The base rates of retail day trading

It is 16:05 ET (04:05 ICT, winter) on a Friday. You have just closed your third week of trading MNQ, the micro Nasdaq-100 future, in a simulator. The log says 41 trades, 24 winners, +$380. A chat you follow says that traders who are “consistent” for a month are ready for real money. You feel ready.

Before you decide, you need one number that has nothing to do with you: how do people who start where you are usually end up? This lesson gives that number, explains why it is so low, and shows how to use it without ignoring it or giving up.

Key terms

Base rate (tỷ lệ nền): how often an outcome happens in a whole group, before you know anything special about one member Definition. If 3 of 100 drivers crash in a year, 3% is the base rate for “a driver crashes this year”.

Prior (giả định ban đầu): the belief you start from before your own evidence arrives Definition. On this site the prior for any trader, including you, is “no edge yet”.

Edge (lợi thế): a result better than chance after all costs, shown on enough trades to rule out luck Definition.

Day trader (người giao dịch trong ngày): someone who opens and closes positions within the same session, usually many times a week Definition.

Net of fees (sau phí): after commissions, exchange fees and slippage are subtracted Definition. Slippage is the gap between the price you wanted and the price you got.

Terms you need: R is the dollar amount you risk on one trade, from entry to stop (an order that exits a losing trade); target is the exit order for a gain. Long means buying to profit from a rise; short means selling to profit from a fall. A contract is one standardized futures unit (MNQ moves in 0.25-point ticks worth $0.50 each, or $2 a point), and a round trip is entering and exiting a trade once (with commission paid to the broker and exchange). Hit rate is the share of trades that win, standard deviation is the typical spread around the average (EV1.01), and a prop-firm evaluation is a paid test account with a maximum loss limit (RSK1.01, PROP1.03).

Chart first: what costs do to a trader with no edge

How it works

Futures are zero-sum before costs

Every futures contract has a buyer and a seller Definition. When NQ rises 10 points, the long gains exactly what the short loses, so all traders’ gross results add up to zero. Commissions and exchange fees then leave the group entirely, and the total falls below zero Definition. Slippage moves money from traders who demand an immediate fill to the firms that supply it, so for a retail trader it is one more cost Definition.

That is the mechanism behind the base rates below. Nobody has to be foolish for most traders to lose: costs are charged on every trade, while gross results cancel out.

Small costs, many trades

A tiny cost per trade grows large because day traders trade often. Our lab’s prop-firm model charges 0.05R per trade as its realistic cost case and assumes three trades a day Model. Three trades a day for 60 sessions is 180 trades. At 0.05R each, a zero-edge trader gives up 9R, which is $360 at $40 per R. That is before the fixed costs (data, platform, evaluation fees) that EV2.02 adds up.

Luck hides the drift for a while

Over 180 trades of ±1R, a zero-edge trader’s result spreads widely around that −9R average. Using the spread from EV1.01, the standard deviation is about √180 ≈ 13.4R, so roughly one zero-edge trader in four still shows a profit after three months Definition (normal approximation). Those traders feel skilled. They are the lucky quarter of a group with no edge, and only the base rate tells you so.

What the data says

Worked example: one zero-edge long, then 180 of them

A synthetic MNQ trade, no real date. You buy 1 MNQ at 21,000.00 with a stop at 20,980.00 and a target at 21,020.00. MNQ moves in ticks of 0.25 points, worth $0.50 each, so 20 points is 80 ticks, or $40. Your risk is 1R = $40 and your target is +1R.

Assume an all-in cost of $2.00 per round trip (commission, fees and a little slippage; an illustrative number, not a firm’s price list). That is $2 / $40 = 0.05R.

• If the target fills: +$40 − $2 = +$38, or +0.95R.
• If the stop fills: −$40 − $2 = −$42, or −1.05R.
• With a 50% hit rate the average trade is (0.95 − 1.05) / 2 = −0.05R.

Over 180 trades: −0.05R × 180 = −9R = −$360 expected. To merely break even you need a hit rate of 52.5% on this 1:1 trade, because 0.525 × 0.95 = 0.475 × 1.05 (RSK1.01 owns this break-even arithmetic).

The mirror and the failure

The mirror. Sell 1 MNQ at 21,000.00 with a stop at 21,020.00 and a target at 20,980.00. The numbers are identical: the same $2 cost, the same −0.05R average at a 50% hit rate. Direction does not change the base rate; whoever takes the other side pays the same costs.

The failure: reading luck as skill. After 180 trades you are +$500. It is tempting to say the base rate does not apply to you. But a zero-edge trader finishes above +$500 (+12.5R) in about 5% of cases here (normal approximation, mean −9R, spread 13.4R), so in a room of 100 zero-edge traders about five of them hold your record. +$500 on 180 trades is consistent with no edge at all. EV3.01 shows how many trades separate a small edge from luck.

The other failure: treating the base rate as a verdict. It is where you start, not where you must end: it sets how strong your own evidence needs to be.

Use it as your prior

The house rule House rule: assume you have no edge until your own record, kept for every trade with costs included, shows one over enough trades to rule out luck. In practice:

1. Log every trade, not just the ones you remember: entry, stop, exit, R and costs.
2. Judge your results net of costs, never gross.
3. Compare your record with the zero-edge drift above, not with zero.
4. Change size or move to real money only when a written, measured gate is met (EV2.04 builds the ladder).

Prop-firm note. An evaluation does not change the arithmetic. Our lab’s prop-firm model found that a zero-edge trader loses money on every modelled Topstep account once realistic costs are charged Model. Its results are an upper bound (it checks the loss limit at the end of each trade rather than tick by tick), so the real picture is no better. EV2.02 and PROP3.06 carry the numbers.

Do it on the platform

Common mistakes

Common mistake: Treating a good month as evidence against the base rate. About 60 trades are far too few to separate skill from the roughly one in three zero-edge traders who are still above zero after 60 trades Definition (or the roughly one in four after 180 trades).

Common mistake: Judging your record gross. A trader who is +0.03R a trade before costs and pays 0.05R is losing money, however good the entries look.

Drill: your own zero-edge line

Use your own record, or invented numbers if you have none yet.

1. Write down your trades per day, your typical risk per trade in dollars, and your all-in cost per round trip.
2. Compute your cost per trade in R (cost divided by risk).
3. Multiply by the number of trades you plan to take in the next 60 sessions. That is the drift a zero-edge trader at your pace would show.
4. Write one sentence: “I will treat my results as an edge only if, after N trades, I am above this line by more than luck allows.” Leave N blank until EV3.01.

What we don’t know yet

• The share of NQ and MNQ day traders, or of prop-firm evaluation traders, who profit after costs: not yet measured. The two studies above are the closest evidence.

Recap

• Futures are zero-sum before costs and negative-sum after them; that is the mechanism.
• Fewer than 1 in 100 Taiwanese day traders were predictably profitable after fees (Measured, other market); about 97% of persistent Brazilian mini-index day traders lost money (Plausible, working paper).
• A zero-edge trader drifts down by the costs, and luck keeps about a quarter of them above zero after 180 trades.
• Start from “no edge yet” and drop that prior only when your full, net record says so.

Further reading

• Barber, Lee, Liu and Odean (2014), “The cross-section of speculator skill: Evidence from day trading”, Journal of Financial Markets 18:1–24. PDF.
• Chague, De-Losso and Giovannetti, “Day Trading for a Living?”, working paper. SSRN 3423101.
• Our lab: the 2026-11 evidence review grades the Taiwan result Measured and the Brazil result Plausible; its citation check confirmed the 97% figure.
• Our lab: the prop-firm evaluation model (zero edge loses on every modelled account once costs are charged; an upper bound).

Prerequisites: EV1.03, so you can read the badges in the evidence boxes. Next: EV2.02 turns the cost line from this lesson into a full monthly P&L statement, so you know what your edge has to pay for.

Educational content only. Not financial advice. Futures trading involves substantial risk of loss, and most people who day-trade lose money.