Day Trading: Facts, Fiction and Discussion
- TONYBRIG
- Kirk
- JenL_3
- KirkL
- KirkL
- JenL_3
- JenL_3
- TONYBRIG
- JenL_3
- TONYBRIG
This archived discussion is "read only".
For the corresponding "live" discussions, post in the active topic forum here.
« Previous 5 6 7 8 9 10 11 12 13 Next »
» Kirk - More Hazards In Day Trading
First posted on "Ask Rande" and I am posting here since it is a good article that all interested in Day trading should read.Excerpts:
He was appalled by what he found. Most of the traders were not just losing money. By his calculations, they were likely to lose every dime they put up due to the way they were handling their accounts. Their best hope was to quit before they zeroed out.
--Trading costs were high. The average account paid 56 percent of its value annually, in fees, commissions and margin interest (which is interest on money you borrow to increase the size of your account).
Johnson's conclusion seems pretty clear: ``The average public investor should refrain from short-term trading.'' Period.
Good Stuff. I like the commission part. Start with $100K and you give $56,000 to the Day Trading House for "Fees". Think they are interested in educating the public and their customers about this?
-- posted by Kirk
» JenL_3 - Mini-Bubbles
<img src=" http://www.geocities.com/WallStreet/Dist... " width=400 height= 60 >
This from 9/1 WSJ:
Run-Up in Linux Concerns Reprises Frenzy in Net Issues
By SUSAN PULLIAM
Some excerpts:
Another week, another bubble.
This week's feeding frenzy among Internet day traders has developed around stocks associated with Linux, the computer operating system that was developed by computer hackers and which many technology experts believe could eventually pose a challenge to Microsoft's Windows.
Tuesday, some of the air was let out of the bubble, with nearly all of the Linux stocks -- including Applix, Corel and Ariel -- giving back some of their gains from the run-up, which began on Friday and accelerated on Monday. Applix, which stood at around 8 before its recent run-up, closed at 14 11/16, down 3 15/16, or 21%. Corel, which traded at around 4 last week, closed at 5 3/4, down 5/8, or 9.8%. And Ariel, which was at about 2 before its big rise, closed at 4 7/16, down 2 1/8, or 32%. Applix and Corel had finished Monday among the day's top-10 winners, with gains of 12.8% and 13.3%, respectively.
The run-up in Linux stocks provides the latest example of the powerful explosion that can happen in a group of stocks when Internet chat rooms embrace an idea. It also, undoubtedly, has left some investors wondering what hit them. Almost as abruptly as they began talking up Linux stocks, Internet chat rooms dropped the stocks like a hot potato. That has left some day traders -- those investors who rapidly hop in and out of stocks, sometimes within minutes -- wondering whether the stocks are headed back to their pre-frenzy levels.
There may be an argument that the party isn't over. Remember, for instance, what happened when Internet investors leapt into shares of Siebert Financial and JB Oxford following a big run-up in the first tier online brokers, such as Ameritrade and E*Trade? Both Siebert and JB Oxford gave back much of their gains following stratospheric jumps in early February and mid-April. But JB Oxford, which was a penny stock before the dot-com crowd discovered it, is still trading at a relatively lofty level of over 8. Siebert closed Tuesday at 17 5/8, way above its low for the year of 5 3/4.
But the life cycle of the minibubbles that seem to be emerging with growing frequency in Internet stocks appears to be shortening, as Internet investors search for new ways to achieve the great gains they enjoyed earlier in the year. "These ideas are like footballs," says Merrill Lynch Internet analyst Henry Blodget. "They get thrown around for a few days in the chat room and then they get thrown to the side of the field, and they go find another one," he says.
The Linux craze first took root on Friday, when Internet investors discovered similarities between Applix and the hot, newly public Red Hat, both of which provide Linux software and support. Red Hat has been on a tear since its initial public offering, skyrocketing from its offering price of 14 to a close Tuesday at 82 5/16, up 6 3/4 or 8.9%. Why, then, Internet investors reasoned, shouldn't Applix deserve an extra dollop of market value, too -- say, $140 million compared with its prefrenzy starting point above $80 million?
Even some day traders themselves recognize the weakness in the thinking behind the trend. "For Red Hat to be worth $6 billion is foolish," says Mayer Offman, head trader at day-trading firm Generic Trading in New York. "Maybe Red Hat is worth only $200 million. But everyone extrapolates the other way. Momentum traders love seeing these kinds of stocks."
The frenzy didn't stop with Applix, however. On Monday, it swept up such forgotten stocks as Corel, Ariel, Unify and Enlighten Software. Shares of Inprise also ignited on Monday from the rush to find Linux plays.
The moves were extraordinary. Ariel, which has a strategic alliance with Red Hat, rose 200%, or 4 3/8, to 6 9/16, while Corel, which is providing software that runs on Linux, jumped from a low of 4 7/16 on Friday to a close of 6 3/8 on Monday, a 44% increase.
To understand why, take a look at a small sample of some of the messages posted on just one of the big chat rooms that was pushing Linux stocks:
13:48
Cheetah: CORL ... expect major coverage ... bulletin boards, print and tv media tonight and in morning papers tomorrow ... why? Hottest Linux play ... 10 million served and up big today in tough market.
15:18
scottnmd: APLX liftoff
15:33
aaa: APLX Babooooom
15:41
PV: ADSP there she goes
15:49
zipp: ADSP & CORL great buys for tomorrow
Those kinds of comments were being posted, rapid fire, all day long on dozens of chat rooms. Says Mr. Offman, who made both bullish and bearish bets on the stocks Tuesday, "People were just going after everything."
There is just one catch, however. Most of the companies whose shares are now being billed as Linux plays are small, little-known technology stocks for a reason, say investors. In some cases, they are companies that had limited success in other software businesses. And now they are trying to reinvent themselves as Linux companies, say some investors.
Corel is an office-automation company that bought WordPerfect but had been having limited success convincing investors of its merits. And, until this week, investors also weren't buying Ariel's wireless-network story. Corel and Ariel officials couldn't be reached for comment.
In most cases, there is, at least, a real Linux connection. Santa Cruz, which supplies Unix server software, has said it will provide technical support for Linux. And Inprise provides customers with Web browser applications that can run on Linux.
But it is far from clear that these companies have the kind of business that can sustain the stocks at this level. No question, Linux is catching on out there, particularly in the server market, where it gained a 15.8% share of the market for new units of software sold last year. In the client market, representing desktop and personal computers, for instance, Linux gained 2.1% of the market measured the same way.
"In either case," however, says Dan Kuznetzky, a program director with market-research company International Data, "it's not a commercial platform," meaning Linux can be downloaded for no charge off the Internet.
What some of the Linux companies are doing, by repackaging Linux and offering services or software along with it, is a little like selling bleach, says Mr. Kuznetzky. Some people add perfume, others go for fancy packaging. Some even add a thickener, so it won't splash so easily. "The advantage comes from brand management, and the people who can manage a brand well can convince people their brand is better."
Before buying these stocks, says Mr. Kuznetzky, it would be worthwhile asking yourself whether they have been successful companies so far. "Have they proven themselves to have a good grasp of what customers want and a good distribution method?" If the answer is no, it may be worth sitting out the ride, he says, no matter how much fun it looks.
<img src=" http://www.geocities.com/WallStreet/Dist... " width=106 height=89>……..Jen
-- posted by JenL_3
» KirkL - Follow A Lazy Day Trader on Paper
I don't support day trading....just to make that clear.but, one of my newsletter partners is what is known as a "Lazy Day Trader" which is supposidly more successful as they trade from home, might only make a trade a week to a few in a fast moving day and have a system they follow.
Many find plenty of value in the newsletter just on my writing and stock picks as well as what Frank Parish has to say about estate planning (he is an attorney), what Jim Jorgensen has to say about the market and the stocks and mutual funds he likes as well as what stocks Lazy likes for very agressive investors. We give several styles of investing for our readers to read about.
Anyway, Lazy (Brian Williams) is now doing a 1 month period where he downloads us his trades before he makes them so we can enter them in something like Quicken and follow along to see how he does. Subscribers to the newsletter are allowed to email him questions and he will try and answer them.
Since we allow you two months where you can cancel for a free refund of the subscription, it might be a good way to see if you are cut out for trading BEFORE you actually try and the cost risk to you is ZERO since you can get your $149 (Kirk's Suite101.com special rate) newsletter subscription back if you decide what we offer is not of value to you and you wish a full refund.
Brian just started downloading stuff this weekend so there is no time to go the free sample route (only subscribers can participate) but the full refund method is a way you can participate.
send me email about how to quickly subscribe if you are interested.
mailto:kirk_69@ix.netcom.com?subject=I_w...
Thanks
PS Sorry if this seems like an advertisement....
I guess it is, but I also think it is a ZERO risk way for you to try and see how hard simple day trading is to do well.... and that assumes Brian makes money this month. His trades are going to be out there for all to see and follow.
-- posted by KirkL
» JenL_3 - Chat Rooms for Day Traders
This from 9/19 WSJ:Chat Rooms House the Secrets Of Wall Street's Fastest Traders
By REBECCA BUCKMAN and SUSAN PULLIAM
On a recent Monday morning, the stock price of little-known software developer Applix took off like a rocket, leaping nearly 50% in the first hour of trading. Soon, shares of other software companies similar to Applix were on a run, too, chalking up giant stock-market gains on a late-August day when there seemed to be no reason for such excitement.
What was going on? It wasn't company news or Wall Street recommendations that fueled this fire. Rather, Applix was part of a group of small technology stocks that grabbed the spotlight that morning in the Internet's stock chat rooms, the rough-and-tumble cyber-meeting places where investors exchange ideas, opinions and tips on stocks.
Powerful Propellant
Anyone who didn't spend the past year on Mars has heard the warnings about stock chat rooms. And in fact, many of them are teeming with stock promoters, wild rumors and misinformation. But for anyone who invests online, especially a frequent trader, chat rooms can be a useful tool to spy on Internet traders who are moving stock prices, even though some of them may be unloading a stock at the very moment they are chatting it up.
A first trip to a chat room can make a new trader ("newbie" in traders' language) feel like a tourist in Bermuda shorts visiting a foreign bazaar where everyone is wearing robes. But the landscape really isn't as complicated as it might seem. Chat rooms come in two varieties: those that are free, and those that charge a monthly fee.
Within those categories, the differences are many. But there are two places to find stock-chat rooms that are free and attended regularly by large numbers of traders. The first is provided by Yahoo
which offers an ever-changing roster of stock-chat rooms where traders come to exchange ideas on the broad market or on particular stocks. It's easy to listen in. Pick a nickname and password to register. Click "Chat", then click on an area of interest such as StockWatch and -- voila! -- you're in chat-land.
Yahoo's chat rooms are not to be confused with its message boards. These, too, are free of charge. But technically they aren't chat rooms, because the talk doesn't occur in real time. Instead, message boards carry lists of company-specific comments that include the time, date and "Yahoo ID" or nickname of the person who posted the message. Anyone can respond to a message, privately or publicly.
Although the message boards don't have the immediacy of a chat-room conversation, some traders use them for the same purposes, and message boards can be a useful way to get a bead on what other investors are thinking. To go to Yahoo's, click on "message boards" and enter the stock symbol of the company that interests you. Other message boards can be found on
http://www.siliconinvestor.com
Yahoo draws visitors from a broad and diverse population. As a result, its stock-chat rooms often are frequented by unsophisticated or beginning traders.
If it's no-holds-barred action you're seeking, however, try visiting the free rooms on one corner of the Internet called "IRC," which stands for Internet Relay Chats. IRC is a computer-server network that, among other things, is home to hundreds of chat rooms, many of them devoted to sex. Several of the servers have been adopted by day traders, though. These traders have turned some of the "channels," as chat rooms are called there, into highly active forums for quick-on-the-trigger stock investors.
Be warned: This is the Wild West of stock chat rooms. Thousands turn out every day in these chat rooms, and the action can be heavily promotional. Though there is no written agenda, the traders in the IRC rooms tend to play a set of stocks each day -- specifically, whatever happens to be moving. And the masses are often led down the path by self-appointed gurus with names such as "Cheetah" and "theMaxx."
Where the Fees Are
Mind you, IRC doesn't have the brand recognition that Yahoo does, though it's visited by many veteran day-traders. And it's no picnic to get there. As a start, visit
where you'll find directions on how to download the necessary software, along with a list of frequently asked questions and answers that will help in setting it up. After installing the software, log on to the server named Othernet, which contains several popular stock-chat channels, including some that also operate individual Web sites
For traders intent on opening their wallets for the privilege of chatting, there are dozens of chat rooms that charge a fee -- usually several hundred dollars a month -- and offer services such as training, technical analysis and other attractions. A few of the better-known for-pay chat rooms are
To get an idea of how these chat rooms and message boards work -- and what the risks are -- consider that run-up in Applix's stock late last month. It began on a Friday, when investors' affection for Red Hat, a newly minted initial public offering, spilled over onto Applix. Like Red Hat, the Westboro, Mass. company provides services and software for Linux, a computer operating system developed by computer hackers that some people believe will eventually present a challenge to Microsoft's Windows.
But the stock action didn't get white-hot until the following Monday, when some chat rooms began heavily promoting shares not only of Applix, but also of other software companies that also had some association with Linux. In a flash, shares of Ariel, Corel and a host of others began taking off as well.
A glance at the hourly stock chart of Applix that Monday shows why it can be dangerous to rely on chat rooms as a source of investment ideas. During a 31-minute time span, the shares fell sharply from the day's peak of $24 reached at around 10:30 a.m. and then headed back down to around $18, two points below where the stock opened.
Trading logs for earlier that day from another for-pay chat room show tub-thumping promotion from "Merlin," the chat room's owner and "moderator" or resident guru, whose real name is Chris Rea.
Mr. Rea urged his traders to buy the stock 116 times in the first hour of trading alone.
No wonder chat rooms are controversial. Rick Berry, an analyst with JP Turner in Atlanta, says, "They are detrimental to the markets." Chat-room fans are equally adamant. In the words of day trader Lee Ang, who works for Generic Trading in New York, "You can get a lot of good tips on what is moving, what is hot, and what the leaders of the day are." Still, he adds, chat rooms are only for the fleet of foot. And not the faint of heart.
Just posted fyi - no recommendations on any of the links mentioned in the article...Jen
-- posted by JenL_3
» JenL_3 - Rande cited in FortuneInvestor.com
Rande is cited in this article in FortuneInvestor.com:To Pay Your Taxes, First Define "Day Trader"
For Most Traders, Capital Gains Aren't the Problem
Carolyn T. Geer & Carol Vinzant
For day traders, the day of tax reckoning is near. All that turbocharged trading can have nasty tax consequences, no matter what the investment results.
Say a trader made money: Because the gains come from positions held less than a year, they will be taxed not at long-term capital gains rates but at higher, ordinary-income tax rates. That means a trader in the top tax bracket in a high-tax state will fork over not 20% but nearly half his earnings to the taxmen.
Of course, half of something is better than nothing. Many people would gladly pay taxes if they could only rake in some profits. "Unfortunately, I just don't see that happening," reports Robert Doyle, a CPA and financial planner in St. Petersburg. Of his 20 or so day-trading clients, most lost money last year. Even the Electronic Traders Association says beginning day traders should expect to lose money.
Like Richard Bloom of Palm Harbor, Fla. In a year of trading, "I made money for Schwab"--$10,000 in commissions--"but I didn't make any money for me," he says. Yet, like many losing traders, Bloom swears he's learned the system and vows to keep trading.
The tax question for most day traders, then, is not how to handle their vast winnings, but how to deal with their losses.
Accountants for day traders put them in three categories: investors, traders, and traders who elect mark-to-market accounting. There are no specific rules on who qualifies as a trader, only court cases, from which experts have gleaned this much: You should be trading "continuously, regularly and frequently," and your trades should be short-term, says Boca Raton, Fla., CPA Ted Tesser. (Long-term investments are okay if they're segregated and designated as such.) Bottom line: You probably can't keep your day job.
Taxwise, average investors have it worst. When they win, they must pay taxes on all gains that year, with no ceiling. When they lose, they can deduct only $3,000 per year in net losses, carrying forward the rest. Sadly, $3,000 isn't nearly enough for people with big losses--many day traders, that is. Another drawback: Expenses go on Schedule A as "miscellaneous," which must exceed 2% of income.
Traders enjoy several breaks. They can deduct unlimited business expenses for such things as computers on Schedule C, which trims adjusted gross income. As of 1997, they can also elect mark-to-market accounting. Technically, this means that, in addition to reporting realized losses, traders must treat open positions at year-end as if they'd sold them on Dec. 31, booking gains and losses at ordinary-income tax rates.
Practically, this absolves them of the "wash sale" rule, which postpones the deduction of a loss if the same or a similar stock is bought within 30 days.
Most important, since losses go on Schedule C, mark-to-market traders don't face the $3,000 limit. Even many accountants don't know that. One Seattle day trader with $80,000 in losses was told he was subject to the $3,000 cap--so it would take him 27 years to write it all off. Then New York CPA Robert A. Green, who runs http://www.tradertax.com showed him how he could qualify as a mark-to-market trader.
The catch for all traders: Schedule C is a red flag because it harbors such potential for abuse, says KPMG CPA Rande Spiegelman. The IRS doesn't much tolerate returns that show large expenses with little income--which many day traders have. To show this isn't just an expensive hobby, the trader must be trying for a profit. "You don't need to have a profit," says Spiegelman, but if you don't produce a net gain for three years, the IRS may run out of patience. Then again, you may run out of patience first.
If You File As an Investor ...
Pros:
Anyone qualifies
Long-term rates apply automatically
Income is capital gains, so no self-employment tax
Cons:
$3K/year limit on deductible losses
Trading expenses are "miscellaneous," which must exceed 2% of income
"Wash sale" rule A trader ...
If You File As a Trader ...
Pros:
All trading expenses are deductible
Income is capital gains, so no self-employment tax
Cons:
$3K/year limit on deductible losses
"Wash sale" rule
Long-term holdings must be designate
If You File As a Mark-to-Market Trader
Pros:
Deductible losses unlimited
All trading expenses are deductible
No self-employment tax even though ordinary income
No "wash sale" rule
Cons:
IRS permission needed to reverse status
Long-term holdings must be designated
How Much Does the IRS Really Want to Know?
Does a day trader have to list each of his trades on Schedule D? Since most brokers' year-end 1099 statements don't show purchase prices, that could mean sorting through mounds of confirmation slips to match buy and sell prices--or paying an accountant a small fortune.
While big accounting firms say listing is necessary, day traders' accountants use a shortcut. Underlying calculations can be complex where the "wash sale" rule applies, but on the return these accountants often just summarize the activity by month or year. Some attach supporting documents, such as detailed brokerage reports.
Others tell the IRS they're available on request. That's okay, says one IRS official, as long as the gross proceeds on the 1099 match your tax return.
CPA Tesser says he once stapled (actually, nailed) confirmation slips for 7,200 trades to a client's return. The IRS replied, in essence: Thanks, but next year keep the paperwork.
This artice was originally in the 4/12/99 issue of Fortune and was on the Fortune.com website, but now can be found at FortuneInvestor.com
......Jen
-- posted by JenL_3
» TONYBRIG - Self employment tax?
I dont get it is this the same as Social Securitytaxes?
VBOLHH
Interesting array of scenarios for Investors/Traders have to dry to adopt to the best
one. 
Funny dont sense much smoke lately concerning
Day Traders does that mean no FIRES burning?
VBOLHH
-- posted by TONYBRIG
« Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next »
Please follow the guidelines set forth in the Suite101 Posting Etiquette when adding to the discussion.