"Too many people say to me, 'I have an idea for how to trade the markets! I KNOW I have a talent for it.' These people are going to have deep sadness. They are going to feel like killing themselves. They are going to do what I did, and consider doing infomercials for diet pills because even that is better than trading stocks. They are going to cry a lot."
- James Altucher
For the uninitiated, day-trading, as the name suggests, is trading in stocks when you hold your position for a very short period of time (usually less than a day), with the sole purpose of increasing the amount of cash that you had in your account by the end of each trading day.
When you do this, what you look for in a stock are completely different from what you would look for if you were to hold your position for a few months or a few years. Holding it for longer makes you an investor as opposed to a day-trader.
The simple difference is that an investor believes in the long term prospects of the company she is investing in, while the day-trader has little to no care about the long term prospects of the company. In fact, a day-trader often doesn't even know what the company whose shares she is trading actually does. An investor will often stick with the investment through dips and rises and focuses more on the fundamentals driving the company rather than stop-loss triggers (price point lower than the bought price upon which the day-trader automatically sells and cuts her losses).
Even though the end goal for both is the investor and the day-trader is the same, to increase their wealth, the approaches are completely different. And despite what James Altucher says (from his experience), both approaches have their own probabilities of making you rich or losing you money.
So, as always, there is no right answer.
Would you hop from one exciting relationship to another or invest in one where the fundamentals click?
Would you sell a below par product to a customer or would you set the right expectations?
Would you visit several new places for a few hours each or live in a new one for a few months?
Would you read the Wikipedia summary of a book or would you read the actual book?
There is no blanket right answer, that is.
However, with constraints on a point in time and who is answering the question, there is always a right answer. And these two are constraints that are always enforced.
Would you day-trade your way through life or invest in it?
CONVERSATION