Chat rooms -- havens for the 'social' investor
Money Central Investor - 8/25/99
moneycentral.msn.com
Loaded with good and bad advice, these Net forums can be dizzying but fun places to learn and exchange investing ideas. Just beware of speculators hawking dubious stock tips.
By Risa E. Kaplan and Jon D. Markman
Investors today are always running on Internet time, using new-age discussion formats like bulletin boards and chat rooms to keep pace with the fearsome flood of information. The best of these communities turn the ideas, discoveries, opinions and questions of private investors into useful tools that can help solve the puzzles of investing as fast as a few odd pieces can be posted.
In this article, we'll explain how to use chat rooms to your advantage. In two weeks, we'll follow up with an article on how to find and use some of the best bulletin board sites on the Web. With your skepticism radar fully engaged, you can leverage the cunning of the Web collective for help in narrowing your focus, discarding bad ideas and hanging tight when the market just makes no sense.
From G-rated to the Badlands
Investment chat rooms are like coffee-house discussion groups on speed. The tamest of the breed are found at sites such as MSN MoneyCentral, Yahoo! Finance and Excite. These are typically amiable discourses that can be fun and educational. The number of participants at any one time will vary from one person muttering to himself all the way up to 1,000 people or more.
Some are hosted by investment celebrities; most are hosted by whomever shows up. But the day-trading chat rooms of the Internet Relay Chat (IRC) are an entirely different beast, where widely followed speculators tell legions of fans which equities or options to hold onto for a half a point and when to dump. Here's an overview of leading investment-chat sites -- first the G-rated ones and then the Badlands. Chats on all other financial portals are similar; just click the chat links on their home pages to start.
Yahoo! Chat
Because of Yahoo!'s size and reach, a decent chat is almost always going on, day or night in its markets chat rooms. The site's chat technology is excellent and easy to use. You'll need to register at Yahoo! first and then visit the list of chat rooms. Click the link on the top navigation bar for News And Business, and then choose Biz: StockWatch. That launches a Java chat application. After it loads, you'll find yourself in a virtual room with anywhere from a half dozen to several hundred people. On the right is a pane listing all the chatters. On the bottom is a box of Tools that will help you discover who's chatting, change rooms, or create a private room.
Related Sites
--------------------------------------------------------------------------------
Yahoo! Chat Rooms
Yahoo! Chat Events Calendar
Chat rooms are generally free-for-all conversations with many threads, or lines of thought, going on simultaneously. This is not a place to hang out if you need to feel focused and in control. Watch for awhile, and then throw out a comment or a question. Someone will usually respond after a few beats. If you strike up a nice conversation with someone, you can start a private conversation. Click his or her name in the Chatters pane, and then click the PM (private message) button at the bottom of the pane. A window will open, and you can begin a conversation that's not much different from a phone conversation.
Occasionally, Yahoo! holds chats hosted by gurus ranging from Individual Investor chief Jonathan Steinberg to TheStreet.com columnist James Cramer and Fortune magazine writer Andrew Serwer. Check the Events Calendar for a schedule. If you have a My Yahoo! account, you can click a link to add the event to your Interactive Calendar, and the site will send you an e-mail reminder.
MSN MoneyCentral Chat
MSN MoneyCentral's open, or unmoderated, chats are not generally as well-attended as the ones at Yahoo!. But our hosted chats are great places to get questions answered and meet fellow investors. On our main Discussion page, accessible in the Insight area or by clicking on the "Today's Best" headline at the bottom of the MSN MoneyCentral homepage, you'll see a schedule of the hosted events that occur at regular intervals, including a weekly one-hour chat with markets editor Jim Jubak and a weekly one-hour chat with MSN MoneyCentral's managing editor Jon Markman. The chats usually start with a topic and then become open forums for questions. Almost every question is ultimately answered, if not by the host, then by fellow chatters. A group of chat-room regulars has become so friendly that they've actually gotten together in person a couple of times, once on the South Carolina coast and once in New Orleans.
MSN MoneyCentral
Discussion
--------------------------------------------------------------------------------
See Discussion Highlights, the chat schedule, hot newsgroup topics and more. Or, go directly to the Open Chat.
To start, click the event link on the Discussion page at the listed time, or click the Open Chat link on the left navigation bar at any time. Type a handle (nickname) into the text box at the top of the page, and then click Join The Chat. During a hosted chat, you'll see a list of 30 to 150 guests in the right pane; the host's name is bold and has a gavel icon next to it. Type your question or comment in the pane at the bottom of the screen, and then click the blue cloud icon on the right to send your message.
You'll see your comment on the screen, and a fair question rarely goes unanswered. You have to read fast, though, because comments whiz past. Use the scroll bars on the right side of the pane to display missed comments. To preserve the whole chat, if you're using a Windows-based PC, click inside the chat pane, press Ctrl-A to select all the text, and then press Ctrl-C to copy. Open a word-processing application, and press Ctrl-V to paste the entire chat transcript into a document for later review.
Internet Relay Chat
If you have a taste for frontier life, you'll want to check out investment conversations in Internet Relay Chat, or IRC. This is the home of those infamous day-trading chat rooms that you may have heard the media finger as the birthplace of every ill that has befallen U.S. equity markets in the past half a decade. To get started, you'll need to download some software and then configure it. Remember that this is the Badlands. It's not supposed to be easy.
Related Sites
--------------------------------------------------------------------------------
mIRC
Active Trader
Visit mIRC to obtain the software required to run Internet Relay Chat. On the home page, click the Download mIRC link, and then choose the download site closest to you. Follow the directions on the screen for installation.
Run mIRC from your computer as you would any program. On mIRC's first screen, click Introduction to learn more about the program, and then close the dialog boxes by clicking the Xs in the upper-right corners. You'll face an Options dialog box. In the middle of the box, type your full name, e-mail address and nickname. Then choose a server from the drop-down list at the top of the dialog box. In the server drop-down box at the top, choose Othernet: US, MS, Vicksburg, and then click the Connect To IRC Server button.
A short scrolling notice from the server will then appear on your screen, followed by a dialog box titled mIRC Channels Folder. Type "#activetrader" in the narrow entry line, then click the Join button, and you're in. The #activetrader channel bills itself as the "#1 Live Free Financial Chat service on the Internet," and it's hard to dispute the claim. It seems to be busy day and night with users from around the world. The denizens seem savvier as a rule than the Yahoo! crowd as well, possibly because it's harder to find. Type a message or comment in the entry box, and it will be instantly visible to everyone on the channel. The channel's organizers have talked about moving their discussion group to the Web as a Java-based chat room; visit Active Trader to check on their progress.
Another top channel to visit is #daytraders. Although these channels look raw compared to Yahoo! and MSN MoneyCentral, they are usually monitored by "Ops," or systems operators, who boot users that employ foul language or go off topic. The Ops' names and directions for contacting them are displayed every time you log on. Press the Status button atop any screen to see them again.
Watch out for day-trader scams
If you like #activetrader and #daytraders, you might consider taking a look at pay-only trading chat rooms, which you'll find on the conventional Web at UndergroundTrader, Day Traders On-line or The Momentum Trader. At these sites, stocks are announced much like a football coach calls "plays" in what seems like real-time. For that reason, the day-trading rooms can read like virtual casinos.
Related Sites
--------------------------------------------------------------------------------
UndergroundTrader
Day Traders On-line
The Momentum Trader
But beware: Just as in Las Vegas, the odds are stacked against you. Many of the self-appointed gurus making trading-room calls have uncertain motives, and they may not themselves be doing what they're telling you to do. Indeed, it is suspected that many of the gurus hang out in secret chat rooms (or, um, talk by phone) before announcing their picks to the dozen or so big chat rooms. The plays have been pre-determined based on certain criteria. The stock is usually inexpensive with low average daily volume, and it has decent-looking charts showing strong support at the present price. Rumors about deals in hand are often surreptitiously self-placed at bulletin boards at Silicon Investor or elsewhere to set the scene.
Let's say a stock whose symbol is "HYPE" is trading at $5 with average daily volume of 50,000. The guru group starts the day by buying 200 to 5,000 shares each. The price immediately starts lifting because of the multiple orders. The group then begins posting its play in various chat rooms, hoping newbies will buy just on the basis of its recommendation. If 500 people pick up on the concept and each take 100 shares, the volume could easily reach its daily average in just a couple of hours. That will set off alerts on thousands of more legitimate traders' screens. The guru posts on the channel at every uptick to create even more excitement. The stock is now at $7.50. At that point, the guru announces a target of $8.50. Some observers buy at $8, believing there is still 50 cents to be made. Meanwhile the guru and his gang are selling HYPE. When the stock hits $8.38, it begins to drop like a rock. Within seconds, it is at $6.50.
Strategies
--------------------------------------------------------------------------------
Recent articles:
? Analyze your portfolio with the Investment Finder by Jon D. Markman, 8/18/99
? How to use our powerful stock finder by Jon D. Markman, 8/11/99
? Use put options as insurance on your portfolio by Randy Myers, 7/28/99
more...
The guru pats himself on the back, declaring to the room, "We hit the target." Few in the room realize that the guru and his gang have set sell limits well below that target. Some observers have scalped an eighth or quarter of a point, and the early buyers maybe made two or three points. But newbies are still holding at the high, rolling their eyes. They realize they have just become long-term investors, having paid $8 for a stock that in a few days will be back to $5. Tomorrow the newbies looking for counsel will post, "Is anyone still in HYPE?" And they'll get no answer.
Here are some basic rules of the road for IRC chat rooms: Assume everyone in the chat room is lying, even though most are actually friendly and helpful. Be wary of rumors that are hard to check out. Beware of posters who repeat a stock idea over and over without any explanation. And don't ever think you're going to double your money in a week by hanging out in a chat room, even if someone else tells you that they did. Finding the right stocks at the right time is much harder (and more rewarding) than that.
In sum, talk is cheap, but a misplaced bet on a low-priced, low-volume stock can cost you a small fortune. If you feel that you must trade on someone else's advice, you're much better off paying to subscribe to a legitimate online newsletter with a good public track record, such as the ones sold by Strategy Lab portfolio managers Tony Kolton, Bert Dohmen, Janet Brown or Terry Bedford.
|
