In one day of trading last week, Jeff Landau made $300.
Not particularly exciting perhaps, but then again, it's better than losing money.
"I'm very conservative in my approach, actually," Landau said after a typical seven-hour day spent in front of several computer screens brimming with market data. "I'd rather get singles and doubles consistently and every so often hit home runs."
Though Landau has so far proven successful at making a living by day trading, statistics show that the overwhelming majority of day traders lose money. And while it is too early to tell, the recent stock shakeout may have a sobering effect on the day-trading craze.
At the Westwood branch of Cornerstone Securities, a national chain of 20 day-trading centers that until recently called itself ProTrader, the number of people using the facilities has eased somewhat in the last couple months.
"It's probably because of the sell-off in the market," said Albert Kruger, Cornerstone's branch manager. "You don't run into people at cocktail parties (who are) saying they made $100,000 in an Internet stock anymore."
But he also notes that trading in general tends to lull during the summer months, when people go on vacation and the markets are usually less volatile. And there is no indication that day trading is about to die out. There are as many as 15 million people who buy and sell stocks online, according to a recent study by U.S. Bancorp Piper Jaffray, with more than 100,000 of them at least part-time day traders.
Two types of traders
Of course, there is a difference between day trading and less-intensive online investing. Day trading primarily consists of trading in the daily movement of share prices, trying to make a quick buck on the often-fractional movements of a stock, and in general settling accounts at day's end. Most online investing, on the other hand, tends to be longer-term buying stocks and holding on to them for weeks, months or even years before cashing out.
"The two are not the same," Landau said. "There's no room for fundamentals in day trading, unless some news item (on a given company) comes out."
At places like Cornerstone, where Landau trades, each member puts up at least $50,000 to open a trading account, which is monitored by the company's management. Only after going through a training course on the ins and outs of trading is a person allowed to trade on his or her own. Moreover, newcomers are first paired with a mentor who counsels his charge as the trading takes place.
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