From the SEC website:
“Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time.”
Trading over a period of several days is NOT day trading. What you describe is not day trading either. If you are a “pattern day trader”, there are certain rules you need to abide by, including a $25,000 minimum account.
Day traders are a special kind of idiot IMO. Don’t confuse day traders with “market makers”, which is an issue for another thread completely.
Yes, you can make money by buying a stock and selling it in a few days for a couple buck profit per share, provided your profit is higher than your commissions.
It’s that simple. If you buy 100 shares of AAPL at 172 ($17,200) and sell it at 175 (a 1.7% increase), you’ve made $300 profit - $12 buy commission - $12 sell commission = $276 total. Are you OK with that? That’s a 1.6% return.
Can you do that with Google at $571? The same investment of $17,200 only buys 30 shares of Google. If Google moves the same 1.7% as AAPL you can sell it at 580 for a profit of $270 - commissions for a net of about $244 or 1.4% return.
There’s an old market saying; Bulls make money, bears make money, but sheep get sheared and rabbits get eaten. If you’re an amateur you’re either a sheep or a rabbit, so you should enter at your own risk.
Anybody who tells you it’s necessary to know an insider or do something shady is out to shear you. I mean it. Period.
So how do traders make money? Most of the short term traders are good at market analysis and technical analysis (TA) which is study of the price and volume action of the stocks and markets. You can’t predict the future, but TA shows that certain price and volume behavior patterns tend to repeat. (Sort of like human behavior.)
They know that the market is in a bear trend right now (going down) and the bullish (upwards) movements tend to be corrections. Buying and expecting a stock to go up is very risky right now.
They also understand things like the fact that AAPL has pierced it’s lower Bollinger Band, and crossed below it’s 50 day moving average. It also formed a hammer candlestick today and the stochastic is looking oversold. You probably can’t interpret what I just wrote, but the people you’re up against in the market understand all that.
They say it takes a minimum of 4 years to really learn what you’re doing. (But I have no idea who “they” are! LOL!)
In general, the Motley Fool web site is an excellent learning resource and starting point. If you want to learn about technical stuff, I suggest looking up Technical Analysis by John Murphy.
You can simplify it even further by looking up some of the trading methods by Oliver Velez which strips the trading process down to the bare bones for people want it really easy and reliable. For what’s going on in the economy I recommend the Minyanville website.
Or you can just buy and hold and hope for the best.
EDIT: changed can to can’t - whoops![/quote]
Thanks for the the response, I am curious as to where you got the $25,000 minimum account. Do they have to be special for day traders or traders who hold stock for days? I ask because ameritrade’s stock account minimum is $2000 and whether it be 100 or 10,000 stocks you only pay $9.99 per equity trade.