9 Reasons Why I Stopped Day Trading | By Joshua Eriaborosan OFOMAJA (JEO)
When I first got introduced to the financial markets some few years back, I was excited because it seemed I could just make a lot of money so fast by simply trading large positions every day but that expectation was short-lived mainly because I had great mentors and got burnt so fast that I learned my lesson never to play with fire.
Day trading is definitely not what professional traders engage in, especially in these times. If trading where that easy these guys would not spend a lot of money on great tools like the Bloomberg terminal (Industry-standard tool for finance pro) subscription for research and supper analytics.
What is Day Trading?
Basically, this is the buying or selling of financial security with the hope of closing the trade position before the close of the day in their respective markets.
Day Trading is very short term. Typically, traders who day trade tend to use from 4 Hour price charts to the extreme 1 Minute price chart to carry out technical analysis.
If you are new to trading, please do not day trade if you plan on doing this for life and make a living from trading.
Below are the reasons why I think you should not day trade and rather be long term focused.
1- You are Human:
When you day trade you are going to overwhelm yourself with the fast pace of day trading. You’re human and you have feelings. Most of the big investment banks and asset/wealth management firms have trading algorithms that help term with day trading. Humans don’t day trade for them they only monitor the “Robots”.
For you to succeed in trading, in general, you must learn how to know where the Smart Money is going and then protect yourself against loss. Personally, from experience, I have found it really hard to achieve that day trading. There is only so much I can do at a time, I’m human and so are you.
2- Speed Kills:
This is one general phrase I have found to be very true when it comes to trading. I remember when I first started trading, I was trading with the 15-minutes, 30-minutes and 1-hour price chart and with the help of leverage I was able to make a good percentage of return in just a few days.
I was excited about my achievement and I could not wait to let my teacher know what I have done. Surprisingly what he told me shocked me. He used that snake game in a Nokia phone to explain a very valuable lesson for me.
He said when you wanted to play that game did you start with the fastest speed or you started with a very moderate speed? Of course, I started at a moderate speed. He told me to be long term focused. However, this did not sink in then I continued my way until I lost real money fast doing “High speed/frequency trading”.
When you day trade you have a very high tendency to over trade i.e. risks a lot of your capital I one trade or even your overall portfolio for the trading day. This can be disastrous because you are probably over leveraging and this can make you lose all your money when things do not go your way in the market.
Personally, I think traders love to over trade because they feel they always have to be in the market minute of minute to make a lot of money which is not true that I can assure you won’t make as much money in the long term that is even if you have a positive P and L at all.
4- Measuring volatility incorrectly:
One of the best qualities of any professional trader is their ability to correctly measure and monitor market volatility this is basically why I can trade any asset very well.
When you day trade it’s hard to correctly measure volatility as there is too much market noise and it is bad for day traders.
5- Stop hunting:
If you have been day trading you must have noticed something. Sometimes it feels like the market knows where your stop loss was placed it then goes to hit it and then starts moving to your original trade direction. This is a nightmare for day traders.
One of the reasons for this is a bad broker practice called stop hunting where some bad brokers can just spike prices to where a lot of stops are located to remove their clients from the trade, making them lose money while they gain on their expense.
However, I personally think that is usually not the case even though it happens. I think since markets do not move in a very linear (straight) format there could be some normal correction taking place before a trade goes in your direction. If you have did not measure volatility correctly it will of cause hit your stop loss.
The biggest effect of this on day traders is the tendency for them to either widen their stop loss or even stop using stop loss altogether. This usually leads to the loss of almost all if not all their capital.
6- Time Consuming:
Now one of the reasons I like trading is the freedom I enjoy doing other things that bring satisfaction to me. When you day trade it means you have to be in the market almost 24/7 especially for FOREX and Crypto traders only robots can do that and succeed.
Day trading for me to the joy of trading, I literally did not have time for myself or anything else. It was too time demanding and anytime I was not looking at charts and placing trades I feel like I was miss out, which is a position you never want to find yourself as a trade. It can lead to taking what we call boredom trades i.e. trading for trading sake.
I noticed that because of the high pressure and time-consuming nature of day trading it increases our stress level and when your stress level is too high, I can almost assure you’ll lose money. Believe me, I know what I’m talking about.
A high-stress level is something every professional trader or business person avoid, by all means, it is bad for productivity and good decision making.
8- High Blood Pressure:
LOL! I know many of you guys may be wondering “high blood pressure”. What do you think a bad sleeping, eating and stressful life of a day trader would result in? When I was day trading, I went to the hospital for some general check-up and I found out that my blood pressure was far from normal of course I’m fine now.
However, I don’t know if it was day trading that caused that directly but I hope you get my point. Day trading is not a healthy human lifestyle.
I left this for the last deliberately. Depression can kick in for some day traders due to high-stress levels combined with the fact that most of them are not even making money from day trading.
It feels like you don’t even know what you are doing, you’ve become a trading addict more like a gambler and because you believe day trading can solve all your “money problem” you fail to tell yourself the truth on how day trading is affecting you negatively.
This can make you feel like you are a failure, which you are not. All you need is the right guidance and principles to succeed. Be very open-minded and kill your ego, it will serve you well to do so. I know what I am talking about, please just be humble and seek help.
Clap for yourself for finishing reading this write up. You have just pushed yourself forward in life. What I shared with you today is very unconventional and they are truths that came from my own experiences. I just want to shorten the learning curve for you.
ABOUT THE WRITER
My name is Joshua Eriaborosan OFOMAJA (JEO), I solve investment and marketing/business problems for individuals and businesses.
Disclaimer: All advice I share are general knowledge you should not invest or trade solely on them. It would be fair to carry out your own research.