What is a Good Daily Stock Return? Understanding Realistic Expectations in the Market

Ever found yourself dreaming about those massive daily returns you see in movies or hear about from that one friend who swears they’re making a killing in the stock market? I’ve been there too. The truth about daily stock returns is far different from what Hollywood portrays, and understanding what’s actually “good” might save you from disappointment—or worse, financial disaster.

As someone who’s navigated the markets for years, I want to share what realistic daily returns look like for different types of traders and investors. Whether you’re considering day trading or just curious about what constitutes a good daily performance for your portfolio, this guide will set your expectations straight.

The Reality of Daily Stock Returns

Let’s get right to the point: most professional investors consider a 5-10% annual return to be good. Breaking this down to daily returns, we’re talking about an average of just 0.02% to 0.04% per trading day (assuming 252 trading days per year).

Surprised? You should be! This tiny figure contrasts sharply with the exciting “get rich quick” stories that circulate online,

For day traders specifically, the picture is even more sobering:

• According to studies cited by Investopedia, approximately 97% of day traders who persisted for more than 300 days lost money
• The average net annual return for day traders is around -$750 (that’s a loss!)
• Less than 1% of the most profitable day traders from one year remain profitable the next
• Active day traders in the U.S. typically underperform a value-weighted index by an average of 10.3% annually

Despite these discouraging statistics, understanding what constitutes a “good” daily return depends on your trading style risk tolerance, and investment goals.

Different Perspectives on “Good” Daily Returns

For Long-Term Investors

If you’re a buy-and-hold investor (which most successful investors are), daily returns shouldn’t matter much Here’s why

• The stock market fluctuates daily, sometimes dramatically
• Long-term investors focus on annual returns of 7-10% (the historical average of the S&P 500)
• Compounding works its magic over years, not days
• Checking daily returns often leads to emotional decisions and potential mistakes

Warren Buffett himself doesn’t worry about daily performance. He famously said, “The stock market is designed to transfer money from the active to the patient.”

For Active Traders

If you’re determined to be more active in the markets:

• Swing traders (holding positions for days to weeks) might target 5-15% returns per trade
• Position traders (holding for weeks to months) typically aim for 20-25% annual returns
• Day traders often hope for 0.5-3% daily returns, but as we’ve seen, most fail to achieve this consistently

Why Most Day Traders Lose Money

Before you get excited about potentially earning 1-3% daily, understand that achieving this consistently is extremely rare. The data from Investopedia is clear – up to 95% of day traders lose money. Here’s why:

1. Transaction costs eat profits: Even with today’s low commissions, frequent trading generates costs and taxes that significantly impact net returns

2. Emotional biases: Fear, greed, and other psychological factors lead to poor decision-making

3. Professional competition: You’re competing against institutional traders with:

   • Advanced algorithms
   • Faster execution capabilities
   • Better information
   • Larger capital bases

4. Market efficiency: Most price movements happen for legitimate reasons that are difficult to predict consistently

5. Capital limitations: The pattern day trader rule requires at least $25,000 in a margin account, and even that’s considered minimal for serious day trading

What Actually Constitutes a “Good” Daily Return?

Rather than focusing on specific percentage targets, here’s a more realistic framework:

1. Any positive return that exceeds your benchmarks is technically good

2. Consistency matters more than occasional big wins

3. Risk-adjusted returns are more important than absolute returns (a 2% return with low risk is better than a 5% return with excessive risk)

4. Your return should compensate you for your time and effort

For example, if you spend 8 hours day trading to earn what would amount to minimum wage, is that really a good return on your time?

A More Practical Approach to Stock Returns

Instead of chasing unrealistic daily returns, consider these alternative approaches:

1. Focus on Annual Returns

Rather than daily targets, aim for annual goals:

• 7-10% is excellent for diversified long-term investors
• 15-20% is exceptional for active investors who aren’t day trading
• Anything consistently above 20% annually puts you in rare company

2. Use a Tiered Investment Strategy

I personally use this approach:

• 80% of my portfolio in long-term investments
• 15% in intermediate-term positions
• 5% or less for short-term trading (if any)

This way, I can occasionally satisfy my desire for more active trading without risking my financial future.

3. Track Your Performance Properly

If you do trade actively:

• Measure performance over months and years, not days
• Track your risk-adjusted returns (Sharpe ratio)
• Compare your returns to appropriate benchmarks
• Account for all costs and taxes

What the Research Actually Shows

Let’s dig deeper into the research cited by Investopedia:

• A Brazilian Securities and Exchange Commission study found 97% of 1,600 day traders lost money over 300+ days
• The average day trader net annual return was -$750
• In Taiwan, less than 1% of profitable day traders remained profitable the following year
• U.S. active day traders underperformed the index by 10.3% annually
• An SEC report revealed 70% of retail forex day traders lost money each quarter

The conclusion is undeniable: consistent profits from day trading are extremely rare.

Factors That Affect Day Trading Success

For the small minority who do succeed at day trading, several factors appear critical:

Capital Adequacy

• The $25,000 pattern day trader requirement is just the start
• Successful traders usually have much more capital to buffer inevitable losses

Knowledge and Skills

• Deep understanding of market mechanics
• Technical analysis proficiency
• Trading psychology mastery

Disciplined Approach

• Sticking to predefined trading plans
• Avoiding emotional decisions
• Maintaining focus despite distractions

Risk Management

• Using stop-loss orders
• Setting daily loss limits
• Position sizing appropriately

Technology and Tools

• Professional-grade platforms
• Real-time data feeds
• Reliable execution capabilities

Realistic Expectations: A Comparison Table

My Personal Take

After years in the markets, I’ve learned that focusing on daily returns is usually a recipe for disappointment. When I started out, I was obsessed with daily performance, checking my stocks every hour and making way too many trades. The result? Underwhelming returns and a lot of stress.

These days, I concentrate on building a solid portfolio that can deliver consistent annual returns of 8-12%. I still occasionally trade more actively, but with strict limits on how much capital I risk. This approach might not be as exciting as day trading, but it’s helped me sleep better and actually grow my wealth over time.

How to Set Realistic Goals

If you’re just starting out, here’s my advice:

1. Start with annual targets, not daily ones

2. Benchmark appropriately – compare your returns to relevant indices

3. Focus on consistency rather than home runs

4. Diversify your approach – don’t put all your money into one strategy

5. Keep learning – markets evolve, and so should your knowledge

So what is a good daily stock return? For most investors, it’s the wrong question to ask. Daily returns are noisy, unpredictable, and can lead to poor decisions when overemphasized.

Instead, focus on building a sustainable investment approach that matches your risk tolerance and time horizon. If you do want to day trade, understand that success is rare and requires exceptional discipline, knowledge, and resources.

The most successful investors I know don’t obsess over daily fluctuations – they build systems that work over the long term. As boring as it might sound, patience and consistency usually beat excitement and action when it comes to growing your wealth through stocks.

Remember, even a seemingly modest 10% annual return will double your money approximately every 7 years. That might not seem as thrilling as making 3% in a day, but it’s far more achievable and sustainable for the vast majority of investors.

What are your thoughts on daily returns? Do you track your performance daily or prefer to look at longer timeframes? I’d love to hear your experiences in the comments below!

The “7% rule” for stocks is a risk management strategy that dictates selling a stock when it drops 7% below the purchase price to limit losses and preserve capital. This rule, popularized by investors like William O’Neil, is based on the observation that even strong stocks typically don’t fall more than 7-8% below their ideal buy point. It can be implemented by setting a stop-loss order with your broker or through manual monitoring. Another related, but distinct, “7% rule” is a retirement planning concept where you assume a 7% annual withdrawal rate from your investments to determine how much you need to save for retirement, as explained in this YouTube video.