March 4, 1999
that anyone can trade stocks on the Internet, a hefty batch of "day
traders" are becoming a force to be reckoned with for seasoned traders.
Ray Johns of Daytraders.com and Marc Beauchamp, of North American Securities
Administrators Association, Inc., answer your questions.
Boyce of Detroit, MI asks:
How much responsibility if any do day traders bear for the up and down swings in the market?
Beauchamp, of North American Securities Administrators Association,
Media accounts suggest that day traders do impact the stock market, especially in some areas such as Internet and tech stocks.
Johns of Daytraders.com responds:
Well, simply put, in the stock market for every buy order there must be a corresponding sell order and vice versa - so I don't know if I'd say day trading has much of an impact in the real sense of up and down swings in the market. As well, the trades often executed by day traders are relatively small when compared to some of the larger 20,000, 50,000 or even several hundred thousand share block transactions effected by larger firms on Wall Street. I think it's difficult to say "day trading" is any more responsible for the up and down swings of the market than any other aspect associated with buying and selling of stocks in the market. Certainly one word from an influential market analyst or someone such as Alan Greenspan or Warren Buffett can [and often does] have a far great and much more broad impact on the market that the orders placed by day trader I would think.
I think, if anything, the added orders placed by day traders simply increases the liquidity and volume seen in the markets, and perhaps not so much the actual direction of stocks or the market as a whole.