Succesful Daytrading Daytraders Daytrading

Day traders quickly buy and sell stocks during the day,
hoping their stocks will continue climbing or falling in
value for the seconds to minutes they own the stock. This
allows them to lock in quick profits. Day traders usually
buy on borrowed money, hoping that they will reap higher
profits through leverage.

Day trading, however, can be highly risky. Most individual
investors don't have the wealth, time, or temperament to
make money and sustain the devastating losses that day
trading can bring.

Here are some of the facts that every investor should know:

-Be Prepared For Severe Financial Losses

Day traders typically suffer severe financial losses in
their first months of trading. Many never graduate to
profit-making status.

Given these outcomes, it's clear: you should only risk money
you can afford to lose. Never use money you'll need for
daily living expenses, retirement, or take out a second
mortgage, or use your student loan money for day trading.

-Day Traders Don't "Invest"

They sit in front of computer screens and look for a stock
that is either moving up or down in value. They want to ride
the momentum of the stock and get out of the stock before it
changes course. They don't know for certain how the stock
will move, but they're hoping that it'll move in one
direction, either up or down in value.

True day traders don't own any stocks overnight because of
the extreme risk that prices will change radically from one
day to the next, leading to large losses.

-Day Trading Is a Stressful and Expensive Full Time Job

You must watch the market continuously during the day at
your computer. It's extremely difficult and demands great
concentration to watch dozens of ticker quotes and price
fluctuations to spot market trends.

You'll also have high expenses, paying your firms large
amounts in commissions, for training and computers. You
should know up front how much you need to make to cover
expenses and break even.

-Day Traders Borrow Money Heavily Or Buy Stocks On Margin

Borrowing money to trade in stocks is always a risky
business. Day trading strategies demand using the leverage
of borrowed money to make profits.

This is why many day traders lose all their money and may
end up in debt as well. You should understand how margin
works, how much time you'll have to meet a margin call, and
the potential for getting in over your head.

-Check Out Day Trading Firms With Your State Securities
Regulator

Like all broker-dealers, day trading firms must register
with the SEC and the states in which they do business.
Confirm registration by calling your state securities
regulator, and ask if the firm has a record of problems with
regulators or their customers.

You can find the telephone number for your state securities
regulator in the government section of your phone book, or
by calling the North American Securities Administrators
Association at (202) 737-0900. NASAA also provides this
information on its website at
http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm.

Just like anything else in life with potentially great
rewards, there's risk involved with day trading. Just make
sure you're in the right mindset and armed with sound
information before you through yourself headfirst into
buying and selling stocks.