Previously, I’d mentioned that both Bagel and I are profoundly, philosophically opposed to day-trading. Today I wish to elaborate a bit on why. Again, the target audience of this blog is laypeople who’ve never day-traded, or who may never have even invested before, who are looking to simply learn more about the subject. After poking around on Facebook this past summer (and engaging in random arguments with complete strangers as I’m occasionally wont to do) I quickly discovered that many people actually don’t possess basic financial literacy and historical knowledge about the stock market. People will know about “America’s Top Model” on television but won’t have the slightest inkling about how the stock market, that is, the foundational pillar of modern capitalism, works. In fact, many people on FB –at least the folks I corresponded with this past summer– will rail insistently against all of capitalism, decrying the entire economic system as “evil” and “rigged.” And they will somehow do this without being even able to articulate to me the difference between bonds and stocks. Look, to paraphrase Josh Lyman: “…I realize as an adult not everyone shares my views of the world… and with an issue as [big as the economy] I’m prepared to accept a lot of different points of view as being perfectly valid…” but when it comes to the stock market, we’re talking about the economic engine that drives the American and global economy! A cornerstone of modern civilization! If you’re going to rant at me in dissertation-length posts on Facebook about how, “Bernie is a Genius and Capitalism is Bad,” then we’re gonna at least get the names of the damn commandments right!
You know, it’s okay; I didn’t know much of this material either until my mid-twenties. Despite having been a good student, having gone to college, and even having worked at a bank (albeit, again, not for the financial side), I was ignorant of much of the inner-workings of how the American financial system actually works. This post seeks to shed a little light on the subject. Let’s start with some basic background.
Day-trading was never my first choice, at least not for a living. It’s not an activity I’ve willingly entered into. First, it’s something I’ve actually tried before. And my experience then was mixed. I had incredible highs and soul-crushing lows. Second, from all the reading I’ve done on the subject, and from my own personal experience, I’ve found day-trading incredibly dangerous and risky. While some day-traders may make short-term profits, in the long-run, virtually all get positively destroyed and lose their shirts. Repeatedly, I’ve read online and heard from countless sources that the real way to build true wealth is to buy and hold for the long-term. Buy value stocks and buckle in for a long, thirty-year ride. This is how the all-time greats like Warren Buffett and Peter Magellan amassed their tremendous fortunes.
I totally agree with this assessment.
Furthermore –and this may be a little lofty/high-minded, but I’m just going to put this out there– I philosophically disagree with the entire concept of day-trading. I’ve mentioned in a previous post that Bagel 110% condemns me day-trading. And I actually also 100% agree with her as well. [More on this in a future post.]
Additionally, know that the playing field is hugely stacked against individual investors. In markets, it’s the institutional players –the Bank of Americas, Citibanks, Goldmans & Morgans– that control all of the real money. These outfits are massive in scale, employ the most brilliant people, and possess unparalleled resources in terms of research analysis, technology, and connections (government and otherwise). Day-traders and individual investors are known at these banks as “Retail Money” or, more pejoratively, “Dumb Money.”
I am starting a blog written anonymously about day-trading. Of course many posts will cover day-trading; but I envision some posts will also be about my general lifestyle– that is, day-trading as a means to pay rent, buy groceries, and pay bills. When you’re just a normal, regular prole trying to day-trade for a living, you’ll find that it’s not a 9-5 job. It’s more a like a startup you’ve self-bankrolled that’ll engulf your entire life and every waking moment. Even when you’re not trading, you’re thinking about trading. Or you’re preoccupied with a massive position you’ve taken on that’s moved against you. Or about half-a-dozen other things on your many to-do lists. I’ve transferred just about every last cent out of my Citibank and Chase accounts into my Fidelity brokerage and am putting it all on the line. It’s not some abstract number in some 401k that blithely moves up and down which you see every other quarter or maybe even once a year. This is real life. As John Hoynes would say, “Welcome to the NFL.”
Why written anonymously? Well, while my closest friends will know my true identity, I’m confident they will remain discreet. And generally, it just makes me more comfortable. In person, I’m usually reluctant to share personal financial details (I was always taught that it was bad taste and a faux pas to do so in polite society) but if this is a blog that’ll largely be about my adventures (or misadventures) in day-trading, then it’ll simply be unavoidable disclosing some personal financial information. I’ve thought about this lots and have made my peace with it. I love writing. I love programming and finance. Combining the two –at least for now– makes sense to me.