Why I Don’t Day Trade and Never Will

In a seemingly unending parade of new investors flowing into Robinhood, hoping to make their fortunes alongside their merry men, I have avoided the conveniently found gold rush.

I have never believed in “get rich quick”, and often times that is merely someone else trying to get rich off your back. Forex, calls, puts, Wall Street Bets, and financial meme accounts overwhelming?

Don’t worry. I have never been a day trader, and this article will provide a deeper, methodical look into my principles and investing playbook.

Day Trading Defined

Day trading, swing trading, volume trading, position trading. Confused yet? While each may convey similar meanings, it is best to alleviate any confusion and define terms before proceeding.

Day trading usually refers to the practice of purchasing and selling a security within a single trading day. Day traders are attuned to events that cause short-term market moves.”

Hint: focus on buying and selling within a single day. So, if you buy a stock at 10:00am, but you don’t sell until tomorrow at noon, are you a day trader? Technically, no.

However, for the scope of this article I will define day trading as holding an investment for a time horizon so short, one could not possibly be concerned with long-term fundamentals.

Who Are My Competitors?

I recently completed Michael Lewis’ New York Times Bestseller, “Flash Boys”. I’ll be the first one to admit this is certainly no book for beginners, but it provides marvelous insight into the infrastructure behind Wall Street.

Yes, I studied finance in college, but we never learned about fiber optic cables, electronic exchange networks, broker order flows, and other information technology features supporting the markets.

University finance programs focus on analyzing cash flows, transcribing news and analyst reports into pro forma statements, and trying to calculate intrinsic value.

I had no idea a few dozen “investors” paid tens of millions of dollars for access to a high-speed, state-of-the-art fiber optic line that gave “flash traders” a 5 millisecond advantage over their peers.

Then came my next natural question, “Why would someone pay so much money for this seemingly trivial infrastructure? Surely, they’re not buying access out of the goodness of their heart.”

This goes back to the concept of investing as a zero sum game. Every trade has a winner and a loser. Ray Dalio’s firm, Bridgewater Associates, pays millions of dollars for top-notch IT and investment research.

Am I really naive enough to believe I can beat these people trading off my iPhone or laptop from Des Moines, Iowa? Of course not.

Short-term investing is no better than gambling, and the odds are even more stacked against you. Your loss is someone else’s gain.

“But, I made $200 buying Tesla call options this April”. Yeah, anyone can get lucky a few times, but there is no scientific record to support day trading as a profitable investment strategy for ordinary investors like myself.

Mental Health and Stress

For the record, I have never day traded in my life, but there was a brief moment in time when (I admit) I would check the Wall Street Journal every 30 minutes for market updates.

Was there ever anything so pressing that I couldn’t wait until the end of the day, or God forbid next morning?

Of course not. However, I was no better than Pavlov’s dog, conditioned to check my phone for updates. Even worse, I found myself consuming hours of content from talking heads on CNBC.

“You have to buy now. This is the opportunity of a lifetime! No, now it’s time to sell and rotate your portfolio towards secular growth.”

Was any of this behavior informative, beneficial, or boosting my investment returns? I don’t even need to answer that because the answer is so self-evident.

I thought it was great to continuously load my head with information and always be up-to-date on the latest market gossip. I never stopped to ask myself, “What would knowing this information mean?”

Would I sell my investments because markets took a tumble? No, I plan on holding my investments until I die. Would I buy more during “this great opportunity”. No, I dollar-cost-average across time.

It’s obvious to say none of this was good for mental health or stress management. Often times, I would need to go to the gym or run just to feel normal again.

Stress and emotional trading are never indicative of long-run investing success. What do I do now?

I subscribe to a few newsletters that give me every day market updates, and I check my investment account statements 4 times a year. I turned off CNBC and the talking heads.

Boy, life has been so much better ever since!

Short-Term Capital Gains

Investopedia provides a wonderful distinction between short-term and long-term capital gains.

“Long-term capital gains are derived from assets that are held for more than one year before they are disposed of.

Wealthy Diligence has recently partnered with Audible to provide our readers a 30-day free trial with this exclusive link (no strings attached). Reading has fundamentally changed my life, and I want my followers to have a similar experience.

Long-term capital gains are taxed according to graduated thresholds for taxable income at 0%, 15%, or 20%

A short-term capital gain results from an asset owned for one year or less before it is disposed of…they are subject to taxation as ordinary income.”

Due to short-term capital gains being taxed as ordinary income, the tax rate applied to the gain is significantly higher.

Remember, when investing you must calculate returns based on after-tax value. It’s great to say you made a 100% return, but if you have to pay a 35% short-term capital gain tax, it doesn’t sound so wonderful.

Day trading gains will always be treated as short-term capital gains; thus, profits from day trading are far less desirable than profits from long-term investments (all else equal).

Even better, investors can use retirement accounts (IRA and 401(k)) to defer taxation on profits into the future.

I’ll never forget my personal finance professor telling our class to never day trade in a retirement account. Why? You can’t write-off losses as tax deductible, and approximately 85% of day traders lose money.

Investing Isn’t My Active Job

For me, investing is simply a way to earn modest passive income through dividends and capital appreciation.

My goal is to let corporate managers run their companies and distribute free cash flows to me as a shareholder. I have no desire to make investing my second job.

I already have a normal job, and I frankly don’t have the time or energy to follow these trends. I feel sorry for people who constantly flood their brain with current events and the latest earnings report.

Seriously, this was once me, and I know how emotionally draining the process can be day-in and day-out. My goal is to simplify my life in a principled manner, not make it overly stressful and complex.

I sincerely believe the best investment you can make is in yourself by acquiring a higher skillset and earning more income that you can invest. It sounds cliche, but it’s entirely truthful.

What else could you be learning or doing with your time that’s more productive and profitable than trying to navigate day trading?

Focus on Savings Rate, Not ROI

It makes more sense (and you’re better off) making a 5% return on $100,000 than 100% on $2,000. Day trading “experts” and platforms place too much of an emphasis on generating returns than saving money.

why i don't day trade

Plus, how are you even going to trade if you haven’t saved any money? Answer that one! Additionally, savings rate can be reasonably controlled, while investment returns are never guaranteed.

I say reasonably controlled because I can’t predict cancer or car wrecks (hint: this is why proper insurance is so important, but let’s save that for another day).

Obviously, I am not saying to go out and buy 30 year Treasuries at 1.5%, but saving more of your income provides flexibility for lower returns.

We all know someone personally, or have heard a scenario, where an individual just reached age 60 with nothing saved for retirement. I’m not trying to villainize or make anyone feel guilty (life happens).

Now, they are effectively forced to take-on risky investments to reach their retirement income planning goals. Meanwhile, their peers may be de-risking their portfolios with conservative asset allocation.

I would like to see a greater emphasis placed on people bolstering their personal saving’s rate, not ushering in unrealistic investment returns to short-change saving money.

Rent Seeking

Finally, this last section is where I will probably catch the most flack. Nevertheless, I shall persist onward. Day trading doesn’t do anything for the world.

You’re not creating liquidity by trading 5 stocks in your basement. Clicking buttons on your iPhone doesn’t create wealth.

Day trading is false noise (smoke and mirrors) masquerading as real economic activity.

Personally, I want to feel good about providing a real economic good or service to the world and investing in companies that provide long-term value. This is why ESG investing is so prominent.

Am I saying you’re a bad, unethical person if you day trade? Absolutely not. Am I saying it’s impossible to make money day trading? Nope, some people make a lot of money.

I would never tell someone how to live their life. That’s their business only. I’m just giving you insight into how I feel about the corruption of investing as a medium of rent seeking.

Why I Don’t Day Trade

There it is, folks. My complete and transparent thoughts about the nature of investing in America and why I don’t day trade.

I’ll leave you with a wonderful piece of wisdom any of your grandmother’s probably have told you. If it’s too good to be true, it probably is!

New Article Notifications

Make Money Online

Wealthy Diligence is hosted by Bluehost, and I seriously recommend this product for anyone looking to start a blog or website. My readers can receive an exclusive discount through this link.


Investing outside a bank or a credit union is not FDIC insured. All investments are subject to additional risk, which may cause you to lose your money. All information provided here is for informational and entertainment purposes only.

It is not an offer to buy or sell any of the securities or other products talked about within the scope of this article. Wealthy Diligence makes no claim or guarantee for specific investment rates of return.

Please discuss all investments with a CPA, CFA, CFP, or other professional, and always perform your own due diligence before investing.

I may receive compensation for affiliate links clicked or products purchased.