Day traders get stiff warning

FSA cautions over get rich quick dreams

Online investors looking for a quick buck have been told to take care or risk losing their shirt. The warning was delivered by the Financial Services Authority (FSA) in the wake of a massive increase in the volume of share dealing by private investors. It's the second warning the FSA has dished out about online trading and Internet stocks in as many months. In a message directed at consumers, the FSA said the upsurge in demand was partly due to a number of investors new to the market, many of whom are particularly interested in smaller, new technology companies. Investors must recognise that these smaller stocks, by their nature, can often be illiquid and thus subject to volatile price movements, the FSA said. Christine Farnish, of the FSA, said: "Consumers investing their money in smaller company shares need to know that the prices of those shares can be very volatile - both up and down. They need to think carefully about the risks involved before deciding what shares they buy and how many," she said. In October, Howard Davies, head of the FSA, warned investors about the hazards of day trading on the Internet. He said that only three out of 10 day traders in the US made any money, while the rest lost out. ® Related stories: FSA warns of Net trading dangers Finance watchdog calls for e-regulator status Cash Register

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