This is a personal story about my bitter-sweet experience with trading. Hopefully, the following lines will compel you to reconsider venturing into day-trading.
I began my journey by investing in stocks two years ago (around June 2018). I had some savings and I aspired to earn a bigger return than my bank had offered for yearly deposits. Bonds would have also been an option, but I wasn’t satisfied with the return on them either. In Romania, the average yearly bank deposit return was around 2.8% in local currency (RON), or around 0.3% in EUR. Bonds here have an average annual return of 5%. My aim was around 10–12% annually.
I opened a trading portfolio and commenced by researching a handful of tech companies. Being a beginner and having invested a substantial percentage of my savings, I was careful and I patiently analyzed the stocks I bought. My positions aimed for mid and long term profit. At the time, I did not get too involved in monitoring the market and technical analysis. Instead, I would just check the news couple of times a week to read updates about the companies I invested in.
First year in: complete success. I’ve exceeded my target and acquired a return of around 13%. As time went by, I consolidated my fundamental analysis skills and transitioned to mid-term trading. I was paying closer attention to important news and tweets that might have affected the stocks in my watchlist. Everything was unfolding as initially planned.
Beginning of Q1, 2020: By the beginning of this year, I hovered around 20% profit. Coronavirus was starting to affect the markets in February 2020. Overall, the impact on my portfolio was positive. I had the intuition to close most of my long-term positions. Moreover, I shorted some companies that would be greatly affected by the pandemic. It turned out a pertinent move and it paid off in a couple of weeks.
Covid-19 lockdown: Since I had plenty of time to spend at home, I began studying technical analysis and tried to learn how to deal with volatile markets. The last two years inspired confidence, driving me to trust that if I could profit using fundamental analysis, earning short-term profit by applying technical analysis wasn’t out of the question.
Downfall: One can imagine how this wager worked out, since I’m here, writing the article. Nothing worked. The tutorials about applying technical analysis to different markets, the advice received from top traders, the patterns I tried to identify were all working against me. Furthermore, in my ignorance, I was full of confidence based on previous performance in long-term investments. This, of course, prompted more loss and more confusion. About two weeks in, short-term trading made me lose 80% of the profits from the past two years of carefully calculated investing.
Today I found a video on the internet that precisely describes what day-trading felt like: https://img-9gag-fun.9cache.com/photo/a1RB2qG_460svvp9.webm
I can’t stress enough that I’ve been a lucky one. I had enough clarity to put an end to it before suffering substantial losses. Day-trading is a beast you do not want to tamper with if you’re unprepared. Without proper training and a history of at least a couple of months of profits in your virtual portfolio, stay away from it!
I’m aware we’ve all heard it repeatedly before: “Trading CFDs is risky and 70% of people lose their money… ”. If you venture in that zone, full of confidence, without consolidated prior knowledge about using these financial instruments, it’s highly probable that you will end up being one of the 70% and you will find yourself advising others not to follow in your footsteps. Will they listen? Most likely not, generating this ever-recurring pattern that fills the pockets of the few experienced short-term traders. The worst part is: in all honesty, it’s money fair earned by professionals, notwithstanding it used to be mine and yours.