Me vs. Day Traders
Day traders put food on my table. I have them to thank for my daughters braces and bills paid on time. I’m a big fan of day traders. I’m not being caustic either, I mean, how can you not love a group of people who go to work 7 days a week, 24 hours a day, just to make sure I can lounge around my house drinking daiquiris and watching TV? No seriously, I haven’t set foot in an office building in years, I just love these guys. Though I suspect they may not be doing so well themselves, but to each his own.
You see day traders, make it possible for me to do my magic. They create markets and provide liquidity. If every single one of you out there followed my advice and became a long term holder, crypto markets would seize up and liquidity would be non-existent. In the best case scenario, we would have to pay double digit fees to third party brokers just to enter or exit our positions. Our lives would be much more expensive.
I have, on rare occasion, had the opportunity to sit down with one of these day traders, look them in the eye and shake their hand. I thank them profusely, and they smile at me, until they understand what I am thanking them for. I am thanking them, much as I would thank the maestro, in an orchestra, I am thanking them for making it possible for me to enjoy the fruits of their labor, their magnum opus; free of charge. I am just the humble user of a machine (market) lubricated with day trader money.
Okay so now I’m being a bit facetious, but you will have to forgive me, it comes with the territory. You see, more than one of my close friends are day traders. I have a friend who has built an entire business, a life and a mortgage around one of the day traders favorite tools, chart reading. I have another who is more open about what he does, he feels the market, then places his bets. And that’s what both my friends are doing, placing bets.
I suspect the day trader is the product of early success. Much like the first time casino player. I suspect it is rare for a person who steps into a casino for the first time, and then proceeds to lose their entire paycheck, to ever want to come back. On the other hand, if on your twenty first birthday you stroll into a casino and through a series of risky wagers proceed to double your money, have some free drinks and a general good time, you’re more likely than not to be back. You see, I suspect most day traders start out successful.
Because why else would you do it? These are not unreasonable people, they have families and daughters who need braces too. They are in it to make money. And my guess is that they start out that way, they make a few hundred dollars on a trade, then they wager a bit more and make a few thousand. Then they think “man, this is easy,” and increase their bankroll, and perhaps, for a while, things go well.
But then one day, you start adding your positions and you realize you are down 15%. Then you start trying to make your money back and you go down another 15%. Then you know you have to at least make your money back, the system you were using has broken down, so it’s time to invent a new one. And that’s the point you become that guy in the casino everyone knows to avoid, even the tourists, you’re the guy who knows he can make it back. If he can throw the dice just one more time.
Because it is that hard to make money as a day trader. You are not only competing against a few larger players, who are better funded, better informed, better entrenched than you are; you are competing against legions of these traders. There are myriads of people, from Ivy League schools, with Ivy league connections and Wall Street financing, trying to win the day trader race with some proprietary edge. Because that’s what makes or breaks a day trader, his edge.
You see, if you are a day trader, you are likely out-funded, out -manned, and outgunned in a war to capture that elusive edge. And this is trench warfare, you never really win, you capture that edge for a few trading sessions, then lose it to the competition, who exploit it until some other better funded (or just lucky) group takes it from them, It is not just a funding war either, it is a talent war, an idea war, and a 24/7 trading war. You never really had a chance. In day trading, much like gold rush mining, its the exchanges/shovel salesmen who make all the money. Or did you forget your trading fees?
Contrast this with the type of long term holding we advocate. We do not have to zoom in and out of position on daily, sometimes hourly basis, on a mission to make that edge. We don’t care about every little bit of news; noise or signal, it doesn’t really matter. Day traders sleep light. Long term holders on the other hand invest a couple of weeks of their time to promising coins, we research them to the bone. We know, and verify, every little tidbit we can find. But after we make our decision, after we make the call to invest, this coin becomes a distant memory in our cold storage solution. The daily gyrations of the market matter not. And we can have a daiquiri without stressing about market news (or noise). Is this not a better way to live?