Ask Stacy: Is It Possible to Make a Living Trading Stocks?

Photo (cc) by Lars Plougmann

This week’s question comes from a longtime reader who wants to make a living the same way I do — getting out of bed in the morning and sauntering over to a computer. But he’s choosing a completely different way of doing it. Instead of writing articles about money, he wants to earn it by trading stocks.

I’m pursuing a career as an active trader and investor and believe that one can make an incredibly good living as an active trader. But from reading your articles on investing, you seem to think it’s not a good approach. And I understand that the average day trader loses money. My approach is all-inclusive, ranging from short-term trading to long-term investing, with a great deal of study and practice (paper trading) to go along with it.

In your comments above the list of stocks in your portfolio you say, “I’m an investor, not a trader. In my opinion, trying to time the market is a fool’s game.”

Can you tell me why you said that? I respect your opinion and am interested in what your thoughts are on this, as I’m aggressively pursuing this course for myself.
– Dean

Here’s your answer, Dean!

When I started in television news nearly 25 years ago, I had no experience, no pertinent educational background and no connections. Anything’s possible. There are people who make a living at virtually everything, from playing golf to lion taming. So I’d never suggest there’s something you can’t do.

But from my experience and observation over many years, making a living trading stocks is tough.

What I’ve seen and experienced

Before adopting TV news as my chosen profession, I was a stockbroker for more than 10 years. During that time, I tried short-term trading for my own account. I failed to consistently make money. Then I formed a partnership with two knowledgeable friends and tried to use a trading strategy we developed to trade index options. It took several months, but we ultimately lost our entire $10,000 pooled investment.

Among my 1,000 or so clients, I also had a handful who attempted to trade their way to riches. Not one succeeded. Zero.

I had two close college friends who went into the commodities trading business, one in New York and the other Chicago. It took years, but ultimately both failed. I used to know a floor trader in New York who made a killing in silver back in the 1980s. He subsequently lost it all and went bankrupt.

That’s why I say, “I’m an investor, not a trader.” I didn’t form this opinion by reading a book. I attempted to do it on more than one occasion and had my hat handed to me, as did virtually everyone I’ve known or observed over the last several decades. So you’ll understand why I’m skeptical.

At the same time, I’ve found that while trading is a tough way to make money, investing in quality companies over long periods of time isn’t. I’ve demonstrated that right here by publishing every stock pick I’ve made since 2008 in my online portfolio.

It’s not just me

There’s a mountain of evidence suggesting market timing is tough. For example, despite the fact that mutual funds employ both the smartest people and best technology on the planet, the average professionally managed mutual fund underperforms a simple, unmanaged index.

Then there are the gurus. Wall Street is littered with the bodies of market-timers who thought they had it right, but ultimately got it wrong by missing giant market moves, both up and down.

Among investors still standing, the most famous is undoubtedly Warren Buffett, and he’s certainly no trader. He’s said on more than one occasion that his favorite holding period for an investment is forever.

Where are you learning it?

I did my first story on day-trading schools about 15 years ago. These are schools that recruit would-be day traders by promising them that successful short-term trading techniques can be taught — for a hefty fee. Some students may successfully learn techniques to make money, but even the first guy I interviewed who owned the school admitted that most of his students lose their money and wash out.

Whether it’s day trading, market timing or any other short-term investing system, if you’re paying money to learn it, there’s an elephant in the room: If the teachers are so great at it, why aren’t they doing it instead of teaching it? Trading stocks in your boxer shorts at the kitchen table for a few hours a day sure sounds a lot simpler than leasing office space, advertising, recruiting and teaching.

The very fact they’re charging to teach it is evidence it doesn’t work well enough to make a living.

The bottom line

As I said at the outset, I’m a firm believer that anyone can do anything they set their mind to. There are people who play poker professionally, and there are people who trade professionally. But they’re few and far between and, in my opinion, have a special gift. They can teach you techniques until the cows come home, but they probably won’t, because they don’t have to. And even if they did, I suspect that, like professional athletes, they’ve got something that can’t be taught.

None of this means, of course, that you shouldn’t learn everything you can about trading, market timing, poker, golf or anything else that interests you. Sharpening your skills is always a great idea. But there’s a big difference between learning to be a better investor and making “an incredibly good living as an active trader.”

If you go forward, Dean, let us know what happens. I’d honestly like nothing more than to be wrong and for you to get rich.

Then maybe you’ll open a school and teach the rest of us how you did it.

Got a question you’d like answered?

A great way to get answers to just about any money-related question is to head to our Forums. It’s the place where you can speak your mind, explore topics in-depth and, most important, post questions and get answers. It’s also where I look for questions to answer in this weekly column.

About me

I founded Money Talks News in 1991. I’ve earned a CPA (currently inactive), and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The 14 Most Deadly Car Models
The 14 Most Deadly Car Models

These vehicles are involved in fatal accidents at least twice as often as the average car.

12 Ways to Maximize Your Social Security Checks
12 Ways to Maximize Your Social Security Checks

You may be eligible for more retirement income than you realize.

16 Affordable Products That Could Save Your Life
16 Affordable Products That Could Save Your Life

You’ll want to order these sometimes surprising products from Amazon ASAP.

This Chase Card Is Great for Groceries and Cash Back on Everything
This Chase Card Is Great for Groceries and Cash Back on Everything

You could earn more than $600 cash back in your first year just from grocery shopping.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

27 Things You Should Never Pay For — and How to Get Them for Free
27 Things You Should Never Pay For — and How to Get Them for Free

When you know the tricks, you can save big on all kinds of useful things that others pay for.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.