Is Day-Trading Gambling?
My post on TheMindBite.com:
Could you imagine getting a job with a limitless cap on how much money you could make every day? No boss. No one telling you what to do. Working from the comfort of your own home. Hell, you can even work naked if you wanted to! I mean, c’mon who really likes wearing pants anyway.
As a teenage day-trader and financial literacy advocate, this is exactly what I do. Living the dream you could say, but I am often told that the stock market is nothing more than gambling. “There is no way to win. The game is rigged. There are others that are so much smarter than you. Long term is the only way to successfully invest your capital.”
These are all common responses when I tell people that I day-trade for a living.
In all fairness, they may be right. There is a known common statistic that 90% ofactive day-traders do lose money overall. You have all the odds stacked against you with broker commissions and America’s lovely capital gains tax. Just twenty trades a day at $7.00 each, and you are already looking at paying $35,000.00 a year just in commissions alone. Now let Uncle Sam take about another 30% of what you potentially make, and we can finally call it a day with whatever pennies are left over for yourself.
In the long term, the market will tend to rise as America continues to grow. Over aperiod of years, companies will eventually reflect long term earnings and guidance as the true potential is shown. However, investing is a lot different than day-trading because you are measuring your success in years vs. measuring your success day to day. The shorter timeframe makes you less likely to succeed because of the small margin for error you are given. However, closing every position at the end of the day (true day-trading) doesn’t expose you to risk of news over night.
When all is said and done, it comes down to education of the market. In my opinion, the 90% statistic is due to a lack of financial education. The common person comes into the game attracted by the lavish lifestyle, and thinks anyone can do it. In reality theres so much more involved. This is the main reason why I founded BioStocks.com, where I developed educational programs to teach day- trading/investing to those willing to put in the time and actually learn. These programs teach what I have found to be the most successful way to go about the stock market, before you end up curled up in a ball crying on your bathroom floor after you just lost your life-savings.
Personally I’m confident that I will have grey hair by age 30, I work 60+ hour weeks between the market and research, and am exposed to the career field that has the highest suicide rate in the nation.
You may be thinking who in their right mind would ever want to do this after looking at the facts…so stay tuned for when I go over why stock-traders do what they do — it’s so much more than gambling.