I’m probably the only person in America who doesn’t work in the business field. This guy moved next door to me about three weeks ago and we were talking about what he does. He said that he day-trades and that is how he makes all of his money for rent and stuff. He has a lot of stuff in his house and a nice car and stuff and he says that it’s all from day-trading. I’ve heard of it before but I’m not sure what it is exactly.
Excuse my ignorance on the subject. The reason I want to know is that I am interested in letting him do it for me but I want to have some idea of what’s going on. It sounds shady but I know this guy pretty well now and I trust him. I approached him about doing it for me and he was reluctant at first but said he would do it.
Day trading refers to opening and closing positions very quickly, usually inside of one day. Opening a position can mean buying shares of a stock, or it can mean selling short. Day traders hope to make money off the small shifts the stocks make during a day. They use news stories plus a very arcane set of mathematical formulas to decide which way a stock is moving.
What’s the difference between day trading and gambling in Las Vegas? They don’t serve you free drinks while you’re day trading. Traders generally don’t make money over the long term, investors do.
How well do you know the guy? How much are you prepared to lose? If you want to try it, set a limit on how much you are either prepared to lose or can afford to lose and consider it lost money. Chances are in long run, you won’t make any money. Transaction costs are a factor here. My advice is if you don’t know what you’re doing, get educated first so you can at least ascertain the risk.
You should not go for it. Day trading is very risky and most day traders go broke. You especially should not trust your money to some guy who is practically a stranger.
This guy literally has NO job. This is his only source of income and our apartment complex isn’t exactly the projects. I understand that it’s risky but could he just be extremely good/lucky at it? He doesn’t bomb with his own money and he said he’d just put my money in the same boat as his. Am I being naive and stupid?
Forgot to say that I know him pretty well since we hang out a bunch, even if it was for a few weeks. Sadly, I think I’ve chilled with him more than any of my “real” friends for the past couple months. He isn’t the type that would screw me over. I think that he’s one of those elusive “good people” that isn’t even capable of imagining stuff like that.
I don’t know the specifics of securities law - we’ll be educated whenever manny finds this thread - but I believe that, while any body can be a day trader for their own account, to do it with other people’s money might require some licensing, insurance, etc. that your new pal may not have.
Don’t do it. Your friend’s integrity is beside the point. He is gambling.
Day-trading is a great way to lose money. People who do it always talk about their success stories, but they stay very silent about their losses. They know nothing about the companies whose stock they trade and totally disregard fundamental news (oil prices, GDP figures or whatever), believing they can outsmart the rest of the market purely through number-crunching technical voodoo. They also need to bet large amounts of money.
I would go for it if you trust him. It’s just like gambling, as is almost any investment. Just don’t give him all of your assets!!!
One of my best friends is a day trader and until he quit it to go into the Web business with me, he was doing quite well. It consumed his day, and it was nice because he could take off when he wanted to. But he made a nice living from it.
Yeah, like a Series 7 and Series 63, being licences that you have to get to be a broker. These are harsh exams and for good reason.
Bottom line? Day trading is slightly more respectable in the investment world than throwing blowjobs in the men’s room at Grand Central. Sure you can make a lot of money doing it, but you can also stuff balloons filled with heroin up your ass and make a quarter million in five hours. I spent two years with a securities firm and day traders are NOT thought of highyl, to put it mildly. Day traders usually make their money off of exploiting small changes in price of large blocks of stock. Oh, and by blowing up their clients–selling them on stocks that tank. They earn the fee either way. He might make money that way, but given that the current climate has even moderate investor’s portfolios down an average of 30%, I’d be hesitant.
Can’t agree. Investment and gambling are totally different.
I have a friend who does day trading here (in commodities futures) in Hong Kong. He thinks he’s being smart, but it’s gambling.
Investing is what I do. After 9-11, I bought some blue-chip stocks while everyone was panicking. They have come up 20-30%. My friend would sell now and put the cash on something else. Me? In 20 years’ time, the annual dividends on those stocks will probably provide me with 5-10% of the money I need per year to live on when I’m retired.
I think you’re getting a concensus here by some people that have been around the block. To increase your net worth substantially over a long period of time the stock market is a good place to be, but by investing in quality stocks in long term positions, not day trading.
No, you should not invest with this guy or start day trading on your own. It is very high risk and you are definitely an investor who should invest conservatively. If he doesn’t have a license to trade on your behalf, it would be illegal, and if he is willing to do it anyway, what does that say about whether to trust him with your money.
I know people who trade on their own behalf and have become very wealthy using Schwab on line. The strategy is not day trading however, it is picking a stock in an company that will grow a lot, buying a few thousand dollars worth and holding on to it for over a decade, whether it goes up or down. It helps if this is an industry that you know a lot about.
But I’ll definitely note your lack of the business class’ insistence on at least some black and white. If you want to make money on the stock market, study up a bit, get a legitimate broker (and, yeah, if you’re on to it you can e-trade by yourself without one, but for a long term investment plan, and without the time to study up on various issues yourself, the value offered by a good broker is worth it) and buy some stuff that’ll go up over the long term. Worrying about what might happen today is only for people with really long legs, or, perhaps, intimate knowledge.
abidude, from the tone of your posts, it seems as if you’re just waiting for someone to suggest you do it. No smart person here will. Day-trading is foolish, real investing is not. It’s that simple.
I suggest you read to wealth of information on the Motley Fool’s sight: http://www.fool.com/ if you want to get started being an investor. You can still use something like E-trade to be a “real” investor, if you don’t want to deal with an actual broker. (But actual brokers are good people. They know how to properly research companies and market conditions and so on.)
I’ll go the other route and say “no,” but not for day-trading fears. Maybe this guy makes his money not by day-trading, despite the fact he doesn’t have a job. Maybe he makes his money by telling you he makes his money day-trading, and getting you to put in some cash. Naturally, you earn some money (which he promptly pays you), enticing you to invest more (a lot more). Then he skips town (having profitted from you), moves into another nice apartment complex, befriends his new neighbor, and tells him he makes a living day-trading. Cycle repeats.