Home' Navy News : September 30th 2010 Contents Finding it
hard to help
your people with
This film will help you.
Watch the video or order the DVD on the website
ADF Financial Services Consumer Council
ASIC Chairman, Tony D'Aloisio, examines the risks
associated with online day trading.
KEEPING up with the latest technol-
ogy can give you a strategic advan-
tage over your competitors.
At first sight, day trading software
can appear a great way to beat the
If you are thinking of buying a day
trading software system or attending a
seminar on day trading, there are some
risks to consider. Don't rush to sign
up. Invest with your head, not over it.
What is day trading?
Day traders try to make money
from making lots of trades within a
short time frame. They do this by tak-
ing advantage of small price move-
ments in shares and other investments.
Day trading systems are trading
strategies, systems or computer pro-
grams that direct when traders should
buy or sell shares and other invest-
Trading is a tough game. Millions
of shares and investments are traded
in Australia daily by corporations and
private individuals, and there is a high
failure rate among new traders.
In this respect, share trading oper-
ates like other businesses, like trading
cars or antiques. It demands skill and
A day trading strategy is not 'long-
term investing'. Long-term investors
buy shares and other investments with
the goal of building wealth over time.
Spending lots of money on soft-
ware does not guarantee success,
regardless of what glossy sales bro-
chures might suggest.
1. Be cautious of promoters who
encourage day trading or sell
systems that advertise easy prof-
its with minimal risk. Do your
research and make sure you com-
pletely understand what it involves.
2. Watch out for 'churning'. Churning
happens when the provider encour-
ages you to make lots of trades.
With every trade you pay a com-
mission -- so churning generates
more commissions for the provider
Be sure to understand how the
provider makes money from your
trades and how the trading system
3. Only commit if you have lots
of time to devote to trading.
Professional day traders spend
many hours every day studying the
market, and even then they find it
difficult to consistently make prof-
its. Ask yourself if you have the
knowledge and time to compete
4. Always keep track of the cost of
trading. Day trading fees add up
5. Only use day trading systems if
you can afford to lose the money
you put in. These systems can cost
thousands of dollars -- can you real-
ly make that back?
6. Check the promises made to you by
promoters. The advertised perfor-
mance of day trading systems may
be based on simulated or hypo-
thetical trading, not actual trading
results. Impressive looking graphs
and projections may not factor in
costs such as commissions, spreads
and real (actual) pricing, or the cost
of buying the system or training.
Investing between the
Before investing time and money
in risky day trading software, it pays
to remember the essential principles of
Whether you're looking at day
trading or any other type of investing,
you'll be on the right track towards
wiser investing, if you:
Identify your individual goals and
Understand your investing style
and tolerance for risk;
Be aware of the trade-off between
risk and return;
Only invest in products you under-
Know the importance of diversifi-
cation and asset allocation.
You can download a copy of
'Investing Between the Flags' at www.
See ASIC's consumer and investor
website, FIDO at www.fido.gov.au,
or call 1300 300 630 for warnings on
scams and frauds, and for tips on what
to consider before buying share trading
The Australian Securities Exchange
website www.asx.com.au also has
useful guides explaining various
Email ASIC with topics that inter-
est you at ADFcolumn@asic.gov.au.
KNOWLEDGE IS POWER: Day trading is touted as a way to make big money fast, but you can get badly
burned along the way if you're not adequately prepared.
Photo: LAC Aaron Curran
September 30, 2010
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