8 Reasons to Not Be a Daytrader

Post I just did. The full post is at: http://jamesaltucher.com/2010/11/8-reasons-not-to-daytrade/

But here is the first part:

8 REASONS NOT TO DAYTRADE
November 6th, 2010 | Author: James Altucher | Edit
Everyone wants to be a daytrader. Let me tell you the best days. You get in at 9:25am. You make the trade your system tells you to make at 9:30. And by 9:45, the trade is done, profitable, and you’re done for the day: $1800 richer and happy about it. Even better are those stories of people who took $3000 off of their credit card and “18 months later I had $25,351,011.45 in the bank!!!” The first day I decided I was going to be a fulltime daytrader, on May 18, 2001, I was so excited I couldn’t sleep at night. It was unbelievable to me how much money I was going to make.

But its all a lie to yourself. I still occasionally daytrade. And I’ve daytraded for other people. I’ve daytraded for hedge funds and for prop trading firms. Right before I started daytrading, an old-timer who had spent 40 years in the business told me, “Don’t do it. Why do you want to be involved with those people.” But I wanted to be “those people”. I was one of them. I was a TRADER.

Don’t do it: Here’s why:

- Suicide. At some point you will feel suicidal. That doesn’t mean you lost all of your money. You might just be having your worst week in 2 or 3 weeks. But for whatever reason you bought when you should’ve sold and that sent your head spinning and now you need to be talked off the ledge. I’ve talked many people off the ledge in the past 10 years and had to be talked off a few times myself. Its not a pleasant feeling. Why do that to yourself?

- You’ll overeat. Why not? You just put on the trade and the second you did it went against you. So you put on more and it went against you some more. So now you are staring at it and you are feeling bad. Your body needs to feel good. Your body is very short-term in its thinking. Its saying, “you did something that made me feel bad so now I need a doughnut. I know that will balance the bad feeling so go do it. Hurry.” So you eat a doughnut. The trade goes against you more. Screw it, you eat 5 more doughnuts. Six. Seven. I’m getting sick even writing this. Eight. Nine. And so on.

- Your eyes go bad. Imagine you have two screens in front of you and thousands of numbers and they are all blinking and changing from green to red to green. You’re staring at these numbers for thousands of hours over the course of years. I can’t read books close to me anymore. The letters all melt together and look like a kaleidoscope. I have to take my glasses off to read them. Although, is that so bad? Maybe I won’t need glasses anymore eventually.

 

I often wonder what eight 24" monitors will do to the eyes, and I use a slate blue background as the black and white hurts too much. When I post a chart here, etc., I use freestockcharts.com as they are very vivid in the black background. Still, I wonder about the eyes too.

Sometimes I'll leave a little late, it's dark, and the street lights, and cars headlights look to have a purple tint...

 

The most ive ever traded with is 3 monitors. But its brutal on the eyes.

Personally, think daytrading doesn't make sense unless you have a massive edge and massively good psychology and stamina.

 

I swing trade equities and options. Every now and then pull some day trades in my own account. I don't necessarily 'have' to sit in front of the monitors. Just a habit I guess...

 

You always hear this claim but I don't think there's any evidence that staring into a monitor or even 8 monitors is physiologically "harder" on the eyes than say a similar amount of time reading text from a book.

 

Why the intense involvement ? Can't you just code up your strategy and leave your computer to it with one monitor that you check on once a day to see how much you've made that day ?

That way if you have a bad trade, you don't know about it until you get back from the beach and it's already been offset by several good ones in the meantime.

 

Sounds like a plan but get back find a good one offset by several bad

 

My primary activity as a trader is a day trader and my primary market is the futures market.

1. I have never felt suicidal but I have experienced brief moments dispair following heart breaking losses.

2. I follow the zone diet, which balances carbs, fats, and protein. I do not over eat and I avoid sugar like I'd avoid the plague.

3. Looking at monitors for many years has caused my vision to deteriorate to the point that I now wear glasses. I also developed back problems but fortunately, I have been able to manage that through excercise, yoga, and meditation.

You can't equate day trading to your points against it without clear and convincing evidence. I don't think you fully understand the concept of causation. It's entirely possible I would have needed glasses if I weren't a trader and my back problems may have been caused by the remodeling project I did on my house a number of years ago. I largely disagree with your position.

Edit: I just clicked on your link and would like to address your other points.

Blood pressure. Day trading can be <b>very</b> stressful. My BP is consistently 110 / 70 but there have been times when it has been elevated due to trading. Yoga and Meditation are effective tools to treat this and many, many other professions come with high levels of stress as well.

Nothing Productive. I make regular contributions to charity as does one of my clients. We are able to do this by virtue of the profits I generate from trading. I have donated quite a few dollars to my local community college for students who are in need and also for students who aren't but show a high degree of motivation to excel. One went on to medical school. That being said, there are times when trading does feel unproductive and this feeling has led me to pursue a second master's degree because the older I get the more I feel the need to move away from the markets as my primary source of income. I agree with your point in part.

No Career. A number of years ago I started a Hedge Fund and generated positive returns in all but one year, which I lost 20%. I currently operate as a CTA rather than a CPO. I would say that qualifies as a career. The IRS would tend to agree with me. However, for the average guy who trades his or her own account trading may not qualify as a career. Quit trading and try and get a job somewhere else and you'll quickly find out how valuable (not very) your skills are in the marketplace. I agree with your point in part.

It's impossible. No it's not. I've been doing it for 21 years, with 90% of those years being profitable. Most people will fail, however so your point is fairly valid but just because the odds are stacked against you doesn't mean you raise the white flag without even trying. The lightbulb never would have been invented if Edison gave up after a few attempts.

 

Integrate SOUND alerts in your system/strategy, so you don't have to look at the monitor all the time. Most of the time (70-80% at least) market is in consolidation, there is not much to do during that period, if you are only playing trending or momentum.

 

This is a pretty good suggestion but I have found that to be successful you need to study price action throughout the day. Merely getting a sound alert when some criteria is met renders your trading method more of a science than an art and it's my firm belief that trading is an art that uses science as a tool.