I think your post was extremely well thought-out, and I agree with almost all of it. If someone told me they were going to quit their job and become a full-time daytrader, I would first say "don't" (having made the progression from daytrader to dealer, I know how difficult the former can be without the experience of the latter). But if one is determined to be a full-time daytrader, or at least spend a large amount of leisure time playing in the market while keeping a full-time job, my one piece of advice would be this: it is far, far better to try to hit singles than homeruns. It's useful (and appropriate) to imagine yourself as a batter going up to the plate against a major league pitcher. In this scenario, if striking out is equivalent to losing money on a trade, and finding a way to get on base is equivalent to making a profitable trade, which of the following courses of action do you think would afford the best probability of 1) getting on base, 2) possibly coming home to score, and 3) staying on the team over the long haul....swinging for the fence every time, or sticking your bat in front of the ball and just trying to find a way...anyway...to get on base? Against a major league pitcher, the latter is obviously the path to survival.
The same approach applies when trading. Believe it or not, the best market makers have the same strategy; they're trading in the same market as the daytrader, and realize that hitting singles consistently is far preferable to going for the homerun. For the daytrader, this strategy can manifest itself in many of the same ways it does for the dealer, and in many of the ways you mentioned in your post. This strategy is most certainly NOT manifest in the approach of those who seem to think that trading is like stepping up to a blackjack table. It's always amusing (and somewhat saddening) to read a post from someone about a $2 stock they're ready to put their IRA money into, and in the next sentence mention that they just got back from Las Vegas. To the extent that the stock market is a zero-sum game, this type of person pays everyone else's rent. |
