Rise of the day traders and why they’re not winning.

Would you trust the safety of your family and home based on a clear weather forecast from an unqualified meteorologist? He eyeballed a bunch of charts and graphs to give you the report. However, it contrasts with the major news report of an EF4 tornado headed your way!

Suppose your doctor told you she was able to make your diagnosis, after getting some advice over drinks with her friends. The comments they shared with her had come from posts on Google and Pinterest. After one more text with her best friend, she assures you surgery will cure you!

After giving similar situations, an article by David H Bailey on Mathematical Investor asks, “So why does the financial community still tacitly encourage day trading?”

A Rise In Day Trading

Our current worldwide conditions seem to have set the stage for a rise in day trading. Several articles tell of contributing factors, such as:

  1. Bored, millennial, white-collar workers sitting at home with lots of time and money on their hands.
  2. Since almost all professional and collegiate sports are closed, many of the sports betting operations are closed, too.
  3. It’s cheap to borrow money because of the Fed’s zero-interest policies.
  4. You got a stimulus check from the government and it’s burning a hole in your pocket.
  5. Some celebrities are promoting day trading.
  6. After the February crash, the stock market has risen rapidly. Many traders now feel invincible.
  7. Zero-fee trading platforms target millennials.

See complete articles at Washington Post, Traders Magazine and Vox.

Day-trading Defined

Investopedia defines day trading as “the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game—if it is played correctly. But it can be a dangerous game for newbies or anyone who doesn’t adhere to a well-thought-out strategy.” (Emphasis added)

It’s a game. Similar to gambling. Or much the same as the “meteorologist” or the doctor relying on her friends to diagnose your medical problem. It’s not based on facts or proven knowledge.

Mathematical Investor compares day trading to “speculation (yes, ‘speculation’ is the entirely appropriate term here) in financial securities, typically performed by amateur investors…”

Day Trading Doesn’t Work For Regular People

The article cites sufficient studies proving most day traders lose money. Here is one example. “A 2019 study of foreign exchange traders found that over 90% of individuals who trade in these securities lose money and quit.”

Burton Malkiel, author of A Random Walk Down Wall Street explains, “To go and day trade and think that you are investing, that’s what I think is absolutely wrong and is likely to be simply disastrous for people. … It’s not that they can’t make money gambling, … but over the long run, this is a losing proposition.”

Investing, Not Playing A Game

Some of the current day trading apps are as appealing as playing a game. Even Investopedia compared day trading to a game. However, investing isn’t a game. 

At iFlip, investing using the best stock market app for android with algorithmic trading software built in can be fun. But it is different from mobile stock trading or robo financial advisors. 

iFlip has AI, machine learning that’s almost a living thing. The mathematical algorithms adjust based on changes in the market. It’s part of your Smartfolio and mitigates losses when the market dips. 

Day traders can only hope to read their charts correctly, then enter and exit the trades at the correct times. iFlip’s AI isn’t for day trading. It’s not a get-rich-quick scheme, but a solid investment that has shown to produce superior results for the long-term.

Why Does Day Trading Continue?

If most people lose money along with other consequences, why do people continue to day trade? Who is promoting it?

Bailey continues in his article, “Sadly, basically all major brokerages and financial news media are involved—after all, they clearly profit from frequent trading and a fixation on minute-to-minute market activity.”

Through the power of the internet, “millions of individual investors have been convinced that day trading, (is) the way that ‘smart’ investors win in today’s market. However, as we have seen, this notion is utterly, woefully, disastrously false.”

Why would you want the major brokerages to profit from your trading? Let iFlip introduce you to a better way to invest than playing the day trading games. 
The machine learning of AI helps you grow and protect your wealth. For no cost, you can check out the best stock market app for android with algorithmic trading software built in.

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