Wednesday, November 28, 2007

DinosaurTrader Brings a Very Good Topic Tonight on his blog: Is Day Trading Gambling?

Here was my response to this very very good question:

That's a great question Dino.
Day trading brings out gambling habits in emotional people. The constant repetitive trading will bring out emotional sides in traders.
Small time frame traders are the most vulnerable of all traders b/c they are most likely to second guess their views b/c of the speed of the timeframe. Second guessing leads to overtrading, overtrading leads to churning of the account via commissions/slippage and the emotional aspects of trading(revenge trading, fear of missing out, fear of being wrong, stubborn/egotistical trading, catching up, frustration etc etc etc).
Trading small time frames is very risky to a trader who does not have a rock solid strategy he needs to stick with and tune out all the noise that interferes with the trader intra day.
If you are an obsessive person, then day trading is definitely not for you. trading will instigate and wake up all sorts of negative habits namely over trading which is a trading sin. That is still one of my worst traits. My brokers love me, but screw the brokers. If i set a daily limit of 3 trades everyday and after three trades i am completely done, then i'd beef up my long term PnL for sure. How many times have you made 1-2 trades and were up nicely on the day, only to piss away the nice gains by putting on 10-15 mediocre trades later in the session?
Over Trading brings out gambling like habits and makes a trader very obsessive.

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