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- #1
You got the short end on that trade.I traded a saturday for a wednesday once.
well that could workI traded a saturday for a wednesday once.
Sounds like a good way to go broke and divorced. You did get me curious to do some reading on the matter. Here's a article that I felt sounded right.
Why Day Trading is a Loser's Game - StockTrader.com
Warren Buffett sums it up best,
With enough insider information and a million dollars, you can go broke in a year.
3. Taxes and the costs of trading are a serious hurdle
This comes back to #9, but it’s worth breaking down the basics. Here are the key terms to understand:
Out performing the S&P 500 in any given year is a feat in itself, but when you then take into consideration taxes, commission costs, and research (those hot stock pick services, chat rooms, and market newsletters don’t come for free), the game becomes that much more difficult.
- Short term capital gains tax – “Short term capital gains do not benefit from any special tax rate – they are taxed at the same rate as your ordinary income. For 2015, ordinary tax rates range from 10 percent to 39.6 percent, depending on your total taxable income.” – TurboTax
- Long term capital gains tax – “If you can manage to hold your assets for longer than a year, you can benefit from a reduced tax rate on your profits. For 2014, the long-term capital gains tax rates are 0, 15, and 20 percent for most taxpayers. If your ordinary tax rate is already less than 15 percent, you could qualify for the zero percent long-term capital gains rate. For high-income taxpayers, the capital gains rate could save as much as 19.6 percent off the ordinary income rate.” – TurboTax
- Trade Commission – Charge to buy or sell stock.
- Order Execution Quality – Many brokers sell high frequency trading firms the right to “peek” at your order and more or less screw you on your fill. This is called payment for order flow. Despite being $.01 or $.02 per share, poor fill costs can add up real quick when you trade frequently.
Lesson: When taxes, commissions, and other costs of trading such as research are taking into consideration, the challenge of outperforming the market year after year as a career are compounded.
2. Confirmation bias and your emotions are your worst enemy
Trading is a mental game. The mind is a beautiful thing, and given a runway of endless inspiration data, it can wreak some serious havoc.
Confirmation bias definition via Wikipedia,
Confirmation bias is the tendency to search for, interpret, prefer, and recall information in a way that confirms one’s beliefs or hypotheses while giving disproportionately less attention to information that contradicts it.
In the trading world, this means you see a setup or price action and quickly convince yourself to buy or sell. Unfortunately, 99% of the time you should be doing the direct opposite.
Technical analysis is one of the worst in provoking this natural human behavior. “Oh, I’ve seen this pattern before, it’s a buy”. There is a reason why online brokers offer dozens and in some cases hundreds of technical indicators. Indicators encourage you to see more “patterns” and trade more frequently.
Think #2 would really apply to you, no offense meant.
Closing Thoughts
For new investors getting started, trading should be a quest for knowledge, not about getting rich.
While I have no regrets of investing thousands of hours into the markets over the past 18 years, I’ve had to accept the reality that my retirement portfolio would be further ahead had I understood these truths from the beginning:
If your mentality is to use the market as a vehicle to supplement income or get rich, stop yourself, you’re already primed for failure. Day trading is a loser’s game.
- The “lifestyle” of a successful day trader is a big fat lie
- You really need at least a $1,000,000 portfolio to trade full-time
- The odds are dramatically stacked against you
- Allocate 5% or less of your portfolio to trading (speculating) and invest the rest in low cost index funds
- The effect of compounded returns over the course of several decades is amazing
- Taking tips from people “smarter” than you is a terrible idea
- One trade can easily make or break your year (or career)
- Taxes and the costs of trading are a serious hurdle
- Confirmation bias and your emotions are your worst enemy
- Passive indexing is the best path forward for 99.9% of Americans
I absolutely understand what you guys are saying. And I'm sure you know what your talking about. I dont doubt that for a second but I would really like to try it. I ain't doing nothing else right now with my time except watching marathons in my pajamas and its something I have always been wanting to do. Kind of like bungie jumping or sky diving maybe those are less risky endeavors at that but I want to try it none the less. So help me. Lol
why dont u just do stocks......I absolutely understand what you guys are saying. And I'm sure you know what your talking about. I dont doubt that for a second but I would really like to try it. I ain't doing nothing else right now with my time except watching marathons in my pajamas and its something I have always been wanting to do. Kind of like bungie jumping or sky diving maybe those are less risky endeavors at that but I want to try it none the less. So help me. Lol
Thinking if getting into it and would love your advice of best way to get started
That would be zero. I did some research but I have a lot more to do. I think I want to trade in forex. I'm trying to find a good place to open an account. I'd like to be able to make as many day trades as I want with out having to keep a 25k min. Also like the idea of trading 24 hours a day. And from what I researched you can do with forex.Let's start with, how much do you know about funds, bonds, stocks and their derivatives?
That would be zero. I did some research but I have a lot more to do. I think I want to trade in forex. I'm trying to find a good place to open an account. I'd like to be able to make as many day trades as I want with out having to keep a 25k min. Also like the idea of trading 24 hours a day. And from what I researched you can do with forex.