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comes out. Buying CMGI for the short term then is informed speculation and what the position trader specializes in. But to do this kind of position trading, you can't be phobic about holding a stock for days at a time. |
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I recently talked with a professional who had been involved in day trading for the last three years. She doesn't do much day trading now, preferring to be involved in helping educate new traders. But she still trades selected IPOs as soon as they hit the open market. While this tactic can be quite risky compared to getting in on the initial offering price and being assured a gain almost totally risk-free, for her it seemed less risky than what she had been previously doing as a day trader. She told me that when she learned day trading, she was a victim of being taught that she "must" trade in 1000-share lots to make any money. She said instead of making money, this approach cost her a lot of moneyboth in working capital and in commissions. |
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She told me that if she were to do it again, one thing she would do differently, in addition to trading fewer shares, is stay in her positions longer, not being in such a hurry to get out as soon as the stock dropped a fraction. This is counter to what most traders think. They tend to err on the side of not getting out fast enough, even though they are far better at exiting than longer-term investors. But this trader's opinion was that often her stock would come back the eighth or quarter within a couple of minutes. And if she hadn't had 1000 shares riding, she could have taken this chance and held on to it longer. |
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The Dating Game: "Can I Bring Her Home to Meet Mother?" |
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I talked with another professional trader who has been buying securities for many years and trading the last two years through direct access at a trading firm, and was now teaching an advanced class for day traders. |
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The analogy he used for day traders extending their positions beyond scalping for fractions was one of getting to know a new woman gradually. He said he needed to begin slowly by trading the stock for fractions, getting to know it day after day, but not holding it for very long. He likened this to having casual greetings and maybe chit-chat with an attractive woman where there was some interest but not really spending much time with her. |
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