Ask The Rabbi

She Was a Day Trader

The Color of HeavenArtscroll
Topic: Day Trading

Name@amp;Withheld

Dear Rabbi,

Do you have anything to say about the phenomenon of "daytrading?" It seems to me that it's not a very "kosher" thing to do. People that know what they're doing can make a lot of money at it. To supplement our income, we have taken a portion of our savings (which would not make or break us) and opened an account for that purpose. So far I'm not doing very well. Daytraders try to take advantage of the intraday swings in the price of a stock. The more volatile the price swings, the better. If the stock is falling in price, it does not matter, because a trader can borrow the stock to "sell it short" and then buy it back at a lower price to return it, thereby pocketing the difference. If a stock went up in price 10 dollars and then fell 10 dollars, ending up the day at the same starting price, a day trader could earn $20, whereas an investor who held on to the stock throughout the day would not make a penny. It seems like gambling to me. I do not see how it contributes anything to society. My husband says it serves a valuable service by providing liquidity to the market and narrowing the spreads between the buy and sell price. If I could be successful at it, it would solve a lot of our problems.


Dear Name@Withheld,

Stocks are a legitimate investment. Buying stocks is essentially no different than buying diamonds, land, or wheat. According to everything that I know about "daytrading," I cannot see why it should be classified as a forbidden form of gambling.

Everyone agrees about one thing: Daytrading requires nerves of steel, tremendous concentration and an understanding of the markets. It can make one a lot of money in a short time; however, most people seem to lose money at it. Think long and hard about whether you really want to do this.


 
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