Day trading is commonly defined as the rapid buying and selling of securities with the objective of making small gains with each trade that add up to much higher annualized returns than would be realized with a buy-and-hold strategy.
This of course assumes that the trader has superior information and tools that will enable him to win more times than lose.
The information and tools that are easily available nowadays via the latest technology are definitely excellent and only a few years ago would only be available to well-funded trading houses on Wall Street.
No doubt, the availability of these systems has contributed to the popularity of the day trading phenomenon and it seems that anyone with a computer and a few dollars is able to participate.
Here, it is well to realize that with all of their enormous resources, even the top Wall Street traders work with odds that are only slightly better than those found at Las Vegas roulette tables and they use sophisticated hedging techniques to control their risk of catastrophic loss.
Even with these resources at their disposal, no Wall Street trader has managed to consistently make winning trades over the long term.
For the private individual, these are daunting odds.
There is almost no chance at all for him to win consistently enough to make this a viable investment strategy.
He simply does not have the resources in psychological training, information systems, options strategies, trade pricing and execution to compete with the guy in a full blown trading house.
The chances that he will win enough times to make a better profit than a buy-and-hold strategy is next to nil over even a 3-to-5 year term In fact, the likelihood is that he will lose a large amount of money before he quits.
Yet there are droves of confident, self-styled day traders coming into the market every day with the hopes of making a living doing this! A large part of the problem is that this is a very lucrative industry and the providers of trading systems actively encourage and feed the fantasy.
They present day trading in the media, which is a willing participant in this enterprise it seems, as an easy, viable and respectable investment strategy with many successful practitioners who are ordinary Joes from Main Street just like themselves.
To me, this is an inexcusable outrage and one wonders where the consumer advocates are when you need them.
This of course assumes that the trader has superior information and tools that will enable him to win more times than lose.
The information and tools that are easily available nowadays via the latest technology are definitely excellent and only a few years ago would only be available to well-funded trading houses on Wall Street.
No doubt, the availability of these systems has contributed to the popularity of the day trading phenomenon and it seems that anyone with a computer and a few dollars is able to participate.
Here, it is well to realize that with all of their enormous resources, even the top Wall Street traders work with odds that are only slightly better than those found at Las Vegas roulette tables and they use sophisticated hedging techniques to control their risk of catastrophic loss.
Even with these resources at their disposal, no Wall Street trader has managed to consistently make winning trades over the long term.
For the private individual, these are daunting odds.
There is almost no chance at all for him to win consistently enough to make this a viable investment strategy.
He simply does not have the resources in psychological training, information systems, options strategies, trade pricing and execution to compete with the guy in a full blown trading house.
The chances that he will win enough times to make a better profit than a buy-and-hold strategy is next to nil over even a 3-to-5 year term In fact, the likelihood is that he will lose a large amount of money before he quits.
Yet there are droves of confident, self-styled day traders coming into the market every day with the hopes of making a living doing this! A large part of the problem is that this is a very lucrative industry and the providers of trading systems actively encourage and feed the fantasy.
They present day trading in the media, which is a willing participant in this enterprise it seems, as an easy, viable and respectable investment strategy with many successful practitioners who are ordinary Joes from Main Street just like themselves.
To me, this is an inexcusable outrage and one wonders where the consumer advocates are when you need them.
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