Why Day Trading / Technical Analysis is a Scam And What Your Best Alternate Strategy Is That Can Make You Rich
Approximate Reading Time: 6 Minutes
- Day trading / technical analysis is gambling: intraday prices are random (no chart pattern is a statistically significant winner)
- Every day trader, penny stock expert and forex trader who claims to be profitable is likely a fraud and relies upon marketing tricks
- 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
- Selling options is, by far, your best strategy. I can teach you how to earn ~50% every year – and I make it EASY to learn!
I don’t like to call something a scam; it’ll invite 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)
I would never recommend that anyone becomes a day trader, or that they trade penny stocks or forex.
And, to be clear, I do think that all 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.
I used to day trade a bit.
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, it’s all part of the learning process. But I didn’t feel like I was learning or building anything while day trading.
Back in 2008, I would research and cycle through all of the technical analysis indicators; a few of them seemed to work and I thought that I had found the “holy grail”.
But, none of these indicators stood the test of time.
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.
I have never received confirmation from the market that any day trading, penny stock or forex strategy was consistently profitable.
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 trader 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).
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.
Currently, my trading commissions & fees are about .3% of my account size – yes, 3/10 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 OptionsHouse 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 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 are in business to make money; so they try to capture the maximum amount, as quickly as possible, from the trader’s account before the trader loses it all.
Day trading strategies oftentimes rely upon continuation of trends and trading breakouts. But, to consistently make money, 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.
But with day trading, many patterns will show that FB and AMZN has broken through it’s 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.
Finally, 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 Instragram or Facebook, people who’ve done it know how miserable it is and that you’re not being productive or effective.
Yes, 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.
And almost all of the day traders I know fail.
The ONLY successful “day traders” I know are actually “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.
The only successful forex traders I know are market makers at investment banks.
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.
If you want to see one of my older videos on why day trading, forex and penny stocks are a a scam you can watch here: YouTube Video on Why Day Trading & Technical Analysis is a Scam
Day traders do not have the odds in their favor. 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 a more consistently profitable strategy.”
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.
What’s interesting is that when I make money now, I don’t get happy because I expect to win.
Most day traders rely on technical analysis (charts). 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.
Learn more about how to learn a skill! Visit BestStockStrategy.com for free videos!