Daytraders

In the last few years, computer technology in financial markets has become accessible to individual small investors, who pursue a much more aggressive investing strategy than previously possible. This shift has spawned a field known as daytrading, in which traders sit glued to a computer and an online service like E*Trade, attempting to exploit small fluctuations in minute-to-minute stock prices. Daytraders buy and sell with no intent of investing in the companies, only using them to make money on an extremely short-term basis. This is a very high risk enterprise, for economic theory holds that while individual transactions may occasionally outperform the market, such performance is not sustainable, and in the long term no one can "beat the market".

The problem is that daytraders are trying to do just that, ignoring losses to revel in their successes. Their behavior raises several concerns:

• Daytraders increase the volatility of the market.
• Daytrading is gambling, and it encourages compulsive gambling behavior, which creates social risks to the traders and their families.
• Groups of daytraders can become "medium-sized sharks" who move the market with no regard for the actual businesses involved.