Common claim 1: Fund managers don’t beat the S&P 500 over 30 years, why should you?

Active managers do not day trade furthermore, their primary job is to provide more stable (efficient) predictable returns over time after costs (less return volatility i.e. beta relative to the S&P 500).

Day trading with 100Ms+ will degrade edges due to market impact issues. The leverage, slippage and counterparty risk will cause high drawdowns or…

blow ups.

High net worth individuals would rather earn a 7-8% average return (after fees, 15-20% max drawdown, lower volatility) on investment per year on an active fund with super small drawdowns relative to the S&P 500 10% compared to holding the index (10% avg, >50% maximum drawdown).

Definition:
A beta >1 indicates higher volatility and higher potential returns/risk, while a beta <1 signifies lower volatility funds with comparable or superior returns to the index with a beta below one with other favourable characteristics receive funding. (E.g., persistence and low drawdowns)

They want lower variability and risk on their lump sums, funds provide this, alpha is desired but comes second. Most HNWI individuals are over 40 and have to protect their capital. This can be argued but few HMWIs want to run a high variance system with 50% max drawdown with 100% supposed returns per year, stability comes first.

Comparing active manager returns to retail trading is absurd, they trade with different incentives and goals in mind. Taking completely different risks over different time horizons. We are comparing minutes-hours holding times to months-years. Active fund management is fundamentally different.

Common claim 2: You need to make over 14-20% per year for it to be worth it daytrading

Nobody and I mean nobody is aiming for only a 20% annual return from daytrading, every trader has fatter tails, comparing institutional position trading to retail trading so directly is ridiculous.

Definition:
Fatter tails/Higher tail risk = More variance in returns more extremes e.g., an active manager wouldn’t make >2000% in a year but a minority of retail traders will, many will lose their principal as well.

2.1 Addressing the core critique
Yes, the average result for daytraders is negative once costs are included but…

Most daytraders do not test or build robust strategies this adds to the skew to ruin disproportionately.
This part is conveniently left out of critiques, retail trading is rife with nonsense while quants demand rigour.
Population statistics (e.g., EU trading statistics) measure combined market participation. They do not isolate disciplined, capitalised, research-driven traders operating under robust trading strategies.

The probability of durable success is low but not logically zero and cannot be precisely estimated from loss data alone.

Points about short term capital gains taxes can be mitigated by changing asset classes or product e.g., futures (e.g., 60/40 in the USA). This depends on where the trader is based etc, this is not tax advice.

To sum it up

If Quant critiques were more serious they would talk about costs combined with low autocorrelation and low signal to noise ratios on low timeframes (valid points) instead of relying on appeal to authority with basic stats and industry posture.

Quant trading is one of the many ways you can choose to interact with markets successfully, if someone insists their way is the only way to trade, step back.

TLDR:

They’re comparing incompatible risk distributions and incentive structures. Daytraders and Active managers do not operate in the same way making these claims off-base. If you want to day trade make sure you develop and backtest your system properly (without curve fitting or overfitting) before proceeding.

Do not rely on price cycles. e.g., Hurst, wyckoff, dow etc.
Use frameworks that have microstructure basis such as OHLC, Volume profiling and/or order flow. Your strategies must be unique and must execute consistently with logic to back its function.