Why Are Day Traders Looked Down Upon?

You may have heard of day trading and the negative connotation that goes along with it and those that are engaged in it. Generally seen as a way to try and get rich quick, day trading is when you buy and sell a security within a single trading day.

So why are day traders looked down upon? Day traders are looked down upon because critics see them as shysters who don’t want to put in the time and effort to invest in the stock market like serious investors.

Day traders follow the stock market and look for securities that they can buy low and sell high within the same day, making an immediate profit. This, of course, is virtually not the case for most day traders as only a small percentage of those engaged in day trading make consistent profits. Yet there are still tons of people every day who turn to day trading to try and become successful. 

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What Is A Day Trader?

A day trader is an investor that buys and sells stock within one business day, hoping to not have any holdings once the market closes which would present more risk. They may buy hundreds or thousands of shares worth thousands or even millions of dollars in order to make money off of just a few percentage points. Or, like many small-time investors, hope that they will pick a stock that they got at a good price and have a huge windfall once the stock skyrockets, which is extremely rare to do within a single trading day. 

Critics feel that these types of traders generally think that they can skirt the system and come out ahead, not wanting to put in the time and effort necessary to invest like normal traders, who go deep into evaluating a security when making a trade decision and commit for the long haul. This is a major reason why they are looked down upon by regular investors who feel that they are putting in the hard work to secure a better financial future for themselves or their families. 

5 Reasons Why Day Trading Is Frowned Upon

Day Trading Is Not Foolproof And Is A Riskier Form Of Investment

Day trading is definitely risky as you can buy large amounts of stock in hopes of selling it higher later only for it to go down even further later. Critics say that it’s a lot like gambling and is seen often treated that way by even those who are in the business. And if you don’t set a limit at which to sell the stock if it is tanking, much like setting a limit on how much you will lose at gambling, you could lose all of the money you invested, and quick.

The odds are stacked against day trading and the research makes it overwhelmingly obvious that it is a bad decision, however there are still those people who think that they can beat the system and become rich without putting in the work, making them that much more unlikeable, in the eyes of the critics. It’s this mentality that rubs people the wrong way, day traders wanting to cut corners and not put in the necessary hard work to become successful. 

Day Trading Is Often Sold As A “Get Rich Quick” Scheme  

Serious investors know that it is not going to happen overnight, they are in it for the long haul and are willing to put in the effort over the course of years in order to properly invest. Day traders seem to have the idea stuck in their head that they can somehow do what no one else can and make millions in a day. Add to that all of the advertisements and gurus promising to help everyone get rich quick day trading if they just try their secret recipe to success and you get even more attention on the subject. 

Day Traders Are Not Considered Serious Investors

Even the most experienced investors take a lot of risk when day trading, although if they are that involved, they probably won’t touch day trading with a ten-foot pole. If you hardly know anything or even very little about the stock market and trading, you are wading into very deep waters trying to day trade. That is another reason why day traders are looked down upon, many of them think that they know everything about the stock market when in fact they probably don’t know enough to invest in regular stocks.

Fake Gurus And Social Media Scams Make Day Trading Look Easy 

You have probably seen these guys on social media, posing with big boats or fancy cars, saying that they are so successful at day trading and have made millions because they are so smart. These are all just ploys to get others to either buy something or to get more followers on their accounts. The chances of being successful at day trading are under 1%, making it more likely that you will get hit by lightning while sitting in your Lazy Boy watching the local news. There are so many get rich quick schemes and people willing to promise you the world because “they made it” and all you have to do is follow in their footsteps. Make sure you don’t fall for it and don’t believe the hype.

Day Traders Need To Take Large And Riskier Trades To Make Decent Profits

In order to make any real amount of money day trading, since you may buy and sell it with only a couple percentage points difference, you have to buy a lot of the stock, which means spending a lot of money. This can be an issue at multiple levels. First, by making large trades in the hopes of making a quick profit, in most scenarios, you will be assuming more risk than you should. Second, most people don’t have that kind of cash so they will borrow, take out loans, or try to get people to invest in their venture, again making them that much more unlikable. Imagine having a friend of yours ask you for a few thousand dollars so that they can day trade and finally make it. Not a chance, right? I didn’t think so. 

Why Do So Many People Day Trade?

It goes back to the “get rich quick” scenario, which again leads us to why day traders are looked at as if they are the bottom dwellers of the fishbowl. It seems like a plausible idea- buy a bunch of stock at a low price and when the price rises, sell it for a profit. There are a few very obvious wrongs right off the bat here. First off, what investment are you going to make? If you are well versed in the stock market you know that there aren’t that many that jump up high in one day, so if you are trying this then you must not be well versed. This means that you will probably not know what kind of investment to make. Secondly, how on earth do you think that once you buy the stock that it will magically jump up for you to sell it for a profit within a day, even if it has been trending up it can fall just as easily. You need years of training and experience before you can time your trade entries so well, and even then there are no guarantees. Thirdly, you need a lot of money to get started since you will only be making a small amount on each stock and the profit comes in the volume of shares that you are buying and selling. All of this does not make up a winning formula. 

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Conclusion

In the end, it all comes down to having patience and willingness to go through the normal investment process in order to become successful in the stock market, and day traders want to cut all those corners. They have become the bane of investors worldwide and are looked down upon by those that are serious about the stock market and the investments that they make. It can be an easy trap to fall in with all of the promises that those that “made it” may promise you, but don’t fall for it. Successful day traders are about as common as hippos on the moon.

BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!

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