Taken from Wall Street Journal
http://www.startupjournal.com/column...lifestyle.html
Day Traders Begin To Make a Comeback
By MARK HENRICKS
Jeff White grew up dreaming of making a living playing golf and for a while lived that fantasy in the sport's minor leagues. But some success in the stock market led him to trade his clubs for a computer monitor to become a full-time trader.
"There was something to be said for not standing for long hours in the sun when your results aren't what you want them to be," says Mr. White, of Schertz, Texas. "That was when I started trading stocks on the side and it got to where I was enjoying trading stocks more than golf. So I made the career change."
The appeal of making a living actively trading securities through a personal account, or day trading, surged during the 1990s, and then went bust after 2000, along with the stock market and many traders. Day traders may buy and sell stocks dozens of times daily, holding each position for mere hours or minutes, in contrast to most traditional investors who may hold securities for months or years. At its peak, one now-defunct trader's association estimated there were several thousand individual day traders.
There are varieties of day traders, explains Mr. White. "Scalpers" may perform hundreds of trades seeking to profit from very small price differences. Mr. White says he does five to 10 trades each day, holding positions from a couple of hours or up to a week. He doesn't always close out all his positions at the end of each day.
One attraction to day trading is the excitement, says Toni Turner, a veteran day trader in Irvine, California. "The market moves extremely fast and there's always something happening and it's usually unpredictable," says Ms. Turner, who was drawn to day trading in the early 1990s because of the thrill. "It's an extreme of excitement," she says. "It a huge game, and the wins and losses are very real."
Traders can make significant money. Mr. White says that it's possible for a new day trader to generate an annual return of 25% or more. But, he says, they must have significant money to invest and be able to ride out downturns, runs of bad luck and a steep learning curve. It can take years of study and practice to learn to trade consistently profitably. That's why Mr. White and others recommend beginners only invest cash they can afford to lose.
"There are untold numbers of people who have made the mistake of taking their entire nest egg and trying to trade it," he says. "That's not something I encourage at all."
Some successful traders, including Mr. White and Ms. Turner, become authors or educators who train would-be traders on how to get started. The training can be expensive. Veteran trader Tom Busby of Mobile, Alabama, charges up to $9,500 for a course of education that includes five days of hands-on training, a year of online video lessons, and two sets of software. The extensive training is necessary, Mr. Busby, says, because day traders are competing against professionals backed by institutions. "It's sort of like being in a pool of sharks," he says. "You're going to get eaten alive."
Still, almost anyone can become a day trader. There are no licensing or other requirements. All you have to do is open a brokerage account -- although Mr. White says there are federal regulations require brokerages to limit traders who have less than least $25,000 in a margin account. Most traders use online brokers because they charge low commissions and facilitate the speedy in-and-out trades involved in the work.
Conventional schooling doesn't guarantee success, however. Robert Deel, who operates an online trading school from Murrieta, California, says the worst day traders are engineers, doctors, lawyers, dentists, economists, computer programmers, accountants and entrepreneurs. Mr. Deel says psychological characteristics common to these successful individuals tend to hamstring them as day traders.
"One thing is they do not like to be wrong," Mr. Deel says. A common fatal mistake is to stay with a bad trading idea, hoping it will turn around, he says. Winning traders realize quickly when a trade is going against them, admit they were wrong and exit the position to limit losses. A second problem Mr. Deel spots in these groups is a tendency to over-analyze. "When it's time to push the button, they freeze up because they want more confirmation," he says.
The best day traders are airline pilots, graphic artists and heart-lung machine operators, Mr. Deel says. This disparate group produces good traders because they excel at analyzing visually presented information, he theorizes. Pilots, the best of all in Mr. Deel's experience, are also trained to make quick decisions based on instrument readings without spending overmuch time questioning the indicators, he guesses.
Day trading seems to be making a comeback, in these experts' opinions. Many of today's traders are investors, active or otherwise, who were bruised by the market downturn earlier this decade and determined to do better this time around. To do so, they are learning about risk management and technical analysis, and taking advantage of steadily shrinking trading commissions, improved technology and better access to information to make day trading a more enjoyable and lucrative business than it was.
For Mr. White, trading has posed some of the same psychological challenges that drove him off the golf course. "You can get in a funk with your trading and it's hard to start over because it's such a mind game," he says. And, while he's out of the sun now, he hasn't found the hours to be shorter. He starts start each trading day at about 7:15 a.m. and rises from his computer at 6 or so in the evening. "It's a pretty long day," he says, "but it's something I really enjoy, so I'm willing to do that."
Jul 30, 2007, 4:36am
A Day in the Life of a Trader 
Similar Threads 
