The return of the day trader

By Felix Salmon
April 9, 2009

Jane Kim is the latest journalist to do a story about day-trading retail investors, and boy has she found some doozies:

The uncertain environment has prompted David Dilley of Bonita Springs, Fla., to trade more frequently. The 76-year-old retiree believes there has been a “sea change” in economic philosophy — shifting from private enterprise to a command-and-control economy. “The long-term market gains that we’ve had in the past will not occur until that reverts and we get back free enterprise,” he says. So, while he had considered himself a longtime buy-and-hold investor, he’s now trading Canadian oil trusts in his E*Trade account several times a week…

Mark Swenson of southern New Hampshire says he typically trades with exchange-traded funds, instead of buying individual stocks. The 40-year-old says he started trading for the first time last October, in part to generate additional income in case his work as a plumber dried up.

Kim does pick up on one interesting incentive to day-trade — or, rather, the lack of an old disincentive:

While short-term investors are likely to face higher tax bills — since short-term gains are taxed at higher rates than long-term gains — he notes that some people who incurred big losses last year will be able to carry those losses forward to offset taxes in future years.

It’s unintuitive, but it makes a certain amount of sense: if you lose a lot of money in one year, then your risk appetite can actually go up, in that you don’t need to pay lots of taxes if you gamble irresponsibly and make lots of short-term gains. So, good luck with those Canadian oil trusts, Mr Dilley!

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Comments
4 comments so far

I was buy-and-hold long-term-capital-gains until late 2007. Closed most positions, gave up on investing and started trading options instead. Worked for me.
Will go long again when I see “change I can believe in”, meaning I will buy almost no US stocks, just a bunch of ADRs. Already bought and sold once (into this dead-cat bounce), will do so again as needed.

We are noticing a large amount of new sign-ups to our two newsletters with particular interest in gold stocks. Investors on the street are paying close attention to the FED and gold movement, and the recent phenomena of people cashing out on scrap-gold has turned the luxury applications of gold into an investment strategy.

The return of the day-trader is surely here. On the TSX exchanges, there are too many bargains to even get our heads around. We are confident in the Resource market, it has bottomed and unlike 10 years ago when these speculative juniors wouldn’t even trade, we are seeing a large amount of volume, on otherwise speculative-high risk juniors. This gives us the impression that the liquidity issue is over, and the demand for the US dollar from cashing out on brokerage accounts is over.

Mario
ResourceBubble.com

I invested 25 g into my rsp and I’ve been trading thru my td stock account. If it’s up ten percent, then I sell. I’m now at 39 g. A recent trade was RIM.I’m 44 years young and a lot of trading years left. Whooha,I’ll say no more!

Posted by ric | Report as abusive

trading is a zero sum activity. At the end we all get caught with a bad trade and the profit goes to zero… if we r lucky… :)

Posted by rob | Report as abusive
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