Beware of Day Trading

Beware of Day TradingDespite what all the ads and Youtube channels of self made millionaire day traders tell you, beware of day trading! Crushing majority of day traders lose money! Estimates are around 95%. That’s why so many of them make videos. To support their habit. Day trading is very similar to sports betting. The only thing that makes these two “sports” better than casino games is the fact you have some control over your gambling through real data analysis. There is money to made on Wall Street, but day trading is not the guaranteed method. Much like poker, the way to the top is through the art of pacing yourself.

Long Distance Runner

Ever wonder why the same people end up at the final tables of poker tournaments? Well, their big secret lies the art tempering. They know there are many opponents, so they never come out with their guns blazing. No matter how great a hand they hold, there can be a better one and they must beat everybody to win. The reason why people start day trading is to make money. And as the ads promise, you can make money in a matter of days or months. This is like saying to a poker player, “If you win at the first table and have the most money overall, I’ll give you the prize.”

Sure, you may get lucky and “win” money on day one. However, do you get lucky everyday?  Day one, great, day two, three… Just as no one loses all the time, no one wins all the time either. The one left standing after say round 1000, wins. Investing is not sprint, it’s a  marathon.

Some Numbers on Why You Need to Beware of Day Trading

As we already said, day traders start with a get rich quick dream. And this is generally their progression after they enter the market:

  • 40% trade for only 1 month
  • 20 % are left after the first two years
  • 7% remain after 5 years
  • 1% of all  traders are profitable after fees
source: tradeciety.com

Besides the gruesome numbers above, day trading is also a major contributor to GDP. That’s why there is no opposition against it from the government. The number one driving force however will always be vision of easy money. The ads and Youtube channels swaying people to get in are also a contributing factor. To be successful in day trading you must do a lot of research and stare at stats and market movements all day. And these guys make videos all day. Why do you think that’s the case? Because making videos makes them far more money than the day trading business.

The Right Path to Take

We’ve talked about savings here already. Proper investing and saving takes time. You must adopt the long distance runner mentality. Same as sport betting, day trading should only be done with “play money.” The money you have to play with, meaning you will not miss it if you lose it. The number one step in saving money is an income generating activity. Numbers in day trading are stacked against you, so look elsewhere. Once you have income arranged, then you can take part of that and put it aside into some financial instrument.

Savings account, investment fund and a whole life insurance policy all do the job really well. And don’t track the performance on daily basis. Not even in the first few months. Set up a plan, follow it, and check back at least 6 month later, at best a year. Daily checking on performance will only put stress on you.

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