Day Trader

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Just a little over a month ago (Jan 2011), I ran into a former coworker/ friend. He was looking at a house in my neighborhood. We got to talking and I ask what he’d been up to. He said he had become a Day Trader and had been day trading stocks now for a couple years. All the sudden it hit me, I had no idea what he was talking about. None. I knew a day trader traded stocks but other than that I didn’t have a clue.

He had me over to his house and showed me his home office. He had four monitors on his desk. One was a tv screen with CNBC on it. The other three had charts and graphs and looked like Christmas with red and green graphs with yellow, white, and blue lines running every which direction through the graphs. He explained some of it to me, but I was lost.

One thing that we talked about was that he was making a comfortable living being a day trader. Now, like most people, he didn’t talk actual figures and I didn’t pry. I know he has a public service retirement, so a comfortable living I assume can be anywhere between 25 and 100 thousand smackeroonies a year. In our talk that day and numerous talks since then, I’m guessing it’s beyond the high end of my estimates.

So, now my curiosity is peaked and I want to know what I don’t know. I love to learn, especially if I believe it will benefit me later. He invited me over to watch him work, but asked that I didn’t ask any questions until he was ready to talk because he needed to concentrate. He talked as he worked and walked me through what he was doing. He had CNBC on the TV again and they were showing the opening bell and the usual morning shows that I usually ignored, preferring more traditional news.

My friend told me that the first thing he did before I got there was check the news to see if there was anything that would affect the stock market in general and the stocks that he traded. The stocks he was paying close attention to were a technology stock, a precious metals mining company, a Las Vegas casino, and a few others. He also had charts showing the S&P, the Dow, and the NYSE.

After the opening bell, he just watched and kept changing the size of his graphs, drawing more lines on them, and talked about support and resistance. After about 20 minutes of this, he starts clicking the mouse on a spreadsheet type screens saying he’s shorting and has to put his stop here and his target is there. Within a minute it was all over and he announced that it didn’t do as well as he thought it should have and he got “stopped” out. He said after commissions, he made about $30 on that trade.

I watched him do this for the next few hours. He made several more trades saying that he made money on some but lost a few bucks on others. Finally, he said, “that’s it for today, it’s too choppy.” Now he was ready to talk.

I still had no idea what he had done. He explained that he uses a trading “platform” to make his trades directly to the stock market and doesn’t use a broker. That muddied the waters even further. How does he do this? I asked the only question I knew to ask. “Where did you learn how to do this?”

He said he got into trading a couple years ago because one of his friends did it. He said he had no idea what he was doing when he got into it. He said when he retired, he had a deferred compensation plan and knew it wasn’t making him much interest. His friend told him to “roll it over” into a trading account. So he did. Said his friend showed him how to avoid the risk with a four to one profit loss ratio. He said the first year, he thinks he lost more than he gained but it was mostly because of the commissions. Then he took a class. It was a full seven day class and cost him $6000. He said since then, he has been making more and more money. His goal this year is to make 100% of his “bank.”

I left his house confused but with this thought of “I wonder if I could do that?”

So back home and on the world wide net to see what I could find. There’s lot’s of stuff but nothing makes sense. I called my friend. What books should I read to decide if I should take the class. He knew I was seeking knowledge but also knew I wasn’t ready to shell out six g’s for a seven day class.

We’ve talked to great lengths since then. My wife calls him my new best friend. I also read a book called “Strategies for the Online Day Trader.” It is designed for someone who has already been trading, so although it gave me a lot of info, I didn’t understand what I was learning. Now, I’m reading the “Beginners guide to Day Trading OnLine.” It makes a lot more sense and I’m slowly learning more and more. I’ve already got a few more books in the wings.

So far, I’m really enjoying what I’m learning. It’s all so new, and the thought of making a few extra dollars to add to my income is exciting.

I figure in about six months, I’ll have enough information to decide if this is something that I want to do. The best part of it is that even if I don’t do it, I’ll have enough information that I’ll be able to make better decisions on my current investments. I’ll keep you informed.