You’ve seen the banner ads on the Web. “Make Millions In Penny Stocks!” “Whiz Kid Trader Turns $4,000 Into Billions!” “Make Money 24×7 Trading The Forex!” Take this course, or buy that program, then sit back and watch the cash roll in.

Before you send your credit card number check out what a real life independent trader has to say. Like Frank Guariglia. The Philadelphia resident has been trading stocks full time from home for more than three years. “When I tell people what I do for a living they think it’s the coolest job in the world, the road to easy money,” Frank says. “But, the reality is a lot different. This is hard, tedious, stressful work. I put a lot of time in. I’m up at 4:30 AM checking news and markets around the world, reading the Wall Street Journal, getting ready for the opening bell. Most nights I’m doing research. There’s nothing cool or glamorous about it. Some days it’s painfully boring. I sit, I watch, and I wait for setups that offer an above average potential for profit. Traders like to trade. Doing nothing for hours on end is extremely difficult.”

Anybody can be a trader. Open a brokerage account, set up a computer with a phone line, and you’re in business. Day traders, however, are a special category. The New York Stock Exchange( NYSE) and the Financial Industry Regulatory Authority (FINRA), require “pattern day traders” to maintain at least $25,000 in their accounts and they can only trade in margin accounts. Margin is a loan from a broker secured by the securities and cash in the account. A pattern day trading account offers tremendous leverage. With the $25,000 minimum a trader can buy $100,000 worth of stock during the day. Pick a winner and you can make a fortune quickly. If the stock tanks you can lose big, maybe even more than your original investment.

Frank worked as a service manager at Verizon Communications before he became a full time trader. During a round of downsizing his entire department was consolidated with another center in a different state. He was offered an attractive severance package in lieu of relocating, and he jumped at the opportunity to strike out on his own. “I didn’t wake up one morning and decide that I wanted to be a day trader. I’ve been a serious investor for 30 years,” he says. “I dreamed about trading the stock market full time, but lack of time and lack of capital held me back. With my severance, and some savings, I suddenly had both.”

Very few people succeed as traders. Most blow up their accounts in short order, some in just a matter of a few months. Insufficient capital is often the reason. A trader who hopes to trade full time and live off the profits of a $5,000 account probably has about the same odds of succeeding as a Powerball player. Losses are a big part of the game. Even the best traders lose more trades than they win. They last in the business by keeping their losses small and letting their winners ride.
How’s Frank doing? “Well, it’s been over three years, and I’m still here,” he says. “Fortunately, I was able to start with a comfortable capital position. I haven’t had a profitable year yet. I started right before the Dow hit its all-time high in October, 2007, then crashed to a generational low in March, 2009. But, this year has been good so far. You don’t get proficient at this overnight. It takes many years of study and experience. The mistakes I made early on cost me quite a bit of money. I consider it my tuition. Some traders fail for the same reason that many businesses fail. By the time they start to figure out what works they’re out of money!”

Rule Number One is PRESERVE YOUR CAPITAL. If you run out of chips you’re out of the game. Successful traders are masters at money management. They risk a small percentage of their account, 2% or less, on any single trade. “I took some pretty big risks early on that resulted in sizable losses,” Frank says. “I also made the same mistake that many traders make by holding on to losing trades in the hope that they would bounce back. Sometimes they did, and that only reinforced a bad habit. Eventually, a loss not taken quickly will turn into a huge, painful loss if you keep hanging on. Take the small losses, and move on. One good winner can make up for a string of losers.”

Day traders are looking for quick profits, and they close out their positions by the end of the day. Holding a trade overnight is risky. Adverse news like a bad earnings report, a lawsuit, or the departure of a key executive can drive the stock sharply lower the next morning. “I generally don’t want to hold a stock too long,” Frank says. “More time means more risk. A winner can turn into a loser real fast.”

Prospective day traders are strongly advised to read the Securities & Exchange Commission’s cautionary message, “Day Trading: Your Dollars At Risk,” at http://www.sec.gov/investor/pubs/daytips.htm. Frank says, “Trading is becoming increasingly difficult, and dangerous, for small independent traders like me. We compete with high frequency traders using rooms full of computers to make millions of trades a day with the goal of earning a fraction of a penny on each trade! A lot of days are extremely volatile, just wild and crazy. Then, there was the “Flash Crash” of May 6. My jaw dropped as I watched the Dow plummet 1,000 points in a matter of minutes. It looked like it would never stop dropping. I had one trade going, and couldn’t get out fast enough. I panicked, like many other people did, and lost a sizable amount. I heard that some trading firms, entire companies, were wiped out by the event. Could it happen again? Who knows?”

So, why would anyone want to work long, hard hours, and expose themselves to such high risk in a competition where the odds are decidedly stacked against them? Frank says, “I always wanted to do this. It’s in my blood. I’m always thinking about the markets, even on holidays and weekends. I love the independence and flexibility it offers. If I only want to trade for an hour, or take the whole day off, I don’t have to get permission from anybody. Working from home is great. Long commutes, bad weather, difficult coworkers are not a problem.”

What does the future look like for Frank? “This is a very risky business. I’d like some financial security. I have private health insurance, and it’s getting more expensive every year. A part time job with benefits would be nice. I would be happy to work nights or weekends, and trade during the day. I have a tremendous amount of energy and stamina.”

©2010 Frank C. Guariglia. All rights reserved.

Author Bio: Frank C. Guariglia has diverse career experience including entrepreneur, telecommunications manager, and day trader. He’s always interested in potentially profitable opportunities. Send him email

Category: Finances
Keywords: trading,stocks,investments,finance,money,trade,daytrading