Is Day Trading For Everybody?
When it comes to trading, day traders don't keep any positions open overnight. Day trading is officially a mug's game. For the vast majority of day traders studied by UCLA researchers in 2010, 95 percent had lost money. As a result, you may be able to join the 5% of people who succeed.
Author:Gordon DickersonReviewer:James PierceJan 14, 2022208.4K Shares3M Views
When it comes to trading, day traders don't keep any positions open overnight. Day trading is officially a mug's game. For the vast majority of day traders studied by UCLA researchers in 2010, 95 percent had lost money. As a result, you may be able to join the 5% of people who succeed.
No, they also discovered that experienced losers continue to lose. Trading to learn is no more reasonable or lucrative than gambling on roulette, according to the researchers.
So, is day trading for everybody? No.
Disadvantage Of Day Trading
Day traders have seen their advantage eroded even more after that research was finished. Computers that can purchase and sell thousands of times a second have risen to prominence in high-frequency trading (HFT). There is a lot of money to be made if you have access to exchanges at lightning speed.
Day Trading Is A Losing Game
Costs mount quickly when you're day trading. Every time you make a deal, you have to pay a transaction charge. If your deal is worth $5,000, you'll pay $10 in fees on a normal exchange, which is 0.02 percent.
It's not a huge problem if you trade once a day. That's $500 if you trade 50 times a day. One hundred thousand dollars in fees for day trading 200 days out of the year. As a result, day traders question why they haven't made any money.
Longer Trade Pays Better
Bitcoin is expected to climb in the next several weeks, so, for example, you purchase ten Bitcoins at $6,000 apiece, paying only $10 for the spread. The price of Bitcoin has risen to $6,200 three weeks after the first surge of $11,000. If you sell your Bitcoins and make $2,000, unlike the day trader, you just have to pay $10 in the spread, rather than $1,000. In the long run, the difference in the two techniques' respective profit margins is substantial. Having a long-term perspective is more lucrative (and less stressful) than taking a short-term one.
Using Trends To Your Advantage
Try to acquire cryptocurrencies at the beginning of an uptrend and then sell them at the peak of that trend. To put it another way, if you wait until the market is in a downtrend before buying, you generally lose out on a little portion of the profit at the bottom of the cycle. It was once said by a trading instructor that only monkeys pick bottoms. Deep knowledge may be found within that stunning depiction of the human digestive system. Trying to get on the bandwagon before everyone else does.
Even the fact that they've even started is a guess. It locks your money in a cryptocurrency that will never rise in value. It's wiser to wait for the trend to develop before jumping on board. Don't attempt to be greedy by choosing bottoms; if you get on a solid trend in its early stages, you'll earn more than enough money.
When Trend Doesn't Work
It's possible that trends are only fads. This is a common problem! There is a good chance that trends will continue, but it doesn't guarantee that if you purchase into one, the price will merely go sideways or even reverse gear right after you acquire it.
Once again, cutting your losses comes into play in this situation. This is a question that Jesse Livermore would ask: "Does the price seem fair?" Is it doing what you had hoped? In the event that it's not, it's time to consider leaving, even if you have to take a tiny financial hit. To make up for the many modest losses that occur each year, you just need one or two truly excellent transactions per year.
Discipline Is Everything
It's all about discipline.
Like a good poker player, a superb trend trader is a master of the game. Their patience is tested as they fold hands after hands, each time losing a little amount of money. It might be emotionally draining to lose so much, but if you don't stay disciplined, you'll miss out on the major gains.
A string of losses could be like tossing a coin and getting heads eight times in a row if you're confident that your trading strategy is sound. When things go wrong, it doesn't always indicate that your approach is flawed; it might just be poor luck. As long as you've analyzed your approach and feel this is the case, then it makes sense to keep firing.
Summary
Despite the fact that many traders have mastered these strategies, only a small percentage of them are really profitable due to psychological biases. Breaking the rules begins to seem like a natural part of your personality. Great traders learn to take the voice with a grain of salt, but they also learn to keep to the rules and manage the voices rather than having the voices dominate them. We're all human.
Gordon Dickerson
Author
Gordon Dickerson, a visionary in Crypto, NFT, and Web3, brings over 10 years of expertise in blockchain technology.
With a Bachelor's in Computer Science from MIT and a Master's from Stanford, Gordon's strategic leadership has been instrumental in shaping global blockchain adoption. His commitment to inclusivity fosters a diverse ecosystem.
In his spare time, Gordon enjoys gourmet cooking, cycling, stargazing as an amateur astronomer, and exploring non-fiction literature.
His blend of expertise, credibility, and genuine passion for innovation makes him a trusted authority in decentralized technologies, driving impactful change with a personal touch.
James Pierce
Reviewer
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry.
His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy.
Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
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