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X CORP might be $16 bid, while the offer might very well be a quarter point higher at $16 ¼. This means that an individual trader buying and selling at the quoted market would be able to sell stock at $16 a share but would be required to pay $16 ¼ a share to purchase those very same shares. The quarter-point difference is the spread, representing the profit margin that market makers hope to secure. A day trader has to first overcome the spread before a profit can be made. Spreads are present in virtually every type of financial instrument tradedstocks, bonds, futures, options, etc. Dealing with and analyzing spreads is discussed in greater detail later in this book. |
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The second major disadvantage to the day trader has been the lack of access to the ''real market." The securities industry has constantly tried to keep real-time quotes out of the hands of the general public. Even live business telecasts such as those on CNN and CNBC used to delay quotations by 15 minutes. And as of the writing of this book, Nasdaq still delays its quotations to the public by 15 minutes. |
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I have never understood why these delays are permitted to exist. Once a trade report is released, it becomes public news. The fact that the media still allow the news of a price to be delayed 15 minutes seems unconscionable; the media would not do it in the context of any other type of news. If one hopes to compete in the day trading arena, the knowledge of pricing cannot be delayed even for seconds. Unless an individual is willing to commit to an efficient quotation service, day trading is all but impossible. Most markets and exchanges display quote changes and pricing information after they occur rather than showing market movements while they are happening. Why this phenomenon is of the utmost importance and how it affects you are discussed later in this book. |
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The high cost of tradingcommissionsis another impediment to day trading success. Despite massive amounts of |
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