Day Trading?

In their paper, "Can Day Trading Really Be Profitable?" Carlo Zarattini and Andrew Aziz take a deep dive into the world of day trading with the Opening Range Breakout (ORB) strategy, and their findings are nothing short of electrifying. They reveal that day trading isn't just a roll of the dice but can be a veritable goldmine when done right. From 2016 to 2023, the ORB strategy, when applied to the QQQ ETF, generated an impressive annualized alpha of 33%, outshining the passive buy-and-hold approach. The secret sauce? Using the leveraged ETF TQQQ to amplify returns while sidestepping broker leverage constraints, leading to a jaw-dropping 1,484% return compared to a mere 169% for passive QQQ investors.

But this isn’t just about high returns; it's about smart trading. The authors highlight the critical importance of rigorous risk management and the wisdom of cutting losses quickly while letting profits run wild. Despite the challenges and risks, including slippage and the psychological demands of disciplined trading, the study affirms that a well-executed day trading strategy can outperform passive investments, even in volatile markets. So, while day trading might be seen by some as a high-stakes game, Zarattini and Aziz argue it's more akin to a well-played chess match—strategic, disciplined, and potentially very rewarding.

In markets where fortunes swiftly unfold,
A tale of day traders, both daring and bold.
With screens aglow, they rise with the sun,
Chasing the breakout, a race never done.

ORB strategies, five minutes to find,
The high and the low, the market's true mind.
To buy or to sell, on signals they leap,
But risks lie in wait, both wide and deep.

With leverage in hand, like a double-edged blade,
Profits can soar, but debts must be paid.
QQQ, a tech titan's parade,
Through bull and bear, their fortunes displayed.

Yet skeptics stand firm, in shadows they stay,
"Is this not gambling, at the end of the day?"
For every tale of gains in the light,
There's a story of losses, in the dark of the night.

So ponder this dance, of risk and reward,
In the quest for profits, is wisdom ignored?
To trade in the moment, or invest for the years,
Each path holds its own, with triumphs and fears.

The 0.5%:
"Day trading: where skill meets the thrill. Score big or go home."

The 99.5%:
"Day trading: a rollercoaster without the safety bar. Most end up dizzy and broke."

Undecided:
"Day trading can be a goldmine or a minefield. Balance it with a long-term game, and maybe you won't lose your shirt."