Day Trading

In: Business and Management

Submitted By weiszerik
Words 430
Pages 2

Day trading is defined by the Securities and Exchange Commission (SEC) as “to 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.” This promise of “quick profits” accompanying a new rule that gave priority to trades of less than 1,000 shares (Small Orders Executions Systems) which “leveled the playing” for small investors and the ease that websites gives people to short-term borrowing of capital to allow people to make big trades with little money has left to the growth of day traders around the world. Day traders tend to ignore the other part of the SEC definition, which seemed to be added as a caveat to the promise of wealth. It reads that “day trading is extremely risky and can result in substantial financial losses in a very short period of time.” Still with the levity of the SEC’s warning and many studies sighting that most day traders end up losing money in the long term, some trading websites have seen a growth of 50% from year to year of active accounts on their sites. The question should be asked then with day trading is “why with the inherent risks that most if not all day traders fall into, why someone would continue the practice of day trading?”
{This borrowing of funds (leveraging) has even became the marketing ploy for CMC, the biggest market maker in Canada, to entice people to use their site. CMC lets people know that an account valued at 10,000 dollars can make investments of 100,000 dollars giving clients a chance to make 4,000 dollars at the end of a trading day, but if the market goes south could leave an investor thousands in the hole. Even with this upfront risk posted on CMC website and studies showing that most day traders will lose money in the…...

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