Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or failing in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but running the risk of higher losses too.

As SEC Chairman Levitt recently stated in his testimony before the U.S. Senate, "[Day trading] is neither illegal nor is it unethical. But it is highly risky." Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.

Here are some of the facts that every investor should know about day trading:

Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it is clear: day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.

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Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even.

Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads.

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Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.

Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee. Once again, don't believe any claims that trumpet the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations.

Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading.

Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator and at the same time ask if the firm has a record of problems with regulators or their customers. You can find the telephone number for your state securities regulator in the government section of your phone book or by calling the North American Securities Administrators Association at (202) 737-0900. NASAA also provides this information on its website at www.nasaa.orq.

http://www.sec.gov/consumer/daytips.htm
Last update: 09/23/1999

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Freedom Investments, Inc. periodically will advise you of certain order practices, which are of importance to you. In that connection, please be advised that in the ordinary course of business, Freedom may execute orders to purchase and sell securities that have been entrusted to us, by you, with a market other than the Primary Market for those securities.

Our decision to place orders on any of these markets may be determined based on the competitiveness of that market of the security in question, or on other factors, including a payment which we may receive for order flow.

In all cases, the alternated market shall be required by Freedom to compete with the best available bid or offer shown in the Primary Market, and would be required to match sales with respect to volume with the Primary Market.

It is important that we advise you that Freedom may receive remuneration for placing orders in an alternate market. Such remuneration is in the format of rebates. Such rebates may vary from time to time, but will not exceed two cents per share.

If at any time you wish to have an order placed for your account on a specific market we will be happy to accommodate your wishes, and the order will be placed in the market specified by you at the time you place the order. We do not believe that the aforementioned practices compromise the execution of your orders and are generally in line with industry practices. Should you have any questions, please feel free to contact Freedom Investment's customer service department.

Investors should also be aware of the availability of information from the National Association of Securities Dealers (NASD) as follows:

The NASD Regulation Inc. Public Disclosure Program Hotline Number Is (800) 289-9999.

The NASD Regulation web site address is www.nasdr.com. An investor brochure that includes information describing the NASD Regulation Public Disclosure Program may be obtained via the NASDR web site or through NASD media source at (301) 590-6142.

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Nothing herein is to be construed as a solicitation or any transaction. The information presented has been obtained from sources considered to be reliable, but it is not purported to be complete or without error. Freedom Investments, Inc. and Fahnestock & Co., Inc. and/or the officers and directors, and/or members of their families, may at times have positions in any securities mentioned. All commissions and fees are subject to change with notice.