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Lesson 20: Basics of Level 2 data (the Market Depth or Order Book)

Lesson 20: Basics of Level 2 data (the Market Depth or Order Book)

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Education Center / Day Trading / Intro Course / Lesson 20: Basics of Level 2 data (the Market Depth or Order Book)

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Andrew Aziz (C) Bear Bull Traders is a business based in the United Arab Emirates. For all inquiries please contact (email only) Aziz Online LLC FZ Al Shohada Road Al Hamra Industrial Zone - FZ - Ras al Khaimah - United Arab Emirates [email protected]

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We may publish testimonials or descriptions of certain selected real or simulated trading performance for educational purposes only, but these results are not indicative of future results or performance, and are not intended to be a representation, warranty or guarantee that similar results will be obtained by you. Our provided $50,000 funded training program is conducted entirely in a simulated environment. All accounts provided are 100% simulated and do not involve real money. Any fees paid are strictly to cover the cost of the competition, platform access, and data services. We are not a proprietary trading firm, and we are not licensed or registered to offer financial or investment advice. This program is for educational and training purposes only. Any gains achieved in the simulator do not reflect real-world performance and should not be seen as an indication of future success in live trading. Real trading involves significant risk, including psychological challenges, and there is no guarantee of profitability. There is no profit-sharing or real capital involved at any stage.

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Available research data suggests that most day traders are NOT profitable.

The Profitability of Day Trading: What Research Tells Us A growing body of academic research suggests that the majority of individuals who engage in day trading do not achieve consistent profitability.

In a comprehensive 2014 study titled “Do Day Traders Rationally Learn About Their Ability?”, researchers from the University of California analyzed an extensive dataset comprising 3.7 billion trades executed on the Taiwan Stock Exchange between 1992 and 2006. Their findings revealed that only 9.81% of day trading volume could be attributed to traders who demonstrated repeatable, predictable profitability. Furthermore, these consistently profitable traders represented less than 3% of all active participants on any given trading day.

A separate study published in the Journal of Applied Finance in 2005, titled “The Profitability of Active Stock Traders”, examined 1,146 U.S.-based brokerage accounts that actively traded equities between March and June 2000. The researchers, affiliated with the University of Oxford and University College Dublin, found that only 50% of traders generated a profit during that period, with the average net gain being $16,619.

Similarly, a 2003 study published in the Financial Analysts Journal, “The Profitability of Day Traders”, reviewed 334 active trading accounts from February 1998 to October 1999. In that sample, only 35% of accounts were profitable, and a mere 14% earned profits exceeding $10,000.

These studies collectively demonstrate the substantial difficulty of achieving long-term success in day trading. While methodologies and market conditions varied, the overall trend remains clear: a significant portion of retail traders fail to generate consistent profits. At minimum, the data implies that at least half of all day traders are unlikely to be profitable, and in many cases, the percentage is considerably lower.

These findings underscore the reality that day trading is a highly speculative and risky activity. Participants should be fully aware that trading can result in significant financial losses, including the total loss of invested capital.

The content provided is intended for informational and educational purposes only. It does not constitute financial, legal, or tax advice. Any mention of a specific security or market should not be interpreted as a recommendation to buy or sell. All investments and trades carry risk, and decisions should be made with care and, where appropriate, with guidance from a licensed financial professional.

For full legal details, please refer to our complete disclaimer here.

Citations:

Barber, Brad; Lee, Yong-Ill; Liu, Yu-Jane; Odean, Terrance. (2014). Do Day Traders Rationally Learn About Their Ability? SSRN Electronic Journal. SSRN Electronic Journal

Garvey, Ryan; Murphy, Anthony. (2005). The Profitability of Active Stock Traders. Journal of Applied Finance, Vol. 15, No. 2. The Profitability of Active Stock Traders

Jordan, Douglas J.; Diltz, J. David. (2003). The Profitability of Day Traders. Financial Analysts Journal, 59(6), 85–94. The Profitability of Day Traders

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