By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Darla Bartkowiak, president of 1 800DAYTRADE.COM, says her firm has never been investigated by the SEC. The company's advertising, which includes a large billboard near its Preston Road offices, never oversells the possibilities of day trading, Bartkowiak says, and the company's logo is simply "The new frontier in trading." (That new frontier is found in an office tucked between a Vietnamese restaurant and a kick-boxing school.)
At the Dallas company's training classes, Bartkowiak says, new traders are told to practice at least a week before they start trading real money and stick to trades of 100 or 200 shares until they gain confidence.
But even the Electronic Traders Association, an industry group, is less than sanguine about the odds confronting day traders. An informal survey by the association found that 60 percent lose money in the first three to five months of trading. After that, the ETA claims, those who can still afford to play average $25,000 a month in profits. Yet that average is deceptive: Only a few traders score riches. The rest -- about 60 percent -- lose $6,000 to $8,000 a month, the study concedes.
Despite the Senate hearings, the SEC machinations, and the warnings from experts, most days about 20 traders gather in the suite where Whitlock does business. The number varies depending on how recently 1 800DAYTRADE.COM has offered one of its five-day seminars to attract newcomers, and the firm says it has about 200 active day traders.
Traders need a minimum of $25,000 to open an account, although the firm's managers say they sometimes make exceptions. Traders can pay $300 a month plus $19 for each transaction to get the online service fed to their home computers. If, like Whitlock, they work out of the trading office, there is no monthly fee and each transaction -- buying or selling -- costs $22.
After 1 800DAYTRADE.COM offers a weekend class, most seats in the trading room fill up, Whitlock says, but within a few weeks only the hardy remain. The others typically have exhausted their capital and gone back to drudgery.
"I haven't seen you around for a while," one trader calls out to a man who pokes his head into the trading-room door and looks around longingly for a few minutes. "I go to work now," the new arrival explains dejectedly. "It wasn't on purpose."
The traders at the 1 800DAYTRADE.COM offices are almost exclusively male. Only one woman, who works part-time as a receptionist at the company to help pay her way, trades there. Others use the service at home. One woman, who trades at home "in her bathrobe," says she made $150,000 last year, only to lose $75,000 in the past six months.
Whitlock likes the trading room. "I learn while I'm in here," he says. But the ambience in the trading office is not for everyone. Long, tense silent stretches -- where only the low volume of CNBC and an occasional shrill cell phone are heard -- are punctuated by boisterous moments of ribald humor among the traders. "You sound like a squealing pig," one trader booms for all to hear when his neighbor tries to blow his nose discreetly.
Three veteran day traders (that means they have more than six months' experience) sit behind Whitlock. The three appear to be trading profitably. Evan Rogers, who teaches the course offered to 1 800DAYTRADE.COM's new clients, is one of the three, and he trades the assets of a partnership that includes some of the firm's owners.
Typically, they base their moves on tips from online services and news channels. They also spend time looking at the graphics on their computers, charting stock prices. They follow monthly and daily trends. Rarely do they focus on the fundamentals of a company's finances -- they're not investors, they say; they're traders.
The veterans can make newcomers like Whitlock feel like an outsider. Easily overheard from Whitlock's station, the back-row veterans engage in conversations about the good life awaiting successful traders. They buy fancy cars. ("Is $34,000 a good price for that?" one trader asks a friend in a loud phone conversation about a 1994 Corvette coupe.) Their wives have rich tastes. (One spouse wants only leather furniture, a veteran trader tells the others.) Their vacations are fun. ("My catch was no smaller than 6 inches," a buddy brags about his fishing expedition.)
Whitlock can also eavesdrop as the veterans pass one another trading tips and compare daily profits ($25,000 or more on good days, they say).
Whitlock is not in their league. He trades mostly in companies responsible for basic Internet technology, an industry he believes he knows well because of his former days at Nortel, a telecommunications company based in Richardson. He also intends to stick to trades of fewer than 300 shares until he learns the business better. The low volume means smaller profits, but smaller losses too. Nevertheless, he has already lost $11,000 out of the $40,000 in capital he started with six weeks ago.
He's not ready to quit yet. "What I really see is potential," Whitlock says. That, and a life free from corporate demands.
When Whitlock clicks on the buy or sell button on his monitor, a message is sent through an electronic communications network directly to the system controlled by the exchange (NASDAQ or New York Stock Exchange) for matching trades. Typically, Whitlock and other traders send limit orders -- offering to buy or sell at a set minimum or maximum price.