The Morality of Day Trading

Options trading can be a contentious issue. Some have even accused me of being involved in an immoral undertaking — stealing other peoples’ money. I am not contributing anything to society, nor building anything or furthering the advancement of mankind. Furthermore, “I am teaching others how to do it, so there is a place in hell for me.”

I assure you, not only is trading not immoral, but we have a moral obligation to earn as much money as reasonably possible. Further related to being fiscally responsible for our families and bringing forth an ever-advancing society, let me set out an example as to how we have a moral duty to create wealth.

Take the old pensioner, Fred. He worked all his life, saved his money and invested in the stock market for the last 45 years. Now Fred is retired and looking to enjoy his last few years with the savings he has accumulated. Do you not agree that he should get the best possible price when he cashes out of his stocks?

That highest price is what would be the most efficient price available. The more players in the market, the more liquidity and price efficiency there will be. If you remove market participants, you lower that efficiency while raising volatility. The more players pull out of the market, the less Fred’s portfolio will be worth. Any investor, trader, speculator or algorithm super-computer that removes itself from the market would lower that efficiency. Given enough “moral” people pulling out of markets, Fred can watch his stock rot on the vine. Would Fred be able to sell his stocks? Absolutely! Would he get the best price? Not at all.

I would also submit that we are not stealing anyone’s money, as sometimes suggested by the moral police. We only trade with other traders. Everyone who enters this arena knows full well the risks and rewards. In fact, with some brokers, you need to pass a test proving that you understand the risks. Goodness knows that everyone has signed off on multiple forms to accept all responsibility for their actions.

Therefore, just as two teams enter a football game, every player knows and accepts that there will be a winner and a loser. Of course, if you’re a Buffalo Bills fan, you already know that our beloved team is heading to the Super Bowl this year, so the above analogy may not apply here.

Never feel pressured by those who are trying to shame you to stop trading. Trading is a vehicle in which you can quickly and decisively improve your personal economic health, putting yourself in a position to help others. It is the wealthy who are the most benevolent, not the poor. Never discount hard work, but those who work the smartest tend to have more; and the more they have, the more they give. You are not beholden to anyone an apology for trading, just as they do not owe you any explanation for their occupation.

However you frame it, trading is a highly moral endeavor as you seek to improve the lot of your life. You are not coercing anyone to trade. Everyone who trades agrees on the price; they dissent from the instrument’s value. That creates market liquidity, reduces volatility and enhances the value of the investments.

I have also come to realize that some of those who demean this profession on the grounds of morality are the same ones who find excuses not to work at anything. One fellow I know, although quite intelligent and able, somehow finds any excuse to avoid work. The last time we spoke, he was dumpster-diving for food. When offered an alternative, he scoffed at my suggestion to flip burgers at a fast-food restaurant “because he’s vegetarian and it is against his principles.” Sheesh!

It pained me to refuse his begging me for money, but I left him with the notion that if he spent half the effort trying to find excuses not to actually earn a living, he’d be very rich!

The morality of trading… we discuss this and other issues on our Tuesday night Meetups. Miss them? No problem: you’ll be sent the recordings. How are you able to get these informative webinars? Just join the Inner Circle. The benefits are many, and the cost is minimal. Click here for details and to subscribe.

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And don’t worry… there is nothing immoral about trading. Fred will thank you!