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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: jomama who wrote (8156)	3/22/1998 10:21:00 PM
From: Robert Graham	Respond to of 12039

Alex should be able to help you here. But I will add a few comments that Alex can support or invalidate. The following is from close observation as an outsider to day trading and through my talks with other successful day traders. Has your freind had a history of successful short term trading? I am thinking your freinds experience with sucessful trading should be on the order of a few years which would include market changes. If he has not, then he need to evaluate why he is considering day trading. From everything I have been able to see, this is a very difficult way of making money. Only on the order of 10% succeed. This requires allot of work and going through a risky learning curve where your goal is just to survive through your learnings experience. Is he attracted to daytrading because of the odds and thrill one can get from beating the odds? This is where he visualizes himself being rewarded by large amounts of $$$ that the market can provide to him? Then he is a gambler. Is he attracted to day trading because he thinks as a trader he can maximize his returns further by continuing with his approach to trading but "doing it in the timeframe of a day" to accumulate wins more quickly? Then he is a speculator that is unaware of the risks involved with daytrading. Or does he think daytrading will meet more pragmatic needs like that of supporting himself full time and perhaps he thinks the way the market has become more volitile over time, this may support a shorter timeframe to his trading but then will require him to learn a new method to trading that he is willing to go through? The first two type of players have no business in day trading because their chances of success is very limited IMO, and I would even question their future success in short term trading. The last type of player is making their decision after some thought and is not motivated by the what turns on a "gambling" type of mentality that such trading can promote in other participants. When this type of player sees that price jump up and down minute by minute, this is a drug to the people who are there for the thrill and adrenalin flow. Better they go to the casinos where at least their true intentions are not hidden from themselves as in being a fool. They are likely to end up with the same odds and success rate as a gambler would in a casino. At least in a casino, you get free drinks and if you "lose it all", you can get a free room for the weekend. IMO many that are attracted to day trading are there for the wrong reasons which undermines their potential for success. Also if your freind is going to day trade full time, does he have on the order of at least $100,000 to $150,000 to play with which he could ultmately afford to lose and walk away from as a "learning experience"? Can he play his short position as well as his long position in trading? It is essential for a full-time trader to be comfortable and successful with taking a short position as he would be for a long position. Does he have the time and energy to pursue a learning curve in this form of making money? He may not see any results that he can rely on for a good part of a year or even more, particularly if he starts this by jumping in to this full-time to see if he can float or swim. Successful day trading requires a comittment that cannot be taken lightly. It is like obtaining a "Masters degree" at a very competative college. It is interesting to see how a strong bull market, like this is the only kind of market that one would need to know how to play, attracts so many people into day trading. This is like the gold rush days where strikes are advertized and attract many more people into gold panning. In this case, the brokerage houses and SOES shops never advertise how many do end up losing in this game, which IMO comes to an overwhelming majority. If it appears that I am attempting to have your freind (re)think carefully about this approach to the market, then you are perceptive. But then from seeing the result of day traders take on this method to financial success, I have good reason to come across this way. Bob Graham