Day Trading: It's a Brutal World

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It can seem simple when shares are generally rising. Strong markets can mask underlying risks, like losing more than your principal when on margin. Concerned about just that, the National Association of Securities Dealers last week began requiring brokerage firms to disclose day-trading risks and to determine whether a client is suited before opening an account. None too soon. Day traders' favorite stocks have long been Internet and other high-tech companies prized for their big price swings. Since April, Net stocks have fallen on hard times, revealing many formerly brilliant day traders to be little more than lucky novices. Unfamiliar with strategies like selling short or hedging with options, many have lost big and quit. But the flushing out is far from complete.

--By Daniel Kadlec

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