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Day Trading: Devil's Den or Golden Egg Hen?
- by Ricky Kumar, 3/11/1999     (Part 1 of 4)

As American day trading firms prepare to launch practices in the UK there has been increasing concern about the financial safety of private investors tempted to try their hand. A day trader is essentially a person who holds positions in stocks for a very short time often making several trades per day and although we have a great many short term investors in the UK, 'day trading' per se for private investors isn't as prevalent simply because the dealing costs are so high.

In the US, it is reckoned that there are as many as 300,000 individuals day trading from home. The markets there are much more volatile and discount brokerages allow individuals to trade for as little as $5 a time. They've also got state of the art decision support systems, which are often a feature of the services offered by regular brokers. This has gone some way towards putting the home trader on the same footing as the Wall Street or City professional. Of course, we've also known for some time that the US benefit from lower phone call charges, allowing them to spend more time on-line watching price movements from home.

Despite recent press coverage, not a great deal is known in the UK by the public at large about day trading; which has become irrevocably confused with institutional trading and made controversial by the antics of rogue traders like Nick Leeson who brought down Barings bank and John Ho Parker who lost 8 million for Griffin Trading. In the latter's case, over 100 traders suffered losses when Mr. Parker exceeded his personal limit and spent everyone else's!

Both managed to wreak havoc for the institutions at which they conducted their trades. More recently publicized is the story of Stephen Humphries, a city trader who lost a lot of his money through an involvement in the Griffin affair and then went on to amass further losses of about million, on money he didn't own, by exceeding a limit usually imposed by the trading software. In fairness though, these events are not nearly as common as they're perceived to be and, though damaging in themselves, are made more so by the media circus that ensues when something goes wrong. In the states a big fuss was made over a certain Mr. Barton who lost a lot of money and went on a shooting rampage at one of the day trading firms in Atlanta (US)

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Ricky Kumar is an entrepreneur, a private investor and editor at the Kyric Network. Visit his site and share your financial perspectives:

Disclaimer : Please note that these articles do not necessarily represent the views of UK Share Net. The views expressed are those of the authors. The price of shares can go down as well as up. No infringement of copyright is intended, any offending articles will be removed as soon as possible when notified.
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