A Cautionary Tale

by Dual Income No Kids on August 26, 2006 · 0 comments

Daytrading. Nearly all the personal finance books I’ve read say that daytrading is a BAD idea. They give three reasons why this is the case: 1) daytrading subjects your investment to short term capital gains taxes, 2) short holding periods rule out large returns and 3) high trading costs reduce profits.

That said, since Miel and I sold our shares in the Hansens Natural Corporation, I have been daytrading and have lost a good deal of money. After trading the Exxon Mobil Corp. (XOM) and taking it on the chin in the amount of $2,622, I made about $180 trading Frontier Oil Corp (FTO). After that, I then made another $660 from Evercore Partners (EVR). Despite two winning trades, the bottom line is I’m down $1,944.

So, in the hope of salvaging something from my losses, I offer my bad behavior as an example.

DON’T DAYTRADE.

Instead, follow a prudent buy and hold strategy. Thoroughly research your investments and market conditions prior to investing.

Hope this helps,

James.

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