The apparent ease of trading stocks on-line and gaining access to information previously reserved for brokers and professional traders has prompted many individual investors to take up day trading, the buying and selling of stocks full-time. Some have given up lucrative careers to become day traders. Why? “The allure is obvious,” explains Money magazine. “No bosses, complete control over how and when you trade and the potential —or so it seems—to make a lot of money.” One 35-year-old man who quit his $200,000-a-year job to trade stocks at home is quoted as saying: “How else can you have no inventory and no employees, pay no rent, tap-tap-tap on a keyboard and make a living?”
Experts warn that trading stocks is not as easy as it may seem to a new investor. One psychiatrist who specializes in the stresses of trading observes: “Trading seems deceptively easy, but I like to say that it’s the hardest way to make an easy dollar.” The endless stream of financial news and advice has not come without side effects. Paul Farrell, a Wall Street journalist, notes: “The relentless thrust of information racing at lightning speed at the individual players—both the individual investor and the institutional trader—is having a major psychological impact: rattled nerves, frustrations, stress.”
Overconfidence can also be a snare. Financial columnist Jane Bryant Quinn warns of dangerous attitudes among traders: “You think that if you’re at the helm—or at the mouse—bad things can’t happen. You’ll always be able to intervene in time.” She adds: “Because we can access information used by pros, we start to think that we’re pros, too.” Despite the widely publicized stories of investors who have become rich overnight on the stock market, the trading of stocks carries inherent risks. Some investors have been very successful. Others have suffered significant losses.
Investment advisers urge potential investors to consider a company’s past record and future prospects, the demand for its products, and competition from other businesses, and several other factors before selecting a firm’s stock. This information is often available through stockbrokers and other financial institutions. Many investors consult with financial planners before purchasing stock. By considering the background of a company, an investor can also ensure that his money will not be used to support an unethical enterprise.