Day Trading: How To Lose Your Money

A website banner advertisement on the front page of a major online news site read: ‘Free Day Trading eBook – The Complete Guide to Day Trading’. I clicked on the ad, curious as to how exactly ‘Day Trading’ was being peddled this time, and was greeted by the following screaming headline: ‘THERE’S NEVER BEEN A BETTER TIME TO TAKE CONTROL OF YOUR FINANCIAL FREEDOM’.

Manure For Sale

Talk about selling a big ole’ stinky pile of manure! Let’s get this straight right off: if it smells like manure, it is manure. Day Trading will NOT lead you anywhere close to financial freedom. In fact, the gigantic, overwhelming, stupendous odds are that you will lose money, time and again, if you try your hand at Day Trading.

Why? Because Day Trading is gambling, buying and selling securities on the same day, placing bets as to which securities will go up, which fall down, during a time period lasting anywhere from milliseconds to seconds to minutes to several hours. And just like casino gambling, the odds are hugely stacked against you. Oh, sure, you might garner a win here and there, enough to keep your hopes up, convince your self that you should stay in the game. But eventually, losses will far outstrip gains.

And despite what Manure Salesmen tell you, a Process, a Strategic Game Plan, will not help. ‘Naturally’, these folks say, ‘you’d be a fool not to have a Process before you start trading, you know, because a Process allows you to succeed no matter what the market conditions. A Process moves the odds in your favor so it’s not about dumb luck, it’s not gambling. Rather, it’s a proven method that leads to your success!

A Process? Strategic Game Plan? More and more and more Manure! 99% of those who stay at day trading long enough will lose all of their money. Ah, but what if I’m in the 1%, you ask? Well, if you want to take on those odds, go for it, roll the dice, knowing that you will most likely, almost definitely, probably certainly, lose.

Sure, there exist a tiny percentage of people who consistently make money at Day Trading. But let me tell you something about these folks: typically, they work for large financial institutions; trained in the field of finance and have years of work experience; use other people’s money; have access to company specific and market moving news before the public; and benefit from computers programmed with the most current analytical software designed to make trading decisions every millisecond based on a thorough review of fluctuating prices, incoming orders, and financial news.

As for go-it-alone individuals, they have limited technological resources, bet with their own money, are less skilled, and are prone to let negative biases and emotions interfere with rational decision-making. The result? Risk of loss is much, much higher.

Who Makes Money

Manure Men, predators, scam artists, who pitch ‘Read my book! Attend my seminar! Sign up for my online course guaranteed to make you rich!’ – these are the ones who make money. And they do so off the backs of vulnerable people who fall for the pitch delivered by people lacking a conscience, blind to ideas of ethical right and wrong, all too willing to sell a Brooklyn Bridge or two to anyone who comes calling.

But hey, we live in a world of buyer beware, right? Besides, as Manure Men will tell you, ‘I did so incredibly well at Day Trading that I felt compelled to share my secret because I want everyone to be rich like me.’

When I hear baloney like this, I laugh and cry at the same time. I laugh because the claim is so absolutely false and ludicrous. And I cry because vulnerable people believe it, then end up losing money, maybe even their life savings.

Why People Willingly Step in Piles of Manure

What’s the hook, the angle, the catch that keeps drawing in more customers? It’s a multi-layered lure.

Part 1

Independence. Ditch your 9 to 5 job and work at home on your own schedule but within market hours.

Part 2

Easy Money. On the surface, this is how Day Trading is sold. ‘I became rich day trading – you can too!’ Driven by greed, seduced by the fantasy of fast, easy money, time and again new victims buy into the program only to lose their shirt.

Part 3

Thrill Seeking. The forces that light up the human mind when playing a slot machine, buying a lottery ticket, or sitting down at a Las Vegas table to play Texas Hold’em, are the same forces operating for Day Traders.

There’s an adrenaline rush, an instant feedback from trading (whether win or lose) that satisfies the appetite for instant gratification. Buy and hold a stock for a few months or years? How boring is that!

unknownEnter Buddha

The goal is not to achieve wealth as soon as possible because to arrive all at once would be self-defeating. The goal is to grow – be it material, spiritual, psychological and emotional growth – and in the process experience all that life has to offer.

Be An Investor NOT a Day Trader

Day Trading is not Investing. Do your self a favor: don’t even consider Day Trading. Ever.

Unlike Day Trading, investing is not about entertainment. Investing is boring. It should be boring. Because investing is about:

  • Diligently and wisely putting money to work for you.
  • Accepting a level of risk that allows you to sleep well.
  • Understanding your investments. And if you don’t understand the investment, then don’t invest.
  • Knowing the associated costs, whether these are transaction fees, account fees, fund management fees, and tax treatment of income, dividends or capital gains.
  • Diversifying your holdings to minimize risk and reduce volatility.

Invest in YOU

If financial management is not your occupation, and you’re not really interested in managing your investments, then hire a Robo-Advisor or Financial Advisor. What’s most important is to invest in YOU!

Whatever your strengths, your passions, invest time and effort in developing your self further, going deeper, because bringing value to your self, your family, your community, is a worthwhile endeavour.