A friend of mine has taken up a form of daytrading as a hobby, using a discount online broker. First, he relies on a stock analysis service to identify the best stocks, and only trades stocks that received their highest rating. He then uses technical analysis to identify which of the highly rated stocks are likely to break out (and up) from a base pattern. When one of his targeted stocks begins to move up, he buys; he sells when the upward move appears to be ending (or at the end of the day). For nearly two months now, he's been averaging one such trade per day. Over 90% of these trades have been profitable, usually yielding a gain of 1% to 4%. Since he is quick to cut his losses, the magnitude of the losses has been less than the gains.


This approach to daytrading appears to be low risk with rather high reward. Has my friend just been "running good," or might he really be onto something?