Day Trading: A
Little Bit Of History
Day trading is
basically just what it sounds like: the practice of buying and
selling financial items within one trading day. The most common
instruments that are used in this kind of transaction include
currencies, stocks, and options. Futures are also a popular
speculation, with commodity, index, and equity investments
being traded.
Day trading is not for everyone. The risks are high, but so are
the potential earnings. With the advent of the internet, more
amateurs are getting into the game, but it used to mainly be
the province of stockbrokers and certain types of specialists
on the floor of the New York Stock Exchange.
Did you know day traders have been around since the advent of
the telegraph? The key to successful trading is the ability to
have up to date communication on a daily basis. The telegraph
allowed investors to get price quotes in a timely manner, and
bets could easily be placed on stock or commodity
prices.
One big difference between
then and now is that traders of the olden days were betting
against each other as to what the price would do rather than
purchasing the product itself. Needless to say, this type of
trading was vulnerable to all kinds of corruption at all levels
and there were absolutely no protections in place.
The system of trading was
fundamentally changed during the second third of the 20th
century, thank goodness, making the business honest and
legitimate. The invention of ticker tape allowed a continuous
flow of information about price fluctuations to be viewed all
day long. The new system required the use of brokers to make
trade for customers, and the cost of commissions cut into any
profits. Investors also were forced to depend on the
reliability of their particular broker rather than on their own
abilities.
In the 1970's, the rules
were changed allowing brokerages to compete for customers by
decreasing commission rates, and the number of day traders
exploded due to the new affordability of the practice. However,
trading was still being done exclusively through
brokers.
The accessibility of the internet
gave small traders a direct line to trading and changed the
face of this kind of speculating forever. Today, thousands of
regular folks are learning the rules of day trading and giving
it a try. Due to volatility and the risks inherent in this kind
of system, however, it is wise to consult a professional and
learn how to do it properly.
For great stock tips to help you
invest wisely, contact the professionals at Blue Chip Stock
Trader (http://bluechipstocktrader.com/
). Art Gib is a freelance writer.
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