(MENAFNEditorial)
We’ll shoot straight for the obvious one here. Nobody could blame you for believing it given that the same image of traders is portrayed just about everywhere – cocky street-smart fast-talking and above all extremely rich. Of all the stereotypes about day-trading the one about all day traders being extremely rich is the biggest myth of all.
There are two sides to this myth however; the first is that day traders are extremely rich and the second is that they’ve all lost fortunes. This is sort of like saying that everyone who works in the oil industry is John D. Rockefeller. There are admin clerks in the oil industry just as much as there are in any other. But recall we’re talking about day traders themselves.
Image in the Media
This image of day traders is perpetuated by the media. It’s no fun making movies about traders who live at home with their mothers and make $60000 a year (itself a respectable salary). The iconic Wall Street movie would never have made it past the cutting room floor if Michael Douglas hadn’t said “greed is good” but rather “let’s aim for stable compound growth of around 1% per day.”
It’s not just Hollywood. As recently as the end of 2014 CNBC and others were reporting that a 17-year old day trader who they previously claimed had made $72 million trading on stocks actually well hadn’t. How easy would it have been to verify this story in the first place? Extremely easy: They just wanted to buy the lie about day trading just like most people do.
The problem with perpetuating this myth about day trading is that when things go bad for the economy day traders are ones picking up an unfair amount of the flack. Books like Michael Lewis’s Flash Boys (an excellent read with valid points) and talk about introducing a Tobin Tax (a tax on each individual trade – like trading is inherently malevolent) come to the foreground of the discussion.
Tobin Tax and Zero-Sum Game
A Tobin Tax innumerable books about how traders are incapable of making rational decisions Hollywood articles claiming traders are “evil” and others all miss one important point: Day trading is a zero-sum game. There are rich people and there are poor people and there is everyone in-between.
The myth that day trading makes everyone millionaires is an easy one to make (with a few examples) but is even easier to refute (with solid fact). The lesson is as useful to remember for those involved in trading as those looking in. Perpetuating the myth that day traders are all wealthy does nobody any favors.
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