Can you really make money day trading?

Rashed Alkhzaie new
“Your profit is the broker’s loss and vice versa. You should naturally expect the system to be designed against you in every way,” writes Jordan News columnist Rashed Alkhzaie. (Photo: Piqsels)
There has recently been a trend in the streets of Jordan among companies that advocate, promote, and advertise day trading for the public.اضافة اعلان

Big lit billboards promoting trading commodities like coal and oil are on almost every major intersection, road, and roundabout.

You might have also run across their ads for free stock trading training and seminars, which should supposedly prepare you to venture on your personal investment career and become financially independent.

Those businesses, known as retail brokers, facilitate environments mimicking the real markets and provide sophisticated financial products known as contracts for difference, also known as spread betting. 

These companies almost always provide you with trading tools that have high leverage (a form of credit) structures, usually through a trading platform or app known as the Meta Trader app.

On this app, you are able to trade any commodity, stock, currency pair, exchange-traded fund, or bond in the form of a contract.

This means you do not really invest in the real asset but rather enter into a contract with the broker to bet that the price of said asset is going up (long) or down (short), and you both agree that in order for the broker to book in that contract you have to pay a fraction of the cost of the asset and have a collateral sum available as well.

After a period passes, during which you are being charged with daily interest fees, you now choose to close the trade or terminate the contract.

The difference of the price of the asset when you entered the deal vs the price of the asset when you exit the deal is incurred by one of the parties, either yourself or the broker.

If you go long on gold, for example, and the price goes up by $100, the broker agrees to pay you that $100, minus the commissions, fees, and spreads.

The rest is your profit.

If the price goes down by a $100 by the time you close the deal, the broker will simply deduct $100 from the margin (collateral) you paid on the deal and give the rest back for you. 

It sounds a little like a scam, right? Well, that’s because it is in some sense, given that the trade is based on a contract where one party will pay the difference to the other party; your profit is the broker’s loss and vice versa.

You should naturally expect the system to be designed against you in every way, similar to the design, environment, and experience of casino games — all created to reduce your odds. Does that mean you are destined to lose?

Absolutely not, but it is critical you understand how the system’s calculations really work to actually make money out of this field.

I have spent more than eight years in this field, on both sides of the fence, and I can comfortably tell you that you can make insane amounts of money.

You can also lose money faster than throwing it into the ocean. I can also promise you there is no seminar out there that can ever prepare you to jump into day trading.

Expect to burn two years of your life at minimum, just practicing and researching until your skills are sharpened enough to make real money trading.

Finally, no broker will ever give you information on things such as slippage, deal execution speed, and liquidity providers’ price quotes, which are all critical factors for your trading environment to be sustained. 

In conclusion, no one will ever knock on your door to hand you an opportunity to make money.

Trading is based on financial and mathematical sciences that takes years to master. Eighty percent of the game is based on science, and 20 percent is based on the trading environment.

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