She was a day trader....

Now sing along, to the tune of The Beatles' Day Tripper:

She was a day trader

one commission left

it took her soooooo long

to find out

but she found out....

I like to start out with a funny song parody, if one comes to me!   I'm writing this at the request of Marilyn M., who suggested I write an article about day trading, when I suggested to her she might like to learn it (and hence make some money).

Money, money, money.....it makes the world go round.  (Cabaret)   "Money, money, money.....MONEY!".... wasn't that one by the O Jays in the early 1970s?   Then there is just plain "Money" ("That's what I want"), written by Berry Gordy, founder of Motown, and performed by numerous artists.  Being a Baby Boomer, and proud of it, the version I liked the best was by The Beatles.  The weirdest version I ever heard was by a group called The Flying Lizards in 1979.  They were considered to be New Wave artists, and were one hit wonders.  I have to see if that version is on You Tube.  If it was half as weird and fun as I remember it to be, it will be a good 3 minutes and however many seconds (as most pop songs were in those days).

If you are interested in seeing the others who sang this song, rather than cut and paste them, I'll give you the Wikipedia link: 

http://en.wikipedia.org/wiki/Money_(That%27s_What_I_Want)

I don't know if there are more songs written about love, than were about money, but to paraphrase another famous song, usually "you can't have one without the other!"

Now what does this have to do with day trading?   First the usual disclaimers.  I am not a financial advisor.  Anything you do subsequent to reading this, it your own responsibility.  I don't make stock recommendations, and I don't have a crystal ball.  Or as one woman at a Tunica casino told me, "If I knew which machine was going to jackpot, do you think I'd be giving it up?"

Another disclaimer:  I am not really a day trader.  There is a requirement that I'm sure was another SEC regulation to protect people from their own stupidity, that you have to have at least $25,000 in one particular broker account before they will allow you to day trade.  The definition of day trade means (now this is in simple language, there's a lot more fine print):   You are watching the market movement or the volatility of a particular stock.  You are buying and selling the exact same stock, over and over again in the same day, moving on the "moving of the stock."   This is great fun, of course.  It's like playing any video game these days, but depending on how deep you get into it, or how bad or good you are at it, and if your broker's internet site crashes at the wrong time, or the dog has eaten your kid's homework.....you could lose everything.

These are called variables, which can also bring good results, not just bad.  If you are trying to extract the homework from the dog's mouth and taping it together for your kid, you're away from the computer, it might happen that you missed out on making a trade that would turn out to be a bad one!   So when that happens, make sure to apologize to your kid for yelling at him/her, and give the dog an extra treat!   

For some people who day trade, it doesn't matter whether its a good company, bad company, and sometimes the company is in the process of unwinding to pay off creditors!   Some of you will be surprised to learn that even though General Motors is in bankruptcy, their stocks still trades "over the counter" on exchanges other than the NYSE, Nasdaq or American stock exchange.  The stock was renamed the "Motors Liquidation Company blah blah whatever" and people are still buying and selling the stock, hoping that there will be something left over one the liquidation is done.  That is the short version.  After all, I am not an investment counselor, recommendation any course of action.  And in fact I say:  DO NOT TAKE MY ADVICE!   I'm just a storyteller here, folks!

If you think ANY form of buying and selling stocks, including the types of companies they call "blue chips" is NOT gambling, you need to check in with reality.  It IS gambling and very much so.  My guy, G. (this time I am not even going to use a first name even though it's a common one or I can make one up) said to me one time:  "It's the biggest casino in the world."  (Wall Street)  

Lest anyone think that the current problems with the stock market BEGAN with either the current administration, the last one (GWB), Clinton or even Daddy Bush, Reagan, Carter, Nixon, etc. etc., they are mistaken.  Things that have gone on lately have been going on ever since human beings were trading something of value that they had for something of value that the other guy had.  We call that "bartering" and wouldn't those early humans be surprised to learn that they would now be considered "commodity traders!"

So I am not a day trader.  I "watch by day" but I'm not allowed to be a day trader.  Just like any game, it is more fun when you understand the rules.  A lot of professional stock traders, advisors, etc. will tell you some of it has to do with luck.  But I do not believe in luck.  I believe you make your own luck, and it first starts with education. You don't have to buy any course to learn how to do it. There is enough free information on the internet.  The "average joe" retail investors have more advantages when they "play the market" than ever before.

Understanding the game does not necessarily mean you will win.   You'll win some of the time, but not all of the time, and even the best of the best understand that.  An old story that "money groupies" like to tell is that of Warren Buffett sitting out the tech boom in the late 1990s and early 2000s.   He says he "doesn't like to buy what he doesn't understand," and because he held on to such big chip stalwarts such as AT&T, Coca Cola, etc. that is often interpreted to mean that one should "buy and hold" such companies forever.   Don't kid yourself.  Buffett was holding, but he was also buying and selling, frequently.  Buffett also said, "buy when others are fearful, and sell when others are greedy."  Again, great advice from one of the Masters.  A lesser known Buffett saying is (paraphrasing), "I wish I could be buying and selling like the "little people" do.  Then I could buy and sell what I wanted and wouldn't have to report it in advance to the SEC."  

People like Buffett own substantial stakes in large companies, which is why they have to disclose when they are selling, so as not to flood the market with shares and crash the market.  Mutual funds, 401K investment managers, insurance companies who take your money and invest it, so they (hopefully) have the money to pay your claim if you have a loss, have to do the same.  Isn't it interesting for Buffett to say that he would like to have the advantages of the "average joe" to buy and sell and select stocks and make money?   Just for the fun of it?   When I first became aware of Warren Buffett, I like so many other people thought, "He has more money than G-d.  What is he still at it for?"

The more money he has, the more he can do.  Once a person who has done without for so many years has done all the things he or she wants to do (travel, buy a nice house or car, send their kids to college, whatever), the question becomes, "NOW what do I do?"  It is a myth that rich people aren't happy.  Rich people are very happy, because now that they are rich, they can afford to do what is one of the highest, if not the highest on the Maslow chart of the hierachy of human needs.  (Link to Wikipedia's article on this:  http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs)

Philanthropy is one big thing.  Aren't you always happier when you are giving, rather than receiving?   Self-actualization.  Being of help to others.  Showing others how to do what they did, and moreover....that it IS doable!   I've often heard people comment to me, after reading or seeing someone offer a course to teach you how to make millions.  They say, "well, if they are so smart why aren't they DOING it instead of teaching it?"   It's because they wish to be of assistance to other people so that they can achieve their dreams and goals.   Money is only a means to an end, with the end result being that you can make other people happier when you are able to give them a hand-up, AND a hand-out if necessary.  It's the ultimate "pay it forward."

Oh, and there was another Buffett saying that you might not have heard about.  He said last year when the market was crashing.  I won't quote it exactly, because I don't want to get the article flagged, but it had a little something to do with being a sailor on leave who drank a lot and was in the home of certain ladies of the evening.  ;-)

He was describing his feelings of elation at the possibility of buying some exceptionally rock solid companies that are not going to ever fail or lose money.   His exuberance was not because he was feeling good about making money off other people's misfortunate.  Let me explain what I mean.  You need a winter coat.  You go to the department store and you find a beautiful coat, it fits you perfectly, you look in the mirror and it makes you look great and feel great. 

You then discover that the coat is marketed down 75% off the retail price.  And there is another sign above the coat rack that says, "all clearance items are an additional 25% off." 

Do you feel bad that you are able buy the coat at that price?   I don't know of anyone who would.

Many (but not all) of the people who suffered misfortune in September and October of 2008 unwittingly brought the misfortune on themselves.  They demanded that their stocks be sold and their mutual funds be redeemed, causing shares to flood the market.  So I think, and this is my opinion only, is that it is become to become "witting" (as opposed to "unwitting").   In the future of course.  Not even G-d can change the past...

(Well, I do think the past can be changed and overwritten, but that is beyond the scope of this article.  It involves astral planes and stepping into other dimensions....LOL)

There is a lot more I could say about this, including "why" the bailouts, etc. etc. but that is a "whole 'nother story for another time," as one of my fellow writers used to say before he passed on to one of those other dimensions.   In closing, I would like to say, "You are broke because you want to be."  No, I am not being mean.  That is the topic of one of the best sellers on Amazon right now.  (I have not read the book nor do I get compensated if you buy it on Amazon or anywhere.)   I understand the author's point.  As long as you are going to be pointing the finger at others and blaming them, you are not going to be doing anything to improve your financial situation.  "Crying poverty" may get you a lot of sympathy, and it may even win you a lot of friends.  Misery loves company.  Success has company and is in general, happier.  Remember that self-actualization thing, too!

(Please let me know in the comments section or in a Gather mail if you would like to see more articles on this theme....Thanks!)