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The best advice for non-professionals is to simply not trade. Taking commissions into account, your expected excess return is negative, i.e. you'll better off

The best advice for non-professionals is to simply not trade. Taking commissions into account, your expected excess return is negative, i.e. you'll better off just going long on some index fund. All the advice being thrown around at laymen on stock trading are nothing more than empty platitudes that have not been empirically shown to consistently work. Keep in mind that when you're playing the markets, you're competing against institutional investors and hedge funds that have far superior resources (data, algorithms, etc) to better analyze the market and to even move the market in a direction favorable to their holdings (e.g. Warren Buffet). The most likely outcome of trading is that you'll get out-gamed by these sophisticated investors.

gchokov 12y ago
There are a lot of studies and theories which can help you to outperform professionals. There are also a lot of examples on amateurs doing much better than professionals. You can check "Random walk down Wall Street" if you are interested on this matter.
- mistermann 12y ago
  Also if you know where to look (twitter, forums), you can find plenty of amateurs that outperform the market, and post their trades publicly.
  - mtrimpe 12y ago
    Just like you can find plenty of people who toss heads more often than tails.
    - mistermann 12y ago
      Do you care that you might be quite uninformed on this particular matter?
- jeffreyrogers 12y ago
  Right, but those aren't for day traders. Most of those strategies depend on holding for long periods of time.
zippergz 12y ago
If I'm being honest, I trade as a form of gambling. And I treat it just like I'd treat traditional gambling if I partook (the most I'll do is $5 or $10 in a poker machine). I only trade with money I can afford to lose. It's a fun pastime, and I have been lucky (yes, lucky, not smart) enough to come out ahead so far. But I'm always sure to avoid getting cocky and throwing in money I can't lose.
- berberous 12y ago
  Did you 'come out ahead' in the sense that you made money, or in the sense that you beat the S&P or similar indices? I don't doubt that you, specifically, may have beat the S&P, but I think lots of people don't keep a great track record of how they've done, tend to forget their average or bad trades, and overemphasize their good trades in their minds. I'll then ask them how much their overall portfolio has grown from year 1 to year 5, and then calculate the S&P's growth in that time, and they almost always have only managed to match it (with a lot of time wasted to do so) or actually did worse.
  - zippergz 12y ago
    I keep obsessive track, and over the last 12 years I've been roughly equivalent to the S&P 500 (which, again, I attribute far more to luck than anything else). Like I said, this is for fun, not for true investment purposes. So anything that doesn't lose money is a win in my eyes. My real investments are primarily in index funds.
  - exhilaration 12y ago
    * I think lots of people don't keep a great track record of how they've done Ha! This is true for me, I only realize how much I've lost when I see those negative numbers in TurboTax before filing my tax return.
Mikeb85 12y ago
Agree, mostly. The one advantage of being a small trader vs. the hedge funds is that your trade blocks are too small to swing prices, so you can get in and out of positions quite easily. I would definitely also not recommend day trading per say, a timeframe of 1-5 days per trade is IMO better as you can actually see a decent swing in price. It is possible to win, but you need to be good, and most people who do it in their part time simply don't have the knowledge or experience required...

gchokov 12y ago

There are a lot of studies and theories which can help you to outperform professionals. There are also a lot of examples on amateurs doing much better than professionals. You can check "Random walk down Wall Street" if you are interested on this matter.

mistermann 12y ago
Also if you know where to look (twitter, forums), you can find plenty of amateurs that outperform the market, and post their trades publicly.
- mtrimpe 12y ago
  Just like you can find plenty of people who toss heads more often than tails.
  - mistermann 12y ago
    Do you care that you might be quite uninformed on this particular matter?
jeffreyrogers 12y ago
Right, but those aren't for day traders. Most of those strategies depend on holding for long periods of time.

zippergz 12y ago

If I'm being honest, I trade as a form of gambling. And I treat it just like I'd treat traditional gambling if I partook (the most I'll do is $5 or $10 in a poker machine). I only trade with money I can afford to lose. It's a fun pastime, and I have been lucky (yes, lucky, not smart) enough to come out ahead so far. But I'm always sure to avoid getting cocky and throwing in money I can't lose.

berberous 12y ago
Did you 'come out ahead' in the sense that you made money, or in the sense that you beat the S&P or similar indices? I don't doubt that you, specifically, may have beat the S&P, but I think lots of people don't keep a great track record of how they've done, tend to forget their average or bad trades, and overemphasize their good trades in their minds. I'll then ask them how much their overall portfolio has grown from year 1 to year 5, and then calculate the S&P's growth in that time, and they almost always have only managed to match it (with a lot of time wasted to do so) or actually did worse.
- zippergz 12y ago
  I keep obsessive track, and over the last 12 years I've been roughly equivalent to the S&P 500 (which, again, I attribute far more to luck than anything else). Like I said, this is for fun, not for true investment purposes. So anything that doesn't lose money is a win in my eyes. My real investments are primarily in index funds.
- exhilaration 12y ago
  * I think lots of people don't keep a great track record of how they've done Ha! This is true for me, I only realize how much I've lost when I see those negative numbers in TurboTax before filing my tax return.

Mikeb85 12y ago

Agree, mostly. The one advantage of being a small trader vs. the hedge funds is that your trade blocks are too small to swing prices, so you can get in and out of positions quite easily. I would definitely also not recommend day trading per say, a timeframe of 1-5 days per trade is IMO better as you can actually see a decent swing in price. It is possible to win, but you need to be good, and most people who do it in their part time simply don't have the knowledge or experience required...