Wannabe Daytraders Learn About Losing Loot
By Mavis Scanlon
Staff Reporter
9/27/99 5:44 PM ET
ONTARIO, Calif. -- How do you make $1 million daytrading? Start with $2 million, goes the old joke.
However, said six successful traders on a panel at last weekend's first annual International Daytrading Expo, it's no joke.
Don't even think about turning to trading for a living unless you've got wads of capital -- at least $100,000 -- and can afford to lose at least half that amount, said the panel members, all of whom were billed as having made at least $1 million off their trading.
And though the so-called "Million-Dollar Panel" was the keynote presentation of a two-day gathering, most of the speakers and exhibitors stressed the risks, rather than the rewards, of daytrading.
Contrary to the popular notion that the daytrading industry is akin to snake-oil salesmen peddling wonder cures to unsuspecting prairie dwellers, the Expo's message was crystal clear: Beginning traders will lose money.
"To go out and think you'll make oodles of money with $10,000 is in the clouds," said Tim Bourquin, a co-founder of the Expo and a former Los Angeles cop.
Overall, this weekend's event, which drew an estimated 2,000 traders and wannabes from as far away as Maine, Alaska and Hawaii, was hailed by attendees and exhibitors as a much-needed national networking event for daytraders, be they active traders executing as many as 400 trades per day, swing traders who buy and hold for two to five days, or beginners testing the waters.
"Everyone has a different trading style," noted Million-Dollar panelist Lawrence Black of Arlington, Va., a 27-year-old once dubbed "one of the biggest traders the financial world has never heard of" by Washington Post Magazine. "It's really important to consider what kind of trader you want to be."
Indeed, you must decide whether your time horizon will be short term, long term or daytrading; whether you'll trade New York Stock Exchange or Nasdaq stocks; and whether you'll use technical analysis charts or not.
Black said he makes about 400 trades a day, definitely in the "grinding" range, but still fewer than the 700 to 1,000 daily trades that another panel member, Gary Johnston of QuarterMove Securities of Newport Beach, Calif., said he used to make before changing his trading style.
"Eventually I figured that kind of trading style, grinding every 1/16 of a point, became frustrating and stressful," Johnston said. He now focuses on certain stocks, even learning a little about the companies he's considering trading, he said.
Another panelist, Ken Jahre of OnSite Trading in Great Neck, N.Y., said he sticks to NYSE stocks. He said he trades a group of 18 stocks and likes the fact that on NYSE, a trader can put in a stop order, which automatically triggers a sale if a stock drops below a certain price. That way, "you can free yourself from being preoccupied" by momentary price movements, he said.
Meanwhile, in the exhibition hall, where vendors pitched trading software programs running from $600 to $2,000 and subscriptions for trading chat rooms and advice services running upwards of $200 a month, education was the theme.
And for good reason. Many visitors were like Tien Nguyen, a 42-year-old computer programmer from Diamond Bar, Calif., who has been trading a little on the side for the past five years. Now he's pondering whether to take a month-long vacation in December or January to experience the trader's life.
At least Nguyen has a plan. The biggest mistake new traders make is focusing on profits before focusing on learning how to trade, said Greg Capra, vice president and co-founder of Pristine.com, a Web-based advisory service.
"To think that one can be successful without training and education is the biggest myth" in the industry, added Oliver Velez, Pristine's president and co-founder.
Indeed, there's no such thing as the Holy Grail of trading, cautioned Sunny Harris, founder and president of Sunny Harris & Associates, in a tutorial titled "Reliable Daytrading Techniques for Beginners." A self-taught trader, she said she was forced to run her own money after a broker lost $125,000 for her within a month. She gave some stark stats on the risks of trading. Of every 10 trading days, she told a crowd of roughly 300, you might win on four days and lose on six days, and that's "if you're as good as the pros." To earn $1 million a year, a trader must bring in $4,000 a day, every day.
Sunny's Picks
Sunny Harris has devoured more than 300 books in her years of trading research. She gave the following titles rave reviews for the beginning trader:
Technical Analysis of the Futures Markets by John Murphy
Trading Systems and Methods by Perry Kaufman
Stock Patterns for Day Trading by Joe Krutsinger
Stock Trading Wizard by Tony Oz
Developing a systematic approach to trading is one of the most important things to prepare a successful trading career, said the pros. Get a system, make sure it works and stick with it, said Harris. And, she added, if you see someone doing something that works, by all means, copy it -- after testing, of course.
Bourquin, the Expo's co-founder, advised would-be traders not to run out and spend thousands: It's not necessary, especially in the beginning. "Educate yourself," he said. After reading books and researching online, "then you decide if you want to buy some formal training."
Sandy Lewis, a certified public accountant from Nashville, was doing just that. She was there to learn more about technical analysis, she said. Lewis, 56, has been trading for about a year and a half and considers herself a fundamentalist, someone who trades stocks based on an understanding of the company's business. "For a CPA, fundamentals are easy," she said. The Expo "helped me highlight what I need to learn," she said. She'll go home and study and figured she'll be ready to buy at the next Expo, scheduled for New York in early spring.
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