With so much talk in the news of day traders and investors, we thought it would be useful to discuss whether the allure and excitement of short term trading outweighs the more boring strategy of long term investing. On the surface, day trading or short term trading appears to be a relatively easy way to make money. With Tesla and Apple and other tech stocks posting such enormous gains in a relatively short time frame, what is so complicated about doing that?
The reality is that timing the markets and individual stocks in the short term is very challenging for the professional traders with all the tools and technology at their disposal, which makes the odds of success even more stacked against non-professional short term traders. There are periods in time where short term trading strategies can work swimmingly but this this is not the case over the long term.
It is well documented that in general for the most part, buy and hold investors often outperform short term traders (after tax and other costs are factored in) by 6-7% per annum. There are always a small number of day or short -term trader success stories that are promoted by the media of course, but the reality is that over the long term most day or short term traders are not successful and eventually lose money.
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