Who knew that a€freebee€
really meant a€expensive€? That may seem like a contradiction, but
day traders can easily find themselves in a situation where it turns out
to be true.
I teach a number of
strategies that require software that displays tick charts. However I
often have students who tell me that they use such-and-such piece of
software that will not display them. But they refuse to change because
the software they are using was free.
Since many people try
day trading as a supplement to their regular income, they do not often
want to invest in it before showing a profit. But there is a problem
with this line of thinking. Why does it seem so unreasonable for people
to spend around $100 on a piece of decent charting software when they
hope to make thousands of dollars from it each month?
On the one hand, this
attitude is wrong because the software you use is not simply a tool. It
is an investment which should pay for itself multiple times over.
But there is a larger
problem with this attitude of not wanting to invest in a commitment to
day trading. You might have heard the saying, “Trading is a zero-sum
game.” If you want to buy a stock, a commodity or a currency, then
somebody else has to sell it to you. In some markets this might be a
market maker, but most of the times it’s another trader.
What this means is that
you are in competition with someone else. If you buy and prices are
going up and you win, then the trader who took the other side of your
trade loses. Admittedly, he could be trading in a different time frame,
and while you are taking profits he might still be in the trade and just
experiencing a draw down. But for simplicity€™s sake, let’s say that if
you win, the person who took the other side of your trade loses and
vice versa. In other words with every trade, someone either makes money
or loses money. You cannot participate in the market a€for free€ and
with zero risk. Someone has to lose for someone else to gain. Someone
who comes into day trading with the attitude that they can succeed
without putting themselves on the line, even if that means dropping $100
on a piece of good software, is not cut out for day trading.
We play what they call
“the game of games,” and we play it to win. When you trade, you are
going up against the brightest minds in the industry, equipped with the
best software and hardware, using multiple monitors, $800 chairs,
ergonomic desks and lighting so that they never get tired, a blazing
fast internet and data connection. If you think you can magically reap
the rewards of a system dominated by these high powered figures with
free charting software that cannot even display tick charts, then you
are outclassed from the beginning.
Inexperienced and a€casual€ day traders can profit. But they cant€™t do it without an
investment in time, research, experience, and, at the very least, the
right tools for the job. Otherwise, they may think that they are playing
the markets for a€freebee€ when, in fact, they
are setting themselves up for a very expensive prospect of losing time and again to those willing to invest in their endeavors.
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