DayTraders.com Senior Market Editor Ray Johns says day trading should be part of an overall investment plan

SUMMARY: DayTraders.com CEO reviews the services their website provides to day traders and short-term investors. He points out that day trading does have risks and says the company aims to educate visitors while providing services for those who do trade the markets.

Ted: Thanks to the growing power of the Internet, an increasing number of investors have become day traders. These are folks who buy and sell stocks within hours, or even minutes, in hopes of pocketing quick profits. Where on the Web do they get information to help make the trades? Beginning today, here on "Power Lunch", we plan to take a look at these and other questions about day trading in our weekly series, "Day Trading: Risks and Rewards." To kick off this segment we've invited the senior editor of Daytraders.com, one of the largest trading sites on the Internet for day traders. Here to tell us more about his service, where he gets the research, and how you might profit from it all. Ray Johns, of DayTraders.com, joining us from San Jose, California today. Nice to have you with us.

Ray: Thanks, Ted. Nice to be here.

Ted: First of all, on your Web site, you're giving stock tips, right?

Ray: Yes. We have a number of different services. The first service is a newsletter geared for day traders who play the market and that covers day traders as well as short-term position traders, so, not necessarily in and out in one day. We also have a trading room where the more advanced traders who are going in and out of the market on a daily basis can gather. So, those are the two primary services that we provide.

Ted: Let me raise this question early on in the chat that we're going to have here. And that is are there some folks who probably ought not be doing this doing it anyway?

Ray: Yes, I think unfortunately that's the case. As you know they've been talking about some regulations and things coming down the road with the SEC and you know, we think that's a good idea. Unfortunately, you know, there's been a shift recently from people who day trade in market who were financially well off and using day trading as just another means of investing in the market. To some people who are using day trading as a means to create wealth from nothing. This is where you hear about people using, you know, money from credit cards or mortgages where they shouldn't.

Ted: Right.

Ray: And so, that is something. When people come to our site and sign up for our service, we have a two-week free trial. We do try to do some education. We do have information on the site. And you know, I think there does need to be some education so that people who are doing day trading understand the risks and that they aren't using money they don't have.

Ted: All right. And, in fact, and then we'll move on, let's dispel this. The average person cannot get on and make any serious money day trading; is that correct?

Ray: Yes. We do see a cross-section. There are going be some people who do poorly when they begin. There are going to be some people who do well when they begin, but for the most part, there is a learning curve, and than can be an expensive learning curve. It's unrealistic to think you can go into the markets, you know, cold and know everything there is to know about day trading.

Ted: All of that said, for those folks who do have some discretionary funds available to them for this, as they might use to go to Vegas or anywhere else, or they think they're really that good, they can get tips from you guys. Now, where do you get your information? Where does your research come from?

Ray: Well, for example in the newsletter we do a lot of technical analysis. I know you have a background in technical analysis yourself. And we mix had with fundamentals about the company. One thing we should stress is that in our service we do trade stocks that are... that do have good fundamentals behind them. So, we want to be trading the higher-quality names so that if we do have to hold them a little bit longer than a day or two or even a week that we are in good solid positions. And that's something I want to stress to your viewers.

Ted: We're not talking about over-the-counter stocks with eight ticker symbols or penny stocks here.

Ray: Yeah. I mean, we do cover some of those from time to time in our higher-risk segment of the service, but largely we recommend sticking to stocks that are also good investments. I think one thing that should be pointed out is before you ever think about becoming a day trader, you should be proficient at investing and again, day trading should be part of an overall investment.

Ted: But let me ask you this. Some of your holdings, AMR, AOL, dell, Monsanto, are these stocks you want to be in and out of on a hourly or daily basis?

Ray: I own these in my long-term portfolio.

Ted: What's long term for you?

Ray: Well, for me long term, like I say, I have long term and short-term recommendations that I service. The stocks you just covered are ones I happen to hold for the next three to five years.

Ted: Okay.

Ray: But at the same time we recently day traded AOL, bought it at $102, $103, sole it at $119 and then went short. So, a stock like that, if you get in on the wrong side of the market and you're going to have to hold it for a month or two, there's always going be buyers of AOL. Nature got a sound business behind them. So, like you say, it's not some five-ticker stock that, you know.

Ted: Ray, we'll leave it there. Folks who want to tune in on your location it's www.daytraders.com?

Ray: That's correct. DayTraders.com. We have a two-week free trial for all subscribers.

Ted: Thanks for joining us.

Ray: Thank you for having me.

Ted: Senior editor of DayTraders.com, from San Jose, CA today.