A correspondent recently asked if it was possible to successfully day trade stocks without doing much research. The question was poorly worded, because it depends entirely on how we define much. But before I answer the actual question, I wanted to address the rather worrying subtext within it.
The question implies that what the inquirer really wants to know is can you make good money from trading without doing much work. I can be confident in that assumption because it’s a question I get asked a lot. I posted previously on the subject of whether day trading is hard work, but this question is subtly different, asking if it requires much work. And that’s a concern.
It’s a concern because it suggests that the state of mind of the person posing the question is that of someone who is essentially lazy. Laziness is rarely a quality that leads to success in any field. You don’t find many successful lazy athletes, or rich lazy business owners.
Now don’t get me wrong, I am a self-confessed lazy git, as I often point out in my day trade posts. I usually only work mornings, spending around three hours in front of the screen. And yes, I make good money from it. But it took enormous amounts of work to get to that point. I did not wake up one morning, decide to be a professional day trader, quit my job, and start raking it in working three hours a day. I did wake up one morning, decide to be a professional day trader, quit my job, and then spent a couple of years learning the ropes and jumping from one strategy to another. And then I spent more time knuckling down with a mentor and learning how to do it properly. And then I spent more time practicing what I had learnt, refining my strategy, and getting my psychology sorted.
Day trading is like much in life: you get out what you put in. The rewards are potentially huge, both financially in in terms of time freedom (which is where the name of this site comes from). But it takes effort to get there. Yes, you can be lazy as a trader, but only after you’ve put in the hours up front. The link between effort and reward in trading is, I think, far less robust than the link between effort and reward in most other fields. I suspect it takes much longer to become a rich plumber, or a wealthy surgeon, or a loaded real-estate investor than it does to make an equivalent living from day trading. But there is still some up-front effort required.
So I worry when people ask me questions about how little work they can get away with as a trader, because I know those people are the ones who are least likely to succeed — in trading or in any other endeavour.
As to the original question, taken at face value: yes, it’s possible to successfully day trade stocks with little research. I spend between half an hour to an hour a day on pre-market research. That’s around 30% of my working day (well, my working morning), so in one respect it’s a lot. Realistically though, I don’t think many people would consider an hour a day a lot of work.