Thinking About Becoming a Day Trader?

March 9th, 2010

It’s a rising market – get ready to trade
Back in the days of the wild stock exchange boom in the 60s I met a guy who was intent on one thing only – making money. He dreamed and planned and plotted and finally hit upon an idea. He hired an office in a building which had a long distance view to the trading board of the local stock exchange. He bought a table, a chair, a telescope and a telephone connection to his broker. He would sit up there watching the trading board which in those days was operated by a couple of clerks who wrote the numbers up in chalk. He wasn’t a day-trader, but a minute trader. He made millions in a short time.

Then came the day traders
Day trading is the practice of buying and selling of stocks, options, currencies and other financial instruments in the same trading day and closing all deals before the market closes.

Who are the day traders?
Day trading used to be the preserve of financial firms and professional investors and speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among casual, ‘at home’ traders.

When to trade
Not all days and not all times are good for day trading. It works best on a rising market, meaning this is a good time. 2009 was a great year to invest in stocks, when the stock market was recovering from the previous disaster years. I have never day-traded, being nervous of losing money quickly, but I have done it successfully by buying and selling over a few days.

It doesn’t always work
A lot of day traders hit the jackpot last year, but there is a danger, a sort of casino addiction. According to a recent study published by researchers at the University of Pisa, gamblers often suffer from “impulsive, compulsive, addictive behaviors.” Using 20 patients undergoing treatment for pathological gambling disorder at an Italian clinic as their sample, the scientists tested patients’ ability to modify their behavior in response to changed circumstances.

The addiction danger
Online trading can become an addiction, and the cyber-world can become a substitute for work and family. You may come to feel that you can’t be away from your computer monitor for 10 minutes or you will miss a hot stock or your position may downtick. If you make a bad trade or fall behind in a position, you might “double up”, meaning trying to make it back all at once. These are the symptoms of compulsive gambling.

A note from a confirmed day-trader
After a year of day trading, I’ve come to the conclusion that it is not as profitable as investing for the longer term. Like gambling, the odds are stacked against you, and the more you play, the more you lose.

This entry was posted on Tuesday, March 9th, 2010 at 9:16 am and is filed under Economy, Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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