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

For many, the ticker-riddled screens of a day trader equate to not much more than the roulette tables of a Las Vegas casino. Of course, here in the UK, we might want to draw a comparison between the former and a bingo hall. Then again, a large hall full of OAPs scrambling to fill out bingo cards doesn't really have the same glitz to it. However, despite loud and repeated warnings from government regulators about the dangers of day trading, a significant number of individual investors remain unphased and ever willing to take the on the risk/reward that they feel is balanced in their favour.

The difference is that unlike the slot machines that are programmed to pay less than they take in, it is much easier for untrained day traders to imagine that their success or failure is entirely in their hands because it's between them and the commands they issue. A couple of good trades might go some way to bolstering a traders confidence and those who are not in tune with the psychology of day trading may have a tendency to make rogue trades or to become arrogant and delude themselves about what they're really capable of. It's partly because of this that institutions now appear to be closing ranks over the issue. Salomon Smith Barney say that day trading requires in-depth knowledge of the markets, techniques and strategies and that people often don't realise that they're competing with professional licensed traders in securities firms who are making moves well in advance of anyone else. In a recent statement, they made it clear that they 'do not promote day-trading strategies for private clients'.

So in light of all this damning news, will day trading ever hit the UK? You can bet you're your bottom dollar it will! The UK markets invariably follow the US and we can confidently expect to see a growth in day trading over the next couple of years - fuelled by a growth in Internet use and the inevitable fall of connectivity charges. The cost of being online is falling by the week as new vendors fight for market share of telecommunications. At the time of writing new vendors are currently announcing free call charge Internet access in the UK. Discount brokerages are bound to make it here at some point, too, and when that happens day trading really will take off!

In closing, let's not forget that more people trading online will result in more volatility, thereby helping to create the environment for day trading. Also, for fear of being labelled 'British and sceptical' there does exist a breed of existing investors who treat their day trading as a kind of business activity, many of whom actually do make a go of it stateside (often operating US accounts from the UK). They spend their time looking for value in good companies that have simply had their downsides magnified by market makers, a lack of news or heavy institutional selling. For a number of these people, it actually works!

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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:

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