Day Trading – Want to Lose Money? Then Go Ahead and Day Trade
Day trading systems, everywhere I look I see them on the internet. They offer huge profits with little or no risk but the fact is day trading simply loses money.
Ask any e-book seller for a track record to support their claims that their day trading system makes money and you will normally be met with a deafening silence.
They can’t produce one, because day trading is doomed to failure.
In theory, day trading sounds exciting and profitable:
Hopping in and out the market, taking a few pips here and there and overtime your day trading will make you huge profits with low risk.
This however is not the reality for the following reasons.
1. Currency price trends
Currencies are subject to supply and demand and are a reflection of the underlying health of a countries economy.
If you look at any price chart you will see that over the longer term trends can last for weeks, months or even years.
Shorter term moves tend to be random.
2. The shorter the data the less reliable it is
Let’s take an insurance company when they calculate your life insurance premium.
Ask yourself this question:
How much data do they use?
Do they calculate premiums based upon when say 10 people?
Of course they don’t.
They use hundreds of thousands or more, as the more people they use the more reliable the data is for their calculation.
It’s the same in currency trading:
You can’t anticipate what is going to happen in a day because you simply don’t have reliable data.
It’s common sense really.
Let’s look at another problem.
3. Volatility
Consider a snapshot day in currency trading
Trillions of dollars are traded – that’s a lot of money!
Traders are all trading for different reasons and it is literally impossible to calculate what volatility or price movement will be in a specific day.
Day traders make the mistake of thinking they can.
Stops take them out the market when they least expect it, as volatility rears its ugly head.
Day trading creates risk
Day traders like to talk about restricting risk, but they actually create it for themselves, by trading with stops that are to close guaranteeing they will lose.
On the other hand, they restrict their profits.
The idea is to take profits quickly and move on.
Let’s look at the day trading equation:
High chance of being stopped out + never run profits = loses
The way of course to make money in forex trading is:
Run your profits to cover your inevitable losses.
This is a fundamental rule of trading!
The acid test
Finally, day traders remind me of the old Burger King advert.
When they were looking at McDonalds burgers and insinuating they had less beef than theirs.
“WHERE’S THE BEEF?”
Was the memorable phrase and to be fair McDonalds burgers, at least they had some!
Ask a day trader:
“WHERE’S THE PROFIT?”
And you won’t find any!
Thinking about it
That e-book I was going to buy offering me huge profits for just $99.00 – Might have a Big Mac and fries instead its better value and I get change to.
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day trading | admin | August 4, 2010 | 
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