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Investment - A Dangerous Game

Aug 18, 2007
Games of chance are human phenomena. We play them as children when we learn to count Monopoly money and take a turn on Chutes and Ladders. We progress to other forms of chance as we grow older. We risk a broken heart and fall in love.

We place bets in office pools and buy lottery tickets, and at least once we buy something in a surprise box just to see what might be there. Its an exhilarating feeling to think you might get a great reward and even more of a rush when it actually happens. But some rewards are not worth the risk. Day trading is a good example of that principle. Online investing on a daily cycle is full of risk and definitely not a game.

The Losing Game

Day trading is the act of investing in stocks for a small amount of time hoping to capitalize on the ups and downs of the market that happen incrementally throughout a day then getting rid of all the stocks before the night comes. The idea is that the investor can make money from intermittent increases in a stock then dump it before it falls again. However the potential for financial loss is high because just as stocks can do momentary jumps they can also do large drops.

It takes a lifetime of experience to accurately predict how a stock will act moment to moment and for new day traders, initial losses are huge. The other concern is many day traders borrow money to make the initial investments. So at the end of a day you could not only lose the money you had, but end up in debt as well. A game where you could lose more than you started with is not worth playing.

A Stressful Session

Aside from the serious financial risks, day trading also can cause havoc with your psyche in terms of stress and the demanding pressure of paying attention. Because a loss or gain can happen in the blink of an eye, day traders essentially sit in front of their computers all day long watching every stock carefully. There are time lags in computer systems, and always a worry about the seconds or minutes it can take from when the trader makes the trade online and it actually happens in real time.

Finally there is the pressure of knowing you have to get rid of all of the stocks by the end of business. Day traders never keep stock overnight because of the huge potential losses that can happen in the world markets. Add to that the realization that a disrupted broadband signal or a downed power line could cost you thousands of dollars and imagine the stress each day would bring.

A Hidden Addiction

Day trading isn't really investing, it's legitimized gambling. Day traders risk their savings and financial future on the click of some numbers every day. The adrenaline caused by the highs when it's working and the stress when it doesn't react in the brain the same way gambling does. For gambling addicts, day trading can plunge them down a deadly downward spiral into debt and lost perspective.

Every gambler thinks the next pull of the slot or roll of the dice will be the last one they need for their ship to come in. Every day trader thinks the next 15 minutes are the ones that can bring a million. Gambling addiction is a problem that needs professional help to cure. Be aware of addiction to the risks of day trading.

We all have fun thinking about a twist of fate that could bring us fortune, but with day trading; it's simply not in the cards.
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