What is day trading?

US investors can trade shares easily anywhere in the country

The news that many people were killed in the stockbroking firm All-Tech in Atlanta has raised concern about the growing practice of day trading.

The huge stock market boom of the last few years has made many Americans into millionaires, and has attracted many others into day trading - the practice of trading shares on a daily basis for profit.

All-Tech is one of the largest day trading firms in the US with about 1,500 active accounts, each trader having to put up $50,000 to open an account.

But the growth of the Internet and of low-cost Internet stockbrokers like Charles Schwab and E-trade has made it easy for private individuals to get involved in the stock market for much less. Each trade now costs as little as $9.95 (£6), and can be carried out from home, or at the offices of many stockbrokers.


A risky gamble

Some people have even given up their day jobs, attracted by the possibility of huge gains on the stock market.

But many people, who have only begun trading in the last few years, have not experienced a severe stock market reverse, only the boom conditions of the last few years.

Although he had not traded since April, witnesses suggested that the man believed to have carried out the killings, Mark Barton, may have sustained big losses in his stock market trading.

On Wednesday, all the major US stock markets fell sharply, on worries that inflation may be on the increase, and interest rates may have to rise.

The Dow Jones Average fell more than 180 points, or 2%, while the Nasdaq stock market, which appeals to many day traders because shares are cheaper, fell by 3% and has dropped by 7% in the past two weeks.

There have already been sharp reversals in some highly speculative stocks, especially in the Internet sector. Stocks like Internet bookseller Amazon.com, which increased in value nearly 10 times in the past year, are now worth only half its value of a few months ago.

Now there are fears of a more general decline in stock prices.

That could hurt not just day traders, but the millions of Americans who have stopped saving and have relied on the gains from their shares to pay for large purchases made on credit.

The boom has spread share ownership widely in the United States, attracted by the promise of ever-increasing wealth.

But it now appears that the risks of day trading could be tragically large as well.