Day Trading is for suckers

There is a really interesting piece on the Business Insider website written by Henry Blodget which talks about why day traders can never win.

You can read the full article here but here for me was a key quote which needs to be borne in mind:

Most Wall Street traders have skills, information, and tools that day-traders can only dream of. Trading is a zero-sum game: Market moves aside, every dollar won by one trader comes out of the pocket of another trader. Day traders competing against Wall Streeters is the equivalent of a college football team (or Pee Wee team, depending on the day-trader's skill) competing against a pro team. Is it possible to win? Yes. But it's highly unlikely (1 in 100). Wall Street's winnings do have to come from somewhere, though, so Wall Street thanks the day traders for playing.

Blodget's conclusion is right - if you are planning to day trade your way to enormous wealth then think again - you're probably chasing a pie in the sky dream....

That's probably not what you want to hear if you are visiting a day-traders blog but let's cut the bullshit - making trading wealth is incredibly hard.

Part of the problem I think is that too many private day traders want to cast themselves as institutional traders.

• They sit with multiple screens and charting systems open. They want to talk about resistance, break-outs and the double nipple formation.
  
• They feel they have to be "in" or "on" the market the whole time
  
• If they are not moving money they are not really "trading"

If you are planning to get rich quick then go-ahead and trade forex through one of the online platforms with 200 times gearing. 90 out of 100 of you are going to get fried, maybe 5 of you will eke out a living you're probably going to give most of it back and statistically one of you might make one or two big scores and walk away before you give it all back.

If you do believe you have what it takes then consider these steps:

• There is nothing wrong with buying a reliable share portfolio which includes dividend paying, cash generative shares with high returns on equity - profiting from gains made here is just as much "day-trading" as trading in and out of the global currency market every 10 minutes.
  
• If you are going to trade regularly identify one or two core themes and run with them. Don't try and chase every market and every instrument because that is what the news is doing.
• The trend is your friend. It is the oldest trading mantra and for good reason. We all want to call "the top" or "the bottom" of a market but you will go broke going against the trend.
  
• Use a bit of common sense - trading is made out to be more complicated than it really has to be. Buy low - sell high does not mean buying a stock or currency now because it was 1% lower than it was yesterday
• If you are waking up in a cold sweat at two in the morning and rushing to check your portfolio or positions then you are over-commited.
  

I hope that gives you something to ponder?