I learned a lot from Graham Stephan. I think he's a great YouTuber, real estate investor,
real estate agent and stock market investor…. But he's very wrong about day trading.
If you watch my channel, you probably know i'm a big fan of Graham stephan. I mean if
you’re building your financial wealth, learning about investing in real estate or the stock
market, and enjoy someone nagging at you for spending $6 on a starbucks coffee, of course
you would like him.
Its funny because we both posted a video with Lamborghinis in it for April fools this year.
Except he has baller friends and probably got the lambo for free, while i was the dumbass
who paid $3-4k to rent it… for a youtube video. Hey no regrets, best $4K ever spent
on comedy!
So Grahams video in question is this one, Why 80% of Day Traders Lose money he uploaded
in September 2019. He shared his early experience dabbling in day trading and the get rich quick
scheme..
in today's video, I want to talk about why Graham Stephan is wrong about day trading,
as a full time day trader who's been trading in the US stock market for 6 years and now
going into 7 years.
This video is meant to be constructive feedback on a beginner traders journey, one that I
have most certainly gone through the same way many years ago. We’re gonna discuss
what Graham did well on and the areas about day trading that he was wrong about, and most
importantly, how other beginner day traders can learn from his experience.
Since we’ve been discussing lots of day trading losses recently, and today as well,
and misery loves company, we’ve all been there in the same shoes Graham did, make sure
to support one and other by gently dropping a like button at the bottom of the video,
or as graham would say it, smashing that like button for the YouTube algorithm.
In the video Graham describes his first experience with the stock market when he was still in
high school. But hey that means Graham had an early start trying to make money in highschool.
I didnt know anything about stocks or money in general in high school. I was too busy
worrying about whether I should go to prom or not. Spoilers I didnt go.
So while in high school, Graham saw He saw an online marketing ad for one of the biggest
penny stock gurus in the industry. And that’s what introduced him to day trading in the
stock market, and not just any stocks… we’re talking about these trashy turd penny stocks
that you either love or hate with a passion.
I'm not going to drop names, but that was probably the exact same day trading marketing
ad i saw almost 6 or 7 years ago. Except I wasn’t in high school 7 years ago, I was
most likely stuck in traffic on 405 Interstate in Los angeles. No joke I lived and worked
about a year and a little bit more in LA, and half of my time there was spent in the
car.
Okay sorry for that little detail nobody asked about. But its very interesting that we saw
the exact same ad. How to turn a small amount of money into millions day trading… while
sitting on the beach, driving in those lambos, and banking on the toilet.
And coincidentally, many profitable traders I know today… we all share the same lure,
the bait of promises essentially, that drew us to take the first step into this wild world
of day trading. So in a way, I need to to thank these day trading marketers.
In the video Graham says he had some initial success with these penny stock picks online
and made some profits due to being lucky. And you know what we say about luck in day
trading… luck is not consistently reliable strategy.
In fact, beginners luck is often a very dangerous start for brand new traders. Its very common
for people brand new to the market to think that this is trading business easy… buy
low sell high right? How hard can this day's trading thing be?
And especially with the glorified lifestyle marketing we see on the daily basis, which
you probably saw a few on my Youtube video ads… its easy to have that misconception
that… day trading is easy money, and a get rich quick scheme.
That's why beginners' luck could be extremely dangerous. Imagine if your first few trades
you made $100, $500, $1000 quick. If that worked for the first week for a brand new
trader, Who wouldn't want to double down and quadruple their share sizes and use max buying
power on all their trades the next week?
Graham mentioned in the video that after the initial few successful trades due to beginners
luck, he just had a lot of bad trades after. I'm not sure whether graham actually followed
penny stock chat room buy and sell alerts or he just followed what people were recommending
online on stock forums like stocktwits.
But the key here is that he followed others into those trades. He bought those stocks
that he has no idea about, no plan of where the good entries are, where is the potential
upside, and where should he stop out if the trade worked against.
And that my friends is the biggest mistake you could do as a beginner day trader, following
chat room alerts into a trade blindly, to buy and sell. I know, because I made the exact
same mistake too, Graham isn’t alone in making those mistakes. in fact, i hate to
have to repeat myself again, most day traders start out trading the stock market, by following
chat room alerts.
I'm sure many of you watching this video have made the exact same mistakes here. Let me
know in the comments if you’ve lost your lunch money, rent money or that engagement
ring money because you followed someone’s buy and sell alerts. you guys all know what
i lost, Lamborghini money.
Thats why I only drive a corolla today. Hey gas is only $40 a month, its never caused
any issues in the last 15 years, and i never have to worry about people breaking into my
car. This car is perfect.
Besides sharing his personal experience with day trading, Graham also talks about a few
key points why day traders lose money… and I do agree with most of them. And first and
most important one is because… they havent samshed that like button.
Graham says that most new traders are overly confident with their ability in the market.
Which I agree is very true. And especially when you get beginners luck like we had talked
bout earlier.
He also talks about other reasons why most traders cannot succeed such as the inability
to control their emotions, such as hope, greed, fear, regret. I cannot agree with this statement
more. Most traders lose, not because they don't know how to trade, but because they
don't know how to control their emotions. This is why a trader could be on a series
of small wins, and when one day shit hits the fan, they become emotionally attached
to a trade.
They ignore their own rule of risk management and decide to fight the trend and fight the
stock. That turns into hope and hold which turns into fear of taking a loss, and eventually
that's how a small loss turns into a big unrecoverable loss that blows up a traders account. It's
not difficult to make money in the market, but it is more difficult to keep it.
Graham also mentions that most traders, especially when you are starting out with very little
capital will be more likely to take riskier trades. This is very true. If you’re starting
out with a very small amount of money like $500 or $1000, you’ll be more likely to
want to take trades that can double for 10x your account quickly, in order to justify
the commission cost and the time spent in front of the market.
Small accounts traders are more likely to treat trading as a get rich quick scheme.
You’ll take risk management less seriously because you already have so little to begin
win, what can you really lose right?
And that is the reason in my how much money to start day trading video, i recommend at
least $5000 to start, and treat that as market tuition. 5000 is an amount that is enough
for most people to care about protecting, and at the same time, it's not big enough
for the damage to ruin someone’s financial future… since most new traders are likely
to lose 50% , if not all of their accounts within the first 6 months to a year.
So its great if you have $50k or 100k or more to start trading, but please do yourself a
huge favor, do not use all of that buying power when you’re learning.
I certainly blew up my first few $2, $5k trading accounts. Like i said in that video, you have
to be willing to pay market tuition in order to learn day trading. If you’re not willing
to risk that market tuition then day trading isn’t for you, its like college, if you
don't want to pay a six figure tuition then don't go….
Ok i wish i didn't go to college. Could have saved that six figures for my trading account
instead.
But the biggest issue I have with one of the reasons Graham mentioned as why 80% of all
traders fail is… lack of diversification.
For those who are familiar with the term, diversification means allocating your capital
into various sectors such a tech, retail, utilities, energy, and investing in various
assets such as stocks, previous metals, or real estate. The goal of doing this is so
you can spread the r risk while maximizing your potential profit across all areas. Essentially
not putting all your eggs in one basket.
Diversification is very important yes… if you were investing. I think Graham, being
a long term stock market investor, and real estate investor, really made the video analyzing
day trading as a style of investing.
Clips of Graham saying day trading is investing
And that just couldn’t be any further from the truth. Like i mentioned in a recent video,
day trading cannot be compared to investing. Day trading is a business, these stocks are
trading vehicles and we are just riding the intraday volatility, not investing for long
term appreciation in value.
In fact, i think its great that while we are day trading intraday, we are not too diversified
and have our capital too spread out. Because we us traders should only be taking trades
and buying stocks that show us A+ set ups, whether the stock is setting up for an extended
short, or a red to green move fo rus to go long. So its great to not be diversified in
your trading account, unless you are hedging your position, that's the big difference there.
The last thing you want to do in day trading, is to be in way too many positions, and none
of them are actually real setups that are part of your plan. Remember, we don’t buy
and hold for appreciation in value in trading, we are getting in and out of positions with
price fluctuations.
This video is meant to be constructive and provide some insight from the perspective
of a full time day trader. I'm a big fan of Graham stepha, really enjoyed watching Graham's
video and listening to his short lived experience trading penny stocks.
Graham did do something very well as a new trader in highschool. It sounded like he recognized
really quickly that day trading is NOT a get rich quick scheme. And he recognized his earlier
wins were just beginner's luck and he simply didn’t have the time nor desire to continue
on this journey to learn day trading the proper way.
Which i think is a very realistic depiction and a positive ending for most new traders.
Yes he did lose most of his first trading account, but thankfully he was only in high
school, so he probably started with a small account. So his max loss was probably $2k.
When i was in high school ive never seen my bank account break 4 digits so i think its
a reasonable guess.
I think its great that he realized that day trading is not the kind of business for him,
and didnt overstay to try to revengage trade the losses back all the while treating day
trading as gambling… which unfortunately is something many new traders tend to do.
Again, Im certainly not saying day trading is better than investing or the other way
around, Im just here to make it clear that the former is a job and a business, that requires
learned skills over from hundreds of thousands of screen time, while the later is something
you can casually hold on to, stress free over a long period of time. And again, you can
do both at the same time. Like i do.