Day Trading

• Pages: 296-298

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The Securities and Exchange Commission (SEC) defines day trading as follows: "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."

In its investigation of the practice, which arose in its most modern form with the Internet, the U.S. Senate Permanent Subcommittee on Investigations defined day trading as "placing multiple buy and sell orders for securities and holding positions for a very short period of time, usually minutes or a few hours, but rarely longer than a day. Day traders seek profits in small increments from momentary fluctuations in stock prices after paying commissions." In the more technical language of the National Association of Securities Dealers (NASD), day trading is "an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities."

Canada and the World magazine, in an article titled "Rolling the dice," saw analogies to day trading in the "bucket shops" of the 1920s. "They were storefront businesses where traders gathered to buy and sell stocks. Many were illegal and not unlike off-track bettering shops. Customers were doing no more than placing a bet on whether certain stocks would rise or fall. In the Roaring Twenties, just about everyone could score in a bucket shop. Buy your stock, any stock, in the morning; by evening you could be confident you could sell it at a profit." Most of the bucket shops, according to the magazine, disappeared in the stock market crash of 1929—only to resurface as Internet-based day trading programs in the bull market of the 1990s. As air rushed out of that bubble, day trading almost collapsed. With

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the market strengthening again in the mid-2000s, market analysts, here and there, see day trading reviving again.

DAY TRADING AS GAMBLING

Ever since the emergence of stock and currency markets in the 16th and 17th centuries in Europe, an element of chance has been a strong component of trading in stock so that, around the world's stock exchanges, the movement of stock prices, up and down, has become the main focus of traders' attention and the original...