Day-Trading Country: Quieter, Warier, But Still There Despite Nasdaq Debacle
By CHERYL WINOKUR MUNK
Dow Jones Newswires
NEW YORK -- When stock markets were on a tear, it was easy money for the fast-trading stock speculators known as day traders. But now, some are finding that they have to work harder.
"There's a saying, 'Don't confuse brains with a bull market,' " said Greg Capra, president of Pristine.com (www.pristine.com), a company that trains day traders. It is a lot easier to make money when stock prices are climbing than when they are all over the place as they have been in recent months, he added.
That isn't to say that day traders aren't making money. Some still are. But for others, the market's wild ride has taken its toll on profit and has caused them to be more cautious.
Shea Halligan, the founder of Daytrading.net (www.daytrading.net), said the firm's volume, while picking up, is probably off 30% to 35% from what it was a year ago.
Harvey Houtkin, chairman and chief executive of All-Tech Direct in Montvale, N.J., said his proprietary traders haven't been making as much money as they did in early 2000, because markets have become less liquid and less fluid.
As for retail day traders, those who trade for their own account instead of a firm's, results vary by a trader's ability and experience. Not surprisingly, several traders said that they have had to change their strategies to adjust to the market's choppiness. Jai Ramoutar, director of training at All-Tech (www.attain.com), said that since early summer, a number of traders have come back for refresher courses or to learn new trading strategies.
Some traders are more risk-adverse these days, and many have turned away from techniques that do well in bull markets, such as buying stocks on a dip. "Now people buying dips are getting their heads taken off," Mr. Halligan of Daytrading.net said.
Todd Marcus, a day trader with Edgetrade.com (www.edgetrade.com) in New York, said he has been able to make money by shorting stocks, or betting against them by borrowing shares and selling them, hoping they decline before he has to return the shares. Still, reaping profits has been trickier: "It takes a little more to recognize what kind of trend the market's going to go in."
Andrew Lias, an All-Tech day trader who has been in the business since 1994, said he tends to get out of a losing position quicker than he used to. In the roaring bull market, if he was long and stayed long, stocks bounced back. "Now they don't come back," he said.
Adrian Lufschanowski, a day trader at ProTrader Group (www.protrader.com) LP in Austin, Texas, for almost five years, said it used to be that if a stock went up a point and pulled back half a point, he might buy more and watch it go up again. Now, he is likely to get out and re-enter the market later if there is an opportunity.
Mr. Lufschanowski said he also takes less risk now than when the market was soaring. In the past, he may have taken a position with 5,000 shares, whereas now he starts with 1,000 and inches his way in. "Missed money is better than lost money. You don't want to get too aggressive and get killed," he said.
Not all days are bad ones. Don Bright, a trader and director of education at Bright Trading Inc. (www.stocktrading.com) in Salt Lake City, said the firm, which does not have retail day traders, had its most profitable and highest-volume day on Jan. 3, when the Federal Reserve cut interest rates.
James Lee, president of Momentum Securities of Houston, said December was the firm's best month for overall volume, volume per trader and net profit per trader. "That's happened against a Nasdaq [Composite Index] that has teetered under 2500 from a high of 5200," he said.
Nonetheless, day trading is a tough business, particularly in a rough market like this one. A 1999 study by the North American Securities Administrators Association Inc. found that the majority of day traders lose money. Matt Nestor, the director of the securities division in Massachusetts, said he stills believes this to be true. Though a number of day traders make money, he said losses have been accelerated by stock-market declines.
He described a conversation he had with a waiter in Boston about a month ago who recently quit day trading after blowing all his money. "Now he's bussing tables to pay his rent, and I don't think that that's unusual," Mr. Nestor said.
Newer day traders in particular are likely to have a tougher time in the current market environment. "More experienced people who have had success in the past are having a pretty good run. Less experienced people who are trying to learn are finding it a lot more difficult and are not faring very well at all," said Gary Mednick, president of On-Site Trading Inc. (www.onsitetrading.com) of Great Neck, N.Y.
Dennis Oblack, a day trader with All-Tech who has been in the business for two months, said it was probably easier to make money a few years ago than now, when it is difficult to identify definitive trends. He said that about 50% of his trades are profitable, but the gains aren't enough to offset his losses and cover commissions. Still, he said he is doing better than he did when he started. Then, only about 30% of his trades were profitable, he said. He declined to say how much money he has in his account.
Mr. Capra of Pristine.com said he thinks a down cycle will wipe out the weak. There are always people coming and going into the field, but "in a market like this, more people will leave," he said.
Write to Cheryl Winokur Munk at cheryl.munk@dowjones.com |
