There is a show called Wall Street Warriors which follows the lives of various individuals who make a living on Wall Street. I watched an episode on Hulu.com last night (the "Open Outcry" episode) and it reminded me why I'm a day trader and not a position trader.



Larry is a floor trader in the orange juice pit. During this episode, everyone in the pit is waiting for a major number. This major number is a prediction put together by "authorities" in the orange juice business. It's an estimation of the amount of oj that will be made the following year. It's in millions of boxes. Larry thinks the number will be somewhere between 140 million and 155 million. He has a position on which essentially makes him net long. He's currently up $150,000 on the day.

This estimation is coming from a group of orange juice "professionals" who are currently in a meeting discussing things such as last year's crop, this year's crop, the likelyhood of a freeze and how many immigrants will be available to work the fields. Based on this discussion, they are going to make a prediction that will probably be nowhere close to the actual number. Nevertheless, the floor traders are going to buy and sell based on their prediction of the professionals' prediction.

The orange juice traders of the world are risking ridiculous sums of money on an estimation that's made by people who have no real, vested interest in their own estimation. Humans are quite an interesting bunch.

The number was way above what everyone thought it would be and the market sold off fast. Limit down. Larry's $150,000 profit vanished. Instead of scoring big, he lost huge. The little computer says "down $900,000". Let's bet a million dollars on one hand of blackjack.

When I tell someone that I'm a day trader, the typical response is "Isn't that gambling?" My answer is usually, "Yes and no." and then I change the topic. The thing is, I've had people tell me that day trading is gambling but "investing" is not.

Yeah. Right.

It's a lot easier to figure out what's going to happen today than it is to figure out what's going to happen next week, let alone next month.

If you are a master at understanding fundamental forces and can see what the future must hold, you still need an extraordinary amount of capital in order to benefit from the move that you think will occur. A good example of this is oil. Everyone knew it was going up. Could you have handled the $10,000 daily swings? Everyone knew it was going down. Could you have handled the $10,000 daily swings?

Maybe, if you worked in the business, you might have been able to predict the long-term trend up to a certain point. Are you in the oil business? How about the orange juice business?

What about "investing" in a company? A safe, secure company like, maybe, a bank? I think the current economic meltdown is proof enough that no company is safe. Do some people consistently pick profitable stocks? Yes. Some people do. People like Warren Buffet who can go to the corporation and look at the accounting statements in person. People who know exactly where a corporation stands in terms of assets and debt. People who can truly hold for the long-term because they already have lots of money.

Is day trading risky? Indeed it is. Anytime you do anything where money is at risk, it is risky. Hence the term. Is it as risky as betting a million dollars on your prediction of someone else's prediction? I don't know. You tell me.