THE TELEGRAPH: Day traders are back. If you are tempted to join them, here are some tips.
The day trader – the amateur stock market investor last seen in the heady days of the dotcom boom – is back.
Stockbrokers are reporting bumper trading volumes as investors trade on a daily basis to take advantage of volatility in the stock market.
Barclays Stockbrokers said day traders had returned in significant numbers since the spring. Over the past few months "execution-only" investors – those who make their own decisions without taking advice – have been logging on every day to buy and sell exchange-traded funds, contracts for difference (CFDs) and equities, it said, as well as using spread betting to play the markets.
Since the end of the technology bubble, when novice investors thought they could make an instant profit by trading shares frequently, day trading has been associated with reckless investors making decisions on a whim. But Barclays said the new breed of active trader was savvy and educated, using all the research thrown at them. Unlike counterparts from the days of the tech boom, they are not relying on tips from taxi drivers.
TD Waterhouse, another stockbroker, said it had "never been as busy".
In the past few weeks investors had been trading mining stocks daily, whereas earlier in the year it was banking stocks. It said overall trading activity had increased by 25pc in the past six months; in two days in May daily trading volumes increased by 138pc.
Gavin Oldham, the chief executive of The Share Centre, said he had seen an unprecedented level of trading activity during the past six months, fuelled by market volatility and the banking crisis. "During the first half of the year many investors were dipping in and out of the banking sector in a bid to profit from share price volatility. Even now, the banks continue to dominate our list of most-traded shares," he said.
"This increased level of activity is really testament to the ease and speed of trading online these days. Investors are able to react to changes in the market almost as soon as they happen." >>> Richard Evans and Paul Farrow | Thursday, July 16, 2009
