“Duh” News of the Day: Daytrading is Risky
The following is from a Motley Fool article published on Yahoo Finance:
According to managers of day-trading firms cited in a Washington Post Magazine article, about 90% of day traders “are washed up within three months.” David Shellenberger of the Massachusetts Securities Division has noted that “most traders will lose all of their money.” A principal of a day-trading firm even admitted that “95% will fail in the first two years.” Former Securities and Exchange Commission Chairman Arthur Levitt recommends that people day trade only with “money they can afford to lose.”
What… are these figures supposed to be shocking? With every Tom, Dick and Harry trying his hand at day trading the same way he tries his hand at p*ker in Vegas (i.e. unprepared, overconfident and thinks it’s easy), I think most folks who have done any volume of trading at all (day, swing or otherwise) would say “90% washed up in three months” for pure day trading is optimistic.
Tyro said,
October 20, 2006 @ 2:14 pm
And where did these managers get their stats? What is failure - stop day trading, lose all their money, what? How do they know they lose all their money (might just move it to another broker) or that they wash up?
I’ve traded at a couple prop firms before and didn’t last three months because I hated the ignorant jerks that ran them. I’m still trading but would I be counted towards the 90% failure rate? I think this says more about just how crumby these day trading firms are than trading itself.
Will said,
October 20, 2006 @ 7:05 pm
Tyro - excellent point, and thanks for making it. Looking at it that way, these guys could be counting one trader switching firms a couple of times as multiple “losers,” even though the trader may in fact be successful.
Thanks for your input!
LP said,
October 20, 2006 @ 9:42 pm
Tyro’s point while valid, doesn’t account for a majority of 90% who loose out. These statistics are not shocking and have been valid for years. What’s changed since they’ve collected this data? No discipline, no money. Will, we’ve talked about this before. I think trading, day or swing or buy and hold is just flat out real tough. People are disillusioned by the raging 80’s and 90’s. A period in which almost anything you bought went up. Take those years out and investing looks pretty freakin difficult. Also, why don’t they talk about the 90 - 98% of fund managers that underperform the S&P? What a freakin scam! Tell people not to invest in anything themselves so that the “pros” can loose it for you.
The best part of the article was “I don’t think I’ll be signing up for an account at Lightspeed any time soon. If you’re in the market for a new or better brokerage for yourself, I invite you to visit our Broker Center, where you’ll find some guidance, and where you can also compare four solid brokerages via a handy broker comparison table.” HAHAHA
Will said,
October 20, 2006 @ 11:20 pm
Aren’t those Motley Fool folks so altruistic, just wanting to help the poor Little Guy part with his money in a more politically correct way!
Thanks for the comment LP!
Zoomie said,
October 22, 2006 @ 5:11 pm
What she doesn’t realize is that is what winners are made of- persistence. A quality for which I am sure she lacks. Just look at her resume. If this world was made up of persons of her “character”, we would still be lighting fires with two sticks.