A of dice and stocks listed in the newspaper

The Dangers of Day Trading

What You have to Fear

The dangers associated with day trading are numerous, the most prominent being the fact that you can lose copious amounts of money when day trading. According to a BBC article, a US government investigation found that day traders "rarely make money and sometimes lose tens of thousands of dollars." Additionally, the study found that brokers are cashing in on the volume of trading which is taking place.

"'Day trading clearly is a gamble for most traders, but not for the [day-trading] firms,' said Susan Collins, a Republican senator, who chaired the committee which conducted the survey. 'They make money whether their customers do or not.'"

Insights from an Expert

John Visscher, a partner with Holloway Financial Management of Gainesville, FLA, has been in the financial services industry for over 20 years, and he sees many dangers in day trading. In this clip, he details the risks and a few of the reasons why he does not suggest day trading. He, instead, advocates long-term investing or, at the very least, investing for more than a year.

Other Reasons to be Concerned

A report by the North American Securities Administrators Association (NASAA) found that "70 per cent of day traders lose all the money they invest." Also, according to an article on fool.com, "about 90% of day traders 'are washed up within three months.'"

In the article, David Shellenberger of the Massachusetts Securities Division noted that 'Most traders will lose all of their money.'" The article went on to add that "95 percent of investors fail" within their first two years of day trading. So, the key is to proceed with caution when day trading. The article also advises that those who do day trade, treat it like gambling and "only use money that you can afford to lose."

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