Recently, many people have been discussing day trading; some say it’s a way to make quick money, while others end up losing everything. I’ve decided to take a closer look to understand what the truth behind it really is.

First, let’s clarify what day trading is. Simply put, it involves buying and selling within the same trading day, often making multiple trades with the goal of capturing short-term price fluctuations. This approach emphasizes trading frequency and quick reactions, which is why it’s called day trading. But that’s also why many compare it to gambling — the risks are indeed very high.

I looked at data from regulatory agencies and academic research, and the conclusions are a bit harsh. FINRA and the SEC have issued investor warnings, clearly stating that day trading carries high risks and may not be suitable for most retail investors. More importantly, academic studies have found that most active retail traders end up losing money after deducting commissions, spreads, slippage, taxes, and financing costs. This isn’t an isolated case; it’s a widespread phenomenon.

Why is this the case? The main reason is actually very simple — trading costs. You might make some gross profit, but when you add up trading fees, slippage, and other expenses, the profit gets eaten away. Frequent trading actually amplifies the impact of these costs. Research has clearly shown that the higher the trading frequency, the worse the net returns tend to be after considering costs.

However, studies also do not completely rule out the possibility of skill. Indeed, a small portion of active traders achieve positive returns, but the problem is that it’s very difficult to distinguish true skill from luck. This requires many years of data and rigorous testing.

If you still want to try day trading, I recommend starting with these aspects. First, practice in a simulated environment, setting time limits and trade count limits. Carefully record each trade’s entry and exit points, slippage, commissions, so you can genuinely evaluate your performance. Many people only look at winning trades and ignore costs, which is a fatal mistake.

Second, write a written plan, clearly defining stop-loss rules and position sizes. This isn’t just formalism; it helps you stay rational during market volatility. Psychological biases can easily lead to overtrading or chasing losses, and a clear plan can help you avoid these traps.

Third, only use funds you can afford to lose. If this money significantly impacts your life, don’t touch it. Day trading should be viewed as a learning and research process, not a source of income.

To assess whether you’re suitable for day trading, ask yourself three questions: Can you afford to lose this entire amount? Do you have enough time to learn and monitor your performance? Do you have a clear trading plan? If any answer is uncertain, continue practicing on a simulator and don’t rush to use real money.

What are the most common mistakes? Overtrading, using leverage and margin, and being misled by confirmation bias and overconfidence. Cognitive biases are especially dangerous because they prevent you from objectively evaluating your performance. Simple safeguards include checklists, calmly reflecting after losses, and regularly reviewing your trading records.

What does responsible practice look like? Set a two-hour simulated trading session, limit yourself to three trades per session, and stop once you reach your daily loss limit. Track your win rate, average profit, average loss, and realized slippage. Keep records in a spreadsheet and review weekly. If your net results are consistently negative, adjust your strategy. This approach emphasizes learning rather than short-term performance.

When should you stop? Set objective pause conditions, such as a predefined drawdown percentage or the inability to outperform simple low-cost benchmarks over the long term. Pausing and reassessing can reduce the risk of losses driven by emotions or chasing recent winners.

What’s the bottom line? Regulatory agencies and research all point to the high risks of day trading, and most retail traders perform poorly after costs. Day trading should not be seen as a quick way to get rich but approached with caution.

If you decide to explore it, start with learning the basics, practice thoroughly with a simulator, only invest disposable capital, keep a written plan, and record your net performance. Review investor warnings from regulators and peer-reviewed studies to verify information. View early practice as research, not income. That’s the responsible attitude.