Empowering investors
Adam Leitzes, Josh Solan, Forbes.com, 11.08.99, 12:00 AM ET
Savvy traders are using an antiquated Internet protocol to share ideas, gossip and boost their profits. Take a hint from these Wall Street cybergeeks--the Internet can empower investors of all kinds like never before.
One of the most interactive and unique applications available is Internet relay chat (IRC). In the past three years, IRC has emerged as a battleground for the day trading revolution. Particularly attractive is the ability to instantaneously communicate and exchange information and insight with thousands of other day traders. Unlike popular web-based message boards at Yahoo! and Silicon Investor, IRC offers real-time chatter with no rules and few limitations. Day traders in particular relish the speed and anonymity IRC allows.
IRC is nonbrowser based and requires a separate program, known as an IRC client. The extra download and setup can be an annoyance, but the result is a lean program that makes real-time communication a reality. While several IRC clients have been designed over the past decade, none has quite the following and reputation of mIRC. You can download the latest version at mirc.co.uk. Setup is simple and self-explanatory.
IRC is a vast virtual network. It is not unusual for more than 30,000 people to chat in real-time on more than 12,000 different channels at the same time. One of the largest and most popular free trading channels devoted to trading and investing is ActiveTrader, which you can access with mIRC by clicking the Add button in the Connect category of your mIRC options list, entering "ActiveTrader Server" for description and entering "irc.financialchat.com" in the IRC Server text field. Once connected to FinancialChat.com, enter "#activetrader" in your Channels window and click the Join button. While ActiveTrader gets about 1,500 users a day and is moderated by half a dozen channel operators--like any exchange floor, real or virtual--much of the discussion is off-topic chatter. The hype, however, is far outweighed by an abundance of useful tips, intriguing comments and the occasional "diamond in the rough."
We chatted with WallStArb, the founder and head operator of the channel--known to his real-world acquaintances as Brandon Goyette--about the power and limitations of instant chat. "I would say the chat is just an information forum," Goyette says. "In days past, only the large brokerages had this forum. Now with the Internet anyone has the ability." When 1,500-plus traders latch on to a stock or news story, the effect can be dramatic as the buys pour in simultaneously. We questioned several traders about potential artificially inflated prices, yet they stressed IRC's use as a tool for disseminating information and not as a virtual trading floor. "Moving a stock up or down in a concerted effort is really impossible with a large group as everyone has different motivations," Goyette says. "Some buy early and sell early. Some are here only to short our ideas and momentum."
While IRC and ActiveTrader in particular seem best suited to the hyperactive trader, the ideas generated through real-time chat and constant interaction can be useful to longer-term investors as well. Ironically, Goyette himself preaches analysis, research and patience. "I find that the traders in [ActiveTrader] are too myopic," says Goyette. "They can see five [minutes] into the future, whereas I am trying to look, weeks, months or years out. I'll use my background in technology and my ability to read a balance sheet and analyze cash flows, combined with the 'story,' to come up with something I think will get others excited when they finally figure it out."
The ability to bounce ideas off people like Goyette is reason enough to frequent channels like ActiveTrader. Be warned, however, that plenty of traders online have less than admirable intentions. ActiveTrader attempts to weed out the most exaggerated hype by removing and/or banning offenders from the forum, though plenty of noise makes its way through the filters.
Adam's Word: Thumbs Up! IRC takes investment communication tools like message boards to the next level. Not only is information exchange faster than on web-based services, the quality of the discussion is vastly improved as well thanks to increased moderation and control. Simply put, two heads are better than one, and 1,500 heads are hard to beat. Where else can you find experienced traders and retired investment managers mingling with twenty-something college dropouts, retired professionals and aspiring millionaires. IRC offers an unusual mix of ideas and personas that cannot be found elsewhere in the virtual or actual investment world. ActiveTrader and other chat channels are a worthy addition to any investment arsenal.
Josh's Word: Thumbs Down! The purest example of the Internet as a tool for real-time information exchange, IRC has yet to reach its full potential as a forum for the serious trader or longer-term investor. The few brilliant minds that you will find on channels such as ActiveTrader, worshipped by the remaining masses, lead wannabe day traders in and out of hundred of positions daily. While individuals like Goyette have investment philosophy and vision that shine through the hype, the large majority of IRC traders are simply looking to make a fast buck on the day's hottest issue. Those unable to keep up with the fast-paced recommendations of the channel's elite are eaten alive. |
