Daytrading Is Not a Four Letter Word

The Entry Points

Stevie

It’s a rare occasion when I ever disclose what I do for a living. Aside from a few members of my family, most folks I converse with are told that I do work on the internet with a website, but they don’t know the exact details. Why? Well, I have found over the years that traders like myself, daytraders if you will, are not looked upon with much respect. We could look at it this way:

trader is to dancer as stock index trader is to ballet dancer as daytrader  is to pole dancer

I wonder if those analogies will ever be found on the SAT college entrance exam. Anyway, the reactions I’ve observed to the word “daytrader” have leaned more toward the negative. And depending on whom I tell about my life as a daytrader, I can basically see what they’re thinking, and it’s not pretty. It’s no wonder their reactions, for as we discussed in this recent post – over 90% of those attempting to trade fail, with 80% of daytraders quitting within 2 years.  The statistics are dismal. It’s a tough job, which is the very reason why the surviving 5% should get some respect. At least a little.

Maybe we get no respect because trading is something we can do from home. And anybody can set up a trading account and blow the family nest egg, right? And everybody knows somebody who blew all of their dough either trying to trade, or at the blackjack table, or spent their paycheck on lottery tickets looking for the big pay out. The lottery is the definition of gambling, while blackjack and trading are gambling for the vast majority of people. But those two do not have to be gambling whatsoever. But for the vast majority, this just may be the problem, perhaps trading has simply been put into the same category as gambling, or just hoping to get lucky. Attempting to invest very little for that big win. We will win absolutely nothing investing (gambling?) in the market, without first investing in our own education.

Maybe there’s a reason traders don’t get much respect. Because our college educated friends and acquaintances just can’t fathom that Average Joe (AJ) sitting in his house in his shorts and socks, with a little vintage Boston playing in the background, can eek out a living trading. And AJ may actually be the millionaire next door. But what makes trading even more compelling as a “career” choice is that the guy/gal not only DOES NOT have to invest time or money into a college degree, but can actually be a high school drop out.

Here’s a few facts about the income of the average American in 2011 from high school drop outs through those with a Masters degree:

-High school drop out  $451/wk

-High school diploma $638/wk

-High school diploma with a few college courses increased their average income to $719/wk

-Having an Associates degree earned $768/wk

-Bachelor’s degree $1,053/wk

-And the average wage for someone with a Master’s degree earned $1,263/wk

Now let’s look at the average income of a successful daytrader according to this piece from Chron:

While some day traders earn $500,000 to $1,000,000 and more per year — based on commissions earned — novices might make well under $50,000 annually. That’s why the average annual trader earns somewhere in the middle at $103,000 per year as of 2013, according to the job website Indeed.com.

Average annual incomes for day traders can vary significantly across the country. They earned the highest incomes of $122,000 per year in New York, according to Indeed.com. They also earned relatively high incomes in the District of Columbia and Connecticut at $118,000 and $112,000 per year, respectively. These investment professionals earned incomes closer to the national average for day traders in Florida and Texas — $99,000 and $98,000, respectively. And those in Kentucky and Nebraska earned somewhat less at $91,000 and $84,000 per year, respectively.

Okay, so let’s just take the lowest income of $84,000/yr. and break it down, making the weekly pay $1,615/wk., which still beats out those with the Master’s degree. Am I missing something?

The bottom line is that whether you’re trading currencies, stock indexes, ETFs, stocks, or penny stocks, there is the potential to make a lot of money through hard work and understanding your own psychology. This is not an easy business; if it were then everyone would be doing it.

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