WASHINGTON (AP) - Stock market day traders are warned by firms
of the enormous stress they will face and the risk of being financially wiped
out. But they're also told they can be their own bosses and strike it rich.
State regulators, who have cracked down on a number of day-trading
firms for alleged abuses, said Friday the majority of those investigated
have overblown the potential profits and played down the risks.
And some psychology experts said the anxiety generated by intense,
volatile day trading of stocks by computer can lead the players to take
their frustrations out on their families and friends.
Mark O. Barton, who shot and killed nine people at two day-trading firms
in Atlanta on Thursday, was one of a band of about 5,000 investors
around the country who trade full-time, paying the firms that host them a
commission for each trade. These players ride the tiniest ups and downs of
the stock markets, squeezing profits by rapidly buying and selling shares
electronically. Thousands of dollars of their own money are on the line,
requiring nerves of steel and the ability to make snap decisions.
The day traders, many of whom have abandoned their regular jobs, are
distinct from the 5 million or so amateur investors who occasionally trade
on the Internet at home or at work.
For day traders, the market IS their work - every day, from opening bell
to close.
Day-trading firms, sometimes in response to pressure from securities
regulators, warn potential customers of the risks.
The Web site of All-Tech Investment Group Inc., a company where
Barton traded, carries this statement: ``Warning: Active electronic stock
trading is risky. Participants should be aware of, and capable of assuming
the inherent risks.'
Richard Wolff, owner of Equity Trading, a day-trading firm on the sixth
floor of New York's Empire State Building, said the company managers
use weekly seminars to inform investors of risks.
``We stress that this business is not for everybody,' Wolff said. ``You
could potentially lose.'
But some firms lure prospective day traders with aggressive advertising
promising instant wealth and the opportunity to break free from a
traditional job.
``There are boundless opportunities,' James H. Lee, chairman and
president of the Electronic Traders Association, said in an interview earlier
this year. ``There's a great deal of success in the business.'
Marc Beauchamp, a spokesman for the North American Securities
Administrators Association, said most day traders lose money. Most firms
that have run into trouble ``have misled customers by exaggerating the
potential profits of day trading and downplaying the risks of losses,' he
said.
Since last fall, Massachusetts has filed or settled complaints against seven
firms. One firm promised a ``six- to seven-figure income per year,' said
securities regulators. Another said 85 percent of its customers succeeded.
In Texas, authorities closed two firms accused of operating without state
licenses.
The rush for stock market gold can create extreme anxiety, in the view of
some behavioral experts.
``It's a very high-pressure situation. ... I've seen people hit the wrong
(computer) key out of anxiety' while day trading, said Steven Hendlin, a
clinical psychologist in Irvine, Calif. ``There's a lot of coffee drinking, a lot
of squirming.'
The exasperation of a day of market losses can make a trader irritable
around family and friends or make the person withdraw, said Hendlin,
who is writing a book on day trading. ``A guy may blame his wife and not
even be consciously aware of the cause of his anger,' he said.
The sharp swings between gains and losses ``have emotional
consequences. ... It can be all-consuming for people,' said Dr. Jeffrey
Kahn, a New York psychiatrist who is the president of WorkPsych
Associates, a corporate mental health consulting firm. ``There may be
problem traders who are not too different from problem gamblers.'
Coincidental to the shootings, the National Association of Securities
Dealers, which governs the Nasdaq Stock Market, approved a rule
Thursday requiring firms that promote day trading to disclose the risks to
customers - before they open accounts. |
