I stumbled upon Altucher’s blog by following a tweet about self-publishing. Then while surfing around waiting for my trade to move, I found his post 8 Reasons Not to Daytrade. I thought I’d offer my take on his reasons.
- Suicide – I have lost a lot of money but I never ever thought of suicide. I wouldn’t do that to my family. That’s an easy cop-out. I lost their money and I will make it back, either from trading or from my IT consulting.
- You’ll overeat – I have a strict rule about eating between meals – Don’t Do It! 99% of the days I will not eat in between meals. The 1% is due to social functions.
- Your eyes go bad – My eyes are already going bad. I actually look at the screen less now than I did while doing IT Consulting. In my consulting work I was always on the PC developing code, creating design diagrams and documents, etc. Now I set audio alerts and I do other things while keeping an eye on the market. So contrary to what many believe about day traders, I’m not watching the screen 8 hours/day.
- Social life – This is one of the drawbacks of trading. Twitter has helped to alleviate that somewhat, but the bottom line is that I really miss the interesting discussions with coworkers. At the same time, I must admit that the majority of discussions with coworkers at the office were people complaining about work, the public transport, their boss, etc. So while I’m missing out on the good discussions, I’m also missing out on all the negative ones. He also mentions kids. While kids aren’t a replacement for adult friends, I do think spending quality time with the kids is very important. Without a double I have much more family time due to working at home.
- Blood pressure – My doctor hasn’t noticed anything – my blood pressure is consistently normal. Part of this is due to exercise and eating smart. If one sits at the desk 10 hours/day then your health will be affected. If you trade a few hours, exercise & have lunch, trade a few hours, spend time with the family, etc. then it can be good for your health. I used to get very stressed when a trade goes against me. Confidence in my trading plan, a consistent edge, and stop losses take away alot of the stress.
- Nothing productive – I’ve spent years working for clients on projects that I felt weren’t productive. My last project was a redesign of an existing system. Performance was increased from a 5 hour run time to 15 minutes. The project was eventually canceled. I spent a year on a project to allow customers to read their email via SMS. Who reads their email using SMS? This was a while ago but I don’t think anyone ever did it. Trading gives me time to do things productive for me, what many call “hobbies”. Music, writing, photography, etc. I don’t have time for that while working in the office.
- No career – I think he has valid points on this one.
- It’s impossible – He definitely has a valid point here. For most, it is impossible. I bought his book about trading like a hedge fund. I tested out the “setups” in his book. They didn’t work. Maybe they used to but they don’t any more. If this is his view of day trading then I agree with him, it is impossible. I don’t know a single successful trader who trades like that. I think if one learns auction market principles and trading support & resistance levels then the odds increase from “impossible” to “very unlikely”.
Here are my reasons not to daytrade:
- You’re not passionnate about trading
- You’re not willing to invest 2-3 years full time before making a penny
- You’re not disciplined enough to trade on simulator until consistently profitable for several months. In other words if you want to trade real money for the excitement then trading is not for you. In my opinion most people think they can do that but will probably get bored, discouraged, or burnt out and give up. Or they think they’re smarter than average and that they can do it in a shorter amount of time.
- You are a perfectionist
- You want to be right all the time and have a hard time admitting it when you’re wrong
- You are undercapitalized and/or are trading with money you can not afford to lose. I don’t really know how much capital one needs to start but most agree it’s a lot more than the $5k minimum deposit required by most futures brokers. If I were to do it over I’d take 20k, put half into an account and trade with that. If I lost it then as a second chance I’d put the other 10k in and if I lost that I’d give up. That would be my approach. Thanks to Benkotrader for reminding me of this important point.
Be honest with yourself, it will save you time and money in the long run.