"Stupid" Investment of the Week: "A Beginner's Guide to Day Trading Online"

If you swim in a shark tank during feeding time and can't recognize the bait, chances are you're about to become fish food.

If you plan to swim with the sharks and your only instruction in swimming has come from a book, the chances that you'll be eaten rise dramatically.

So if you buy "A Beginner's Guide to Day Trading Online," by Toni Turner, and use it as your entry into the race of rapid-fire stock jockeys, you could be preparing yourself for slaughter, and you're definitely making a Stupid Investment of the Week.

Stupid Investment of the Week showcases the flaws and problems that make an investment less than ideal for the average consumer. It is written in the hope that spotlighting trouble in one situation will make it easier to root out elsewhere.

Turner's book, coming out in its second edition in February, is the first book to capture Stupid Investment of the Week.

At $15.95, it hardly constitutes a major outlay of capital, but it does qualify as an outlay of cash in the expectation of a return — the ability to go day trading. The average reader is likely to find it falls short.

As a general rule, books on investing and managing money are as good as the reader. If the buyer takes the time to find the right match of information, complexity, and entertainment so that they come away with the emotional discipline to set a plan in motion and see it through, then the book is a success.

In that vein, some of the worst financial books have had their success stories.

By no means is Turner's book one of the worst investment tomes I've ever seen. It is filled with solid information for people hoping to learn about charting techniques and how to better read the short-term action.

But take that information and day trade with it?

No way.

Day trading is buying and selling a security within a single trading day, and it most often involves stocks and foreign currencies.

The typical day trader tries to capitalize on small, quick movements in highly liquid stocks or currencies. A variety of strategies are used — trend trading, arbitrage, swing trading and more — to gain a perceived edge on the market.

Successful traders generally hedge their strategies, matching issues they think will go up with others they expect to fall.

Most observers suggest 90 percent of the people who try day trading fail at it. Success is perceived to be better — but not by much — if a trader hooks up with a trading firm.

In short, trying to start day trading by reading a book is like listening to someone read you the rules of football, s then trying to go referee the Super Bowl.

You might not get everything wrong, but the speed of the game and the complexity of the rules will make it hard to make solid, snap judgments.

"The dumb money out there with 20 grand in its account, trying to day trade online from home, loses everything," says Don Bright of Bright Trading, a Las Vegas-based trading firm.

"These people are dead money, they're the ones who are going to lose this game to professional day traders and institutions and hedge funds. ... Sometimes, in this job, you have to be glad that you don't see the face on the other side of the computer, because you'd feel bad about taking their money," Bright said.

More than virtually any other form of investing, day trading is akin to a game, kind of like playing high-stakes poker or blackjack. It can be just as dangerous, which means it's no place for average investors.

Turner's book classifies itself as being for that market just by using the word "beginner" in the title.

Turner does not downplay the danger, noting in an interview: "Active trading and investing are two entirely different animals, where the risk-reward picture is entirely different and the profit goals are entirely different. ... But even someone who wants to be an investor, and not an active trader, can benefit from learning how to read the price charts.

"If people knew how to read a simple price chart, they would have sold Enron at $62 [per share] rather than at 25 cents."

But that's not the education someone is seeking out from Turner's book, the first edition of which was published in 2000, right as the market and the day-trade-from-home boom seemed to be peaking.

The book spends most of its pages combining each educational lesson with encouragement to go out and do it.

And yet there are few beginning investors who truly understand stochastics — an indicator of momentum that consists of two lines — or the MACD (moving average convergence/divergence), or who can read the book's many varied and detailed charts, then go out to use them.

That's not a knock on day trading or the people who do it. There are some very bright people who make a living at it, but I don't know any who got their start at home online after reading a beginner's book.

That's also not necessarily an endorsement of some of the software or educational programs that hope to turn beginners into stock jockeys. Several of those educational platforms have been previous picks for Stupid Investment of the Week.

Day trading requires conviction, knowledge, an iron stomach, and access to risk capital, the kind of money the investor can afford to lose.

Every successful day trader I've met has stories of trades gone wrong that would scare most wannabes right into certificates of deposit.

While Turner's book appropriately addresses the risk, it's hard not to come away thinking you can be the one to make online day trading work, a feeling that's likely to last right up to the moment when you're swimming in the shark tank and they're eyeing you hungrily.

Chuck Jaffe is senior columnist for MarketWatch. He does not own or hold short positions in any securities covered by Stupid Investment of the Week. If you have a suggestion for Chuck Jaffe's Stupid Investment of the Week or a comment about this week's column, you can reach him at jaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.