Quote:
Originally posted by Daval
It all depends on what you want to do? Do you want to day trade? Swing Trade? Buy a stock and sit on it for the long term?
There are lots of books dealing in various strategies.
I just read a book called 'The Begginners Guide to Day Trading Online'
I can't remember the author, but when I get home I'll check it and post that.
|
My opinion of day trading is pretty low. I've met plenty of smart folks who've lost upwards of a hundred thousand dollars. Don't let me dissuade you if it's something you enjoy and turn out to be good at, but generally speaking you're gonna be paying out the ass on commissions. I think the lowest per-trade fee out there is about $7. That means that round-trip is $14. So, assume you put $20,000 in the market and you do five round-trips a week (one a day). Let's call it 48 trading weeks (giving you time for a vacation and the days that even we jockeys get off). That comes out to $3,360 right there. So before you even talk about making or losing any money you're already down almost 17%. By way of comparison, the S&P 500 averages up a little over 10% a year. So, to beat the S&P (the benchmark for stocks), you've got to make more than 27%. It's also assuming that you aren't paying for live pricing, which starts at $100 a month and runs up sharply from there. If you want to get full market depth from both listed and OTC you can probably count on paying $250 or more a month for the terminal-- that's going to run you another $3,000 a year, or 15%. So now you've got to make 42% to get what you would have had just by sticking your money in the S&P! And, of course, this is assuming that your time is worth nothing. If you went down to the corner store and got yourself a job selling candy for $5 an hour, and spent the 10 hours a week (assuming you trade only the opens and closes) on that, you'd make $50 a week. Multiply that by 48 weeks, and it's another $2400, or 12%. So to beat the S&P *and* your candy-selling job you're gonna have to make 54%!!!
Obviously, there are people who do manage to do this. But it's really, really unlikely. Honestly, there's a reason why the SEC limits day-trading margin to customers with more than $25,000 in their accounts. It's because anything less is going to mean you're slowly bleeding money. If you can put $100,000 in the account, things get a bit less expensive: $3,360 in commissions plus $3,000 in terminal fees plus $2,400 you'd make selling candy is $8,760, only 8.76%, meaning you'd still have the task of making about 19% on your investment to break even with the S&P, but wouldn't be dying a slow death.
Bob