Worthwhile reading for all the "daytraders" out there, and those who wonder what it's all about.
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Daytrading in the Eyes of NYCSKATER
I do not agree with what you have read
indicating that 80% of daytraders lose
money! Nor do I offer any stats of my own
although I suspect >50% of experienced
daytraders make money (I'm not talking
inexperienced newbies who just blindly
start trading with their life savings -
something that is foolish & I for one do not
encourage whatsoever) .
THERE ARE NO RELIABLE STUDIES ON
THE DAYTRADER INDUSTRY, IMHO!
Every study I've seen thus far has only
looked at the awful SOES daytrading firms
- & most people working there are
inexperienced and using a method of
trading I wouldn't even attempt (in fact, I
looked into joining Altec about 5 years ago
& didn't think I could make money doing
that kind of trading - & that was from
someone who traded semi full-time while
holding a day job - not the typical Altec
client who has no stock experience, takes
a 5 week class, & just starts "gambling"). In
other words, the studies are severely
TAINTED, IMHO - they do not look at the
daytrading industry, just a miniscule sick
portion they are directed to look at by the
powers that be - they miss the millions
(yes, I suspect the number is > 1 million) of
people who trade short-term on a semi or
fulltime basis out of their homes.
I have read all the reports and seen all the
TV shows. Pardon the expression, but they
all STINK! The press & SEC's Arthur Levit
haven't a clue of what a daytrader is. They
think daytraders are only the people who
work at companies like Altec and do in
excess of 40 trades a day every day, going
for teenies & closing out positions at the
end of the day. One recent government
report even had the audacity to say there
are only 5,000 daytraders in the entire
country (hey, if that's so, I have personally
seen all of them on the net the past few
years - or there are a few people doing an
awful lot of posting with
hundreds/thousands of multiple identities -
LOL!). Even Joe Kiernan, not the biggest
daytrader fan, doubted that stat on air!
Do not mean to sound paranoid, but I
personally think it's all a scam by the
powers that be at the major full service
brokerage firms. Think about it - you're a
reporter for CNN and are told by your boss
to put something together about
daytraders by the following Friday. You
don't know where to start but your boss
gives you some contacts to start with - all
people at full service brokerage houses. Of
course those people will be biased as they
consider the online trading industry a
threat (&, often incorrectly, associate
online discount trading solely with
daytrading). While talking to them, they tell
you about the horrors at firms like Altec -
and they lead you in that direction. So your
report airs and you state that most traders
at such firms lose money. And, you know
what, you are right! BUT THAT AIN'T THE
DAYTRADING WORLD! And that's the
nonsense we have been hearing in the
press the past two years - the madman in
Atlanta (who, by the way, killed his first
wife before he ever traded a stock) only
heightened the public misconception of the
profession IMHO.
I use "daytrading" in a generic sense. It's
anyone whose sole means of support is
trading. It's anyone who sits behind a
monitor at least 8 hours a day (often
10-12, including research), 5 days a week
researching & trading stocks. The trades
need to be predominantly short-term in
nature - meaning minutes to weeks. Yes, if
half your money is long-term and half
daytraded per the above definition I
outlined, I consider you a daytrader as
well. If it's more 90% long/10% trading,
then (unless you are one of the
exceptional traders making a killing on the
10% - and a few do exist), then I would say
it is more of a hobby (some retired people I
have met do that).
I do make money at this! I don't know what
you mean by "consistently" as I have had
some hefty loss months (some of which
were a learning process to get me to
where I am now). But will tell you this, in
the past 15 months (I quit Merrill Lynch on
August 31, 1998, the day the DOW fell 517
points, after 12 years of employment with
them - I had given them 2 months notice
the beginning of July) I have made several
times my old annual compensation
package (salary + bonus) as an executive
at Merrill Lynch supervising 10 tax
professionals (Masters &/or CPA types).
And I know many daytraders making a
living at this.
And some daytaders only work half a year
- they quit when they make a ton & think
the market is vulnerable - for example, one
daytrader I know works from Nov 1 to April
15th each year. It's the old "sell in May &
go away theory" - that the summers are
slow volume months & that funds take their
tax losses in October and then the money
flows back in from Nov 1 thru year end.
And then you have bonus & IRA money
fueling liquidity through April 15th. At that
point, the markets are at alltime highs and
start looking for an excuse to sell off. Often
the trader stocks (i.e., techs; internets
bigtime in 1999) take a nose dive. And, of
course, the largest corrections are often
between August and October. Pattern has
held true for 1997, 1998, & 1999 (so far).
Hey, that's one of my favorite theories. If I
have another Nov to April like I had last
year, I plan to follow that approach.
Anyway, I'm babbling about strategies here
& that wasn't your question.
One thing the press reports on daytrading
have taught me is to question everything
they report. Reporters are only human -
they have deadlines to meet. As hard as
they try to be objective, they are often sent
in the wrong direction and inaccurately
report. Take things with a grain of salt - I
have learned that lesson by watching them
distort an entire profession!
Note, I'm not saying trading is easy. And
I'm not saying people should quit their jobs
to try this at home. I worked long hours for
many years to build up the trading
skills/confidence I needed to quit my day
job to do this. I typically spent 2-4 hours
during the work day to trade my last year
on the job and literally worked half the
night and every weekend to get my Merrill
work completed. It was one hell of a year
my last one and I was physically/mentally
exhausted when I skated out of Merrill's
NYC headquarter's my last day (yes, I
skated out - everyone thought it would be
approriate if I put on my blades &
rollerblade out of that marble tower the
final day - and I did!) - but I will tell you this
- that was the best day of my life. I do have
1 regret though - that I didn't leave a year
sooner (I wouldn't say 2 years - probably
wasn't ready).
One more comment to anyone seriously
considering quitting their day job to trade
fulltime: Please take at least a few months
contemplating the decision, semi-trade for
at least a year first, read all the books you
can get on the matter, be honest with
yourself if you can take sitting by yourself
behind a monitor all day every day, AND
(most important) DO NOT attempt this until
you have suffered some big losses (like
getting caught in a correction). You must
know what it's like to lose money and what
you did wrong ("the tuition" one most learn)
before attempting this on a fulltime basis -
IMHO.
Hope I shed some light on the matter. I
suspect those that knock the profession
will continue to do so even after reading
this. And those who already know there
are lots of skilled professionals making a
living at this, they will just smile and say
NYCSKATER is wasting his time trying to
convince the naysayers.
Yeah, daytraders have a bum wrap! Tell
someone you're a daytrader and it's as bad
as telling them you are a lawyer! Maybe
worse. I have lots of amusing stories about
that - but that's a post for another time or a
chapter in my book I plan to eventually
write (although I don't know when - I'm so
busy trading!).
Just One Skater's Opinion... |
