Day Trading: Devil's Den or Golden Egg Hen?
- by Ricky Kumar, 3/11/1999
(Part 2 of 4)
It's still debateable (even in the US) as to whether day traders are profitable. The topic of whether day trading gains super-cede those of long-term investors is speculative but there are complexities involved in such analysis. What charges do you include? How is tax applied? Day traders operate on a day-to-day basis so what kind of view can you compare the two on? Well firstly, let's discriminate between home day traders and those who operate through day trading firms. There are over 100 day trading firms in the US. These firms basically supply offices equipped with desks, chairs and computer terminals for individuals to conduct their trading. Most ask for at least $50,000 to open an account and charge extra fees for training.
There are about 6,000 full-time day traders engaged in this activity - conducting their trades at such firms, according to the Electronic Traders Association, and even on the small home traders front, the numbers are growing. The latest example of that interest came recently when over 2,000 small investors turned out for a day trading conference in Ontario. It has been recorded as the largest-ever day trader gathering of its kind and in spite of ever increasing scepticism.
Bradley Skolnik, Indiana Securities Commissioner, said that the conference might make "money for the person who puts it on" but that day trading is "highly inappropriate for most small investors." In a report by the state securities regulators last month, a survey found that 7 of 10 traders, at one particular firm, lost money. Regulators claim that trading firms profit by charging for training classes and commissions on each transaction but that the vast majority of day traders fail to break even. Perhaps predictably, the industry's retort is that after a three to five month learning curve, about 60% of day traders are profitable.
Ricky Kumar is an entrepreneur, a private investor and editor at the Kyric Network. Visit his site and share your financial perspectives:
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