Strategy required to ensure day-trading success

Day trading is growing in popularity as a method for making personal investments.

Day trading is the fast-paced buying or selling of securities via Internet or telephone. It's usually done without the advice of a professional broker and therefore without the fees accorded such professionals.

Day traders periodically track their stocks' progress through online services. As changes in stock or fund value show gains or losses, day traders make moves on their accounts. They then make decisions to hold what they have, buy more shares or sell.

"All you need is a computer hook-up and a bank roll," said Timothy Reese, vice president of investments and assistant branch manager of A.G. Edwards & Sons Inc.

For the novice investor, sites like Morningstar.com, Forbes.com, Standardand-Poors.com or Moodys.com offer a plethora of investment information and a network of links to other sites of investor interest.

Day traders seek to maximize their portfolios by anticipating market trends and making adjustments, up or down, in accord with these patterns.

The key, if you can find it, is to be in sync with the market so you can read its movements, said Oliver Thomas Young, investment broker at Midwest Discount Brokers. The difficulty lies in the timing.

"It's a lot easier to make a call on a stock for a year's time than it is for 10 minutes," Young said.

Steve Townsend, a printing technician, has been a day trader for more than two years. Using free financial information from sites like Nasdaq.com, PBS programming and AM radio talk shows on investing, Townsend said he is self-taught about day trading. His ability increases with experience.

"When I first started out, I thought everything was a sure bet. You find out otherwise," Townsend said. "I'm starting to get more of a global view now," he added.

Investors trading online typically save money in stock transaction costs. Ameritrade, TD Waterhouse, E*Trade and Accutrade are only a few of the Internet companies vying for investors' dollars. Some firms allow traders to invest at rates as low as $7 to $8 a trade, lower than the fees for a professional broker.

"I don't care how much my transaction fees are. I always make sure I make at least $100 per my $26 fee," said Richard Heth, who's completing coursework for a teaching certificate. He places limit orders that activate buy or sell actions when his stock reaches a certain price. He focuses on the incremental gain.

"If you're playing with $2,000 and all you've made is $100 that doesn't sound like anything, but percentage-wise you've made a lot of money," he said.

Both Heth and Townsend have diversified portfolios beyond their day-trading investments, including mutual funds and other savings. Both have made and lost money in day trading, too. They've learned success often results from finding a strategy and sticking to it.

"Day trading requires a certain set of disciplines that you adhere to," Reese said.

"When most people get in trouble with their investments is when they've either broken their discipline or failed to set any," he added.

Heth networks regularly with friends about day trading. "We e-mail each other back and forth to let each other know if a stock has gotten hot," he said. "The thing is, everybody always tells you the good news, nobody ever tells you the bad news."

Carl Baron, owner of Baron Financial Services, said he expects future investors to be more active in managing their money.

"I would not be surprised to see more people doing their own trading, but not necessarily day trading," he said. "They'll do their own research; they'll make their own buys and sell when they want to," he added.

Reese said day traders must keep sight of their investment objectives.

He suggested investors not become glued to their monitors or television sets, charting every market move.

"You lose any sense of what you're trying to accomplish when you're just sitting there watching a tick going up and down every day," he said. "Most of us need the space to go back and take a look at the big picture."