I signed up for martial arts with Master Jo of Elite Toma in Randolph about a month back. A couple of years ago I made a mental note that when I turned a certain age (won’t reveal the age!) I would learn martial arts way of life: to endure hardships, to persevere in your aims in life and to never give up or give in. We got one life - some do as they must, others do as they please. What has martial arts got to do with day trading? The simple answer lies on our brains. To be clear, FINRA rules define a day trade as: The purchasing and selling or the selling and purchasing of the same security on the same day in a margin account. In other words day trading basically means executing short and/or long trades to capitalize on intraday market price action.
Day trading is a bad idea for most people. There I said it. Here's what day trading requires: someone with a strong personality; someone who can face the whirling motions of the markets day in and day out; someone with enough attention to detail to run a business and someone who is highly disciplined. It’s a great for the right person in the right circumstances.
“Those who trade the most are hurt the most" - THE JOURNAL OF FINANCE • VOL. LV, NO. 2 • APRIL 2000
However day trading can be a quick road to hell. If the following descriptors remotely match who you are, then day trading isn't right for you: (a) you have trouble keeping your cool as a cucumber, (b) don't have the patience (or want) to learn how to trade (c) you have a gambling problem (d) prefer research and fundamentals (e) you don't have the time (the stock market is open for only 6.5 hrs. and most likely you are at work!) or money (to fund your account during volatile cycles) (e) you don't have a trading strategy and rely on guesses and feelings (f) you're a rebel and hates rules (g) want to get rich quickly and finally (h) some people on YouTube or other trading forums said you will make lots and lots of moolah!
Don't get me wrong, a lot of money can be made in day trading. In practice, investors behave differently. Researchers in the field of behavioral economics have convincingly demonstrated that investors are usually driven not by rational calculation, but by fear, greed, illusions of control, overconfidence, and other irrational biases. That's why it's easier to post wins than loses. We are usually reluctant to call ourselves losers! We use others to define ourselves. One way is to measure our own abilities by seeing how we stack up against other people. Suppose you are a day trader and makes $500 everyday. How good is this? Should you be feeling particularly proud of your mad skills? To answer this question, you compare yourself to others. If you find out that someone else makes $2000 daily, you will probably not view yourself as that skillful. You will then engage in upward social comparison so that you can get there some day. In terms of self-knowledge, however, it is often more useful to compare ourselves to someone who is similar to us. If you compare yourself to people who are not as skillful as you, you'll feel better about yourself. This downward social comparison is self-protective and makes us look better by comparison.
Any mentally stimulating activity should help to build up our brain. The human brain has an astonishing ability to adapt and change—even into old age. If day trading is a skill that you have always wanted to build on, start at an easy level and work your way up as your skills improve —always pushing the envelope so you continue to stretch your capabilities. Take a class and do your homework. There is no short-cut! If you don't like this, here's a tweet by billionaire investor Chris Sacca " .....you're amazing. This has nothing to do with the market. It's all you and your mad skillz. Don't take profits off the table. Double down, on margin. Borrow everything you can. Stonks never go down!" (December 24. 2020)
“Know thyself!”
We have previously told the sad story of Alex Kearns in one of Gold Members Class. There are other numerous examples you can find such as that of Matthew who says his blood pressure rose, he stopped seeing friends and he ended up losing $127,000. Day trading can quickly become an addiction for many people. Monitor your symptoms; are you glued to your phone or computer (even on bathroom breaks)? are you mentally exhausted? are you anxious? are you stressed? are you distracted even when with your kids! know thyself!
I will chronicle my journey with Master Jae Hyeon Jo (you may want to consider him if you live nearby). Apart from 'kicking and punching," I love his perspective of life at the end of each session. When faced with FEAR he says one can either face everything and run or face everything and rise! If the purpose of life is purpose, find yours.
Disclaimer
This blog is written for educational and informational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. They author may or may or may not have positions in Financial Instruments discussed in this blog. Future results can be dramatically different from the opinions expressed therein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.