Most traders underperform to a coin flip day trading bot

Mar 6, 2022

First-time day traders are most likely going to lose money. CNBC quotes at least four studies with a similar conclusion: 90% of traders fail to make money.

The primary reason that most traders fail is not because of their strategy, it is because of their psychology. As Benjamin Graham liked to say, “The worst enemy of the investor is most likely himself.”

To quantify how bad the fact of 90% losing money is, we compared it to a coin flip trading bot which makes a trading decision based on a virtual coin flip random(0,1)

Below are the results for

• Trading QQQ
• Random enter and exit at 10min intervals
  
• No stop loss
  
• Always exit EOD (no hold overnight)
  
• 100 simulations per year to smooth it out
  

Algo parameters:

• Enter Criteria: Random.random >=0.5
  
• Exit Criteria: Random.random >=0.5
  

Year over year performance:

2016:
Average Performance 1.92%
Best Performance 20.38%
Worst Performance -10.21%
Average MDD -6.65%

2017:
Average Performance 3.08%
Best Performance 10.92%
Worst Performance -4.10%
Average MDD -3.99%

2018:
Average Performance -3.56%
Best Performance 21.65%
Worst Performance -21.08%
Average MDD -12.05%

2019:
Average Performance 4.80%
Best Performance 15.61%
Worst Performance -6.75%
Average MDD -6.03%

2020:
Average Performance 6.66%
Best Performance 33.63%
Worst Performance -17.12%
Average MDD -10.69%

2021:
Average Performance 2.41%
Best Performance 26.31%
Worst Performance -17.97%
Average MDD -7.25%

2022:
Average Performance -4.21%
Best Performance 3.91%
Worst Performance -10.00%
Average MDD -5.40%

We expected it to perform worse than that ;)
Disclaimer: NOT financial/investment advice