Submitted by IamNotStupidUR t3_zvcmz8 in wallstreetbets
Daytrading makes no sense even if you happen to be good at it in most situations
​
I have daytraded and made a reasonable amount of money at it but not enough for me to care. There are a couple of reasons why daytrading doesn't make a lot of sense.
​
First off, it is extremely time-consuming. It will take up all of your time and you are not being paid for day trading, you are getting paid for your investments. So, you can't maintain a 50-100k or whatever job while you are daytrading and have to write that off as lost income. This is important because you will have to live off your daytrading earnings and it gets exponentially to harder to get great and greater ROIs. 10-15% is trivial. 50% is extremely hard and not realistic.
Second, let's say that you are good and can get 40% returns in a year. Well, you have to have a significant amount of money invested for you to be compounding a nest egg. If you were playing with 100k and got a great return on 40% ROI, you will eat all that up easily with living expenses and be starting the next year with 100k again. Let's say you had 200k you were playing with. That means that with a 40% amazing return, you will have return of 80k. Subtract 40k in imaginary living expenses and now you are down to 40k return on a 200k investment or a ROI of 25%. You gave up on making 50-100k at an office job + 10-15% returns on normal investments (all with very little risk) to make 40k busting your ass and taking a lot of risk.
​
This gets to the problems daytrading. It is extremely risky and if you happen to be the golden child who can make 40% a year doing it full-time, you have to be playing with enough money to offset that you have to live off your investment earnings and if you are that kind of a person, you probably are someone that can make a decent amount of money working someplace, which makes it much less likely for you to want to throw away your regular income. The person that is prime for daytrading is someone that already has a lot of money and you usually need a good job to have a lot of money. A person with a good job has very few reasons to want to gamble with their standard of living. The person primed for daytrading doesn't have a reason to want to daytrade. Someone with all of their financial ducks in a row wouldn't be trying to burn a hole in their stomach to get a decent return. They would just park it in mutual funds or get a money manager. I made 37k in two months doing it, which sounds great. At that pace that is 222k a year. Great except I forgo making 150k a year with benefits, 401k, and returns on normal investments of 10-15%. I can have a very good run or being a fucking financial magician and it still doesn't make sense.
For it to make more sense, you would have to be wealthy and not have a good job so your opportunity cost would be very low AND that is assuming that you are very good at day trading. Most people are not wealthy and have shitty job prospects, and are extremely good at investing. It is like a trifecta of things that don't make any sense.