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Posted on Fri, Jul. 26, 2002
HIGHS AND LOWS
Riskier than ever, day trading still lures some
BY CINDY KRISCHER GOODMAN
cgoodman@herald.com
C.B. Arikan is fixed on his computer screen like a teenager playing a video game, one hand on his mouse the other hand frantically hitting keys. But with real money on the line, this is no game.
Arikan, 32, is a day trader, a guy who comes to work in jeans and a casual shirt and trades thousands of shares of stock each day from a warehouse in North Miami Beach. To him, if the stock market rises or plunges, there's opportunity, as long as he's betting on the right side of the movement. On Tuesday afternoon, Arikan was on the wrong side.
''This is amazing, it's disgusting,'' Arikan shouts as he watched nearly $7,000 in profit erode over two hours. The market closed down 82 points.
Though Arikan still ekes out a nice $3,000 profit for the day, he makes an unusual move. He decides to hold his shares overnight. A move that most day traders avoid. This breed of trader typically holds a stock for just a few minutes, or hours, and aims for that quarter- or eighth- or sixteenth-of-a-point of profit. This puts them in stark contrast to traditional investors, who carefully study company documents and look to the market for long-term results. Arikan's overnight hold paid off. On Wednesday, when stock prices soared, he sold the shares by midday, shouting, ``I'm printing money.''
Sure, the market is wild. Yes, the Dow is down 13 percent in the past month. But day trading is still around. It's riskier than ever, and no longer attracting hoards of newcomers, but there are still a good number of day traders in South Florida intoxicated by playing the highs and the lows of the stock market.
For day traders, the recently volatility can be beneficial -- they can make money when the market moves in either direction, as long as they take their profit at the right time. They carefully study the volatility index, waiting for it to rise as a signal that the market has reached bottom.
In South Florida, at least a half-dozen day trading offices have opened and closed in the past few years. And most of the people who dabbled in the profession part time are out. Today, it's a field made up mostly of young, single men who have never worked in the suit-and-tie world, according to managers at local offices.
At Netgain Trading, where Arikan works and serves as manager, only half the 100 traders from a year ago remain. The window in his office overlooks a room full of computers, where he monitors 55 other traders and forces them to stop trading for the day when their losses hit a threshold. He has worked at Netgain for two years after spending five years in the more traditional offices of Merrill Lynch in Miami.
''We're very careful to monitor risk,'' said Ronald Davidovic, branch manager of Netgain Trading. ``We set loss limits, and even profit limits and control the size and type of positions each individual can trade according to their skill level.''
At Generic Trading in Boca Raton, Ivan Katz monitors his computer screen as stocks rally and dip -- mostly dip.
''The mood is more pessimistic than it used to be,'' said Katz, 33. ``You don't see people quitting day jobs anymore to become day traders.''
Five years ago, Katz gave up his job as a sales representative in New York to try his hand at day trading. Katz says he is thankful to come in every day and still make money. These days Katz mostly shorts the market, which means he is betting that stocks will go down.
''It's not all easy,'' Katz says. ``It takes patience, discipline and thought. Now that the market is more choppy, the sentiment is negative. Some people a have hard time shorting because they haven't had to in the past few years.''
Katz said he tries to keep his losses tight. He recently upped his goal to making more than $1,000 a day but he says he focuses more on having profitable days, not on how much profit he will make.
''No one's making money the way they did two years ago. I'm still positive. I enjoy what I'm doing but I understand the frustrations,'' Katz said.
For those who want to become a day trader, a plethora of websites offer recommendations and training courses: the Online Trading Academy, The Day Trading Institute and the Daytrading University. There's the Pristine Day Trader and Day Trading International.
While no one seems to track day traders, the bear market has drastically slowed the growth in Internet-based trading, according to the Securities Industry Association.
Only a few years ago, the securities industry became critical of day trading, asserting that it created volatility in the market. John Giesea, president of the Security Traders Association, said he assumes that is no longer an issue as other factors have played a role in decreasing the number of day traders.
Andrew Tivoli of Plantation has been a day trader for 14 years and has seen a lot of friends get wiped out, especially in recent months. But he says most find some capital and go right back to day trading ``because it gets in your blood.''
''In day trading you can't marry a stock. You can't afford to marry a stock and have a strong opinion on it,'' said Tivoli, who runs a hedge fund that day trades as part of its strategy. ``You have to be disciplined to avoid huge losses. You don't have to play every day. Certain days it doesn't make sense to open up day trades but there usually are a few opportunities every day at the open and close and on big spikes and big dips.''
The day trader mantra: ``Patience and discipline.''
Traders say days such a Wednesday, when the market takes a clear direction, are much easier for them than days such as Thursday, when stock movement varies, forcing them to take small profits when they can.
''You can't let ego get in way of taking a loss,'' Tivoli says. ``You can't afford to sit and hold because in your head you think you're right but the market is telling you otherwise. I've taken big hits at certain points. You just learn not to take a loss that will wipe you out.''
Says Arikan: ``You take your shots. You're wrong half the time but you cut your losers and let your winners run.''
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