But it is small.
In a peer-reviewed study of Taiwanese day traders, fewer than 1% of the day-trader population could predictably and reliably earn positive abnormal returns net of fees. [11]
That is stronger evidence about real skill than a win rate from one good month. But it is one population. It is not a worldwide success rate.
Here is the distinction I wish someone had drilled into me earlier. Winning trades, a profitable year, and a repeatable risk-adjusted edge are three different things.
I had a strong 2025. You can see the numbers on my trading results page. But one good year is not proof of an edge. Consistency over many years and many trades is.
Picking a trading approach: what tends to break down
People love to ask what percentage of traders do day trading versus swing trading. Nobody has that data.
The categories overlap anyway. Mean reversion can be intraday or over weeks. Options are a product, not a strategy. Value investing can sit alongside momentum timing. So instead of making up popularity numbers, here is what each approach demands, and where it usually goes wrong.
| Approach | Holding horizon | What tends to break down |
|---|---|---|
| Day trading | Seconds to hours | Costs, slippage, leverage, execution, overtrading |
| Swing trading | Days to weeks | Overnight gaps, false signals, volatility shifts |
| Momentum / trend | Days to months | Reversals, whipsaws, crowding and regime changes |
| Mean reversion | Minutes to weeks | Trends that keep moving against the position |
| Value investing | Months to years | Value traps, valuation errors, prolonged underperformance |
| Passive investing | Years to decades | Drawdowns, behavioural selling, poor diversification |
| Options strategies | Hours to months | Spread costs, volatility pricing, theta, sizing and complexity |
For what it is worth, I trade a long/short book of NYSE stocks, expressed mostly through options. That puts me in the last row. Costs, volatility pricing, theta and sizing are exactly the things I have to manage every week.
Why retail traders start on the back foot
This is the part I find most useful. It is not that retail traders are less intelligent. It is that the setup is stacked against them.
Overtrading and costs. Every trade adds spread, commission, slippage and potential tax. The US brokerage study shows the link between trading more and earning less. [6]
Leverage and ruin risk. A big move against you can wipe out leveraged CFD, futures and options positions. ASIC specifically calls out leverage and financing costs in CFD outcomes. [3]
Competition and execution. You are up against professional liquidity providers and sophisticated counterparties. Knowing a chart pattern is not an edge.
Overconfidence. A few good weeks can just be luck or a friendly market. You need a big enough sample, and realistic costs, before you can judge yourself.
No real process. An entry signal is not a portfolio. Exits, position size, correlated exposure, capital limits and the market regime all matter.
Mixing up investing and trading. Long-term investing and short-term speculation are different activities. A statistic about one cannot describe the other.
One more thing. Active fund managers trailing a benchmark does not mean they lost money. And passive investing is not risk free.
A strategy is not a trading process
This is the whole point of the article.
Most traders go looking for a better entry. A better indicator. A better setup. But the entry is the smallest part of the job.
It is not about finding the perfect trade. It is about risk management, portfolio construction, market context, exit decisions and measuring your performance honestly.
Think of it like driving. Anyone can turn the key. Staying on the road for years, in rain and fog and traffic, is the hard part.
Understanding how the market works is the starting point. It is not a promise of results.
Where education fits
I will be straight with you. No course reverses these statistics, and you should be wary of anyone who says theirs does.
What good education gives you is a process. For me that was ITPM. It taught me to think in terms of macro context, a long/short book, position sizing and proactive and reactive risk management, instead of chasing setups. That is the framework I still trade today.
If you want to see what that looks like in detail, start with my ITPM reviews. The introductory course is covered in my IPLT review. If you are weighing up the core course, my PTM 2.0 review covers it, and the options course is in my POTM review. And if you decide to go ahead, you can use my code ptmcutts50pct on the ITPM discount page.
Key Takeaways
- There is no single global failure rate for retail traders.
- Every statistic belongs to a specific product, group and period.
- Losing money, underperforming a benchmark and quitting are different outcomes.
- Persistent skill exists, but in the Taiwan study it was under 1%.
- Costs, leverage, competition and overconfidence do most of the damage.
- An entry is not a process. Risk and portfolio construction matter more.
Final Thoughts
None of this is meant to scare you off. It is meant to stop you walking in blind.
The market is open to everyone. The edge is not. If you are going to trade, build a process first. Then let the results, good and bad, tell you whether it is working.
Frequently Asked Questions
What percentage of retail traders lose money?
There is no single global number, and anyone quoting one is oversimplifying. Each study measures a specific group. About 80% of UK CFD customers lose money (FCA, 2022). 68% of Australian retail CFD investors lost money in FY2024 (ASIC). 93% of individual equity F&O traders in India lost money across FY2022-FY2024 (SEBI). 97% of Brazilian equity futures day traders who persisted beyond 300 days lost money. Different products, different people, different years.
Do most day traders quit?
In a Taiwanese day-trading population studied across 1992-2006, more than 75% of day traders quit within two years. Poor performers were more likely to quit. That is one historical group, not a global attrition rate. And sticking around does not mean someone is profitable.
Does trading more often improve returns?
Not according to the best-known evidence. In a study of 66,465 US brokerage households (1991-1996), the most active traders earned 11.4% a year. The market returned 17.9%. Every extra trade adds spread, commission, slippage and potential tax costs.
Is there a small group of traders with real skill?
In a peer-reviewed study of Taiwanese day traders, fewer than 1% were able to predictably and reliably earn positive abnormal returns net of fees. That tells you persistent skill is rare in that population. It is not a worldwide success rate.
Does trading education guarantee profits?
No. And I would be wary of anyone who says it does. Good education gives you a process for risk, portfolio construction and market context. It does not guarantee results, and none of the published loss rates have been reversed by any course, including the ones I review.
Methodology
I have prioritised original regulator, exchange and academic material. Each figure is reported for the exact population, product and period studied, and none of them are combined into a single failure rate. I checked the source links on 10 October 2026. Three academic sources (SSRN, Oxford Academic and eScholarship) sit behind access checks, so I matched those by identifier. Much of this research is historical and product-specific, so read it that way.
Sources
- Chague, De-Losso & Giovannetti, Day Trading for a Living? (2020)
- UK FCA, CFD sector concerns (1 Dec 2022)
- ASIC, Report 828 announcement / FY2024 CFD losses (2026)
- SEBI, 93% individual equity F&O losses (23 Sep 2024)
- S&P SPIVA Australia Year-End 2025
- Barber & Odean, Trading Is Hazardous to Your Wealth (2000)
- Bryzgalova, Pavlova & Sikorskaya, Retail Trading in Options and the Rise of the Big Three Wholesalers (2023)
- ASX Australian Investor Study 2023
- NYSE, Trends in Options Trading (4 Dec 2023)
- Learning, Fast or Slow, Review of Asset Pricing Studies
- Barber et al., The Cross-Section of Speculator Skill (2014)
- MIT, Losing is Optional: Retail Option Trading (2024)
Disclaimer
The information contained in this article is provided for general informational and educational purposes only and does not constitute financial, investment, or other professional advice. The content reflects the personal opinions of the author based on publicly available information at the time of writing and should not be relied upon as the basis for any investment decisions. Earnings reviews may contain forward-looking statements that are inherently uncertain and subject to change.
Readers are strongly encouraged to conduct their own research and due diligence, and to consult with a qualified financial advisor or licensed professional before making any investment or trading decisions. The author and publisher make no representations or warranties, express or implied, as to the accuracy, completeness, or reliability of the information provided and accept no liability for any loss or damage arising directly or indirectly from the use of or reliance on the information herein.
