The Last Days of Day-Trading

Nov. 3 -- The dustbin from the late ’70s includes thankfully extinct relics such as Studio 54, glitter balls and the hustle—remnants from the last days of disco. Will the dustbin from the late ’90s include daytrading?

Daytrading — full-time, rapid-fire buying and selling of stocks by small investors — has been a hallmark of the spectacular bull market of the past few years. In its brief heyday, daytrading was considered by proponents the wave of the investing future and the bane of the markets by detractors for the volatility it created.

Market Condition Not So HotBut with the markets having a tough time this year, daytrading has receded as a major factor of the market’s movements. While concrete data on daytraders have always been hard to come by, anecdotal evidence suggests the practice is in serious decline — with the big losers heading for the exits, leaving the few diehards.

The big question: Will daytrading disappear like disco dancing, or remain a permanent (albeit, reduced) fixture on the stock-market landscape?

“People are getting slaughtered,” remarks one former professional daytrader who asked for anonymity. In the current choppy market lots of novice daytraders are finding it difficult to short stocks and make money, he says, and even experienced people are not making the money they were making two years ago.

“I know people who have not made any money in the last sixmonths. They are living off the money they made last year when daytrading was like shooting fish in a barrel.”

Only the Strong SurviveSuccessful daytraders can make money in down markets as well as those going up, says Christopher A. Farrell, author of the new book, The Day Trader’s Survival Guide.

But he concedes that it’s harder for a novice daytrader to make money in a down market. The experienced daytraders are not the ones getting burned.

The daytraders who knew very little about the market are learningthe hard way that you can lose your shirt, says Lewis J. Borsellino,co-author of The Day Trader: From the Pit to the PC. “Many daytraders arelicking their wounds; others are becoming more educated,” he says.