AlphaAngle tries day trading to see what all the fuss is about:

Aussie Fintwitters will be familiar with certain day traders who regularly post large consistent profits to social media. 

Prior to seeing it over a period of years I would have thought something like that would be reserved for algorithmic trading firms etc. - As an aside if anyone still hasn’t read the book on Jim Simons it’s a great yarn showing its possible to put up 50% years consistently you just need to be a mathematical genius in America during the time computers are just starting to become relevant. However, some regular people seem to be able to make real money being a day trader on the ASX.

Trading is looked down upon by most self proclaimed investors (me) and is by definition a zero sum game. I like to think of it a bit like gambling, of course there are professional gamblers out there who do very well. These traders are part of the market though, the same one I buy pieces of companies from to tuck away for the future and sometimes they are the ones moving the prices around. Curiosity got the better of me and I decided to have a bit of fun and set up a few of the tools the ASX day traders typically use. I sort of hope that this will give me a greater understanding of participants in the market and it just sounds kind of fun!

After doing a bit of research I settled on Invast as a broker they offer direct market access CFDs which essentially allows you to make extremely leveraged trades either short or long that flow into the orderbook and you will see the volume move when looking at the market. My understanding of other CFD providers is they are market makers who sort of pay out the moves in price but no shares change hands directly from what you are doing (this may be wrong, no idea really). Either way these are just financial contracts you don’t own any of the stocks and don’t have any rights to them. The application they provide is IRESS trader and viewpoint which are pieces of software that have graphing and general market information tools (the news feed is actually quite good for seeing all price sensitive announcements). Execution is built in so I’m able buy/sell directly from the application.

There is a bit of set up once you open these applications as they are very customisable. There are some very helpful YouTube videos readily available that gave me some sort of framework in about half an hour. 

Now for the fun bit and I must stress at this point…

I open an order and it immediately feels very different to buying shares firstly you can buy or short sell (most non-tiny stocks). Your account is referred to as margin and different securities have margin requirements. When you buy a stock it uses an amount of this margin depending on the leverage allowed on that stock. For example if I buy $10K worth of WHC which has a 20% margin requirement then I only need $2k. Another major difference is that brokerage is only 0.06% so on this hypothetical 10K trade I pay $6 to get in and likely $6 to get out. Presumably if the margin gets exceeded then the computer shuts down and your money is gone. It all feels very frantic and dangerous. 

First I buy one company I know well and feel familiar with how it trades $MYR. After Solly recently put through a big trade at $0.50 it seems to have put a bit of a floor there. Suddenly a cross trade for 10mil shares goes through. I close out the trade for $400 profit all this in about 10 minutes. Well that went well. Next $WHC looks like it’s the stock of the day lots of action so I trade in an out of it if it spike too high or too low I short or buy it. Lots of just waiting around for the perfect moment to strike (also quite fun but don’t really make any money). Next $CTT (terrible company in my opinion) recently punished by the market, could it be due for a late in the day bounce? No as it happens (probably the least fun trade) very little volume and that made it feel a bit dangerous as well as you could get stuck pretty easily.

One interesting thing I noticed was because the name of the game is jumping in and out of the market trying to make a profit at someone else’s expense the turnover goes up very quickly. For example just mucking around for a few hours today with max 2x leverage on a $10K account I managed to turn over $270K in volume! I am actually shocked at this. Makes me wonder how much of that volume out there is real and its unsurprising that is disappears so rapidly in a crisis. 

The damage: -$3 including brokerage.

Might have to stick to less time consuming and less stressful ways to lose money such as HODLing Bitcoin.