It's the biggest financial
story on the planet. Routinely, as soon as a technology-
or Internet-related company goes public on NASDAQ and
Jones, its stock seems to shoot up 100 percent
instantly. Traders who are ready for the surge can make
tens of thousands of dollars in a few hours!
| Stock tips from the Tiger
months, financial experts have predicted a tech-stock
plummet, but after two years of nearly non-stop growth
in the market, these critics now rank below Bill Clinton
on the credibility scale. Recently, though, day traders
have seen their stocks struggle. Is the Net's bull run
coming to a halt?
you're interested in juggling stocks, you should realize
that day trading is different from investing. Day
traders are looking for the quick payoff every day
(hence the name), while investors generally take a more
conservative approach, looking for big profits further
down the road. Some day traders will see how much they
can make off a large chunk of shares, while others may
try to scalp a profit from a 1/4 bump.
the day-trading path has risks, but I certainly can't
fault the people who dive in. After all, if you had
invested a few thousand dollars in America Online
several years ago during its initial public offering, or
IPO, you'd probably have about $2 million right now.
This year, when Ziff-Davis spun off its Internet
operation, ZDNet, as a separate stock on March 31,
the price nearly doubled after just one day. However, as
a sign of how volatile such stocks can be, it's
currently at a point well below the IPO price.
It's very easy now for traders to work the
stocks online, thanks to sites like E*Trade and
Accutrade. Along with other online brokerages such as Fidelity,
Schwab, and Datek, these companies enable you to jump
in and out of the stock market quickly. But is quickness
worth more than common sense?
According to Tom
O'Brien of Tiger Investment Group, online brokerages
make day trading faster, but not easier. Many people,
spurred by the hype, are taking up day trading without
the patience and know-how that's necessary to survive.
Learn2Trade.com has some excellent tips
on how to get started, as does The Motley
Fool; you should definitely attend "The Fool's
School" if you plan to begin day trading.
the first things you need to learn is how to lose. Yes,
lose. A common folly is revenge trading, where
the day trader seeks to "get back" at a stock that
didn't perform as he'd hoped. (It's the stock market
equivalent of road rage.) If you can't deal with
unexpected failure, this may not be the best hobby for
Another mistake is wanting too much: For
some day traders, a small profit is never good
enough. Such greed scuttled the merger of Lycos and
USA Networks this spring. Many Lycos stockholders
weren't satisfied with the deal's long-term payoff; they
wanted a huge profit right away! They weren't willing to
wait to see the benefits of a union of Lycos with USA's
Network and TicketMaster. Check out message boards
at sites such as Raging Bull for a barometer of
stockholders' feelings -- but be cautious! Visitors with
an agenda may sometimes post misleading messages.
Oh, yeah, here's a question for those who
already are active day traders: You are recording
every single transaction, aren't you? Many of the online
brokerages keep track of how much your portfolio is
worth, but the I.R.S. will be looking for a lot more
specific information about your profits come tax time.
(If you forgot to keep a record this year, don't worry.
After all, what's a few thousand dollars in federal
If you're curious, try the game at
as a test. You start off with a fantasy account of
$100,000, which you can use to "buy" stocks and see how
they fare. What's the next big tech stock? Visit the
site for the U.S. Securities and Exchange Commission
for notice of the next IPOs, and CBS's excellent MarketWatch has the "IPO Daily Report,"
in addition to the day's stock news.
question that no one really wants to ask is, "How long
will this last?" The acclaimed success stories of the
online world -- Amazon.com and the Ebay auction
site -- have seen incredible jumps in their stocks, yet
neither company has turned a profit. What gives? Isn't
there some dire correction around the corner, a massive
plunge of the tech stocks that will send hundreds of day
traders reaching for the Maalox?
Well, yes. It's
bound to happen. The stock market's performance has
always been cyclical, and it's only a matter of time
before some of the inflated tech stocks succumb to the
weight of reality. I can't say when it'll happen, but
you should be prepared. In the market's game of "Musical
Chairs," you don't want to be the one left standing when
the music stops.
Hart, who thinks the asking price on Stonehenge
is a little high
Other sites worthy of
CNBC video feature: Day Dreamers