Monday August 9, 2:52 pm Eastern Time
Day-trading unsuitable for most people-regulators say
WASHINGTON, Aug 9 (Reuters) - Maybe you've read about people quitting their jobs to trade stocks all day; perhaps you have a friend of a friend who is said to be making money and think that could be you -- well, think again, state regulators said Monday.
''To anyone out there considering day-trading, I would say 'Stop,''' said New Hampshire director of securities regulation Peter Hildreth.
The North American Securities Administrators Association (NASAA) released a report Monday criticizing the practices of the day-trading industry, which provides facilities for investors to rapidly trade stocks for their own accounts.
Among the problems highlighted were an exaggeration of potential gains in advertising, a failure to fully disclose risks and lax screening of customers for suitability.
''Day-trading is stressful, hard work and very, very risky,'' Hildreth, who is NASAA president, told reporters.
''Take stock of yourself and your personality,'' he said. ''You need to have a strong stomach for risk and money you can afford to lose.''
Day-traders attempt to profit on small changes in stock prices, buying and selling many times a day using equipment at day-trading firms' offices or using their own computers equipped with the firms'
software.
An analysis commissioned by NASAA of 30 randomly selected accounts at the Massachusetts office of All-Tech Investment Group showed 70 percent of customers lost money and only 11.5 percent showed the ability to conduct profitable trading.
Ironically, the most successful trader in the group of 30 accounts did not conduct any day-trades, holding positions for an average of 47 days.
In a Massachusetts complaint against Block Trading Inc., a former Boston branch manager testified that 67 of 68 accounts lost money.
The NASAA report said day-traders tended to take profits too quickly and let their losses accumulate.
Massachusetts Secretary of State William Galvin said regulators were concerned that people did not know what they were getting into with day-trading. But he said regulators were not trying to outlaw the business.
''People do have have an absolute right to lose money if they insist on it,'' said Galvin.
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