My day-trading lessons
Several months following my decision to engage in financial education and activity and consequent months of long-term stock trading I developed interest in day trading, which is buying and selling stock during the same day, leaving no money in stocks at the end of the day. But since day trading requires more knowledge and better tools I ended up taking a private course from a day trader, who had a developed technique for day trading and was willing to teach it for a thousand dollars. I decided to take this course, although it was relatively big money for me, and ended up taking around 5 private lessons with him, where he presented the system he’s been using.
The system was pretty simple, mathematically, but required a prior analysis of stock graphs to be done each time before trading. I opened an account for day-trading on the US stock exchanges and was mainly trading on the NASDAQ and some NYSE stocks. Initially, I strictly aligned my trading with the learned strategy and made some good money in the first couple days. Then, of course, the statistics started to get more even and I was going back to where I started.
The real problems started to appear when I began to perform different variation on the original strategy, thinking I was smart enough to make the changes. At this time I was also continuously reading more material on day trading of stocks, trying to learn technical analysis better. Now, my erratic and non aligned trading activity started to produce less than desirable results and I was quickly seeing my money flowing out of my account. At later stages I even started investing part of the money into longer term positions, where I thought it was appropriate, based on my technical analysis skills.
At the end, after about 9 months of such stock trading I closed my day trading account, taking out only half of my originally invested money back home. Half of it was lost due to one stock in long-term position which I did not exit in time, cutting my losses, but held to it until it became lower than I could bear (of course, some months later in returned to my entry position and rose much higher). Patience is an important skill of a stock trader but it is of the hardest to develop.
Overall, I could say that all the money was lost due to my neglect of the original system and the fact that I didn’t stick to it. I later read that sticking to a system, when it is your money at stake, is the hardest part of any stock trading, but it is especially true of day trading.
From a philosophic point of view I find day trading immoral. A day trader does not produce anything, he doesn’t even invest in the stocks as he has no stocks at the end of the day. In the end I felt that day traders are like parasites of the stock market, living off long-term investors, trying to outsmart both them and one another. If, on average, day traders earn more money than they loose, that means that they’ve taken money out of longer terms traders, who at least could be called investors and as such, bringing value to the financial ecosystem.
Lessons learned
- Sticking to strategy when trading stocks is of utmost priority. Failing to stick to a selected strategy almost guarantees failure and losses.
- Commission on day trading is high and eats much of your balance. Even if you get $10 per trade (one way). That’s $20 for a round (buy/sell). Sometimes you can do 5 such rounds a day. That’s $100 on commissions, and you could lose on that day in equity as well. Overall, I believe that around 10% of my losses were the commissions.
- Day trading with leverage (4 to 1 usually), can make your balance fluctuate very fast. You can earn fast and you can lose fast. One should play with an amount that he can afford to see lost in one day. I stopped my day trading for good when I lost $1500 in one day and my belly was all tight and I was very stressed. It was too much for me to have lost on stupid mistakes in one day.
- You have to have nerves of steel. Day trading is very fast and sometimes seconds play a role. Seeing your money falling in value in real time is very challenging psychologically. This in itself can lead one to break the strategy.
- Day trading is a job. Starting from the preliminary analysis and ending when the trading day ends it’s 6-7 hours a day job. And then you can loose lots of money in that time, as well. Over time this became very frustrating to me.
My conclusions
- Day trading is better done automated. It’s better to let the software perform the strategy. It doesn’t have any psychological issues. Plus, it can free one’s time of staring at the screen. If a preliminary analysis is required, one can still do it. There’s no tension in doing the analysis since the money doesn’t “play” at this time.
- One can earn money with day trading, but it’s real work, a profession, and it’s not the easiest one. It is definitely not a stable job.
- Day trading is immoral and I don’t want to be a part of it.
Thoughts Aside, Finances for car loans are provided by to the small businesses. These finance companies are serving online holding travel insurance to promote the field of tourism. This tourism field becomes famous through internet finance services, also providing bank loan market for small businesses. This internet market needs some way of money exchange and mastercard for the delivery of money which is safer mood. Other than these cards credit cards also work well. These markets are provided by different and unique credit card types. Among these different types of credit card their exist a cheap service holding 0 credit cards.
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Day-traders are not parasites. They offer a valuable service!
Namely, they buy from someone who wants to sell. And then they sell to someone who wants to buy.
That is they please two people with every position they enter into! Day-trading is not immoral dude.
Your lack of success…a case of sour grapes, has compelled you to call daytrading “immoral.” C’mmon! these guys risk their hard-earned money to make money. They provide liquidity to the market, which is critical for the stock markets to function the way they do. Moreover, it is just a question of time frame. Some, just want to profit over the long-term, as they don’t have the nerve to time the market and others prfer short term, even a day may be; but, how is that being a parasite? every job, as long as it is done in a honest way and within the legal framework, has dignity and respect. But, like a dancer who couldn’t dance and blamed the stage for it, your failure at being disciplined in what you do has made you sour at daytrading!
Praveen, you’re correct that my failure at being disciplined made me sour at daytrading. You’re also correct that daytraders add liquidity to market which perhaps help it. I’ve heard this from another person as well. Yet, I’m not sure that the fact they “risk their hard-earned money to make money” has any effect on the fact that they add little value. If they risked they money by actually financing the business that’d be value. If they risked their money by opening a business themselves, creating products or services, they’d add value. But I still believe that the value they create by adding to the liquidity is small compared to the amount of work these people do.
Agree with me that the more people day-trading, the more money goes into comissions and the less money and work is actually “invested” into the economy. I don’t think day-trading increases the GDP.
the indication that daytrading is “immoral” is a questionable judgement at best. just because one was not successful in an endeavor does not mean the endeavor was “immoral”. i have a strong suspicious that had it been successful, morality would not have been a concern.
it could be argued then that investors are also “immoral”, because what are they doing really? just putting money into an entity but not really doing anything else. if i were to follow this article to its logical conclusion, i could only assume that investors are both immoral and lazy.
not good.