Why I won't copy or invest into daytraders

Daytraders - Do not invest into daytrading or copy them

All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room.

- Blaise Pascal

Some traders are proud of their daily earnings of closed contracts (preferable CFDs) with high returns. I advice you not to follow or copy those daytraders for very good reasons. On CFD brokers you pay a spread for every trade you open or close. In easy words that means your closing price will always be worse than the opening price at the same market price. The resulting difference is profit for the broker. The more often you trade the more profit the broker will earn from you no matter if you loose money or make profits. 

Why do you suppose the brokers on the floor of the New York Stock Exchange always cheer at the sound of the closing bell - no matter what the market did that day? Because whenever you trade, they make Money - whether you did or not. By speculating instead of investing, you lower your own Odds of building wealth and raise someone else's.

(Graham 2006, page 35)

Graham's Definition of investing is very clear:

An Investment Operation is one which, upon thorough Analysis, promises safety of principal and an adequate return.

(Graham 2006, page 35)

Investing as opposed to speculation consists of three key elements:

* you must thoroughly analyze a company, and the soundness of ist underlying businesses, before you buy its stock;

* you must deliberately protect yourself against serious losses;

* you must aspire to "adequate" not extraordinary, Performance.

(Graham 2006, page 35)

The I am stupid but someone else is more stupid than me game

I do have small amounts of capital in speculation however and I know definitely that it is speculation and not investing. That gamble for example is going on with crypto currencies like Bitcoin and Ethereum. 

A speculator gambles that a stock will go up in Price because somebody else will pay even more for it.

(Graham 2006, page 36)

Speculation is fun and can be highly profitable. I compare the current Bitcoin price rally to the situation of the 17th century with the tulip. Easy tradeably tulips or even just paper that proofed you own a tulip were traded for prices of real estates back then - just because prices went up without an underlying value. The underlying value of Bitcoin is a blockchain - Technology that is easy to copy and create the next "big thing". The price is mainly driven by the expectations that crypto currencies will be used in the future instead of today's paper money. However completely unsure is the choice of the technology and if it will be Bitcoin or some crypto currency developed and regulated by a state like the J-Coin (Japan's own development). For normal day by day payments the volatility of Bitcoin is much too high anyway. 

Like Casino gambling or betting on the horses, speculating in the market can be exciting or even rewarding (if you happen to get lucky). But it's the worst imaginable way to build your wealth. That's because Wall Street, like Las Vegas or the racetrack, has calibrated the Odds so that the house always prevails, in the end, against everyone who tries to beat the house at ist own speculative game.

On the other Hand, investing is a unique kind of Casino - one where you cannot lose in the end, so Long as you Play only by the rules that put the Odds quarely in your favor. People who invest make Money for themselves; People who speculate make Money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation.

(Graham 2006, page 36)

That is the main reason I won't invest into daytraders or people who make money only by trading crypto currencies for example. My favorite Investment style is to Analyse a stock based on the business, financial reports and balance sheets a company quarterly presents on the internet.

A Investor calculates what a stock is worth, based on the value of ist businesses.

(Graham 2006, page 36)

Also the filter option to find people with high or highest returns over a year or two means nothing to me at all. They can be e.g. popular investors on etoro but they can easily crash your money in a day or two too.

To see why temporarily high Returns don't prove anything, imagine that two places are 130 miles apart. If I observe the 65 - mph speed limit, I can drive that distance in two hours. But if I drive 130 mph, I can get there in one hour. If I try this and survive, am I "right"? Should you be tempted to try it, too, because you hear me bragging that it "worked"? Flashy Gimmicks for beating the market are much the same: In short streaks, so lang as your luck holds out, they work. Over time, they will get you killed.

(Graham 2006, page 37)

Conclusion

Platforms like Etoro or Wikifolio offer an easy way to copy people's investment strategy. Those platforms automatically buy and sell when the copied person buys or sells an asset to mimik the performance for your own portfolio. But one must be very picky in choosing the right person to copy and know his long term strategy as well as responsibility in terms of investing the greater amount of capital and risk only little capital with speculation like Bitcoin and Ethereum. Trading is unsafe at high Speed and becomes a casino gambling where only the broker can win long term because of spreads, transaction costs or other charges per trade. Do not play this financial video game as Graham calls it.