Wednesday, April 20, 2005

Random Roger's Big Picture: Reader Question

Random Roger's Big Picture: Reader Question

One of Rogers readers asked a few questions about short-term trading. I posted the following comment on Rogers site.

From deep in memory, John Train's first book was called The Money Masters and it was in this book that he reported that he could not find a single rich person who made his money through successful short term trading.

Obviously, there are market makers who do well by earning a eighth or so off of hundreds of transactions per day. Also there are many stories similar to the guy that bought his BMW in one day off of a good QQQQ option trade. But I have been to Las Vegas with folks who claimed to win every trip!

Who do you know that has gotten wealthy calling short-term trades? I know at least 200 millionaires and none of them "trade" stocks. The odds of winning the lottery are probably better. Playing can be fun but the guys I know who quit their jobs to trade full time are back at work. Even with luck, the taxes eat you alive. The spreads are the real killers.

A quarter-point spread once a day will take 50% of your portfolio away!