Is there anything more appealing than making a quick buck through a smart stock pick?
Day trading is exciting, and the rewards can appear tempting.
But when you day trade, youre turning established wealth-building principles upside down.
We’ve got thefive beginning stock trading mistakesthat prevent you from getting rich.
There are reasons why few day traders independent or otherwise do well enough to retire on their trading profits.
Lets look at the realities of day trading.
The longer you allow the stock market to do its magic, the better your odds become.
No Interest Til Almost 2027?
The odds of being right on one toss is 50%.
Those risks can be multiplied by leverage.
In their quest for higher profits, a trader can borrow multiples of their equity to take large positions.
But when wrong, that $25,000 takes four times the hit.
That increased risk makes it far more likely the account can go to zero.
Thats why professionals call market returns as a random walk with an upward drift.
Want to picture that?
Imagine the path of someone whos had too much to drink trying to walk home.
Does that mean the stock will act the same way this time?
A stock that went up yesterday wont automatically go up again.
It might plateau or even reverse itself (thats that pesky random walk).
Even the best-performing stocks dont go straight up.
They protect themselves by investing only a small portion of their total portfolios into any one idea.
One of the most dangerous patterns we tend to follow is a belief in our own abilities.
We tend to be overconfident in our opinions and put too much at risk in any one trade.
But thats only a start.
If you invest in thinly-traded stocks, that difference can pile up the more you trade.
Who Are the Successful Day Traders?
With millions of people investing in stocks, there are bound to be a few who do very well.
But they have computing power, data access and data scientists, too.
Skill-Building Challenge No.
2
Do that many times over with other charts.
Did you make money?
Do that many times, again over different market periods.
There will always berisks associated with investing.
He is an adjunct professor of finance at Wayne State University in Michigan.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
