Whatever Happened to Day-Trading?

In day-trading a person plays the stock-market in such a way as to have everything sold by the end of the day, and hence the name. Buy it at the open, wait for the price to change (a very small bit) then sell.

The problem of course is the transaction costs. You pay a commission on each trade, and you trade a lot. In fact you churn.

This was the subject of much hype and many infomercials in the 1990s. May I presume it has fully died out?

Died out? I don’t think so, in fact I think it is thriving with the advent of low-cost internet share-dealing sites. I’ve definitely read a “day trading diary” in a national newspaper pretty recently.

Another growing sector is trading sports events on betting exchanges. The margins tend to be tighter and the markets are, by definition, faster moving, although of course if you get on the wrong side of a market move your investment can rapidly become worthless :slight_smile:

I trade sports on Betfair with mixed success - see the blog in my sig

The hype died out when the stock market stopped going up like crazy.

As gazpacho indicated, day-trading was much more popular during the period of “irrational exuberance”, when many people became convinced by circumstances that they were investing geniuses. In a relentlessly rising market, it’s not hard to make money jumping in and out of individual stocks. In a normal market, day-trading is a loser’s game for the most part. As Colophon noted, the costs have decreased over the past ten years, but market conditions have made actual knowledge and skill requirements for making any money.

You can still be a pattern day trader. However, the NASD rules for pattern day trader are more strict.

A day trader can actually trade on more than the actual cash they have in their account. From the above cite:

The rules permit a pattern day trader to trade up to four times the maintenance margin excess in the account as of the close of business of the previous day

Day traders are still out there. I talk to them every day.

It’s become a full time job instead of a thing one does if they have a day off.

I think, also, that financial spread-betting firms, such as IG Index have taken part of the place of traditional day trading. I’m not sure what the rules are on spread-betting in the USA, but over here they’re fairly popular among the more risk-taking type with a bit of disposable income. Effectively you’re day-trading but with a leveraged position, plus of course you can take a short stance and profit on market falls.

So it really is like watching porn?

So is financial spread-betting available in the USA? I know gambling is a lot more restricted over there than it is in the UK. (US citizens aren’t even allowed to use Betfair, IIRC.)

When I looked into this a while back, it wasn’t. Several of the spread-bet firms specify that US residents cannot open accounts with them (further to Betfair, see here - fifth point - for another example.)

edited for clarity

If you watch market trades at the end of the day, it’s a strong indicator that it’s alive and well. A day usually ends with a frenetic flurry of activity, most unpredictable and irrational (or more unpredictable and irrational than the rest of the day, if you prefer). Daytraders unwinding their trades contributes to this. So do people doing the equivalent of EBay “sniping” - attempting to gain some advantage by making a near-close trade. It seems to be getting worse.

Day Trading is very much alive and has been especially so during the last month of volatility. There are many talented traders using the unusually large swings in the Dow and FTSE to bet on, with x number of pounds/dollars per point. They ‘go long’ (betting the indice will go up) or short, and (sometimes) hedge their bets with opposite bets or have stop-loss markers, where the bet will close if their loss has reached a certain number of points.

There are many different types of people who Day Trade, and they each need to find a methodology suitable for their own character. This can take a while, so if you’re thinking about taking it up, bet very low at first, until you know your own, personal, attitude and reactions to risk.

This quote applies to casino gamblers as well which, oddly enough, are engaging in the same thing and will always lose over the long-run. Day traders don’t have the long-shot hope of a single gigantic win to pin their hopes on however.

The whole thing is a sham and always has been. It simply can’t be done and that should have have been made clear much earlier in this thread. That is why it died out as a continuing fad for people trying to quit their day job. They lost all of their true day trading fund.

I could write a small book right here about why it won’t work but because day trading is a complete sham fad, I will invite anyone to explain how it could work with any gain after say two years if you are moving your (rather small) amount of money in and out of the market daily while paying any fees at all. The whole concept is ludicous and contrary to any legitimate market theory.

That doesn’t mean that people still aren’t trying it though. People fall for Nigerian scams and multi-level marketing as well.

Your quote included a mis-spelling, not in the original. Is this a computer error?

Yes, I believe. I posted from my laptop which has a touchpad that I frequently brush the wrong way and spew random characters in all directions. I apologize and it was an honest mistake.

Are you thinking of people trading index options every day? Buying DJX calls after a bad day and puts after a good day?

There was a day trader a few years ago who lost a bundle at it and ran amok – went on a rampage and killed a number of people. My impression at the time was that day trading’s public image was bound to suffer.

Formally the term “day-trader” refers to somebody who closes all positions to cash at the end of each day.

But I beleive the vast majority of people termed “day-traders” both now & during the late 90s boom are/were really just short-term traders, holding positions for a few days on average. Some positions were surely sold on the day of purchase, but by no means all.

As a social phenomenon, the term refered to an otherwise ordinary citizen (ie not a trained financial professional) actively churning their own account while following the market every day in near real time.

There is an actual definition of day trader. To be flagged as a pattern day trader, you need to execute 4 or more round trips within a 5 rolling business day period.

A round trip is opening and closing a postion within the same day, during any of the trading sessions.

Examples of round trips.

  1. Buy 100 AAPL at 10:00 AM, sell 100 AAPL at 2:00 PM
  2. Short sell 100 AAPL at 10:00 AM, buy to cover 100 AAPL at 6:00 PM in the extended hours session

Not a round trip.

  1. Sell 100 AAPL at 10:00 AM, buy 100 AAPL at 2:OO PM
  2. Sell 100 AAPL at 7:00 AM in pre session, Buy 100 IBM at 10:00 AM, Sell 100 JPM at 11:00 AM, buy 100 T at 11:30, sell 100 JPM at 12:00 noon, buy 100 MO at 1:00 PM, sell 100 GE at 1:00 PM, buy 100 GM at 1:30 PM, Short sell 100 F at 2:00 PM, buy to cover 100 GOOG at 6:00 PM in the after hours trading

Even though person 2 did a lot of trades, none of them were opening and closing a postion in the same day.

No worries, it’s all good. Some of these guys do make a good living though. And it’s not always ‘I’ve made x amount on such and such today’, they will actually predict a movement and how much they’re going to stake. Very brave, IMHO.

I don’t know all the specifics. Although I majored in economics and have been in the financial industry for a decade, I’ve only been studying day trading BBs and various company fundamentals/investing strategies/charting full-time for around 8/9 weeks, and ‘dipped in’ a little here and there. But my definition of a Day Trader would be a generic term for anyone who monitors a stock price’s movements, plus any news of that company/sector/indice, on at least a daily basis, buying and selling as they see fit - possibly less than once a week. Then again it can also be a term used for someone who regularly bets on different currency fluctuations or stock/indice movements (up or down) more than once per day. There’s a huge variety of different characters who would consider themselves Day Traders, from the ex-professional ‘city type’ to guys (normally) with a good job and cash to spare who trade on company time, to retired people looking to supplement their income. That’s just my take on the situation as I see it.

One thing is for sure though, if there is a way to bet on it somebody will. Recently most Day Traders have been busy and very happy with the buzz caused by the markets’ fluctuations (and learnt a heck of a lot too). Even if you’re only betting $1 or £1 per point, when the Dow moves by 200 in a few hours it gets the heart pumping and the neurons firing…