Don’t tell me: you know someone who doesn’t have a day job, but makes big bucks by day trading occasionally.
Or, you don’t know him, you’ve heard about him, right?
For some people, day trading sounds like the best hobby you can have.
It sounds like something anyone can do, with not a lot of effort or, even if it does involve some effort, it’s not a 9 to 5 job. How cool is that?
If that’s what you think about day trading, take a minute to read this through.
Things that sound too good to be true usually are.
But, for some reason, we often forget this. The things that look like the best hobby in the world are anything but hobbies.
Here’s how the Merriam-Webster defines hobby: a pursuit outside one’s regular occupation engaged in especially for relaxation.
Note the “relaxation” part. Also the “outside one’s regular occupation.” Day trading may be something that you do outside your regular occupation… but relaxation? Think again.
Here are five reasons why day trading makes for a lousy hobby that will not just stress you out, but will cost you. A lot.
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Table of Contents
#1 Hobbies Don’t Make Money
Forget about what you’ve heard. Hobbies, even the most interesting among them, do not make money. Once in a while, they pay for themselves, but that’s it. This is what distinguishes hobbies from jobs. Making money means putting hours into something that you may or may not enjoy (always better to enjoy it, of course) and doing it for a long period of time. Does this sound like a hobby? It certainly doesn’t to us.
Some day traders-to-be start with a quick win and this makes them think that the market’s their’s and that every day will bring them more quick wins. They expect to trade for a couple of hours here and there, without much prep work and then gather their wins and enjoy the rest of the day. That’s dangerous thinking. If you want a new hobby, try photography.
Hobbies are a creative way to relax, to get away from the daily rut or just to do something different, even if you do like your job. Whatever you choose to make a hobby out of, it almost never requires you to invest a significant amount of energy or attention to it—the reason being, you are doing it to relax.
#2 Jobs Make Money
There are more than enough people who have turned their hobby into a successful business. The keyword here is “turned into.” This is the only workable way to make money with a hobby: by taking it a step further. Actually, a lot of steps further, until it becomes a business.
To make a business successful, you need commitment, you need time, you need skills and knowledge and you need to be willing to suffer some losses (i.e., risk). It’s precisely the level of commitment and the amount of time you spend doing something that make you cross the line from a hobby over to a job and make money doing something that you enjoy.
A lot of enjoyable stuff is better done as a hobby—in your free time. Even drinking beer, if you think about it, right? It’s one thing to have a couple of cold ones after a hard day at work and a totally other thing to be a beer taster or “professional drinker,” if there is such a thing.
Day trading, though, as much as you might enjoy spotting trends, feeling the market and testing your patience, is a lousy hobby, because, honestly, it lacks the relaxation factor and requires more commitment.
#3 Trading Isn’t Relaxing
Relaxation doesn’t come from day trading. Relaxation is something you get to do AFTER you put in the time as a trader. And, I’m not just talking about the physical execution of whatever trades you’ve made, but the time spent honing your craft, studying how to trade, learning from your mistakes, etc.
Yeah, you might win big on your very first trade and luck is good while it lasts. But, there is more to trading than one big win and anyone who tells you differently is likely a charlatan out to try to sell you some get-rich-quick scheme. Luck always runs out in the end. So, if you’re banking on luck, we hope you have a lot of money to waste.
If you want to make money, on the other hand, forget about the easy way. Nobody makes money the easy way, not in the long run and not in day trading. Day trading requires discipline, total concentration and the ability to think on your feet. Day in, day out.
#4 Keep Your Eyes on the Prize
Day trading is so tough that even full-time day traders sometimes end their first year in the red. Profits are almost never guaranteed, but the more time you spend day trading, doing due diligence, following the charts and spotting patterns, the more experience you get and the more it starts to become intuitive.
You can’t make a habit out of day trading, if you’re only doing it from time to time. But, you have to make it a habit if you’re to get the big prize, which means making more money than you lose, just like in any other business. The stronger the habit, the bigger the margin between money made and money lost.
Day trading is a high-risk venture—you must already know that. If it looks like anyone can do it at first, that’s because you still have a lot to learn. Yes, anyone CAN do it, but few will. And, anyone who goes into this looking for a hobby or a quick buck is sure to be disappointed.
There are those who day trade part-time and still make a full-time profit. This is entirely possible for you as well, see how you can do the same.