September 8, 1998
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."
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. |
