Gurus or Gamblers?: Day Traders Ride the Bucking Bear
It’s a typical Monday morning for Charles G. McConnell of Steamboat Springs, Colorado, as he wakes up with a mouse in one hand, the remote in the other, and a digital ticker tape burning incremental fluctuations into his mind’s twitching eye.
“All I care about is which way the market is going today. If it goes up I’m going to sell, if it goes down I’m going to buy.”
“Chuck” has been listening to CNBC on XM Radio from 5:30am, which is two hours before the market opens, Mountain Time. The night before, he has been watching Bloomberg to see how the Asians are trading.
“The futures markets were down and it gave me a head start on what’s going to happen the next day. The Asians traded like they were anticipating what was going to happen in the U.S. markets.”
Which is the way it usually happens on Sunday night. According to McConnell, the U.S. markets heavily influence the world markets. Sometimes American news does, too. Announcements from Washington either add to trading confidence or detract.
He’s done his homework on the stock market for over 50 years, having gotten the bug for it in high school. Five books on day trading sit on his shelf, as out of date as a carton of curdled milk. He even wrote a book with his son, Christopher McConnell, called The Trader’s Edge, just to get new concepts into print.
“Shows you how quickly this stuff changes. The volume of shares is astronomical, having gone from millions to billions per day. I have heard an offhand comment by a CNBC commentator, made a split second trade, and made huge money. We’ve gone from picking up the Wall Street Journal in the morning to split second timing.”
McConnell has had many brokers over the years, only having ditched his last one about six years ago when he figured out he was making better decisions than they were. Their fees are $25-$40, and in one of his day trading accounts, he only pays $1 per 100 shares.
Trust in brokers’ motives became an issue, too.
“Brokers can be biased by what their company might be pushing. They are really salesmen for their company. This may have changed in recent years, but my guess is not all that much.”
This opinion has been seconded by Ron Booth, owner of Online Trading Academy in Overland Park. As to why he thinks people have gotten so heavily into day trading in recent years:
“They had finally received all the financial advice they can afford. If brokers lost them 40-50 percent, they think, ‘I can do at least that well.’”
There is also what is called an upward bias, the belief that the market is continually on a bullish, upward movement which is standard among brokers in some cases. This bias is probably what has gotten most people in trouble with their invested retirement savings in recent days.
“As Americans, we naturally have a capitalist upward bias. The market doesn’t always go up,” says Booth.
McConnell agrees, and has thoughts on how the average American who doesn’t necessarily act on the market’s every move can experience a little bit of growth.
“Get into mutual funds that exhibit a belief that the price of gold will go up--- be bullish on gold. Also, you should have at least 30 percent cash.” He currently had 50 percent cash. He doesn’t have confidence that the market is going up, so he is reserving cash to buy bargains as market gets nearer its true bottom. His philosophy is that a world economic degeneration will create a lasting bottom that we haven’t seen.
There are two different camps regarding the long-term future of the market. Both Booth and McConnell agree that the old model has changed and people are going to have to adjust accordingly.
“Some people say that the Obama administration’s economic policies will bail us out in banking and infrastructure within two years. There are others who believe that the dollar will suffer and interest rates will double and are buying gold and selling US. Bonds short [betting that the price will go down],” says McConnell.
Chuck’s greatest fear is that the Chinese won’t roll over their bonds, which means that they will call in their money and un-invest it in America. “If that happens, give me a shovel because I’m digging a hole and crawling in it,” he said.
With the volatility of the market today, it seems that making split-second trades is somewhat akin to pulling the arm of a slot machine. Buying short term as day traders do is a gut instinct endeavor. When asked if he is a gambler, McConnell responds,
“I play poker tournament style. I approach the stock market the same way. I don’t take an un-hedged bet. You can lose your entry fee, but you won’t lose your shirt.”
He has two computers going at once for the same reason, and keeps them both in top working condition. The only time he really missed a trade was when his community server went down. High-speed internet is also a must.
So, should everyone get into day trading on some level?
“I was in the mortgage business for 20 years and decided to bring Online Trading Academy to the Kansas City area. Many people trade stocks for current income, as a job. Retirees also come to maximize their retirement income. About 40 percent of people now come with a defensive approach,” says Booth, who puts his money where his mouth is and trades himself using Online Trading Academy strategies.
McConnell has a view of snowy ski slopes and a river valley. He works wherever and whenever he wants. He out-guesses most of the money managers on Wall Street. He and Booth seem to have control of their money in a time when most people’s accounts are bleeding uncontrollably, which has become a new interpretation of The American Dream, and they don’t have to answer to anyone but the market.
If you would like more information on day trading, check out:
www.Tradingacademy.com/Kansascity
Online Trading Academy of Kansas City
7501 College Boulevard
Suite 275
Overland Park, KS 66210
Phone: 913-956-7050
Toll Free: 866-956-7050
About Online Trading Academy
Irvine, California-based Online Trading Academy is a financial education academy focused on educating students in the art of trading since June 1997. With more than 8,000 graduates, Online Trading Academy offers professional instruction from credible Wall Street professionals, as well as a wide array of beneficial home study materials to supplement classroom study. Online Trading Academy offers instruction across a spectrum of trading styles and instruments, from Day Trading, Swing Trading, Position Trading, and Investment Theory for Stocks, Options, Futures (E-minis & Commodities) and Currencies. Current Online Trading Academy locations include New York, Secaucus, Los Angeles, Irvine, Houston, Dallas, Austin, San Antonio, Boston, Chicago, Orlando, Tampa, Phoenix, Washington D.C., Minneapolis, San Jose, Detroit, Charlotte, Atlanta, Denver, Baltimore, Seattle, UK, Toronto, Singapore and Dubai.
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