Who hasn't thought of dabbling in the financial markets to make a quick buck or so occasionally? However, there's a quantifiable difference between managed risk-taking and playing the financial roulette via unhedged day trading, something that the USPS worker Alex has just found out to his detriment, as per a July episode of The Ramsey show.
Alex earns around $4,000 per month or $48,000 per year. Just a while back, the USPS worker went big on day trading, managing to make $120,000 on levered bets by borrowing $60,000.
Eventually though, Alex lost the borrowed money and took out another loan to recoup his losses, and ended up losing that as well.
Now, the USPS worker is saddled with a net loss of $180,000 and $6,200 in monthly costs on an income of just around $4,000. Alex fears he might lose his day job as well now that he can't afford a delivery vehicle as mandated under his employment contract.
Of course, Alex's story is not an outlier, unfortunately. After all, around 78 percent of day traders lose money.
The Ramsey show received a call back in May from someone who lost $300,000 from an inherited IRA account, all thanks to day trading.
In August, Debra from Sacramento shared that her husband had lost over $1 million while day trading, leaving them with just $15,000 in savings despite earning $350,000 annually.
As it happens, even a supposedly hedged trade can go wrong. Who can forget the WSB user Ironyman who sold a short box spread without taking into account that American options can be exercised early, prompting an early liquidation of his positions by Robinhood, which left him with a 2,000 percent net loss.
The golden rule of day trading is to risk only the proportion of your savings you are entirely comfortable losing in its entirety. After all, this financial roulette table is fickle as well as brutal, and the last thing you'd want is to be saddled with liabilities you can't possibly afford.
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