114

The vast majority of people that day trade lose money. Of those that make money, most aren't going to beat an index fund. Of those that actually beat an index fund, very few do so without investing so much time that they'd be better off working elsewhere. If you have a $1 M portfolio and you can reliably beat an index fund by 1%, that's worth $10,000. If ...


83

Over a period of time greater than 10 years (keep in mind, 2000-2009 ten year period fails, so I am talking longer) the market, as measured by the S&P 500, was positive. Long term, averaging more than 10%/yr. At a 1 year horizon, the success is 67 or so percent. It's mostly for this reason that those asking about investing are told that if they need ...


43

A limit order is an order to buy or sell a product at a specific price or better. For a buy order, you might buy for lower than the limit. For a sell order, you might sell for more than the limit. If you have a buy order at $10 in your example, then you are already covering every price increment up to that price with your limit order; someone may sell to you ...


39

Not sure why @Brick's answer was voted down; let me try to state it more precisely. maker Type 1 (seller): You tell the exchange that you want to sell at price P, but P is higher than the highest price at which any Type 2 maker is currently willing to buy. (You're demanding too much money in the eyes of everyone who's said they want to buy.) Type 2 (buyer)...


34

If you look at DISH's dividend history, you can see that on 20111101 DISH declared a special $2/share dividend payable on 20111201. The ex-date for that 8% dividend was... 20111115. The $2/share drop you saw from the 14th to the 15th was the stock going ex-dividend. So the stock options (which are American options) were deep in-the-money with a large ...


30

Yes, it is unreasonable and unsustainable. We all want returns in excess of 15% but even the best and richest investors do not sustain those kinds of returns. You should not invest more than a fraction of your net worth in individual stocks in any case. You should diversify using index funds or ETFs.


28

Day trading is probably the most often tried and failed activity in the financial world. People think they can parlay $1,000 investment into $1,000,000 in a week with little or no knowledge on how to evaluate stocks and or companies. They think they can just look at where the line graphs' been and forecast where it's going to be next week. Unfortunately if ...


28

I think you might be misunderstanding what a market and limit order are. To clarify. A market order will be executed at whatever the current price is when the trade happens. So you can't be sure what price you will get, but you can be reasonably certain the transaction will happen. A limit order allows you to put in an order and only exercise it at the price ...


26

Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, ...


25

Yes, because you cannot have an exponential growth rate that is faster than the rate at which the economy grows on the long term. 100% growth is much more than the few percent at which the economy grows, so your share in the World economy would approximately double every year. Today the value of all the assets in the World economy is about $200 trillion. If ...


22

You are correct. She cannot claim the initial loss of $1,000 on her taxes, she can only report the $500 profit. However, the IRS does allow her to add the $1,000 loss to the basis cost of her replacement shares. e.g. Trader buys 100 shares at $100 / share. Trader sells 100 shares later that day at $90/share. Loss of $1,000 Trader buys 100 shares the next ...


21

In a reply to one of the comments, you state: "Isn't [getting the transactions filled] a good thing? Isn't that the whole point of placing an order and being the first in line? What's the point of placing orders if they never get transacted?" The point of placing an order isn't just to 'get it filled', it's to get it filled at a price you are happy ...


19

Often times the commission fees add up a lot. Many times the mundane fluctuations in the stock market on a day to day basis are just white noise, whereas long term investing generally lets you appreciate value based on the market reactions to actual earnings of the company or basket of companies. Day trading often involves leverage as well.


17

Day trading is an attempt to profit on high frequency signal changes. Long term investing profits on low frequency changes. What is the difference? High Frequency Signal = the news of the day. This includes things like an earnings report coming out, panic selling, Jim Cramer pushing his "buy buy buy" button, an oil rig blowing up in the ocean, a terrorist ...


17

Suppose we are trading a very illiquid stock of a small company. Some people are trading around a small number of shares for 10€. There are standing sell orders of a volume of maybe 2k oder 3k shares around 10€. They are selling and buying some hundreds of stock. There is another standing sell order for 10k shares at 1000€. You place a buy order for 12k ...


15

If you didn't have a stop loss set (or trailing stop loss) then an equally random spike in the other direction could have obliterated your account and put you in debt to the broker, depending on the terms of that broker, as these are highly leveraged positions. Market anomaly? If your currency bet was unrelated to the fed's interest rate decision today, ...


15

Generally I think you will find that financial institutions and other businesses are well aware that people sometimes set up limited companies with the intention, if things go bad, of walking away and leaving them to eat the losses. You may find that anyone you deal with will require a director to provide a personal guarantee.


14

As you are asking specifically for Kraken, here is what I found: What is ​Maker vs Taker? A trade gets the ​taker​ fee if the trade order is matched immediately against an order already on the order book, which is ​removing liquidity​. A trade gets the ​maker​ fee if the trade order is not matched immediately against an order already on the ...


13

"High-frequency trading" has made day trading basically obsolete. Computer systems can take an order feed, process it through a set of algorithms, and issue an order in under a microsecond. The company operating this system will have a team of PhDs analysing the effectiveness of the strategy and tuning it frequently. Your odds of reliably beating this as a ...


13

A market order basically determines when the order is executed: as fast as possible but the price is unknown. A limit order determines at what price the order is executed: at maximum your limit but the execution time is unknown. Whether a limit order is useful depends a lot on what you are trading. If you are trading a liquid stock during market hours, there ...


12

You have already indicted in another question, titled Which risk did I take winning this much?, that you did not understand (1) Why a previous trade made you as much money as it did; nor (2) How much you could have lost if things went a different way. You were, in that other question, talking about taking short position, without understanding (apparently) ...


12

As pointed out by Daniel Kahneman in his book, frequent stock trading is anything but Illusion of validity. Comparing the results of 25 wealth advisers over an eight-year period, Kahneman found that none of them stood out consistently as better or worse than the others. "The results," as he put it, "resembled what you would expect from a dice-...


10

One thing I like to do every once in a while is look at the day's market movers. It's a list of symbols that had huge movement. There tend to be a couple of 50+% movers every time I look. In fact today I see ATV moved up 414.48%: So there it is—doubling your investment in one day and then some is technically possible. The problem is that the market movers ...


10

"Wealth gained hastily will dwindle but whoever gathers little by little will increase it." Proverbs 13:11 (ESV) Put another way... "Easy come, easy go" You cannot sustain 100% annual ROI. Sooner than you think you will hit a losing streak. Casinos depend on this truth. You may win a few rolls of the dice. But betting your winnings will eventually cause ...


9

It would make sense for an investor or trader to place a limit order in advance to close an existing position at a better price. For new positions, traders might be less inclined to have limit orders on the books because they could be blindsided by adverse news and while their fill would be better than current price, it could end up being a poor fill (think ...


8

Largely, because stock markets are efficient markets, at least mostly if not entirely; while the efficient market hypothesis is not necessarily 100% correct, for the majority of traders it's unlikely that you could (on the long term) find significant market inefficiencies with the tools available to an individual of normal wealth (say, < $500k). That's ...


8

Great question! It can be a confusing for sure -- but here's a great example I've adapted to your scenario: As a Day Trader, you buy 100 shares of LMNO at $100, then after a large drop the same day, you sell all 100 shares at $90 for a loss of $1,000. Later in the afternoon, you bought another 100 shares at $92 and resold them an hour later at $97 (a $500 ...


7

Maybe learn a bit more before plunging in with your own money, buy some good books on the subject and on technical analysis. Open up a virtual account and test your strategies first, develop a trading plan and include risk management in it, think about what the worst case scenario will be on each trade. Learn about position sizing and where to place your ...


Only top voted, non community-wiki answers of a minimum length are eligible