You’re looking for a new investment strategy, and you’ve been reading a lot about day trading. It’s hip. It’s cool, and everyone who’s anyone is doing it, right? Not so fast. Day trading is the buying and selling of securities (i.e. stocks, bonds, etc.) within the same day. Usually, this happens online and trades are made based on small, short-term fluctuations in the price of the underlying security.
For example, let’s say you want to day trade a particular stock. You get yourself hooked up with a broker you found through BrokerStance, and you’ve gone through the red tape of opening a trading account. Now what? Well, you start looking for stocks to invest in. You have access to technical trading software, so you spend a lot of trading days staring at the computer screen, looking for trends in the market.
You spot one, and buy up a particular stock. Then, as the day drags on, the stock jumps erratically. You sell off your position and make a few bucks. That’s day trading. It doesn’t sound too difficult, so why should you avoid it?
You Will Eventually Feel Suicidal
There’s something about losing money that’s completely unappealing for most people. In fact, most people are risk-averse investors. They don’t want to take crazy risks. More than that, they want the lowest risk, highest reward scenario possible. That’s just not possible with day trading.
Day trading is a high-risk activity with questionable, random return. Sure, it’s possible to borrow $5,000 from a friend and turn it over into $25 million in a year. Almost no one does it though. And before you go off thinking that you’re special or different, consider the psychology of averages for a moment.
Everyone, if asked, thinks they are “better than average” or special in some way. The truth is, by definition, most people are average. That’s what “average” means. It means there’s a small percentage of people who are exceptional and a small percentage of people who are really terrible. Most people are smack-dab in the middle.
Unless you’ve got 20 years of trading experience behind you, you’re a rank amateur. If you don’t have a major firm bankrolling you, you’re taking incredible risk for what is arguable a low return over the long-term. When you’ve had the worst trading day or week that you’ve had to day, and this can realistically happen every week if the market trends are against you, you’ll feel like you want to kill yourself. Is it really worth it?
You Rack Up A Lot Of Unproductive Hours
At the end of 50 years of day trading, you haven’t built a business, you haven’t learned any new life skills, you haven’t networked or done anything productive. You’ve learned nothing new about this fantastic world around you. You’ve just been staring at blips on a screen and trying to guess which way those blips will move.
You may have made some money, but so what? You didn’t really know why you made it or how you even got to where you are now. Ultimately, you’ve been unproductive, and that takes a toll on most people, psychologically, when they sit back and reflect on it.
Looking at a computer screen all day will eventually give you almost permanent eye strain. You’re looking at red and green numbers, lines, and reading high-contract data all day, every day, for 20, 30, 40, even 50 years. Be prepared to wear glasses and slowly go blind with all that near work.
You’ll Have No Social Life
If you’re the anti-social type, you might not mind never getting married, never having friends, and never meeting new and interesting people. But, if you’re like most people, you’re an ambivert. That means there are times when you feel like being alone, and being alone “recharges” your emotional and psychological batteries, and there are times when you need to be around other people to feel “seen” and psychologically healthy. You’re not going to get the social integration you need when you’re in front of a computer for 12 – 16 hours a day.
It Can Be Bad For Your Health
When you lose a trade, and it’s going to happen often, the temptation is always there to bury your losses in pizza, ice cream, chips, and other junk food. Obviously, that’s not doing your arteries any good and it could lead to an early grave. What good is the money if you can’t enjoy it. Plus, if you’re prone to high blood pressure, or have any other existing health issues, the financial stress of the wild swings in the market (and the fact that you rely on the market to pay your bills) means that you’re most likely going to exacerbate any and all of those health issues. Not good.
Jarryd Harden likes keeping up with the latest trends in day trading. He also enjoys sharing his insights online.