DAY TRADING Carli Stefanacci Dr. Volpert November 13, 2000
Opening Joke What’s a day trade gone bad?
Answer An investment (okay, bad joke)
Online Investor Vs. Day Trader 2-3 trades per month Orders placed through an online broker Time is not crucial Concerned about companies future, past, balance sheet Regular PC trades per day Orders placed directly Time is extremely crucial Concerned about stock prices, nothing else High -tech equipment
Day Trading: Defined History –founder: Harvey Houtkin’s –SOES bandits Day trading: trading within the time frame of one day, entering and exiting positions within a day but always closing out trades by the end of the day, win, lose, or draw.
Why Day Trade? For a change of pace People believe it is an easy way to make a quick profit for: –retirement –child’s education Easy access Anyone can do it!
Who Day Trades? Anyone! Teachers Lawyers Doctors College dropouts
Before Trading... Most importantly, become educated –Many web sites dedicated to training: traintodaytrade.com daytradingonline.com –Classroom courses Harvey Houtkin’s All-Tech Investment Class Winning isn’t possible all the time! –Even the best lose
Organization of day trading firms Open an account with the firm with your own assets Simply a customer of a day trading firm Organized as limited liability companies (LLC’s): meaning day traders are part owner of the firm and allowed to trade using the firm’s capital
Getting Started Usually day traders begin with $50,000 to $100,000 Most day trading firms require a minimum of $25,000 to open an account Begin trading in lots of 200 shares
Equipment Get the right equipment –A new computer with a large screen Windows NT: lots of memory, will allow for multiple windows to be open Multi-monitor set-up –Direct internet connection –Separate and multiple phone lines –Television
Trading Example Bid price: $ It is offered for $64.75 Investor buys 4,000 shares of the stock at $ (total cost: $257,750) Seconds later, investor sells those 4,000 shares at $ (total sale: $258,750) Profit: $1,000
How To Succeed Don’t get greedy Develop a financial plan before trading –set a daily limit to profit and losses Get out when you can, not when you have to –stay in control, don’t let the market control you Trade when the market is moving –don’t try to ‘move’ the market
More Tips Employ low tolerance, high velocity (LTHV): get in and out quickly with little tolerance for big losses Know when to get smaller No overnight losers Know the stocks –know their past and know how they react
More Tips Trade the truth –Trade on what is happening, not what you want to happen Realize the importance of timing Become disciplined –Control the market –Don’t get attached to the money –Don’t get emotional
Success Stories Barry Brautman –34-year-old former accountant seeking an exciting career in day trading –Lost for two months straight, but now is profiting Nancy Sy –42-year-old credit specialist –Went from $39,000 to $100,000 in two years, and plans to be a millionaire in 5 years
Horror Stories Heather Cameron –36-year-old day trader –Lost $400,000, her town house, and her fiancé Mark Barton –44-year-old ex-chemist, turned day trader –Lost everything and went on a killing spree, killing 12 individuals, including his kids, wife and himself
Advantages Able to take advantage of spreads Minimal concern about overnight news Immediate feedback and results of the days work Holidays and weekends off Unlimited vacation time Access to Level II quoting system
Disadvantages Constantly fluctuating and very volatile Requires constant supervision Need for strong discipline when dealing with losses Unlimited risk Extremely addictive, like gambling
Future Skeptics believe that: –Just a phase –unpredictable –will die out Advocate believe : –a revolution –career of a new generation –some believe that in the future the only way one will be able to trade is electronically
Do You Have What It Takes? Fantasy day trading site – –www2.sportsrocket.com Day trader quiz: ology_test.htmlhttp:// ology_test.html
Questions?