Cynical Day Trading
How do you make a million dollars day trading? Start with two million.
I feel old when I scroll through the financial content aimed at investors in their early 20s. Think about the WallStreetBets Reddit page or the countless YouTube channels with titles like “This Morning Trading Routine Is Boring, But It Makes Me $1,000 a Day” or “How to Become a Day Trader in 30 Days.”
I recently went to the barber, and when he found out what I did for a living, all he wanted to talk about was cryptocurrency and options trading strategies (the kind that are usually outrageously risky). You can probably guess what I told him: “Just buy the entire market, keep buying it, and try your best to never sell it.”
His response? “But crypto is up by X, and I made Y buying deep out-of-the-money call options. The S&P is only up by Z!” Fair enough. It worked, and he made money. I admit I also felt a hint of jealousy. The “Y” he made on those calls was a huge number. Walking home, I even caught myself thinking, “maybe I should give it a shot.” Then I quickly remembered the joke I started this post with.
I enjoy meeting with clients’ kids and grandkids. Nothing is more thought-provoking to young investors than the power of compound growth. For example, $10,000 invested by a 20-year-old today, growing at around 10% per year (roughly the S&P’s historical average), turns into just over $725,000 by the time they’re 65. Start with $25,000, and it grows to just over $1.8 million. Remember, this assumes they never touch the money and stomach the volatility the market throws at them.
That sounds incredible to them until one of three things happens:
- They realize they’ll have to wait 45 years to see the growth. “Invest in the entire market, Vince? I saw someone on YouTube who made that kind of return in 45 days trading options! I’m going to try that instead.”
- They decide they’d rather buy a car or take a trip to Southeast Asia. Investing can wait.
- A master doomsayer convinces them investing is pointless because the world is going to hell.
That last one is rare, but if you’ve read me before, you know I have a big issue with doomsayers. Why is it that when we look at history, we see steady improvement, yet when we look ahead all we imagine is catastrophe? I’d love to know why that is.
I’m glad young people are getting into markets earlier. I just hope they realize that dopamine is not their friend when it comes to investing. To paraphrase Buffett, the stock market is a place where impatient people give their money to patient people. And remember: every trade has two sides. Who’s on the other side of yours? Often, it’s another young person chasing the rush. But eventually, you’ll trade against someone patient. And that patient person will happily take your money.
