Common misconceptions about day trading

[Canis Majoris]

There seems to be a lot of confusion, misconception and misunderstanding about day trading and its advantages as well as disadvantages. Some people even say that it is a form of gambling. In this topic I want to explain why it is not and also address the most common issues which day traders encounter and how they handle them. Thank you for your attention.

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

Further, there is a question of limited profitability. This question has some substance but it seems that people who raise it don't fully understand what day trading comes down to. Many erroneously think that it is mostly about missing good profit opportunities. In fact, nothing can be farther from truth than that. Day trading if done right is actually about maximizing your profits, not losing them.

Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.

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[ktabb]

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

You are incredibly wrong here and very misguided. Day trading absolutely is gambling. It is gambling because it is luck based and not based on any type of valid research or methodology. Strategies for trading assets intra-day by looking at charts do not lead to consistently outperforming the market over the long term, and there are tons of studies and data out there that show this. Almost no day traders consistently beat the market in which they are trading as a whole.

Other trading strategies are often not gambling. Long term investing is the furthest thing from gambling that you can do. Buying an asset because you see value in it and believe it will appreciate over time is the most consistent way to make money. Even trading over 1-4 month periods or so (which is most of what I do) is far from gambling because it is not luck-based but rather based on understanding the fundamentals of the asset and the market in which it is traded.

Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.

What statistic are you talking about that suggests the best trading strategy would be capitalizing on both short term volatility and long term growth? It sounds like you are just saying the best way to trade is sell at the top of every peak and buy at the bottom of every dip. This is not realistic.

You're overall understanding of day trading (which is 100% gambling) is very flawed. Sure there is short term volatility that comes with opportunity to make money, but nobody has the information to consistently profit off of that volatility. It is essentially random noise in a larger, less random pattern.

[TERA2]

I have outperformed bitcoin by 10,000% by daytrading and these increases have been steady since 2013. Daytrading is not gambling. It is a simple system where you learn to buy high volume dips and crashes, and breakouts. I guess 'Daytrading is gambling' is like this nice catchy excuse for bad traders for them to blow off steam.

[Canis Majoris]

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

You are incredibly wrong here and very misguided. Day trading absolutely is gambling. It is gambling because it is luck based and not based on any type of valid research or methodology. Strategies for trading assets intra-day by looking at charts do not lead to consistently outperforming the market over the long term, and there are tons of studies and data out there that show this. Almost no day traders consistently beat the market in which they are trading as a whole.

Profit earned is all that counts in the end. Note that I'm not saying that day trading is profitable for everyone or it is a losing game for every trader out there. But it simply can't be gambling if you accept that trading as such is not gambling. There is no other choice because all price growth starts small, even profits from long-term investment are made of small price moves. Capitalizing on the volatility which results from these small moves allows you to earn higher profits because there is no growth without corrections, however small those can be. Add to this that you can't always be right in your assessment of the future growth and even more so in respect to the extent of it.

And you completely write off arbitrage which belongs to day trading as much as day trading is concerned.

What statistic are you talking about that suggests the best trading strategy would be capitalizing on both short term volatility and long term growth? It sounds like you are just saying the best way to trade is sell at the top of every peak and buy at the bottom of every dip. This is not realistic.

You would need to use trading bots for that and take into account trading fees obviously. Ultimately, it all comes down to how efficiently you allocate your trading capital so as not to lose profit on bigger price moves. It looks like you think that day trading excludes any possibility of "seeing a long-term value in an asset". This is another misconception, of course.

[buwaytress]

Just to start off, I believe that all trading... Even the mpst basic concept of trade and commerce, are exposed to some element of luck. Bitcoin's extreme volatility has made day trading an incredibly viable method of profit taking but also increases this exposure to luck.

That said, I think the most successful traders with the most consistent performances understand this element of luck and use their experience and skill to minimise reliance on luck, otherwise known as external factors beyond their control.

Technical analysis hasn't convinced me as a reliable trading tool for Bitcoin, it certainly has much less reliability in day trading, but the moderate success of bot and algorithm models used by day tradera suggests that there is enough data and short patterns in the volatility, though likely specific to platform and location.

Arbitrage is one example that thrives in day trading. If not only exclusive to it.

[jimbo2000]

My personal take is that day trading just like all forms of trading has a large amount of skill involved but also a big luck element. Just based on my own personal definitions of gambling I would say it's still gambling.

The distinction is that the experienced traders can make good decisions so that there gambles are sensible and in the long term would return a profit.

[MoonIsBlue]

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

You are incredibly wrong here and very misguided. Day trading absolutely is gambling. It is gambling because it is luck based and not based on any type of valid research or methodology. Strategies for trading assets intra-day by looking at charts do not lead to consistently outperforming the market over the long term, and there are tons of studies and data out there that show this. Almost no day traders consistently beat the market in which they are trading as a whole.

Other trading strategies are often not gambling. Long term investing is the furthest thing from gambling that you can do. Buying an asset because you see value in it and believe it will appreciate over time is the most consistent way to make money. Even trading over 1-4 month periods or so (which is most of what I do) is far from gambling because it is not luck-based but rather based on understanding the fundamentals of the asset and the market in which it is traded.

Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.

What statistic are you talking about that suggests the best trading strategy would be capitalizing on both short term volatility and long term growth? It sounds like you are just saying the best way to trade is sell at the top of every peak and buy at the bottom of every dip. This is not realistic.

You're overall understanding of day trading (which is 100% gambling) is very flawed. Sure there is short term volatility that comes with opportunity to make money, but nobody has the information to consistently profit off of that volatility. It is essentially random noise in a larger, less random pattern.

Buy and hold is as much of a gamble as daytrading, I personally don't agree with daytrading being gambling. In both methods you conduct your research, whether that be trough math or trough investigating the technology and news. As nothing is guarranteed and you can't guarrantee that if I buy and hold the price will go up its a bet you're taking, statistical decisions on how likely you find it that something will go up. Anything can go wrong and right.

You can never tell if something is going to work out, so in that sense you're always gambling.

[Canis Majoris]

Just to start off, I believe that all trading... Even the mpst basic concept of trade and commerce, are exposed to some element of luck. Bitcoin's extreme volatility has made day trading an incredibly viable method of profit taking but also increases this exposure to luck.

That said, I think the most successful traders with the most consistent performances understand this element of luck and use their experience and skill to minimise reliance on luck, otherwise known as external factors beyond their control.

If you think about it, you will see that day trading is there to take away the element of luck and at the same time capitalize on it. It may sound strange but there is a lot of sense in this. Even if you can correctly estimate the growth potential, you won't be able to say where the actual top will be because it will be completely unpredictable bordering on random. In turn, it means that you have to sell now and then. Day trading just takes this way of action to its logical conclusion. From this perspective, long-term holding itself with a specific price in mind as a target is the gambling.

[ktabb]

I have outperformed bitcoin by 10,000% by daytrading and these increases have been steady since 2013. Daytrading is not gambling. It is a simple system where you learn to buy high volume dips and crashes, and breakouts. I guess 'Daytrading is gambling' is like this nice catchy excuse for bad traders for them to blow off steam.

Rofl show some proof. This is 100% a lie. You are claiming that for every dollar you invested in 2013, you now have $10,000. I don't think you understand the claim you just made. It's like saying you can run 100 meters in half the time of Usain Bolt. It's laughable.

[aardvark15]

I have just about given up on day trading for a couple of reasons:

1) it’s too hard for me to get a good trading range in a day
2) if I watch the charts all day, I get too emotional/stressed
3) I really don’t have the time to devote to day trading
4) the new tax laws in the US make it difficult to day trade because you have to track every trade and the US dollar equivalent of the coins you are trading

[ktabb]

Profit earned is all that counts in the end. Note that I'm not saying that day trading is profitable for everyone or it is a losing game for every trader out there. But it simply can't be gambling if you accept that trading as such is not gambling. There is no other choice because all price growth starts small, even profits from long-term investment are made of small price moves. Capitalizing on the volatility which results from these small moves allows you to earn higher profits because there is no growth without corrections, however small those can be. Add to this that you can't always be right in your assessment of the future growth and even more so in respect to the extent of it.

First of all you talk about capitalizing on short term volatility like it is easy to do, and like people are capable of doing it consistently. When you buy an asset with the intent of trading it intra-day, how do you know it is going to go up and not down? You can lose money as easily as you gain it. There is no way to accurately predict price movements on this small of a scale CONSISTENTLY. Day traders will lose just as often as they win over a long enough period of time, and because of fees, this will end up putting them on the losing side overall.

Also, profit earned is NOT all that counts. If I am day trading in the stock market and earning 8% ROI in a year, but the S&P500 returns 12%, all of my work figuring out what to sell and buy and when, was just a waste because I could make more profit by just holding an index fund. Same with bitcoin - if you day traded bitcoin in 2017 and made a 200% return, you have failed because you would have made more money by just holding bitcoin. All of that day trading not only failed to help you make money, but it resulted in a massive amount of wasted time and wasted potential profit.

And regarding your comment about not always being right about future growth... it's true that you won't always be right, but you can be right the majority of the time. You can certainly be right MUCH more often than day traders. If you put in the time/effort/research for long term investing, you can get to a point where the only time you are wrong about the long term prospects of a company is pretty much when some unpredictable catastrophe happens, or some information is being deliberately kept hidden.

And you completely write off arbitrage which belongs to day trading as much as day trading is concerned.

You would need to use trading bots for that and take into account trading fees obviously. Ultimately, it all comes down to how efficiently you allocate your trading capital so as not to lose profit on bigger price moves. It looks like you think that day trading excludes any possibility of "seeing a long-term value in an asset". This is another misconception, of course.

Day trading by definition does not involve looking at the long term value of an asset, because the long term value has zero impact on the price within a given day. Take Snapchat for example, which had some great days after its IPO, spiking from $17 to $27 per share, even though long term it is a garbage company.

[JanpriX]

Another thing is that common misconceptions about day trading became "common" to many people because they "commonly" lose a huge amount of money from it. They trade on a daily basis, exposing themselves to risks (in a daily basis) and thus giving more chance to make a bad trade and lose money in the long run.

Personally, I'm not into day trading as I find it very taxing on my physical body as well as mental health. Maybe, my mind is also polluted by these misconceptions but I really believe that it is not for me. I have my own strategy to trade (not day trading) and so far, this provide good profit for myself without so much effort.

[buwaytress]

Just to start off, I believe that all trading... Even the mpst basic concept of trade and commerce, are exposed to some element of luck. Bitcoin's extreme volatility has made day trading an incredibly viable method of profit taking but also increases this exposure to luck.

That said, I think the most successful traders with the most consistent performances understand this element of luck and use their experience and skill to minimise reliance on luck, otherwise known as external factors beyond their control.

If you think about it, you will see that day trading is there to take away the element of luck and at the same time capitalize on it. It may sound strange but there is a lot of sense in this. Even if you can correctly estimate the growth potential, you won't be able to say where the actual top will be because it will be completely unpredictable bordering on random. In turn, it means that you have to sell now and then. Day trading just takes this way of action to its logical conclusion. From this perspective, long-term holding itself with a specific price in mind as a target is the gambling.

I see your point, but it doesn't make much logical sense. You don't take away this element of luck (expressed by what I meant as external factors) by shortening the time frame, you don't regain any more control from uncontrollable factors. I do agree that day trading realises gains (and losses!) more quickly because their exit points (and even entry) are determined by simple timeframes as opposed to price points.

Either way, it's pretty pointless to argue if trading is gambling - I think traders who don't apply discipline or rationale to their trades are gamblers. Simple as that. Just like the master poker player isn't really gambling since he actively minimises his exposure to luck, skilled traders do the same.

And you still can't call the top in day trading... it's still pretty much random. I joined a thread a couple of months back with about 20 players competing against AI on predicting daily ending prices. It just gave me more evidence of this.

[timerland]

There seems to be a lot of confusion, misconception and misunderstanding about day trading and its advantages as well as disadvantages. Some people even say that it is a form of gambling. In this topic I want to explain why it is not and also address the most common issues which day traders encounter and how they handle them. Thank you for your attention.

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

Further, there is a question of limited profitability. This question has some substance but it seems that people who raise it don't fully understand what day trading comes down to. Many erroneously think that it is mostly about missing good profit opportunities. In fact, nothing can be farther from truth than that. Day trading if done right is actually about maximizing your profits, not losing them.

Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.

It is true that day trading can lead to people focusing too much on the short term. But it is also true that day trading, if done right, can mean that you are capitalizing on both short term swings and long term gains of bitcoin or other speculative investments.

My personal experience with day trading is that I find myself tired out by the constant movements, which leads me to panic sell when the opportunity isn't even close to ripe yet. I'm sure i'm a prime example of an inexperienced trader in that regard.

It's no good to promote day trading to everyone, it's certainly not for everyone. But to say that it's no skill and all gambling is a bit too much. It has a lot more luck involved than long term speculation, since pumps can happen sooner or later and you don't know.

[Wind_FURY]

There seems to be a lot of confusion, misconception and misunderstanding about day trading and its advantages as well as disadvantages. Some people even say that it is a form of gambling. In this topic I want to explain why it is not and also address the most common issues which day traders encounter and how they handle them. Thank you for your attention.

In a way, it is. But it is "calculated gambling", but still gambling because you do not really know if your trade will result in a profit or a loss.

First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.

They all are because we take the risks. Starting a business can also be argued as a "gamble". But there's "good gambling" and "bad gambling".

Good gambling is the type that you had put a lot of thought into. Bad gambling is betting in a casino roulette game.

Further, there is a question of limited profitability. This question has some substance but it seems that people who raise it don't fully understand what day trading comes down to. Many erroneously think that it is mostly about missing good profit opportunities. In fact, nothing can be farther from truth than that. Day trading if done right is actually about maximizing your profits, not losing them.

It is but it's not for everyone. Some of us like to buy the dip and hold.

Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.

Whatever works for you. But I would like to see some data on how much holders made compared to how much day traders made from 2015 to 2017.

[TERA2]

I have outperformed bitcoin by 10,000% by daytrading and these increases have been steady since 2013. Daytrading is not gambling. It is a simple system where you learn to buy high volume dips and crashes, and breakouts. I guess 'Daytrading is gambling' is like this nice catchy excuse for bad traders for them to blow off steam.

Rofl show some proof. This is 100% a lie. You are claiming that for every dollar you invested in 2013, you now have $10,000. I don't think you understand the claim you just made. It's like saying you can run 100 meters in half the time of Usain Bolt. It's laughable.

I first bought in when bitcoin was around $200. For every dollar I initially invested, I now have $5,000. If I merely bought bitcoin, that dollar would now be worth $50. You will have to take my word for it. It would be impossible to prove this and any attempt to do so would be rather dangerous.

[ktabb]

I have outperformed bitcoin by 10,000% by daytrading and these increases have been steady since 2013. Daytrading is not gambling. It is a simple system where you learn to buy high volume dips and crashes, and breakouts. I guess 'Daytrading is gambling' is like this nice catchy excuse for bad traders for them to blow off steam.

Rofl show some proof. This is 100% a lie. You are claiming that for every dollar you invested in 2013, you now have $10,000. I don't think you understand the claim you just made. It's like saying you can run 100 meters in half the time of Usain Bolt. It's laughable.

I first bought in when bitcoin was around $200. For every dollar I initially invested, I now have $5,000. If I merely bought bitcoin, that dollar would now be worth $50. You will have to take my word for it. It would be impossible to prove this and any attempt to do so would be rather dangerous.

"Guys, day trading works, trust me! I'm a multi millionaire and I consistently outperform the market by day trading! I can't prove it but you should all be impressed!"

Okay buddy.

[TERA2]

I'm not obligated to provide anyone proof here. I'm simply describing how I came to the opinion that daytrading can work. It's very easy in Bitcoin. There are super predictable patterns that happen over and over. Buying a 50%-70% drop in a short time is always a win. A high volume is always bullish. You also get to trade on smaller exchanges that aren't the leader and you can play follow the leader and have a 5 second advantage. The same shapes on the chart play out over and over. I've seen them hundreds of times. There is tons of volume. It's truly a different market than anything else and we have an advantage because the professionals have not penetrated it yet. It's like a hack. I'm probably not going to trade anything else after I trade crypto because it would suck.

[crypto1010]

I have outperformed bitcoin by 10,000% by daytrading and these increases have been steady since 2013. Daytrading is not gambling. It is a simple system where you learn to buy high volume dips and crashes, and breakouts.

what you explained here is no doubt gambling!

You don't just buy when there is a high volume dip or crash, you basically gambling and hoping that the market recovers to what it was or even better and this kind of crypto buying ( day trading) is not always a smooth ride as market could further crash as was the case when bitcoin rose to as high as $19k and has not recovered since...

[TERA2]

ITs not gambling. Buying a 50-70% crash with a volume candle that eclipses everything else on the chart is a 95% win. The other 5% is the exchange youre trading on getting hacked. If you think it's gambling it's because you're new to bitcoin and not familiar with how bouncy and resilient it is.