The allure of day trading, earning a living by capitalizing on intraday market fluctuations, is strong. However, tales of day traders facing financial ruin are equally prevalent. The dot-com boom era prior to 2001 saw stocks frequently surge by 30% to 200% in a single day. Skilled traders could identify these opportunities before the market opened and swiftly execute trades using electronic brokerage systems. Yet, only a tiny fraction, around 1%, consistently profited.
While stories abound of individuals making fortunes, like the million-dollar short on Corel, losses were also common, such as those incurred from holding onto the WWWF IPO for too long. In retrospect, considering inflation, simply saving money might have been a better strategy since 2001.
So, should one abandon the stock market and day trading altogether? Not necessarily. With the right system, a simple set of formulas, it’s still possible to achieve annual returns of 30% or more. Using such a system, an initial investment of $11,000 could potentially grow to over a million dollars in 17 years. However, this requires a long-term perspective and the ability to withstand market volatility.
For those specifically interested in day trading, a viable approach today hinges on identifying and acting upon groundbreaking news – think a corporation discovering a cancer cure, inventing an eternal life pill, or creating a water-powered car. Crucially, you need access to this information before the majority.
Real-time market news subscriptions, available for around $10 a month, can provide this edge. Access the news around 6 AM Eastern Standard Time. If you discover a news item about a water-powered car, verify its novelty. Buy the stock immediately with funds you can afford to lose, and ALWAYS use a stop-loss order.
Most electronic brokerage firms enable pre-market trading on NASDAQ starting at 6 AM EST. Aim to sell the stock around 9:28 AM EST, capitalizing on the surge of interest as other traders become aware of the news. Doubling your money is a possibility.
However, avoid subsequent trades in the same stock that day. Market makers often introduce complexities and volatility after the initial surge. Remember that significant intraday gains (over 30%) have become rare since 2001. It’s also crucial to avoid holding the stock overnight, as post-news dumps are common.
Finally, exercise caution with IPOs. Heavily promoted IPOs often experience value declines on the second day, benefiting brokerage houses at the expense of individual investors.
In conclusion, if you possess disposable capital, a resilient mindset, and the willingness to monitor market news between 6 AM and 9:28 AM EST, day trading might be a suitable pursuit.