Legend has it that one day in 1929 J.P. Morgan, the wealthy U.S. financier, received a stock tip from a shoeshine boy. It’s said that Morgan promptly sold his entire portfolio, and avoided the stock market crash that occurred just days later. The lesson? When even the shoeshine boy is offering stock tips, it’s time to get out of the market.
These days, those shoeshine boys are cab drivers, waiters, accountants, consultants, students. Armed with computers and Internet connections, they trade stocks on a daily basis, often buying and selling the same stock within a matter of minutes, exploiting the market’s volatility to turn a profit. Using their own money as capital, these day traders work at a frantic pace, using the decimals of difference that occur in a stock’s price between now and 10 seconds from now to – in theory, anyway – net a few easy thousand.
Gambling on the market’s volatility is not a new idea, but the Internet’s promise of easy riches has delivered a legion of new – and often poorly informed – players looking to make a quick buck. As the writers of these four books make clear, it’s likely these untrained traders will lose money, no matter how well the economy is doing.
But since when did a little risk ever stop a true gambler? As long as the odds may be, there are in fact many success stories. As author Sunny Harris notes in Electronic Day Trading 101, “Thousands of individuals are making a killing trading stocks online.” The implied message being, “and they’re not even as smart and as informed as you, so what are you waiting for?” Harris goes on to explain everything from selecting an online broker to developing your own trading system to using the Internet to research stocks.
She’s also honest about what the reader can expect from her book: “Everybody wants something for nothing, or at least fairly cheap,” she writes. “That is what this book is not about. It is my hope that you will read this book and realize several things: Trading is not for everyone; trading can lose you lots of money; and yet trading can make you lots of money if you plan, study, and work hard.” And she’s certainly frank about the reader’s chances of success; right there in Chapter 1, she says at least 80% of people will lose their trading capital within 12 months. For most, there’s more money in working a minimum-wage job than in day trading – a sobering declaration in a book that’s supposedly selling the dream of near-instant riches.
A far more optimistic – though not necessarily realistic – entry in the market is Christopher Farrell’s Day Trade Online, which promises to guide readers to their “first $100,000.” Designed to give “the little guy” a chance to “beat Wall Street at its own game,” Day Trade Online includes brief inspirational – yet oddly anonymous – stories. For instance, an unnamed day trader tells the author why he plays the market by describing his typical day: after making $4,000 in 18 minutes of trading, he calls it quits at 9:48 a.m. to go golfing.
Inspirational, perhaps, but not exactly informative. Farrell does complement his slick-talking style with technical prose on the mechanics of trading, and there’s even the occasional bluntness that comes across as refreshing honesty amid the hype: “Middlemen should not care if the goods they are buying are expensive or cheap. Only one thing matters: selling the goods at a higher price than they were bought for. This is all middlemen are ever concerned about. So long as they can do this, they will put food on the table. The same is true of day traders.” After reading numerous passages in which day traders are described as risk-takers, entrepreneurs, the little guys sticking it to the Man, and so on, it’s refreshing to see their essence dressed down so matter-of-factly.
“Refreshing” is not a word that comes to mind when reading Carol Troy’s Understanding Electronic Day Trading. Written in the dry, methodical manner of computer manuals, Understanding at least has the virtue of not succumbing to the hype surrounding the profession. In this book, day trading is a discipline, and Troy takes on the tone of a slightly weary teacher instructing students in her tried-and-true methods. Each chapter includes an interview with one expert or another, and while this gives the book an insider feel, the advice offered – including “buy low, sell high” – is not always insightful.
Although Understanding gets down to the most basic of basics – a section on choosing the right kind of computer and Internet connection speaks volumes about the level of technical expertise expected of readers – I suspect this book and its digressions will prove too tedious for the kind of goal-oriented people most likely attracted to day trading.
Troy’s dry tone is in direct contrast with Toni Turner’s A Beginner’s Guide to Day Trading Online. “This ain’t no dress rehearsal!” she proclaims in Chapter 1: When you commit to day trading, you are either in all the way or you’re out. After numerous interviews with actual day traders, she lets readers in on the “Three Bs” required of prospective day traders: bucks, brains – and balls. “Successful traders know how to act swiftly,” she tells us. “Many times you’ll have one second to make a decision that may affect your account by thousands of dollars. If your middle name is ‘Waffle,’ you’ll be happier investing.” The layout is reminiscent of a Dummies book, with “Hot Tips” boxes, clever titles and subtitles, and plenty of charts and diagrams.
Indeed, all four books offer charts, checklists, and lists of recommended web sites, and the advice in all cases seems fairly consistent. Buy low. Sell high. Swallow your losses. Savour your victories. Don’t hesitate. Research. Don’t let emotions influence your decisions. These are all worthy pieces of advice, and yet it’s nothing that any grizzled veteran of the trading floor wouldn’t tell you for the price of a three-martini lunch. The techniques described in all four books will take weeks, even months, to master, and I can’t help but wonder if members of the target audience are willing to wait that long to make their first killing.
Of the four, Harris treads the safest line between caution and hype. While the others focus on psychology and tactics, Electronic Day Trading 101 takes a cue from its college-course name and treats readers like willing students, delivering a mountain of information and expertly guiding them through the confusing world of stock symbols and charts. An extensive appendix section completes the reader’s education, with a list of Nasdaq stock symbols, and the author’s personal choices for the best online brokerages, data vendors, and day trading web sites.
On the negative side, Harris is no better than the rest in providing anything specific about the non-American experience, much less any information on the different rules that Canadian traders may have to abide by. Still, these books aren’t totally without merit. Any one of them will give a semi-experienced trader some good advice on reading the financial markets. But if you’re a complete babe in the woods who thinks the only thing it takes to strike it rich is the right guru to show you the way, then you might be better off considering a career as, say, a shoe-shiner. The pay isn’t much, but rumour has it they get all the hot tips.
Day Trade Online
Electronic Day Trading 101
Understanding Electronic Day Trading
A Beginner’s Guide to Day Trading Online