Daytrading is one of those things that many aspiring wealth builders take an interest in. The idea of making thousands buying and selling stocks in the same day is pumped by many characters in the online world, and the sheer information available is overwhelming to even advanced traders. Because it’s such a prominent question, I decided to explore whether daytrading (the practice of buying and selling a stock all in one session) can make you rich and will you lose money day trading?
Can I Get Rich Daytrading Stocks or Options?
Popular online personalities such as Timothy Sykes make it a habit to push the money generating potential of daytrading, but you have to wonder if you can make millions like Sykes or if it’s just a sham aimed at taking your money. In order to answer the question about getting rich day trading stocks, we must first analyze what the pros are doing and see if it’s possible to mimic their money making “tactics”.
Day trading Is Not a Get Rich Quick Strategy, So Don’t Treat It As One.
Prominent day traders such as Tim Sykes and his disciples from profit.ly are very quick to push the idea that (with a little training) you and I can make millions trading stocks like they do. They are not new at selling either, Sykes has a way of getting aspiring wealth builders to follow him and buy his day trading instructional DVD’s. Just because people are buying, does it also mean his product is something you can use to make money in the stock market?
I wasn’t sure, so I started to do some digging and signed up for email updates to see if I could use any of the day trading tactics these guys were pushing. What I found was that, no, daytrading is not a way to get rich quick and trading stocks in general is not for the faint of heart. It takes hundreds of hours to learn how to day trade, and the losses can add up fast during the learning curve.
The first brokerage account I opened was with E-Trade Securities (not the preferred brokerage for day traders, according Tim Sykes) because it was a well known brokerage and my limited knowledge of trading stocks made me weary of names that I wasn’t familiar with. I was happy with the service provided by Etrade, but I quickly realized that trading stocks for a living would require much more work than the big guys were saying.
Day trading And Trading Stocks In General Can Lose You More Money Than It’s Worth.
One of the biggest problems when day trading is you can actually lose far more than you make and just one I’ll advised trade can wipe out all of the gains you make. It isn’t a hard thing to do either. Between the fees for day trading, the regulations and the sheer unexpectedness of the stock market, day trading can be a recipe for disaster to your finances. If you just jump into trading head first, with zero knowledge, odds are you will fizzle as a day trader and could end up blowing your life savings.
If you think it’s going to be as easy as signing up for a brokerage account, funding the account and then making easy money, you will be sorely mistaken. There are so many factors that impact successful day trading it will make your head spin, and even worse, almost no one will give you honest information about stock trading on the internet.
Being such a lucrative industry means you have to push through all of the sales pitches and spam to learn anything of value about day trading.
Because many of you will ignore this advice, here’s one good place to start learning how to avoid day trading mistakes. If you’re going to day trade, at least get the honest information that exists. Some other resources you can start with are..
- Day trading for beginners here.
- This won’t teach you much about day trading, but it’s a good place to start and MarketWatch is a legit research site.
- If it’s a training course you need, try this one.
Successful Day trading Can Take Years to Master, Which Most of Us Don’t Have.
(And our finances can’t fund.)
Here’s the thing. Learning to day trade successfully can take years to learn and many losses before things start to come together. If the key is making money, is it worth the seemingly endless losses before you finally get the hang of day trading stocks?
Think about it. If you day trade for five years before learning to make money, how many losses will you have to incur in the process? For many that attempt it, the losses are enough to completely destroy their finances and potentially so much that they can never recover.
Don’t believe me? Read this daytrading horror story..
This is about a day trader who broke one cardinal rule and lost everything. If you’re saying, “well don’t break the rules”, just know that it’s not that simple. Our emotions play a huge role in our trading habits and it’s not as easy as saying, “I won’t break the rules”. Fear and greed drive even the strongest willed traders to break rules, some never recover.
Another day trading loss story can be found here and all over the internet if you look hard enough. Stats say 70% of day traders lose money. Are you lucky enough to be part of the small group of people who actually make money trading stocks in the same day?
The above YouTube video titled “Day Trading Ruined My Life” will give you an idea of the risks of day trading. I strongly recommend sticking to buy and hold investing for building wealth. Allowing your assets to appreciate over long periods of time is a tried and true methods to build wealth.
The SEC has this to say about day trading. The reason they have regulations in place such as the pattern day trader rule, is to protect those of us who choose to take a risk with money we can’t afford to lose.
Day Trading Is Lucrative For Online Brokers, So They Will Tell You Anything to Sign Up.
Fees as high as $50 per stock trade earn the online brokers making the trade a lot of money. If you do just one a day, it was worth it for the discount stock broker to sign you up. Because you are so lucrative to stock brokers, they will tell you anything to get you trading on their particular platform.
If you’ve heard claims like “$5 stock trades”, cheap options contracts and blah blah, just know that each one is a unique selling point for a discount broker. In most cases there is much more to the fee structure than first meets the eye. Don’t be fooled, do your research and find the best discount stock brokerage, like the one I use.
If You Must “Trade” Stocks, Use a Broker With Low Fees and DO YOUR DUE DILIGENCE!
When you decide to buy a new car, you always do the research to make sure it’s not a lemon or the dealer isn’t a rip off right? Apply the same rules to your broker when signing up to trade stocks. If you won’t hand money to a shady car dealer, why would you give money to a broker you know nothing about?
Some questions you should be able to answer before signing up..
Does this brokerage account charge monthly fees and do I need a minimum account balance?
What are the rules on daytrading and does the pattern daytraders rule apply?
If I need help with a stock trade, does the brokerage offer proper support options?
These aren’t the only questions you should ask, but are a good place to start when researching a brokerage account to start trading stocks.
Skip “Trading” All Together And Start Investing For Your Long Term Retirement.
I went through the stock trading phase and it was a huge bust. I thought for sure I could master the craft and start making huge gains day trading and position trading. Unfortunately, I failed to realize the impact of fees and the unstable nature of the stock market. I’m not ashamed to admit that I was one of the 90% of stock traders who lose money, instead of getting rich.
Don’t get me wrong, I still have my hands in the stock market, but it’s now in a much more relaxed fashion. I no longer swing trade or daytrade. I simply buy good quality stocks in value companies and hold them for the long haul. For this, I use Tradeking because of the low fees, excellent customer service and good research options.
Tradeking has consistently ranked high when reviewed by many diverse outlets. The mobile app is pretty good, the interface isn’t too complex and the fees are more than reasonable compared to some of the online discount brokerages I’ve studied.
Personally, I use Tradeking for my individual account and I’ve recently opened an IRA to sock away a little extra each month on top of the 401K I have through my full time job. It’s been a great option for me and it’s not as geared toward daytraders, which means up sells are less common and the fees are only $4.95 for a stock buy or sell. Find out more here.
Sign up for Tradeking free to check it out here.
Conclusion: Invest In The Stock Market, Don’t Try to Time It Through Daytrading.
In my experience, most people who try to time the market end up getting it wrong. With thousands of headlines impacting the stock market each trading day, I’d be playing with fire if I told you to try timing the market. Don’t try it. More times than not, the market will crush you and a more experienced, tech savvy trader will end up with your savings.
Instead of taking that chance, look to invest in high quality companies or mutual funds like I personally prefer. Whatever you do, stop daytrading. The odds are not in our favor and it’s much easier and more rewarding to watch our accounts grow at a steady pace.
Consider this quote from Warren Buffett in his 1996 Chairman’s Letter. Credit: Business Insider.
“Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards – so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”
Good luck in your stock market endeavors. Let me know what you think about the topic by commenting below. I love debates and other opinions. If daytrading has made you wealthy, feel free to share! Also, if you’ve been crushed daytrading (I hope you haven’t), feel free to tell us about it.
All views and opinions in this article are my own and I do not recommend that you follow them blindly. Do your own due diligence whenever researching on the internet, and save yourself a headache! I am not a financial advisor, nor do I claim to be. Any advice given here is intended for learning purposes only, it is not licensed financial advice.