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At 12:16 PM 2/10/99 +0800, felixty@xxxxxxxxxxx wrote:
>Yes, we need the daytraders!! Come one, come all!! The more the better.
Hehehe
>
>A Position Trader
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Day trading offers both anguish and euphoria
By Jonathan Clements -- THE WALL STREET JOURNAL -- Feb. 9, 1999
Most of the time, I am the nag who uses this column to advocate trading
little, diversifying broadly and looking to the long term. But at the behest
of an editor, for three days last week I ditched those cherished beliefs and
became --dare I admit it?-- an online day trader!
NOT FOR REAL, MIND YOU. My trades weren’t actually executed. Rather, they
were tracked in a phantom account set up with the cooperation of Suretrade,
a Lincoln, R.I., online brokerage firm owned by Fleet Financial Group. The
idea was to get a feel for the new breed of investors who use the Internet
to rapidly buy and sell stocks.
There was more at stake, however, than just ego and reputation. Under the
rules I agreed upon with my editor, I started with a hypothetical $20,000
and had to make 10 purchases over the three days and unwind all of the
positions before the third day was over. No shorting of stocks (betting
against them), no options, no buying on margin. Just pretending to purchase
stocks for cash and later pretending to sell them. The stakes? If I made
money on paper, The Wall Street Journal would buy a pair of court-side
tickets to a New York Knicks game for me and my editor. And if I lost? I
ungraciously offered to spring for a couple of nosebleed seats.
Tuesday. The day starts early and with misgivings. If I fail, I will look
like a fool. If I succeed, I will only encourage those investors who think
they can beat the market. Is it better to succeed or fail? It gets worse.
As I make coffee, the radio announces that trading in Standard & Poor’s
500-stock futures indicates a weak opening. The market is heading lower, yet
I need stocks that will go up enough to compensate for my brokerage
commissions. Forget fundamentals. A low price/earnings multiple, rich
dividend yield and decent earnings growth aren’t enough to propel a stock
higher over a day or two. What I need are anxious buyers.
To find them, I cruise Silicon Investor (www.techstocks.com), a Web site
devoted to stock-market chatter. I can’t judge the quality of the insight
posted on the bulletin boards. But the emotions are palpable. I look for
enthusiasm. Lots of it. Cisco Systems qualifies. Investors are gushing
about the quarterly earnings announcement, due after the market closes, and
about a possible stock split. Dell Computer, too, is rumored to split. With
a few quick computer key strokes, I buy 50 shares of each.
But the biggest buzz surrounds Perot Systems, an initial public offering
priced at $16 and due to begin trading that day. "Should be a great IPO",
pants one Silicon Investor subscriber. "Looking for a nice open." I toss in
a market order for 200 shares. By the time I get to the office, my Cisco
and Dell positions are underwater, but Perot which I had managed to buy at
$33.75 trades at $47. I rush to sell, but the shares are at $42.50 before my
order is filled.
The next day, the stock will sprint past $60. Still, I have a profit of
more than $1,700. Feeling giddy, I toy with doubling up on my Cisco position
but decide against it. The stock looks weak. In truth, the entire market is
weak. The Dow Jones Industrial Average plunges 140 points, then starts to
rise. How to ride the rally? I buy some SPDRs, or Standard & Poor’s
Depositary Receipts that track the S&P 500. Adrenaline pumps as the market
climbs. Overall, I have a $1,500 gain at the market close. Not bad for a day
when the Dow industrials were off 72 points.
Declare victory and go home? There’s still one last treat, Cisco’s earnings
announcement. True to promise, the computer-networking company comes in with
earnings per share that are a penny above what analysts had expected. But
my sense of triumph is crushed along with the stock, which falls in after
hours trading. Apparently, to really impress investors, Cisco needed to beat
expectations by at least two pennies. So much for chatter on the Web. I
leave the office, feeling queasy.
Wednesday. The S&P 500 futures are weak again. That augurs badly for my
SPDRs. Meanwhile, Cisco is in for a rough day, and I can’t imagine why I
ever bought Dell.
I tap in an order to Suretrade to sell the SPDRs and vow to dump Cisco and
Dell when I get to the office. But before I leave home, the radio reports a
deal between Yahoo! and Gateway to allow gateway.net subscribers to create
personalized Web pages. I put in an order for 10 Yahoo shares.
Once in the office, I find Cisco is down and Yahoo is up. I bail out of
both. My Cisco debacle costs me more than $300, but Yahoo made me a quick
$110. The market starts moving higher, and discount brokers offering online
trading are hot. I hastily buy 100 shares of E*Trade Group, which hasn’t yet
caught fire like Ameritrade Holding, Siebert Financial and others.
Later, I discover why. E*Trade is in the midst of a computer glitch, which
prevents some customers from trading. Instead of joining the rally, E*Trade
slumps. What to do? I can’t bring myself to sell amid the panic and take my
E*Trade loss, so I seek solace in retailer Perfumania. The stock had been
buffeted by bulls and bears and is a hot topic among Silicon Investor
groupies. With the stock currently down, I figure the bulls will drive it
back up.
I also buy 200 CompUSA shares at $12.88. The computer retailer will announce
earnings after the close, and the recent strength of the stock and the
chatter of the bulletin-board crowd suggests good things are in store. "I
just got back from CompUSA ... and bought another 1,000 shares right away,"
raves one Silicon Investor subscriber.
By Wednesday afternoon, the Dow industrials are soaring, my stocks are
sputtering, and my eyes ache from staring at the computer screen. This
day-trading stuff is getting old. Feeling drained, I dump Perfumania at a
tiny profit and unwind my Dell at a small loss. Meanwhile, I cling to
E*Trade and CompUSA. Maybe investors will forget about E*Trade’s problems by
Thursday. Maybe CompUSA will beat analysts’ expectations. Wednesday, I gave
back $300 of Tuesday’s profit. I need some good news.
Thursday. I help my son get dressed while scanning the messages posted on
Silicon Investor. Folks are drooling over CompUSA, which came in with
earnings per share that were a penny above what analysts were predicting. In
between tying Henry’s shoes, I punch in an order to Suretrade for another
300 shares. It looks like my kind of day. I reach the office to find
CompUSA had gained 50 cents and E*Trade is up more than $4. When CompUSA
hits $14, I unload 200 shares. But I hang onto the other 300 shares, hoping
for a little more. I also keep my E*Trade, looking for it to hit $60. It had
been there briefly and I don’t want to sell until it gets there again.
Maybe, after the shellacking of the past few days, all technology stocks are
due for a rebound. I buy a special breed of SPDRs that tracks the technology
sector. Too greedy. The market falls back, CompUSA retreats, and E*Trade
crumbles as news spreads of more computer glitches. I hang on as the entire
market tumbles and then rallies. CompUSA gets back up to $14 and I
gratefully unload my 300 shares. That leaves me with just E*Trade and my
technology SPDRs. When to sell? I have to unload before the trading day’s
end, which is only hours away. The market roars back in the afternoon, but
technology stocks don’t budge. Then the market falls. This time, technology
stocks join in. I throw in the towel and dump my final two positions at a loss.
The bottom line? On a hypothetical basis, after forking over $159 in
commissions to Suretrade, I made $1,161 over three days while the S&P 500
slipped 2% and the technology-heavy Nasdaq Composite Index was down 4%.
But all of my profit and more was accounted for by a single lucky hit with
Perot and I would have made even more if I hadn’t been so quick to sell.
Frankly, it’s enough to make you want a beer. I’ll be sure to get it at the
game.
Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.
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