So You Think You Can Day Trade?
14 Sep 2016
Overconfidence, in my opinion can be just as bad as being overly fearful. Especially in investing. I see people who, in the midst of one of the best stock market runs, believe that their superior returns are mostly due to their incredible ability to pick investments. This sense of, “I can’t lose” leads to poor investment behavior and often poorer results. This is especially true in the short term, where unfortunately most investors live today. Day traders, those who buy and sell (popular in bull markets) securities in small time-frames, have nearly an 80% chance of losing “real money” over the course of 12 months. That’s the results from CuriousGnu, a popular blog post, which calculated a median 12-month loss on investments of 36.3%
A 2010 study from the University of California at Davis indicated a small 1.6% of traders were profitable. Fees, taxes and emotions are the driving factors why short term trading is very difficult. Oh, by the way don’t ask the day traders how they are doing….That’s like asking people how they did as they exit a casino…You won’t hear about the bad bets just the ones that they did well on or they will say “oh, we broke even but we had fun!”… Yeah, sure you did… For us mere mortals day trading should be left to the “experts” to make a living.
Good Luck! Jeff
*These are the opinions of Jeffrey Johnston and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.