wsj.com
Edit; Link no longer works, but it might still be out there somewhere.
All Net, All the Time
Tim Stefanich Calls Himself an 'On-Line
Day Trader.' That's an Understatement.
By JASON ANDERS
Tim Stefanich doesn't exactly fit the profile of a typical stock trader. The 34-year-old spent the first part of his professional life as a bodyguard (one of his more notable bosses was Playboy patriarch Hugh Hefner). He also does his research and executes all his trades on-line.
Mr. Stefanich -- who describes his profession as "on-line day trader" -- begins his workday in his Los Angeles home at around 4:30 a.m. In his "trading" room, with three computers going all the time and CNBC blaring in the background, he scans on-line newspapers and investment Web sites for any news that might move the market. No news is too small; he considers anything that can boost a stock even 1/8-point a good investment.
His morning is spent jumping into (and sometimes quickly out of) stocks. He says he'll almost always make at least one trade a day, and sometimes buy into 10 companies or more. By afternoon, he has sold most of his positions, and by the end of the day has closed out of everything. "I never hold anything overnight, or even for an entire day," he says. "It's just too risky." He learned that the hard way last year, when he decided to jump on a plane for a quick visit to his girlfriend in Phoenix. The market slumped during the day, and by the time the plane landed, he had lost $34,000 because of a margin call.
Stay Sharp
"You have to do your research, and be constantly on your toes," he says. "That's just the nature of the market. You need to always know what's going on, or you're going to get burned."
Nothing drove that point home better than last week's stock-market turbulence, Mr. Stefanich says. The volatility has kept him somewhat sidelined, he says, and he's eager to return to his rapid trading style. "It has been hard, because I'm a day trader, and I have gone a couple of days without trades," he says. "It will be good to jump back in."
Ann Summa
Tim Stefanich
The explosion of low-commission on-line trading services is luring more and more people like Mr. Stefanich away from their brokers and onto the Internet, where free stock quotes and information and discussions about companies abound. Mr. Stefanich, who says only that he makes "a lot" from trading on-line, has been trading full time for the past eight years, but switched to on-line trading two years ago.
"I felt like I didn't have as much control as I wanted, and it was harder to monitor my portfolio," he says of traditional, off-line trading. "I also got tired of paying the high commissions."
Mr. Stefanich, who says "on-line trading is one of the greatest jobs to have," mainly trades in U.S. technology stocks that range in price from $5 to $75 a share.
Although he sells his entire short-term portfolio at the end of the day, Mr. Stefanich does own three stocks long-term: Dell Computer Corp., Merrill Lynch & Co. and Outdoor Systems Inc. He considers them his fallback stocks, saying they are stable and have solid track records.
Mr. Stefanich says investors must be willing to trade "fast and furious" to make money at day trading. An example: Earlier this year, he took a 5,000-share stake in computer-game maker 7th Level Inc. at $2.969, and sold a short time later at $3.063. Later that day, he bought another 5,000 shares at $4.375 and sold at $4.6875. Near the end of trading, he bought 3,000 more shares at $6.938 and sold them at $7.344. His total gain for the day: $3,250.
One of the stocks that has been the most profitable for him is Ascend Communications Inc., which he says he traded more than 100 times in one and a half years.
Mr. Stefanich says it's easy to suffer information overload in on-line trading, where it can be dizzying to try to keep up with all of the information whizzing around on the Net.
He says he did get overloaded in the beginning. But he has since narrowed his Internet news sources, so he is able to concentrate on a handful of Web sites and still skim a majority of them. He says he has become more savvy about on-line news, which allows him to absorb more information in a short amount of time. There is a financial incentive: Mr. Stefanich says learning how to use on-line trading systems can be expensive.
"You really have to do your research and understand how on-line trading works," he says. "My first six months trading on-line, I probably lost $60,000. Almost every trade I was doing was a loss." Being a novice at on-line investing, he says, he didn't know when to take a profit or loss, and he was playing stocks that moved a lot more quickly than he was accustomed to. His losses were also bigger because he was executing more trades, and investing more, than he did trading off-line.
"It takes a long time to get the hang of the momentum," he says. "It almost broke me. This is something you either learn real fast or you just get out."
Mr. Stefanich is a well-known fixture on Silicon Investor (www.techstocks.com), a popular on-line message board. He has posted more than 7,000 messages in the nearly two years he has been a member of the service, asking people what they think of certain companies and attacking those he disagrees with. (In one 24-hour period, he posted 52 times.) He uses his middle name on-line, posting under the alias "Tim Luke."
He says he spends a considerable amount of time monitoring the message boards, where tens of thousands of messages are posted every day. Many of his investments are driven by rumors posted on the boards. But he says sorting out the facts from the hype can be difficult.
"There are a lot of shady people on Silicon Investor," he says. "You get a lot of people on there paid by smaller companies to come on and promote their stock. You've got to be careful about who you trust."
Still, keeping track of the so-called hypsters can be profitable, Mr. Stefanich says. He says he sometimes buys into a company that is being heavily hyped on-line, even if there aren't any fundamentals to support a rise in the stock price. Experience has shown him that enough people will believe the hype and buy in.
"I'll be honest, I use them to my advantage," he says. "There is no way around it. That's the way the game is played on-line."
On-Line Enemies
Being a prolific poster on the message boards, Mr. Stefanich acknowledges that he has his share of on-line enemies, something he attributes to the fact that he "tells it like it is." Silicon Investor says it has suspended his account in the past for posting messages that it deemed abusive toward other users, but declines to be more specific.
Mr. Stefanich also declines to get into specifics, but shrugs off the suspensions. "I don't like to see people getting ripped off, and I don't have patience for people who are trying to do that," he says.
Despite the long hours and generally solitary pursuit, Mr. Stefanich says he can't imagine doing anything else. "The money helps you deal with that," he says.
"My friends think I'm crazy," he adds. "They don't have the patience or nerves to do what I do. But there is a lot of money to be made if you put the time into it."
--Mr. Anders is a staff reporter for The Wall Street Journal Interactive Edition in New York.
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