The Profitability of Active Stock Traders

Abstract

Active stock traders, or day traders, who may account for a sizable proportion of US trading volume, hold stocks for only hours or even minutes. Examination of their trading profits reveals that about half of the 1,386 day traders in this study were profitable after paying commissions. Both profitable and unprofitable traders have very similar trading characteristics; they concentrate their trading at much the same time, on the same stocks, and in the same trading locations. Yet the skilled or lucky traders generate $9.5 million in net intraday profits, and the unskilled or unlucky lost $4.6 million in the same three-month sample period.

JEL Classification: G10, G19