Just like millions of other people around the world, I got caught up in meme stock trading that took over nearly every news outlet for several weeks. Over this 20 day period I spent a little over $70,000 day trading.
For those that want to know the results, here is a brief summary. However, I think you will find the whole story interesting and insightful.
Note, the $70,000 is an accumulative dollar amount, the most that I invested in a single stock was $10,000.
$70,449 spent purchasing stocks
$73,234 received from stock sales ($1,500 is from the sale of a call option)
Total profit: $1,285 (I reinvested the $1,500 from the call option sale on another call and lost it all)
Time spent: too many hours to count
The moral: For the average investor with other obligations such as work, friends, and hobbies, commit to long term investing and do not try to time the market with day trades.
Why Did I Start Day Trading
Since the age of 16 I’ve been investing in the stock market, always with a long term strategy and investing mostly in mutual funds.
At the start of Covid, when the markets were in tremendous flux, an increased number of investors started using Robinhood to make option and stock trades. I spent a little bit time doing option trading in March of 2020 and basically broke even.
During this time, a friend of mine took his life savings of roughly $80,000 and started to make “large” purchases in companies that he thought would bounce back quickly, using Reddit to help find these stock picks.
In the span of 12 months he grew his initial $80,000 into about $400,000 at the peak of the market. I saw this and wanted to get in on the action, however I made a mistake.
The mistake that I made was that my outlook was too short, I was trying to make money in the matter of hours or 1-2 days, but my friend had a longer outlook where his investments spanned several months to 6+ months.
I also returned to the idea of short term investing right when Reddit and meme stocks were starting to explode which made it seem like day trading was the correct option.
Looking back, had I simply made an investment and let it sit for just several weeks I could have actually made significant money. However, I did not have the risk tolerance to do so, unlike my friend.
Fortunately, I did realize that my risk tolerance was different and I was able to re-shift my focus back to a long term strategy before I really got burned.
What Stocks Did I Invest In?
I day traded the popular meme stocks such as Gevo, Blackberry, Gamestop and the like. I also bought and sold call/put options on the S&P, Microsoft, Tesla and Disney.
Now, I’m only invested in a few individual stocks like Caterpillar, Activision, and UpWork, while the rest of my portfolio is comprised of mutual funds.
At one point I was up $6,000 on a Blackberry investment but decided to hold for another day. Unfortunately, that night Robinhood and other platforms announced they were restricting trading. The stock never rallied again, but I think I would have made decent money had this not happen.
In the end I pretty much made no money, and if I broke it down by hour, it was probably not much more than minimum wage.
My Time Involvement
At the beginning of this article I mentioned I spent way too many hours on this endeavor. I would start looking at the market at 4am PST to make pre-market trades. Then I would be at the computer ready to trade when the market would open and then follow the stock all day long. At the end of the day, I would watch the market after-hours and possibly make some trades.
I would do this several days per week, taking time away from sleep, my real job, and other activities.
What Did I Learn and Key Takeaways
If you don’t plan to make trading your full time job, then my recommendation would be to investment with a long term strategy and take advantage of mutual funds. Let stock professionals who are paid to manage mutual funds use their skillsets to make you money.
Don’t try to time the market, put your money in and then let it sit. You’ll be very happy in the long run if you don’t try to get in and out.
Lastly, don’t get caught up in other peoples success. With social media it’s so easy for people to show their gains, but for everyone 1 person with astronomical gains, there are 100 other people who lost their hard earned money trying to get richer. Be smart with how and where you put you money. Having a good balance of risk and safety will help you get to a position of wealth.