Perhaps some of you will enjoy this e-mail that I wrote to someone. It is just my opinions, so don't take out on me too hard. Thanks in advance (:
My name is Uri. I am 17 years old and have been trading stocks for the past 5 years. I have 'run the loop' as some might say. I guess you can call me 'Mr. Been there Done that.' If I may, I would like to offer my opinion, based on my own personal experiences.
You see, trading, especially daytrading, is an interesting game. It is to be played only by those who know the game very well. Even then, it is difficult. For every winner there is a loser and at the end of the day when everybody counts up his or her winners and losers, how many people actually surface with a profit? It is difficult to say. But please consider the following. If every doctor and every accountant were to suddenly become basketball players in the NBA, how would they fair? If every swimmer and every runner suddenly began performing complex brain surgery, how would they fair? Or, perhaps better yet, how would the patient fair? Now, I would most probably be correct if I stated that the majority of Daytraders are coming from outside professions. Some were doctors, some were lawyers, some were teachers, some were auto mechanics, and some were accountants. Amazingly, a profession has been created that is the medium of all professions! If at first you don't succeed, try try again...and then daytrade.
Why is it that daytrading has become so popular and seemingly so easy? Well, for starters, it is akin to gambling. No, it's not easy, but it is thrilling. I currently manage portfolios for a number of clients. I am personally more of a long term trader. I challenge you are anybody else to find me the Warren Buffet of daytrading. A logical 'investment' strategy has proven to offer much more in the way of long term profitability than daytrading. In addition, there are many hidden cost factors that a daytrader or a short tem trader must usually pay. For example, a real time level II quote system can cost upwards of $300 per month. Furthermore, the short term tax rate is 50%, well above the normal tax rate, no matter which tax bracket you are in.
Once, a man offered me $200,000 to trade for the summer. After some thought, I did not follow up on his offer. I had role models and I intended to follow their paths. Peter Lynch, Warren Buffet, and Benjamin Graham were all successful long-term investors whom I looked up to.
I once had a client that handed me an account and told me to do what I had to do. To me, that meant careful investing. He however, seemed to have something else in mind entirely. It was not long after he handed me the password that the trades began to get processed. No, not my trades - his. Yes, that's right, he was trading on the account that he had given me to invest with. To make a sad story short, he managed to turn about $23,000 into no more than $9,000 - if even. What could I do? I tried to persuade him into strategies that were a bit safer. I suggested Covered Call writing. "That's not what I like to do," he told me. That is the unfortunate word, 'like.' What people don't understand, is that making money in the market is not about 'like' and 'not like.' It is about 'what works' and 'what doesn't work.'
Consider for a moment, riding a wild bull in a pen. Other people are also riding wild bulls in the same pen. If everybody knew what he or she was doing, perhaps you could justify your own stupidity. Your own bull might hurt you, but at least you won't have 10 other bulls ramming right through you! How much less safe would you feel on that bull, knowing that everybody else is just as clueless as you are? It's many times more dangerous when you're not the only crazy one on the playing field. Perhaps I am being a bit too harsh on daytraders. Of course, I am only 17 and have much to learn. It's just that, the inclination is to buy, even when it is not the right time. It is still difficult for the daytrader to dismiss himself from all of his emotions and make logical and clear decisions. In a game where the object is to make money and make it fast, how can one be entirely true to himself?
As aforementioned, I have been through a lot. I was only 10 years old when I was introduced to the stock market and only 12 when I made my first 'trade.' I guess you can call it a 'trade,' since I was in and out quite quickly. In fact, within a matter of days, my $1,000 investment in Commodore Business Machines was entirely gone from my portfolio. Well, I guess when your first investment goes out of business two days after you bought it, you learn a harsh lesson. Thank God, I learned that lesson early on in life. Otherwise, I may have found myself losing even more of my money today, in other speculative ways, i.e. options, daytrading, futures, etc.
With all that said, I must make one confession. It is sometimes difficult to stay with the same strategy for such a long time. Unfortunately, I recently succumbed to my urges to speculate and trade. That's right, my secure investments, my companies, my role models, chucked right out the window. Sell, sell, sell, those were the orders that went into my on-line broker just a couple of weeks ago. Why? Because of the Internet craze of course! It was like I was in another state of mind altogether. I complied a list of 186 Internet stocks and slowly but surely narrowed the list down to one or two stocks. I threw my entire portfolio into a little, unknown Internet shopping mall company called GallaxyMall. I am lucky that I bought at $6 1/4 and sold promptly, two days later at $8. Otherwise, my portfolio would be feeling a little bit deflated right now, and I would have to face my clientele with a red face. I have learned my lesson. Despite making quite a nice trade, I would still have contentions about doing it again.
Hey look, again, I'm only 17 years old, what do I know?
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