'Doonesbury' On Day Trading
The risky world of day trading in stocks has become so popular among ordinary investors that the Doonesbury comic strip is chronicling the day-by-day progress of a character who has embarked on it.
The buttoned-down Chase opened an online day-trading account this week with $10,000, actually a smaller deposit than most day-trading companies require of an amateur getting into the practice.
By Thursday's episode, Chase was ready to buy shares of imaginary company E-Bid, a new business "with only one product - its own stock." His adrenaline rush was palpable. A day earlier, he masked his fear when the Nasdaq Stock Market dropped 63 points and he was suddenly down 40 percent on his trades.
Doonesbury's creator is cartoonist Gary Trudeau.
Day trading has attracted a small but growing breed of investors, many of whom have abandoned their regular jobs for the prospect of quick riches. Day traders seek out stocks solely for their sharp price swings, buying and selling them quickly to capitalize on the short-term movement in price and rarely holding a position overnight.
But securities regulators have expressed concern that some day-trading companies, which sell training courses and specialized software and provide computer workspace to investors, could be misleading them about potential profits and causing them to get in over their heads. State regulators have stepped up their scrutiny of day-trading firms and a handful, particularly in Massachusetts, have filed fraud charges against them.
"We're concerned when day trading becomes such a part of the culture" that it is featured in a popular comic strip, said Marc Beauchamp, a spokesman for the North American Securities Administrators Association, which represents the state regulators.
"People who are misled about the potential of day trading and lose all their money: that's not funny," Beauchamp said.
Arthur Levitt, chairman of the U.S. Securities and Exchange Commission, warned last week that day trading can be "highly risky" for Main Street investors, who should engage in it only "with funds they can afford to lose." He expressed dismay at stories he had heard of people putting up their student loan money, mortgages or retirement savings to finance their day trading.
Operators of the day-trading companies acknowledge it's not for everyone, but they say it can give financial freedom to ordinary people who study and learn trading techniques. They maintain the regulators are unfairly tarnishing their industry because of a few rogue firms that may have misled investors about what kind of money they could make.
The Electronic Traders Association, which represents day-trading companies, said in a statement Thursday it was concerned that many people may be undertaking the practice without "a clear understanding of the effort required to become successful and the potential risks."
Th group issued guidelines for people considering day trading and a suggested disclosure statement for companies to provide to potential investors.
Among the guidelines: only risk capital that you don't need for living or retirement should be used to finance day trading, and only "highly disciplined" people should get into it.
Will Chase lose his shirt (and suspenders)? Stay tuned.
Written By Marcy Gordon, AP Business Writer