Internet Investor

Click to follow
The Independent Online

Dat traders are suckers, losing out to the house percentage. That's not quite how the NorthAmerican Securities Administration Association (Nasaa) put it, but that is the gist of its conclusion.Releasing its review of day trading to America's press earlier this week, Peter Hildreth, president ofthe association, said: "Day trading isn't investing, its gambling. There is no other word for it."

Dat traders are suckers, losing out to the house percentage. That's not quite how the NorthAmerican Securities Administration Association (Nasaa) put it, but that is the gist of its conclusion.Releasing its review of day trading to America's press earlier this week, Peter Hildreth, president ofthe association, said: "Day trading isn't investing, its gambling. There is no other word for it."

You may already be familiar with the idea of day trading - investors attempting to make profits onsmall changes in stock prices, buying and selling many times a day using equipment at officesspecially set up for the use of private individuals. Even in the US, however, day traders are less than1 per cent of all investors although, by some estimates, they account for 15 per cent of the dailyvolume on the Nasdaq-Amex exchange.

The phenomenon has already been thrown into relief by the murders committed two weeks ago bya day trader in Atlanta, Georgia. Mark Barton killed his wife, children and nine other people in twoday-trading offices, apparently distraught over his trading losses.

The Nasaa analysis covered 30 randomly selected accounts at the Massachusetts office of All-TechInvestment Group over a seven-month period. The review showed that 70 per cent of the daytraders lost money, that the firm used deceptive marketing and the promise of fast, easy money tosign up customers and that it encouraged questionable lending schemes to keep customers at thecomputer even when they did not have the cash to be there.

The number of people in the UK who may be called day traders can literally be counted on twohands. The market is different here. There is not the depth of private involvement in share tradingand, of course, there is the issue of stamp duty, which boosts the costs of day trading in UK stocks.So why the commentary? Because it appears that day trading is coming. As the Nasaa report wasbeing released, one US day-trading firm, Intercapital USA, announced its plans to open aday-trading centre in London early next year. Stealing a march on this is InvestIN Securities, whichis launching its service next week.

Should you consider signing up? Not according to Hildreth: "To anyone out there considering daytrading, I would say stop, think long and hard about it. Take stock of yourself and your personality.You need to have a strong stomach for risk and money you can afford to lose. For heaven's sake,don't do this with home loans, credit card advances or your... nest egg. You wouldn't take thatmoney to Las Vegas; day trading is no different."

Which is not to say that you should not sign up for an online stockbroking account. Trading sharesonline as a private investor and being an all-out day trader trying to ride price differences of a fewpence are two completely different things. There are now 11 web-based stockbroking services inthe UK, with four more due to launch by the autumn. Indeed, Nasaa's equivalent in this country, theAssociation of Private Client Investment Managers and Stockbrokers (Apcims), itself believes inthe power of the Internet. Angela Knight, Apcims' chief executive, recently said that she expects "allbasic execution-only trading to be done on the Net in the future."

Robin can be reached at RobinAmlot@aol.com

Looking for credit card or current account deals? Search here

Comments