Day Trading?

[PuppetMaster]

The average person cannot become a day trader because they lack the capital to do so, most say 50K is the minimum requirement.

I expect to have this much liquid cash by the end of the summer.

My main question is how hard would you say it is to become a successful day trader? I realize that this is a broad question, but for a person gifted in strategic and mathmatical ability, who does very well at poker and games such as chess, to what extent is it posible for them to learn to successfully day trade? And what does the Average Day Trader shoot to make long term over the course of a year in relation to his bankroll?

[Ray Zee]

where are you getting information ahead of the rest of the people. that is what is needed to win at day trading. plus it is all time consuming. those that think you can use past chart results last till their moeny runs out.

[BadBoyBenny]

[ QUOTE ]
My main question is how hard would you say it is to become a successful day trader?

[/ QUOTE ]

Damn near impossible. The more you trade the more you pay in fees, and the better picks you have to make. Also, it may take several big successes to make up for one big early mistake.

[ QUOTE ]
And what does the Average Day Trader shoot to make long term over the course of a year in relation to his bankroll?

[/ QUOTE ]

The average day trader probably shoots for some ridculous amount of return and chases hype stocks and pipe dreams until he goes broke. I find it impossible to believe that some of these traders who are successful claim to make more than a few percentage points above the indexes over a long time. And I believe that those traders are a small portion of those who initially tried it.

I don't want to sound belittling but from your other posts it seems like you are just getting into the markets and don't know much about investing. This is a very dangerous point, and if I were you I would not be over eager to dive into the fire. You could end up losing a lot of money.

My advice to you is to buy mutual funds, preferably a low cost index fund, with either all or the vast majority of your capital. Do not come with any expectations about what you will make in any given year and thus don't count on capital appreciation over any short period of time.

If you do plan on investing in individual stocks, I would look for businesses that are reasonably valued and have good future business prospects. I would not jump into anything on a quick decision, there is too much to possibly overlook by doing so. Also, a stock that is undervalued may take years to realize its proper valuation.

When you do decide to buy something, I would write down specifically why you think they have good future business prospects. I would also write out a justification for their valuation. Then I would write out everything that is a reasonble risk to your chosen company. This has many benefits as it forces you to clarify your thoughts, and makes it easier to pick out flawed reasoning. Also you can post your analysis here, and people will give you an honest discussion of the company and often times will know some risk/angle on the company that you don't.

[PuppetMaster]

[ QUOTE ]
[ QUOTE ]
My main question is how hard would you say it is to become a successful day trader?

[/ QUOTE ]

Damn near impossible. The more you trade the more you pay in fees, and the better picks you have to make. Also, it may take several big successes to make up for one big early mistake.

[ QUOTE ]
And what does the Average Day Trader shoot to make long term over the course of a year in relation to his bankroll?

[/ QUOTE ]

The average day trader probably shoots for some ridculous amount of return and chases hype stocks and pipe dreams until he goes broke. I find it impossible to believe that some of these traders who are successful claim to make more than a few percentage points above the indexes over a long time. And I believe that those traders are a small portion of those who initially tried it.

I don't want to sound belittling but from your other posts it seems like you are just getting into the markets and don't know much about investing. This is a very dangerous point, and if I were you I would not be over eager to dive into the fire. You could end up losing a lot of money.

My advice to you is to buy mutual funds, preferably a low cost index fund, with either all or the vast majority of your capital. Do not come with any expectations about what you will make in any given year and thus don't count on capital appreciation over any short period of time.

If you do plan on investing in individual stocks, I would look for businesses that are reasonably valued and have good future business prospects. I would not jump into anything on a quick decision, there is too much to possibly overlook by doing so. Also, a stock that is undervalued may take years to realize its proper valuation.

When you do decide to buy something, I would write down specifically why you think they have good future business prospects. I would also write out a justification for their valuation. Then I would write out everything that is a reasonble risk to your chosen company. This has many benefits as it forces you to clarify your thoughts, and makes it easier to pick out flawed reasoning. Also you can post your analysis here, and people will give you an honest discussion of the company and often times will know some risk/angle on the company that you don't.



[/ QUOTE ]
Yes, I am new to this, and Im happy I asked the questions becaue I didnt realize "it was damn near imposible", and Im happy I got a straight forward answer.

[GeorgeF]

"The average person cannot become a day trader because they lack the capital to do so"

Day trading works like poker. A tiny minority of players make their money because the majority are loosers. Why do you think you will be the tiny minority of winners?

What makes you think 50k is alot of money? Lots of people have 50k to blow, most of them are smart enough not to day trade, those that are not smart enough loose their 50k pretty fast.

I suggest that you 'paper' trade until you have an 'edge' that you can exploit. My guess is that the rewards are too small, and that you are too lazy to come up with a system for beating other day traders.

Suggestions:
1) make a down payment on an income property
2) put the money in multiple currencies at www.everbank.com (http://www.everbank.com) and wait for a collapse in the stock or other markets.
3) subscribe to market newletter bobbrinker.com and use the time you save not daytrading to earn more money.

[Warren Whitmore]

(1) How hard would you say it is to become a day trader? Quite difficult indeed which is what makes it possible.

(2) Is it possible for someone who is good at games to learn to successfully day trade. As long as you use the word possible and not probable the answer is a definate yes.

(3) What does the average trader earn over the long run in relation to his bankroll? Once again when you use the word average he must lose as like poker it is a zero sum game minus the rake. It costs about $15 to make a trade these days and so with a $50,000 stake about 3,333 trades. Now if you change that question to how much can a trader who can beat the average by 2 standard deviations make...well now thats a different question.

[Ray Zee]

it costs alot more depending on the stock, exchange, and how many shares you trade. there are market makers with their hand in the works every time you trade some stocks. remember the bid and ask prices. that costs you. and they are only for a certain small amount. when you trade more you fall back in to the hands of the market makers.
besides to beat the market by trading you still have to have information no one else has applied. without that info you are just flipping coins against insiders that have some sense in the immediate direction the market is taking. you always are on the wrong side of trades.

[Warren Whitmore]

I agree with everything that you have said except the applicatin part. I have not done any day trading in several years. When I did day trade it was inside a 401K, I paid no transaction fees, and worked off of only two stocks. One was total oil (TOT) and the other was the S&P 500 index fund. The fomula was ultra simplistic I started with a 50:50 mix of company stock and the S&P 500. Each time one account exceeded the other by more than 5% I would move that 5% from the higher fund to the lower fund. As the relative costs of the funds where variable but the Value of the funds where stable they alternated back and forth enough to show a decent profit over a 5 year period. S&P average return = -0.58% (TOT) = 4.10% my 401K = 8.33%. By using this regression to the mean type movement which boils down to buying low relative to the S&P 500 and selling high relative to the S&P 500 I was able to do a little better than the market over the 5 year period. Was this day tradding? Not really sometimes 7 months would go by between trades.
"You have to have information that no one else has applied" Not really all you need to do is apply information that the Majority of the people have not applied.

[RollaJ]

[ QUOTE ]
What does the average trader earn over the long run in relation to his bankroll? Once again when you use the word average he must lose as like poker it is a zero sum game minus the rake. It costs about $15 to make a trade these days and so with a $50,000 stake about 3,333 trades. Now if you change that question to how much can a trader who can beat the average by 2 standard deviations make...well now thats a different question.

[/ QUOTE ]

It costs considerably less for a professional full time day trader. My friend now pays $.006 per share each way.