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An ‘extremely difficult profession,’ day trading nonetheless popular

Technology has made it easier to practise, though ‘emotionally it can kill you’


Date: November 26, 2015

As anyone who has ever tried it can testify, day trading is not for the faint of heart. It’s an occupation whose ranks rise and fall with the strength of equity markets and upon the strength or weakness of the job market. There are few other occupations where you hope for extreme volatility, counting on daily, hourly or minute-by-minute market swings to go your way.

Those with the dedication and commitment to it practise it enough that it can honestly be called a career, but those people are a minority. Most so-called day traders wash out within a year after losses, setbacks and frustration.

What has changed over recent years is that trading platforms have grown more sophisticated and easier to use, and new securities to trade continue to emerge, such as exchange traded funds (ETFs), which can function as day trading vehicles.

“I have been trading for five years and it is just becoming easier to access. Anyone can start a trading account, whether it be stocks, futures, whatever,” says Vancouver-based Lino De Marchi, who describes himself as a professional futures trader and trader coach.

He says that in his West Coast circle of traders, the majority are engaged in stock trading, with a smaller group made up of futures traders like himself.

“It has gotten popular across the country and around the world, but that being said, it is an extremely difficult profession to be in,” he adds.

Like many day traders, Mr. De Marchi has stuck to the trading niche that has brought him success, namely futures trading. But he is aware of the latest securities available for trading, such as ETFs, which offer the same liquidity as stocks and may provide better volatility in certain markets, as well as low transaction costs.

“It is because the margins are very small, kind of like why people trade futures,” he says of day trading ETFs. “You can go in with $1,000 or $2,000.

“If you trade equities, and if you want to trade 10,000 shares of something, you are going to need a lot of money – $25,000, $50,000 to $100,000. So they can hold that same position in an ETF for a quarter of the money. That is why people are drawn to it and there are a never-ending supply of them.”

The economy, too, seems to provide a never-ending supply of would-be day traders, notes Mr. De Marchi, who offers online training via his website “It is a big thing I hear, for sure. People come to me and say, ‘I’m at home, I have lost my job.’”

He has trained a few out-of-work oil and gas engineers who have found him because he often trades crude oil futures contracts. “I have trained two or three very smart individuals who have done pretty well.”

With Canada-listed ETFs, one of the difficulties is that most of the low-cost funds do not boast the necessary trading volume, says Eric Kimia, founder and publisher of ETF Trade Advisor.

“Canadians don’t have a lot of choice for day-trading ETFs. It is all about volume,” Mr. Kimia says. “If they don’t have volatility as a day trader, they are cooked.”

Mr. Kimia says, “You really want a volume of about one million shares a day, so that the spreads are about a penny, hopefully,” he advises. “The most well-known ETF in Canada is XIU,” the iShares S&P/TSX 60 Index fund. It typically boasts trading volumes over that magic one million mark.

By comparison, another popular ETF offered by BlackRock, its iShares Core S&P 500 Index ETF (CAD-Hedged), under the ticker XSP, generates far lower daily trading volumes and is not as good a candidate for day traders despite its relatively high profile.

Mr. Kimia advises those interested in day trading to think long and hard about it as a career choice. “Day trading is a tough business and emotionally it can kill you.”

Jason Berry, a Toronto-based manager with Blue Point Trading Worldwide Ltd. and “professional day trader,” is aware that some people day-trade ETFs but considers the funds “more of a buy and hold” strategy just because the volatility and the volume is not there.

Some traders, if they have a lower risk tolerance, might venture to ETFs, he says. “But for intra-day trading they are looking for market swings and huge volume, three million to five million shares being traded.”

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