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Why Is Day Trading So Difficult?
Posted By: Bennett McDowell
There are three main reasons why day trading is so difficult:
1)When day trading, trading time is compressed. Losses and wins come at you faster and more often which requires a mature, developed psychology to properly handle that kind of instantaneous feedback in such a short period of time.
2)You must develop the psychology not to be seduced by the open market. Trading must remain emotionless and objective.
3)Your day trading results can be highly impacted by trading at higher time frames and the shorter your time frame, the greater this effect will have on you.
The psychology of day trading requires you to not let a string of losses or wins that occur in a short period of time affect your mental state. A frail ego or mind will not do well in handling the results of immediate trade feedback in such a compressed amount of time. It will be too over whelming and may cause incredible frustration and a feeling of hopelessness. This is why position trading using daily charts is recommend for new traders because it allows them time to absorb trade feedback in a manner they can handle while they get a grasp of their trading results.
The open market can be quite seductive especially to the new trader. Day trading requires that you make trading decisions based on sound judgment and analysis void of emotion. New traders that day trade have a tendency to become seduced by the excitement of the open markets and therefore often become emotional traders acting on impulse rather than sound analysis and judgment.
When comparing day trading to position trading, it is easy to see that position trading requires using higher time frame charts like the sixty minute, daily, weekly, and even in some cases the monthly chart. If you are position trading using a daily chart you don’t have many time frames above you that could impact your trading. Compare this to day trading where many time frame are above you. If you are day trading using a one minute chart for example, you have the three, five, ten, fifteen, thirty, forty five, sixty, daily, and weekly traders above you. As a one minute trader you have many traders above you that can throw off your trading approach no matter how good it is. As a position trader, you may have only the weekly and monthly traders above you who do not trade that often.
The differences between day trading and position trading can be as distinct as the difference between day and night. Your success will all depend on your psychology, trading abilities, skills, and your aptitude. As a new trader you will more than likely need to walk before you run, and believe me, day trading is running!
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By Jonathan Yates
On 7-20-2011 at 10:07 pm
Day trading is so difficult as “The Market” or “The House” almost always wins. Study after study reveals that more than 90 percent of day traders lose money. When you read the reviews of the great investors on TradersLog, it is very obvious that they prosper as they work harder and work smarter. Day trading is trying to outmaneuver the market. Some times it will work, but over the long term it is the proverbial, “Picking up dimes in front of bulldozers.” Or, as my father, who spent his entire career in the securities industry used to say, “Little gains, big losses.” This does not mean that profits can not be made day trading, but do it where the individual investor has an advantage. There used to be one for SOES bandits, but we all know what happened to them (and if you don’t, you should find out before you consider day trading). You want to put the odds on your side and control risk. The best book for this is, “The Way of the Turtle.” I think capture the dividend strategies with tax free bond ETFs puts the odds on your side and certainly controls risks for a variety factors. Day trading can be lucrative, but first put the odds on your side and limit risk.
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By David
On 8-14-2011 at 3:24 pm
I too have wondered why day trading is so difficult. I have come to the conclusion that it for 3 main reasons, they are -
1. There is greater randomness on short term time frames.
2. The costs of trading (the spread) are huge and has to be overcome.
3. The winners aren’t given time to become much larger than the losers, therefore you need a higher winning trade to losing trade ratio.
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