Day Trading Lives on Despite The Bursting of the Net Bubble
By STACY FORSTER
THE WALL STREET JOURNAL ONLINE
After the dot-com bubble popped two years ago, most assumed that amateur online traders would go the way of the dinosaur. Internet brokerage firms saw trading volumes plummet as many so-called day traders, burned and chastened, gave up and sought out a less risky investment strategy.
But though their numbers have diminished, day traders are far from extinct.
Last week, nearly 4,400 individuals, down from 5,400 a year earlier, navigated New York City streets brimming with screaming hordes of teenage girls outside MTV's Times Square studios, and a naked cowboy strumming a guitar, on their way to the Marriott Marquis for the International Online Trading Expo.
At the Expo, Jack Schreiner Mettel struggled to carry a shopping bag overloaded with books, pamphlets and handouts about trading and market timing. Despite the grim market picture, Mr. Mettel is raring to get started. The Staten Island retiree wants to become an "active" trader, using a $20,000 stake to buy and sell stocks, as well as build on small mutual fund investments and technology stock positions.
"Right now is the time," he says. "The whole economy is going to improve by the end of the year."
Layoffs and weak corporate profits, and a trail littered with failed active traders, is no deterrent to Mr. Mettel. Feeling much more like 1999 than 2002, the mantra emanating from the Online Trading Expo is: Anyone can get rich in the stock market.
Trade What You See, Not What You Believe
For the remaining true believers, vestiges of the old days remain. Crowding out "Warren Buffett's Portfolio" in the conference's bookstore is "100 Ways to Beat the Market." Seminars about day-trading schools and the challenges facing active traders are among the Expo's most popular.
Investing? The three guys standing behind Datek Online Brokerage's sleek modern-wood display chat among themselves, rather than with would-be traders, at their empty booth. Datek, which does cater to active traders, seemed unable to attract a crowd in search of fool-proof formulas. Their complimentary highlighters are stacked neatly on the tables, waiting for takers.
Across the aisle, eager trading recruits jostle to watch Larry Pesavento, the self-proclaimed "Trading Tutor," as he tracks the market and makes live trades. Listening to Mr. Pesavento, who trades for a hedge fund in San Diego, feels like peeking inside a time capsule. It's reminiscent of day traders of the late 1990s, who spent days trading in and out of positions in Internet highfliers such as CMGI or Yahoo. He eyes a stock chart for tell-tale patterns. He's a shark circling his prey.
"I want to get this down another half point," Mr. Pesavento says, willing the shares of Applied Materials to tick downward. The pattern seems obscure, but many in the throng nod knowingly. Minutes later, the stock nears his target point. "I'm getting antsy," he says. Curiously, he doesn't click a mouse. At the Expo, the Trading Tutor dials his cellphone and places his order through his broker.
During a break, Mr. Pesavento explains what people are seeking: Ideas. And hope. And, like any enthusiast, the diminished crowds present few challenges. "There's a better quality of people coming through," he says. "Most of the people who lost their money in the Nasdaq are back flipping burgers."
"I'm going to take control"
Online traders have definitely evolved since the tech-stock collapse taught them a brutal lesson in survival of the fittest. Gone is the twenty-something rookie who set up a 486 computer in his parents' basement in order to trade his way to fortune. Judging by the Expo crowd, the newcomers to active trading, people like Lori Garbacz, a 43-year-old former golfer on the LPGA tour, or Steve Muench, a 47-year-old dentist from rural Pennsylvania, are bit older and a bit more sober-minded.
But the lust for action hides just beneath the surface. And why not? The wreckage of yesteryear didn't stem from a failure of method, according to Mr. Pesavento. A winning strategy is merely a question of homework. "Most people lose money because they don't understand," he offers soothingly.
Ms. Garbacz and Mr. Muench are eager to learn. They are taking a class taught by David Nassar, one man credited with writing the book on getting started in day trading. At a booth for MarketWise, a trading school in Broomfield, Colo., where Mr. Nassar teaches, more than 2,000 people stopped by throughout the three-day Expo to discuss signing up for a class. Fifteen have signed up for a four-day course at the Colorado trading floor from the Expo, says Pete Stolcers, senior vice president for MarketWise's parent company, Chicago-based direct access firm Terra Nova Trading.
Ever the competitor, Ms. Garbacz is confident she'll learn to navigate the market as well as she did the golf course. Bad advice from a financial adviser in the early 1990s convinced her of that. She wanted to buy stock in America Online, and her adviser disagreed. "That made me so mad," she says. "I knew that was a great stock. So I said, 'I'm going to take control.'"
But she's taking her time. Even with that AOL insight nearly a decade old, Ms. Garbacz estimates she'll hold off a year or two before becoming a full-time trader. "I just want to wait and be patient," she says. "It's not for the faint of heart."
"There's money to be made"
Margaret Spagnuolo, a 55-year-old retired manager from Vienna, Va., doesn't fit the '90s gunslinger profile either. With a warm smile and positive, can-do attitude, Ms. Spagnuolo seemed ready to serve up a cup of hot cocoa to an 'N Sync fan in from the cold streets of Times Square.
Already comfortably retired, she wants something to do while her husband golfs. After watching her financial adviser squander $800,000 of an inheritance from her brother, she decided that trading her own account might be a sufficient distraction. And the bar for success isn't high. "I can't lose any more money than this guy has lost," Ms. Spagnuolo says. After a couple of years with an online Fidelity Investments account, she recently signed up with Terra Nova.
Beneath the serious words, market fantasies remain alive and well. The fallen reputation of amateur day-trading draws a dismissive reaction from Ms. Spagnulo. "I've always been the oddball out [in my family]," she says. Plus, she adds, "There's money to be made."
Write to Stacy Forster at stacy.forster@wsj.com
Updated March 1, 2002 8:24 a.m. EST |
