Last night the BBC broadcast the second programme in the two-part series entitled Traders: Millions by the Minute. The first programme showed the professionals making millions by the minute, the second programme did not. Instead, with one exception, we got to see amateurs, losing. The fact is that the vast majority of home traders lose money. In financial trading it is easy to make money in a bull market, you buy and hold. In volatile markets there is the temptation to trade the swings, long and short and with disastrous results.
The problem for financial day traders is that most markets are rigged for the benefit of the professional élite. If the price isn't rigged then the market you trade in will be. Either the price is manipulated or the market you trade in is front run. Sports trading is a different matter but still, most sports traders are losing traders. Although sports rigging is commonplace and insider trading in horseracing is common too, the playing field is more level between the professional and amateur bettor. Buy and hold lasts only until the end of the event so most trades are very much day trades.
In last night's second programme we saw a house wife making a million but only on paper. When she started using her own money, she lost. A common occurence for traders. The psychological aspects of using your own money are vastly different to paper trading. You will take more risks on paper and may get a long run of success, reinforcing in your mind that you are a good trader. However, that may just be down to luck. After all, a risk taking loser on paper would probably not want to trade with their own money. We got to see a lucky loser on paper, lose it in reality.
When you start using your own money you might be more cautious and the reality of being just another trader snatching pennies in front of a steam roller might be too much to bear. You either give up because you are not going to be as rich as you thought or you take on more risk and blow up. We saw a team of retirees gambling their pensions on the stock market. They looked and acted professional but even they started to lose money. Again, they found it easy in a bull market and got out of their depth through over-trading a volatile market. A former antiques dealer knew all the terminology but he just couldn't trade. He was happy to lose money, year after year, to keep him from selling another chest of drawers.
There was a pair from Birmingham but I didn't know what to make of them. Maybe the BBC's usual multi-cult shenanigans in action. We saw the pair in their parents' house plotting to become 'trillionaires' then driving off in a flashy car to drum up business from black footballers. At least they had the sense to risk somebody else's money. At the end of the show, and unlike the other traders, we were not told how they were getting on financially. I suspect they are still living with their parents.
The only winner I could see was a rather narcissistic chap. He had made over a million pounds from day trading and had been given a multi-million pound fund from The City to trade. The narcissist probably has all the skills needed to be a winner; single-minded, self-absorbed with a touch of obsessive personality disorder. His house was immaculately clean, his body immaculately toned in a gym, his Porsche gleaming immaculately in the sunshine. A life dedicated to being good at everything and that includes making money.
BBC iPlayer - Traders: Millions by the Minute