The only people who make money from it are the fake gurus who sell programs that do not actually work.
Technical analysis and day trading scams / frauds rely upon misattribution - where a profitable trade is attributed to an indicator or pattern instead of expected probability.
Main Points on Why Day Trading & Technical Analysis is a Scam
Day trading / technical analysis is gambling: intraday prices are random (no chart pattern statistically predicts future price movements)
Every day trader, penny stock expert and forex trader who claims to be profitable is probably a fraud who relies upon marketing tricks (visit TradingSchools.org for reviews)
Trading commissions & fees will be expensive when day trading because brokers expect you to lose money quickly
The stress of day trading & sitting in front of a computer is detrimental to your health
I don’t like to call something a scam; it invites people to attack me, call me stupid & point to superstar day traders who (they claim) earn millions a year (yet these traders, conveniently, never post their full trading statements from legitimate brokers).
But let me be clear...
I would never recommend that anyone becomes a day trader, or that they trade penny stocks or forex.
I think that all of the day traders, penny stock traders and forex traders who claim to make money are frauds who rely upon psychological manipulation and clever marketing (fake reviews, television interviews, affiliate programs, etc.)
Remember, there is no easy money! In most instances, making, and keeping, money requires skills and good habits.
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My Personal Experience as a Day Trader
I used to day trade.
I remember feeling very good when I’d have a good day, like a temporary euphoria – similar to the feeling of when I win a poker game.
Overall, I lost a lot more than I won while day trading.
Normally, I don’t mind losing, as long as I feel that I'm improving and getting better.
But I didn’t feel like I was learning or improving while day trading.
Back in 2008, I would research and cycle through technical analysis indicators; I'd have a profitable trade with one of them and then I'd think that I found the “holy grail”.
But when I tried this indicator again...it failed.
No indicator stood the test of time and was consistently profitable.
Whenever I day traded, I always felt like I was trying to explain why a stock didn't move in the direction I predicted - I blamed myself for "missing something" yet, I soon realized that trying to guess future price movements is impossible.
Even if I made money on a trade, it became clear that it was just luck.
I never received confirmation from the market that any day trading, penny stock or forex strategy was consistently profitable.
Day trading is like being blindfolded on a roller coaster and believing I could predict the roller coaster's movement.
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I’m sure that some of you are reading this and thinking, “Yeah! Your strategy probably sucked, but mine is better!”
And to those people, I’d say, “I doubt it. With enough trades, you will lose money.”
Those fake gurus don’t tell their friends, students or Instagram followers that they aren’t successful.
If you are one of those fake gurus who make money by lying to others, I would tell you to consider toning down your lifestyle and learning a legitimate skill instead of defrauding others.
Living a flashy lifestyle by hurting others will likely make you a miserable person. Yes, you’ll be a rich miserable person. But, I can tell you (mostly from my experience in nightlife) that a lot of the people who hurt others and were greedy ended up in jail, in drug rehab, couldn’t maintain relationships and some even committed suicide.
Anyway, to conclude this digression, I estimate that ~95%+ of day traders fail and I’d estimate that ~100% of those who are super flashy on Instagram, Facebook and YouTube don’t make any money from trading (but they definitely have sex with more women).
A lot of my students have lost money with day trading, technical analysis and penny stocks too (actually, I've NEVER met a profitable day trader).
If you ever have an opportunity to peel back the layers and review the results of many day traders (or ask them to login live and show you their account’s trading history / filled trades), it’s likely that almost all of them lose money.
And… the reason isn’t that they’re dumb or anything like that. The reason is just that it’s impossible for retail traders to make consistent money by day trading, trading penny stocks or trading forex.
Whenever I day traded, I never felt comfortable that any indicator or pattern was reliably profitable. Even if I made money on the trade, it could have just been luck.
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Day Traders Pay High Commissions
Currently, my trading commissions & fees are about .1% of my account size – yes, 1/10 of 1%!
I’m good at managing my expenses. The main reason is that 95% of my trades expire worthless or are closed out for 10 cents or less (I pay no closing fees due to E*Trade Dime Buyback Program).
The other 5% of my trades I adjust until they expire or are closed.
The majority of my yearly commissions are paid to adjust these 5% of “bad” trades.
When I was day trading, my fees would run around 8%-9% of my account size; there’s no way to make money day trading when paying these fees.
I actually don’t think most day traders / penny stock traders would make money with ZERO commissions; humans simply don’t have the psychological makeup to be successful traders.
So there’s virtually no way that day traders / penny stock traders can be successful by paying ~8%-9% commissions.
Brokerages charge high fees to penny stock and day traders because they know that most of these traders lose all their money.
Brokerages try to quickly capture the maximum amount from the trader’s account before the trader loses it all.
Video on Why Technical Analysis and Day Trading Is a Scam
Day Trading & Technical Analysis Strategies (or lack of strategy)
Day trading strategies oftentimes rely upon continuation of trends and trading breakouts.
But, to consistently make money in the stock market, I’ve found that being contrarian yields the highest profit potential.
For example, if the market falls ~5% in 2-3 days, and large companies like Facebook or Amazon fall 7%-8% during that time, then your highest probability trade would be to sell puts and bet that FB and AMZN will not continue to fall.
Add in the fact that volatility would substantially increase while the market falls, and therefore the premium received for selling those puts would increase, and it’s no surprise that selling puts during periods of high volatility is one of our core principles at BestStockStrategy.com.
With day trading, many patterns will show that FB and AMZN have broken through their support lines and that a downward continuation is likely.
While betting on the downtrend will be profitable in some scenarios, statistically (with enough trades), it will not be profitable.
I don’t believe any technical analysis indicators are statistically significant, meaning that if you increase the number of trades / occurences, these indicators will not prove to be reliably profitable.
Scientific Research About Day Trading
A study examined 360,000 day traders. It found that the average trader lost 15% a year.
The top 500 out of 360,000 made only 5% above simply holding the SPY index.
Basically, by holding SPY and selling calls, you'll be more successful than close to 100% of day traders.
Negative Health Consequences of Day Trading
Day trading will not provide you with freedom or flexibility. Instead, you’ll be in front of a computer all day (oftentimes viewing multiple monitors) – and this very unhealthy.
And while a photo of you in a suit, staring at 2-3 computer monitors might look cool on Instagram or Facebook, people who’ve done it know how miserable it is and that you’re not being productive or effective.
There is an emotional toll of being a trader, and with day trading, it's worse because you have only a ~0.2% chance of not losing money while day trading.
Maybe there are a few legitimate people who make millions day trading, just like there are a few models who make millions every year – but most of the models I know don’t make much money.
As I've said, I've never seen a successful retail day trader.
The ONLY successful “day traders” I know are institutional “market makers” at investment banks.
I’ve never met a successful penny stock trader – it’s shocking that Tim Sykes has been able to defraud people for 10+ years.
In my opinion, Tim Sykes is a fraud.
Sorry for being so blunt. I’m sure that there are things I’ve written in this article that have offended some people or made you angry.
If so, I apologize – that’s not my intention at all.
My intention is to share my experience to help others and prevent them from being defrauded.
You have every right to make up your own mind and draw your own conclusion.
If you are a successful day trader, penny stock trader or forex trader, please share your trading statements with me!
Because if you actually make money then you’re special!
Yet to be successful selling options, you don’t have to be special. You can be average; and as long as you don’t get greedy or trade too many contracts, you will consistently make money.
Personally, I’m not special, yet I am very successful selling options.
So while I’m sure there are a lot of brilliant day traders out there who think they have a proprietary system that works, the facts are that day traders, statistically, will almost always fail because it’s gambling and not investing.
Day trading is like paying money to bet on the outcome of a coin flip.
The next time someone tells you that they’re a day trader, look them in the eye and say, “I’m sorry to hear that. Selling options is consistently profitable, but with day trading, you will lose all your money.”
Selling option premium is the absolute best way to consistently make money.
And I can teach you how to earn 50% a year every year.
When I make money now, I don’t get happy because I expect to win.
Most day traders rely on technical analysis, charts and patters.
I barely ever use charts.
The only time I’ll use them is to review a stock’s trading range over the past 6-12 months.
For example, if Facebook is currently trading at $170, I’ll look at where the stock has traded over the past 6 – 12 months. That’s the extent of my chart usage.
Once I know the trading range, I’ll then decide what price FB has to fall to for me to sell a put option, then I’ll select my strike price and decide how much premium I would accept to open the trade.
Why BestStockStrategy.com is the best
I make it very easy. I don’t overwhelm you with unnecessary information or talk down to you.
I can teach you everything in 4-6 weeks.
My goal is for you to learn a skill as quickly and easily as possible so that you feel comfortable using this skill for the rest of your life to create the lifestyle that you desire.
Plus, the results speak for themselves. Review our trading statements. Almost EVERY single one of our trades is a winner.
I (David Jaffee) help people become consistently profitable traders while minimizing risk. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel. Finally, if you're looking to Land a Finance Job, then I've put together the best step-by-step course at LandaFinanceJob.com. My personal website is DavidJaffee.com.
I read through your blog post here. I was hoping you could help me with something. I was wondering, Do you know if insder trading is the same thing as a trading scheme? I want to get into trading but I’m worried I might get into trouble without realizing I’m doing anything wrong. Eagerly awaiting your reply.
I would like to thnkx for the efforts you have put in writing this blog. I am hoping the same high-grade blog post from you in the upcoming as well. In fact your creative writing abilities has inspired me to get my own blog now. Really the blogging is spreading its wings quickly. Your write up is a good example of it.
Hi, You have really explained well about intraday trading strategy its best to use it intraday as the newsflow means no fundamental shifts to the market and relative stability in the underlying assumptions. Smart traders may wish to use the 15 minute / 1 hour candles to create these strategies. Lesser may mean transactions costs will eat into profits and higher may mean too much interference with underlying markets.
I know very little about options trading vs trading stocks. Should I study up on the “basics” of trading options and then take your course or would that defeat the purpose of learning your strategy? What knowledge level of options trading do you think one would need to get started with learning your strategy? I want to get started but don’t want to go in blind if there is a minimum level of knowledge needed to grasp the information.
The course is meant for ALL experience levels. You can take it with zero prior experience and learn a profitable strategy so that you can trade successfully.
Hi again, I have a question, I just noticed you wrote that you made $755,000 in 2017. If you say you’re only making about 50% per year, does that mean started with a capital of $1,510,000 to make $755,000? Please advice. Thank you, Gary.
In order to sell naked put options don’t you have to have a large amount of funds in your trading account before a trading platform will approve you? I agree with your premise but I currently only have 4-5K ready for trading. Can I apply your method to grow this account or do I need to follow a different strategy till I am able to consistently keep maybe 50-100K in my trading account to be eligible to sell naked puts?
I have students with $2,000 and some with $1,000,000+.
With a $4,000-$5,000 account, I could teach you how to earn 30%-50% relatively easily.
You’d make 1-2 trades a month.
You’d trade only 2-3 stocks.
It’d actually be relatively easy.
The problem is, it requires A LOT of discipline because you’d get bored.
What a lot of people do with is they try to hit home runs.
They aren’t satisfied with ~40% returns so they try to turn $5,000 into $5 million and then they end up losing everything.
You can turn $4,000 into $5,000 and then $5,000 into $7,000 while learning a skill so that once you have more money, you can easily grow and multiply that money 🙂
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