November 21, 1999
Riding the Mo in the Pale Green Glow
And other money-mad moments in the life of a day trader.
he stock market opens and Dave Goehl immediately makes a $230 profit on 500 shares of eGroup, which he bought yesterday, by accident. Dave is buying and selling securities on the Nasdaq exchange in his shorts and a T-shirt from the convenience of his spare bedroom. "It's the neatest thing in the world," he says. Taped to the wall in front of him is a list of his daily reminders: to trade 12,000 shares a day, to avoid sticking with losers for too long, to choose each transaction carefully. Dave reminds me, constantly, that "trading is 99 percent emotional," and since trading stocks online in real time with lots of his own money is like roasting marshmallows on the Hindenburg, he must keep his wits about him. On the wall above his desk he reads No. 1 of his "Top 10 Habits of a Successful Trader": "Be Disciplined: Discipline! Discipline! Discipline! Discipline! Discipline!"
He wakes up at 6 most days, turns on CNBC, reads the financial newspapers, USA Today, online journals like "The Bull Market Report," Steve Harmon's "Internet Stock Report"; he scans the free message boards on Silicon Investor and Yahoo Finance for any mention of the stocks he's following, some timely nugget that big institutional investors -- firms like Fidelity or U.S. Bancorp Piper Jaffray -- got before the rest of the markets, reports on new research, hearsay of analysts' opinions, any other rumors of upgrades or downgrades that will turn out to be either dependable information or panic or borderline fraud. Thanks to the Internet, Dave has facts at his fingertips not even professionals had in such volume until recently, reports, analysis, a river of opinions on every stock, but so what? How's his gut?
"Usually, the more trades I make, the worse I do," he explains. "In one of the books I read, the guy compares a trader to a ninja -- the way they hide out, they're in black and they can sit there and you can't even hear them breathe. They wait for the perfect moment and then they strike. It's like you could go a whole week and not trade at all until you find the perfect stock."
We try to piece together what we remember from comic books, that the ninja are Japanese warriors who employ lethal, razor-sharp throwing stars, nunchuk sticks, silent footwear. Dave has no formal training in the martial arts; he has no formal training as a stock trader either. He didn't mean to buy eGroup last night. He meant to short it (that is: bet that its share price would fall) but buying it is what he did, which ended up being good, because it went up, not down. Sometimes even a ninja needs luck.
Dave turns to the screen, shoulders slightly raised, with a look of fury and excitement. Now what? His body is motionless but his eyes blaze, his smile gleams. Since 9:45 he has been racing through online charts of Harbinger, Fatbrain.com, About.com, some of his favorite stocks, pausing, thinking, shifting, staring.
Above the bed is a magnetic board that lists certain publicly traded companies, separated into: "dot-com stocks," "e-tailers," "box makers" (computer manufacturers), advertising, "wireless and broadband" (telecom and cable companies), many of them new, soaring growth stocks that share the potential to explode. An I.P.O. section lists companies that are on deck or trading. There's some laundry on the floor, athletic tape on the windowsill and a set of golf clubs in the corner.
Dave is watching CheckFree, which he also bought yesterday, at just under $33 a share. "They're the infrastructure behind bill payments online," he says. "Supposedly Amex is using them and hasn't made it public yet." Dave pieced this theory together from tips on the Yahoo and Silicon Investor chat rooms, plus the cagey response of CheckFree's investor relations department. CheckFree is trading at 33 7/16, Dave stares ahead, smile pasted on his face: "If you can break through 35, you've got 40." Discipline.
One-click bandit: Goehl says day trading can be as addictive as playing the slots.
On the green plastic table beside the bed are messy piles of papers: the record of Dave's 3,500 trades so far this year, an accumulation of notes on new business ideas, magazines, books on options trading. On the shelf are more books: "Liberation Management"; "Thriving on Chaos"; "Think Like a President"; "Control Your Destiny or Someone Else Will"; "What They Don't Teach You at Harvard Business School"; "Secrets of the SOES Bandit"; "The Complete Idiot's Guide to Making Money on Wall Street." There are glow-in-the-dark stars on the ceiling.
Beside Dave's mouse pad sits "Trading for a Living," by Dr. Alexander Elder, a psychiatrist who speaks of himself as an addict hooked on trading. Dave shows me Chapter 10, "Losers Anonymous." Elder explains that we are all losers with a tendency to sabotage ourselves. "If you win big, you get euphoric, you're less disciplined; you figure, Why not bet it all?" That, says Dave, is "the addictive part." He has written in the margins and scribbled across its pages in gassy script: "Control your feelings -- if not, stop." "You must be prep'd to win."
A skinny dog walks into the room, climbs up onto the bed and falls asleep, its feet sticking up in the air. Mrs. Beasley, a 3-year-old beagle mix. Another dog, Doc, comes in behind her, 14 years old, black and gray with a wet nose. I just waterproofed my shoes, and he's smelling them.
"Elder realized that Alcoholics Anonymous was a good model for anyone who trades," Dave says to me. "Basically what he says here is that you have to wake up each day and tell yourself you're a loser."
The price of CheckFree begins to drop. Dave starts banging the keys. "Yuck. Now I'm disappointed."
Still smiling, he unloads his 1,000 shares in two lumps over 30 seconds for a gross profit of $346.
o this is the neatest thing in the world?
Over the summer, when I first met Dave, the day-trading industry was promoting itself with the moronic glee of a Publishers Clearing House Sweepstakes: a 12-year-old buys a helicopter with stock-market winnings, a dude without a job drives away in a Rolls-Royce towing a yacht. But then the message shifted. In a new ad, a goateed hipster with an annoying, satisfied puss -- calculated to look cutting-edge -- tells you: We're pioneers. In another, a classroom of immigrants ostensibly trying to learn some English begins rhapsodizing about an Internet broker called Ameritrade; they've mistaken it for the word America, they think their English teacher wants to talk about online trading and they all love this new country!
See, this is not about money-grubbing; it's a new democratic revolution. Day trading, like the right to own dirty magazines, the privilege of serving in our armed forces, is a fail-safe against the loss of individual freedom -- which for Americans is the same thing as collective freedom -- and for that matter is the only sure way to keep your soul intact. Now an investor controls his own life so he can make the final call, so no one can delude him into thinking that the buying and selling of stocks is more complicated than a couple of mouse clicks, so nothing can obstruct his inherent right to unload his losers on the next bigger dope to come along. And what could be more American than that?
Five years ago not a single person traded online. Today a quarter of all individual investors do so. In the vanguard are the full-time day traders like Dave -- a revolution of guys in relaxed clothing trying to turn their computers into cash registers. I came to see this revolution. I wanted to watch day trading up close, see a grown man exhaust himself with fears of bankruptcy and dreams of ascendance, hollowed out of everything but dread, terror, release, desire. I imagined a crazy Elvis fan, finally sucking on that sweat-soaked scarf.
Goehl has his version of the big board in a spare bedroom, where he does his trading.
I sat in day-trading shops -- the places that became abruptly notorious when an Atlanta trader shot one up in July -- little purgatorial way stations of American greed; rooms full of men not working, giving this thing a shot. I met a tanned Iraqi gentleman in a black Lycra T-shirt with the soft, intelligent brown eyes of a movie star and watched him bleed money on all 11 stocks he'd bought that morning. I met a graphic designer who ran Fibonacci programs, Elliott waves, mathematical prediction models that never worked for him; he didn't have the heart for it. A 27-year-old guy, on a roll, up $124,000 for the day, eating Taco Bell, loving it. A Taiwanese trader who made a thousand buy and sell executions between 9:30 a.m. and 4 p.m., sometimes trading a million shares a day, his hands constantly moving like some hypnotized homunculus building a sand castle one grain at a time. His mother sat in the chair beside him, also trading, not doing as well; his 22-year-old sister sat beside Mom, still in training.
And then I found Dave. He does not belong to the comparatively small subculture of the day-trading shops, but is part of the larger, harder-to-count group that trades in high volume from home, full time, moving in and out of stocks, quickly, trying to profit on the shortest-term rising and falling. Dave is 30, with thick brown hair, muscled, athletic, his big smile buzzing bright like a bug zapper. He has been trading from this desk since October 1998, after he quit his $130,000-a-year (plus bonus) job as the national accounts manager for a booming legal staffing-headhunting organization based in Hartford.
In one important way Dave is not a typical day trader - after a difficult start, he has done well financially, and so far the research suggests that most day traders don't. Dave started trading with $80,000, some of which he parked in stocks he intends to hold for a long time, but most of which he began using for day trading. He says his total stake is now worth $300,000. This year, he says, he is up almost $200,000. But that's the gross number, so subtract $38,000 in commissions paid to Datek and the online brokerage firms he trades through. Now subtract at least another $60,000 for taxes. And subtract his expenses: $300 a month for his PC Quote, which gives him Nasdaq Level II access over the phone line; $300 for his share of rent to turn this part of the apartment into a trading room; $180 a month for newspapers, cable, newsletters, phone. Barring a drastic change in his performance, he will net $85,000 from day trading this year.
Dave spends his days in the muted, fake, unspecial world of a computer monitor. He is alone, obsessed, keeping bright-eyed, hawklike vigil over the screen in front of him. I can't help feeling as though he has been banished to this spare room with its cheap green plastic patio furniture, an enormous bag of hockey equipment, a pile of hockey sticks along the windowsill; this is where the dogs sleep. Sometimes when they're napping on the spare bed, Dave gets up and joins them.
Against all odds, he is fervently excited. He bounces around buoyantly, undulating in his spring-loaded executive chair. Everything in Dave's scope comes across in terms of preachable love. He believes in his new obsession so strongly that I am winded from it. Every time he does a new trade he sucks all the air out of the room. "If you work hard," he tells me, "it's the ultimate."
I'm watching but, right now at least, I don't see it. Dave is a likable guy, but so far the revolution looks like a man hugging a slot machine. I'm trying to figure out what it is that makes a friendly person chuck everything to trade stock all day, alone. What would Dave be doing today if some computer genius had not invented this?
ave's apartment overlooks a park in Washington. Lyndon Johnson once lived next door. He has been living here with his girlfriend, Felice Wagner, since July 1998. Outside of his trading area, the large apartment has big couches, a dining-room table, plants, bookcases, a wrought-iron plant stand, all owned by Felice. What Dave owns -- the bed, the green plastic table, the coffee mug of loose change -- bear the signature of a guy who travels in Hefty bags.
As his own boss, Goehl has more free time, but the market is always at his fingertips.
Dave grew up 20 miles from Minneapolis, in White Bear Lake, Minn. He played drums in a rock band called Black Knight. The band sang Van Halen, Mötley Crüe, Judas Priest, and got as far as the garage. Hockey was his first love. "Dave was what I would affectionately call a grinder," recalls his lifelong friend Anthony Sperling, the goalie of their White Bear Lake High School hockey team. "Not your top scorer, not the most graceful, but there was a level of consistency. He was not afraid to get his hits in the corner, always working 110 percent."
In seventh grade, Dave saw a picture of Arnold Schwarzenegger in a weight-lifting magazine; he bought Schwarzenegger's giant spring chest expander; he read "The Education of a Bodybuilder," written in 1977, in which Schwarzenegger discusses the regimen that made him Mr. Olympia. Dave admires him as a totally driven, self-made man. "If I could be anything," Dave says today, "I'd be Arnold Schwarzenegger. Arnold Schwarzenegger is my idol."
Dave received a full scholarship to play Division I hockey at West Point; he left after basic training ("I didn't like all the discipline and stuff" -- wrong kind of discipline, he says) and returned home to attend the University of Minnesota. He graduated summa cum laude
and Phi Beta Kappa, and went to New York University Law School. Then as a summer associate in 1991, at Skadden, Arps, Slate, Meagher & Flom in New York, he witnessed the unpleasantness of corporate life. The entire floor of lawyers he was scheduled to work for was fired. Their offices were empty the next day. "I thought, This is not fun," he says, and it was around that time that avoiding working for anyone else became one of his goals.
t's 10:45 A.M., and all morning a mysterious box has been appearing on top of Dave's PC Quote market maker's screen, a white square with nothing in it that Dave has to click on to remove. All this fantastic technology -- small order execution system, the electronic commerce networks, the programs that draw a direct line from the capital markets to your living room by way of Web brokerages like Datek -- it's all still a little screwy. It's easy to forget how new this is, but unexplainable glitches are a good reminder.
Yesterday I sat over Dave's shoulder from 9:30 to 4 trying to watch him trade. The numbers and symbols on his screen are so tiny. Today I've moved my chair up so that I'm almost sitting on his mouse pad. I see the flow of buyers and sellers moving toward a common price. An investment bank like Goldman, Sachs offers up to the market a chunk of stock worth half a million dollars, and it disappears in a flicker. It doesn't look anything like the howling, seductive lure of liquid money, no invisible line from a fishhook tugging in my gut. It's lime green and bright cranberry, orange and blue, as colorful and real as any video game.
The bottom half of Dave's screen is filled with real-time tickers he has custom made, 22 of them, each with four or five stocks whose symbols whiz by. He claims he can catch individual price changes to the fraction. He offers this piece of logic as a way of explaining what stock he'll choose next: "Price, volume, a sudden move up or down; I look at the float, intermediate term high and low averages, points of resistance."
That is: he's looking at the number of shares in play, how quickly they're being traded, how the price is moving -- the language of momentum traders, a language once confined not just to professionals, but to a particular subset of gunslinging money managers. Dave is a living symbol of a gigantic shift in the financial zeitgeist
-- the mainstreamed romance of stock picking. Peter Lynch, icon of the mutual fund industry, the man who once ran more of Main Street's money than anyone else, never talked as Dave does. Lynch is about "fundamentals" -- and about trusting your retirement savings to mutual fund managers with proven track records. To the extent we care about money managers now, it's guys like Jim Cramer we admire, guys who run high-octane hedge funds and tell us we don't have to be punks on the sidelines, we can get right in the game and be winners. Why would you want to trust
the next Lynch when you could be
the next Cramer?
Dave tells me he watches both technical and fundamental analysis, and that's more or less true. But it's also true that he often acts when he gets a feeling -- a stock "bugs" him, it "looks beat," he "loves it." Dave types VPHM in his market maker screen. "I hate ViroPharma now," he says. He watches the price move for a while, fingers twitching on the mouse. Yesterday he traded it three times for a gross profit of $50. "I should just not be trading this stock," he says.
Right now he's going to try to short it. Short selling, the full definition, allows an investor to sell a stock he has borrowed but does not own, in hopes of paying for it later, when the stock has dropped in price, thereby keeping the difference; if the stock rises he must repay the loan, plus whatever the stock has gained. Dave scrolls down to the Datek ordering screen. He types "sell," tabs to the next box and types his password, then the symbol, amount, price, seven boxes all together. But he doesn't pull the trigger yet.
Instead he looks at a one-minute chart, then a 15-minute, a 30-day, a six-month chart. Twenty seconds or more of download time pass every time he wants a new chart; all day long we're crawling between Web pages waiting for data. He flips through five other sites, checks institutional interest in the stock through the Thomson Investors Network, scans chat rooms for news, loads a sixth site, waits, checks the float, watching with the stillness in his body of someone getting ready to run across a freeway.
We're getting closer. He lifts his left hand, runs it through his hair, then again. All hair now sticking up he goes back to the market makers screen, where he can see the symbols representing the institutions that clear trades for clients large and small. Who is on the bid side (that is, trying to buy) and who is on the ask side (looking to sell)? Which side is stronger? By how much? He doesn't know the name behind every symbol, but he knows which sellers to steer clear of. He scrolls back to his Datek ordering screen, executes the order, glances at the bid side, which is suddenly gaining strength in the last five seconds. This is when he starts talking to the screen in his soft-spoken, Midwestern manner: "Get out of there, Piper Jaffray!" "Goldman, Sachs is whacking everybody."
"This is weird," he says, scrolling down to see the status of his order. It hasn't been filled yet. He checks a box to cancel, withdrawing his order.
"Why did you cancel?"
"It was spooky. I don't get this stock."
This is the first of 23 cancellations just like it.
ours pass. Dave's relief at having another human present is palpable. He's a tireless chatterer, buying up stocks, explaining "convergence," which is "huge," and right around the corner. All day he talks about the Internet, biggest thing in our lifetime, New Era, blah, blah. I've been sitting in this awful rocking chair for hours and my back is killing me.
Suddenly he stops blabbing. "I'm hesitating," he says angrily. We're headed into the close and he doesn't know whether to sell or hold on. He says something about separating the fear from the mind. So much for the ninja thing. He complains about a CNBC anchor, Ron Insana, calling him Mr. Negative.
"CNBC makes everything more volatile," Dave says. He's distracted. The market's rallying, and he's stuck.
"What would Arnold do right now?" I ask.
"Arnold would sell into the rally," he says. He would go against the grain, he would ride the momentum only so far. "Have the courage," he says. "Sell into the rally." And he does.
cross Connecticut Avenue, Rock Creek Park is an oasis 20 miles long. Dave takes the dogs running there. The creek runs through acres of forest, boulders to climb on along its banks. Open fields of soft grass, the smell of the grass, silent paths. It doesn't feel like the city. Dave and Felice chose Washington because Felice still had so many friends here from Georgetown law school and the firm where she worked after school. They met two years ago, working for the Wallace Law Registry, in Philadelphia. For a short time Felice was Dave's superior; then they co-managed an office and formed a team selling the firm's services.
But Dave was also aggressively pursuing a position in senior management, and in the summer of 1997 he was promoted to the home office in Hartford to oversee sales teams starting new offices around the country. Shelley Wallace, the company's founder, describes Dave as a fast-tracker who worked six or seven days a week for months on end, who jumped on a plane at a moment's notice. "Dave can become anything if he sets his mind to it," she says. "He's always trying to do his best."
They arrived in D.C. in July 1998. Felice started her own business, doing sales training and consulting for law firms and corporate legal departments, and she has never wanted for clients. Leaving Wallace, Dave was ready to begin again, too. He had read an article about day trading in Forbes magazine several months before. The article noted that "a lot of money is changing hands in this guerrilla trading room," and recounted the audacity of a young Russian transplant pulling in $800,000 a year without ever knowing what the stock symbols stood for. Dave began researching the new field. They dreamed of making their own hours, making lots of money and burning it on relaxing trips to fantastic places. They would have fun and live well; the good life.
He had a rocky start. At first he spent a lot of time in chat rooms, following the hot tips of online gurus and weird trader folk heroes; he grew dizzy. On Nov. 2, 1998, he made $1,000 on a trade involving 2,000 shares, but then became angry that he had pulled out too soon, at the slightest sign of the stock's downturn. He bought 5,000 shares at the close, thinking that the next day, when the market popped, he would sell. He couldn't sleep that night. The next day it opened down a point, already a $5,000 loss; it rallied momentarily and Dave could have gotten out with a $2,000 gain. Then it dove again, more than two points this time. He could have dumped it there, or anywhere along the way. But he froze. "I hoped it would recover," he says. "Never hope." He watched all day in horror. After another sleepless night he finally got out, for a loss of $20,781.
He made adjustments. He lowered his orders to well under 5,000 shares, to decrease his risk on single bets. He also decided he was better off on his own, rather than trying to be part of some kind of day-trader community. By December, he was doing O.K. He and Felice found in this new life that they were becoming closer, working out of the house every day, sometimes quitting early on sunny days. They strolled with Doc and Mrs. Beasley. They went out to eat at night. Felice encouraged Dave to work on his tennis, and soon Dave began winning. They played doubles with some of her old colleagues, golfed together and gave dinner parties. They cooked lunches and dinners. Dave joined a hockey team; he didn't have to skip games because work ran late. They took long weekend trips; they went to St. Lucia. They talked about renting a villa in Tuscany.
Dave began pouring more energy into trading -- reading analysts' reports for hours, motionless in his chair. He began talking about the market incessantly. At parties, or visiting Felice's cousin in Adams-Morgan, or in the locker room with the guys on the hockey team, everyone wanted Dave's latest hot stock tips; he was happy to talk shop. "When people ask me about day trading, I won't shut up," he says. Felice began to enforce "no talking" rules when she returned from sales calls. She calls him Mr. Chatty. She practices a glazed look in her eyes to shut him up.
e're looking at Dell. the volume is high. it has been lurching up and down all morning. I've read about day traders riding 20-point jumps, making a fortune in minutes. I want to see Dave ride a rocket.
At 11 a.m. he sells Dell short at 41. Ten seconds later a guy on CNBC says Dell is up a dollar on the news of its Internet subsidiary. Dave says, "Now I'm freaking." Dell takes off as we watch it go against him. He says, "If I were an addictive personality, it would be hard to deal with losing." He amiably tries to clarify: "It's about stopping yourself from eating that next brownie or drinking that next beer or trading that next stupid trade." He bails out, losing one-sixteenth on 500 shares, or $31, plus Datek's commission. At 11:05 he goes the other way and tries to buy Dell at 41116. Over the next four minutes, Dell moves up an eighth, but then falls back below his buying price, and he quickly flushes it for an $81 loss.
Out of one eye, Dave always watches CNBC on a television beside his desk, every day, eight or nine hours a day, a show with no plot, no characters, unless you count the "Truman Show" world-in-a-bubble effect of dumb one-liners from financial-news anchorpeople. CNBC's Joe Kernen complains about his damaged microphone. "I bet Mr. Rogers never has to deal with this," Kernen says. Dave laughs and says: "Jeez! They are so funny. Silly guys." Kernen and his sidekick, David Faber, have nicknames. Faber is the Brain, the implication being that he's an idiot; Joe Kernen is the sweet and innocent Big Kahuna. Mark Haines is their fatso boss and just the type of avuncular golfer with a gruff voice you'd expect to anchor a daily show on money.
There are women, too, but they have no nicknames, they take no comedic leaps and so they seem less important. There's boring Kathleen Hays. There's Liz Claman, the giant swimsuit model in a tight skirt and sweater set. And then there are the rare goddesses: Amanda Grove at Instinet, Maria Bartiromo with the hypnotic shiny lips, who, from the floor of the N.Y.S.E., gives an "Alice in Wonderland" feel to her reports, drowning in a sea of men, the camera looking down on her from on high.
I can't take my eyes off CNBC -- it's the closest thing we have to fun. They have props, like stuffed penguins; they have insults. They fixate so piously on ways of increasing your dough -- for the male anchors it seems to wear better, like normal street attitude, while for the female anchors it seems a little pathological. All afternoon it's yellow charts on blue backgrounds, the same three arrows, either red or green, indicating the direction of the major indexes, like a blot burned onto your eyeball from looking at the sun. Gaviscon stomach acid reduction commercial. Viagra commercial. Commercial for a ginkgo extract, for extra mental sharpness.
When Dave begins shorting KIDE, 4 Kids Entertainment, and it, too, turns against him, I find myself glaring at the price, rooting for KIDE to drop, to move the way Dave wants it to move. I feel almost desperate. "Come on," I say. Dave's back is locked upright; his forehead inches toward the screen. "That's O.K. We'll find another one," I want to say.
I didn't expect to like Dave as much as I do. But I feel a jolt of sympathy seeing how he struggles. He works hard; he worries when things are bad, laughs when things are good; he means well. On top of that, he's starting to remind me of a girl I once dated, same downwardly sloping eyes -- same trouble guessing right about the future. I'm on Dave's side.
He gives a quick, deep dissection of KIDE, many of the background facts memorized. He speaks in that heart-rending way only an aching businessman can, about something as silly as a toy company, that it's suddenly underperforming for reasons known only to God. Dave can't make up his mind on this one. He spends the next nine minutes canceling, buying, canceling, buying, trying to get out of it, and in the end he loses $163.
ark Barton was a day trader, hooked on volatile stocks -- Xoom.com, CMGI, Yahoo, eFax.com; he confused past performance of a stock with what it might reliably do in the future; he had no real experience in the securities world; he failed to turn a profit; and finally he blew out his stake completely. From April '98 to April '99 he lost $400,000 at All-Tech before the brokerage closed his account. In October '98 his wife moved out of the house. In May he pulled all of the furniture onto the lawn and had a yard sale.
In June he opened a trading account at Momentum Securities across the street from All-Tech, with $50,000, later adding $37,500. Over 14 days in June and July, the Rocket, as his fellow traders dubbed him, lost $85,000. On a Tuesday he lost another $20,000 and received a margin call for cash to cover his losses; he wrote a check for $50,000 which, at first, would not clear. He went home that night and beat his wife's head in with a hammer and stuck her underwater for a while and then threw her in the closet. Barton killed his children the following night, and on Thursday, July 29, he visited his lawyer to remove his dead wife from his will.
That afternoon at Momentum Securities, he spoke to the manager of the trading shop about reopening his account; the manager agreed to work around Barton's financial problems. Maybe Barton didn't believe him. Or maybe he did, but wasn't looking forward to any more trading opportunities, because he shot him. He entered the trading room and told some of the traders who'd lent him money from their personal accounts over the past months that, although it had been a bad trading day, it was about to get worse. He killed four in that office, and five across the street where, before opening fire a second time he told the investors at All Tech, "I hope this doesn't ruin your trading day."
That was on July 29. I had spent the 26th, 27th and 28th with Dave. We spoke that next morning; he was surprised at how quickly the "tragedy industry" was targeting day trading as the cause of Barton's rampage, and we both assumed that as the facts unfolded, Barton's rampage would have had very little to do with online trading.
In the week following the Mark Barton shooting, the day-trading industry was depicted as one in which professionals knowingly cater to undereducated, underfinanced newcomers with no experience in the movements of markets and lure them in by exaggerating the upside and playing down the danger, in order to increase trading volume, which, in turn, creates higher commissions on the activity of their clients' accounts. In the media pile-on that followed the shooting, traders were shown receiving cursory seminars stressing superficial stock data, then seated at the hot new technology wired to the markets, with an open channel to borrow money to multiply their stake two- to tenfold.
Regulators accused day-trading firms of deceptive advertising (it was around this period when the ads became about the hope of revolution rather than sickening wealth), illegally transferring funds between client accounts, allowing their clients to circumvent rules governing short selling. Critics suggested that potential day traders be required to go through some kind of psychological test as a screening process, the way police officers and the Secret Service do.
Dave said to me: "It's a sad thing, because nothing really positive comes from something like this, the shooting. When you happen to do what is being vilified, it's not a nice thing. But at the same time I'm thinking, 'Maybe I'm not really a day trader.' "
By this Dave means that he looks at fundamentals, does research, has discipline. He keeps $50,000 in his Datek and other accounts, the ones he trades from; if these accounts swell because of a good day, he wires the winnings into a separate Charles Schwab account, which he says is strictly for long-term investing. "This way it's like going to the casino with only $50 in your pocket," he says. "Don't bring your wallet." What Dave does, he reminds me, is all about discipline, sobriety.
ant to see something?" Dave says innocently. He tries to imitate what institutions do when they generate volume and fool other people into thinking a stock is suddenly hot. By taking some money from his untouchable Schwab account -- money he pledged not to use for day trading -- and throwing up an order on the opposite side of his bid, he weakens the selling side so his Datek bid goes through at the price he wants. Then he quickly cancels the Schwab sell order before it gets picked up.
He'll use the untouchable Schwab account for these head fakes four or five more times today. He'll claim that he's doing so for my benefit. Maybe so, but he'll also end up using the Schwab account seven different times to buy and sell. In his months as a day trader, Dave has learned a few tricks.
Recently, Dave spotted Yahoo, Amazon and five other volatile stocks at prices he liked; he pretty much threw his leave-your-wallet-at-home rule out the window and used his Datek, E*Trade and Schwab accounts to leverage 75 percent of his savings -- or $181,350 at that moment -- to buy and hold them overnight. (Most day traders consider it a cardinal rule to sell their holdings before the close, but Dave is among those who think it's sometimes worth the risk to hold a stock overnight, hoping that it will "pop" at the opening bell, a technique he calls "swing trading.") The next morning he made more than $12,000 after taxes and commissions -- his best single day ever. "Remember the ninja analogy," he wrote to me in an e-mail afterward. "You wait and wait and wait in the dark. You wait for the perfect time and then you strike. And strike hard and aggressively."
Oddly enough, Dave had been in a casino only four times before he started day trading, and has been one time since. During his last visit to Minnesota, he and Felice sat at the blackjack table in the Black Bear Casino of the Chippewa Indians for a couple of hours, and built up $250 on $5 bets. "After day trading, it's such a meaningless amount of money," he tells me. When he and Felice cashed out, he says: "I remember looking at the other gamblers and thinking, What are these people going to do when they find out there's day trading? They think they're having fun at the slot machine -- just wait. It was a kind of frightening thought."
I find a paycheck for $9,000 in the mail when I get home. It's a lot of money for me, and the first thing I think when I look at it is that I want to day-trade it tomorrow, before I waste it on food and rent. Datek's minimum to open an account is $1,000. The rest is up to me. If I had bought $9,000 worth of CheckFree Monday night when Dave bought it, and sold it the next day when he did, I would have $9,345. If I had bought Cisco with that $9,345 when Dave mentioned it and dumped it when he told me to, I would have $12,650. If I had bought 1-800-Flowers with that $12,650 on the Thursday he bought it at 15, and sold when he did the following Monday, at 23, I would have $19,396. Why not get a little something for yourself? Who's counting?
e meet for dinner, Dave and Felice, my wife, Lara, and I, at a restaurant on Wisconsin Avenue. We're sitting in the back in a long booth, with a tiny beaded lampshade over the table. "It looks like a cave in here," Dave says.
It doesn't look like a cave in here. Dave is carrying the rough text of the Caveman Investor, which is his name for a day-trading Web site he wants to create. His Web site was called Daytradingdesk.com, but he decided against anything like "day trader" after the Barton shootings. So it's www.cavemaninvestor.com, after the Phil Hartman sketch on "Saturday Night Live," "Unfrozen Caveman Lawyer" -- a thawed Neanderthal who didn't understand our modern ways, but knew a bad bankruptcy settlement when he saw one. The idea is to help out new day traders.
The way Dave sees it, day trading is not going to go away. It's not a bull-market phenomenon at all. It's part of America now. Dave once showed me a chart predicting that the Dow would continue rising through 2007. Day trading in a down market is tougher -- you can make money shorting stocks, though the risks are higher because your potential losses are essentially unlimited - but he doesn't believe a sustained down market is anything to be afraid of anytime soon.
We order drinks. Dave would like to rear back and burn passionately about Caveman. Maybe that's why we're here, to listen to this speech, but Lara is plainly not interested, and Felice seems anxious and a little fed up. Also, it's Sunday, and maybe she just wants to have fun.
There is a picture of Felice with Dave on his day-trading desk. They are standing in front of a lake at sunset, both wearing thick sweaters; though the lake is thawed you can see snow on the banks. This spot, with the house out of frame, is where Dave's mother, Joyce Goehl, fought a malignant melanoma. She made trips to the John Wayne Cancer Institute, in California, to receive experimental vaccine trial treatments. For much of the next three years she lived at the house on the lake. "She was such a fighter," Dave says, "and gave it everything she had to beat the disease." In the fall of 1997 she died.
"It would have been nice if I had been in the kind of job where I had given myself the freedom to be with my mom," Dave says. Between then and the spring of '98, Dave wanted out of Wallace, and attributes this to a need for independence, but it seems correct also to assume that, like many people, Dave dealt with loss by stifling grief and turning his world upside down, quitting his job and moving to D.C.
He is leaning slightly forward, the cock's comb of his hair jutting up, the weight of his shoulders hanging slightly. He has that Caveman draft on the table. Felice starts telling war stories from their days at Wallace. Everyone is laughing. The details of Caveman Investor will have to wait for some other time. I have the feeling Felice is afraid of Dave's wild new leap, and is trying to silence him, maybe to protect him from himself.
oday is the initial public offering of Drugstore.com. We watch it as it begins, running wildly. Dave asks me if I'd like to try trading. I take his chair.
"The price right now is 513 1/816," Dave says. "It opened at like 70 or 69 and dropped like a rock." After dropping like a rock, it has been seesawing up and down.
"So you have to figure out where it's going to bottom -"
"-and then buy. We don't want to catch a falling knife."
"Right. Should I do it now?" The bids and offers are matching, moving up in chunks at the speed of an overcaffeinated Pac-Man.
"Not yet. Delete my password and type in Matt 1-2-3 and enter the bid." The price seems to be hovering at about 50. "It looks like it might hold there," Dave says. "What the hell. Let's try it."
I enter a bid for 50. "I might've missed it."
Dave says, "Yeah."
"It's a wild bronching bull."
"It's strong. Shoot, it's selling so fast. Try to buy it at 52. See the chart. You've got volume. The chart looks like it's kind of figuring out what it wants to do right now. It's at 5114. That's a big seller over there. That's a big buy order."
"Look at that. It's coming right up."
"Come on. Enter it. It still hasn't clicked."
"I already missed it, probably," I say.
"It might come back and hit it. Here it comes. Boom. You should be filled now. All right, now let's get ready to sell it."
"You're in the money."
"Come on, Drugstore." I'm happy for a few seconds, but the price keeps flickering. "Now it's dipping back down again." The spread between the price I paid and the current price is almost a dollar. Then it's nothing. The price is lurching up and down a quarter every tick.
"So what do you want to lose?" Dave says. "A hundred bucks? You bought it at 52, so how about if it goes to 51 or gets close to 51, you'll sell it and you'll lose a hundred bucks."
"It'd be nice for you to make some money on your first try," he says. And even as he says it, the numbers start flickering the other way again: 51, 52, higher. "O.K.," Dave says. "Now here it goes, back up. How do you feel?"
"I feel wired," I say.
"If it was your money, you'd probably be even more wired. Do you want to make a hundred bucks?"
"Do you want to make a hundred bucks or do you want to sit here and wait and make 200 bucks?"
"I want to make a thousand dollars. If I got 50 grand I could take it easy."
"Well, you can make a hundred bucks right now."
"Oh, I can."
"It's going to go through 53. It's up to you -"
"I'm just thinking."
" -- or you can wait."
"This is what I've seen you do."
"You're ramping," Dave says. "So how high is it going to go?"
"Right. Jesus Christ. What's happening here?"
"There's 53. You've got a hundred bucks."
"Should I go for it?"
"It's whatever you want to do. You can wait. It could go to 70 today. You know, who knows?" Dave watches the volume on the stock, which is extremely high. "Look at all the people. Look at the size on that bid."
"What if I sell at 54? What do I make?"
"You're starting to get parabolic here." He sounds pleased. "This is cool. Look how the bid is higher than the ask. Some people are paying 5314. Some people are paying 54."
"You could sell it at 55 and you've just made 300 bucks. Look at it now, it's at 54; 200 bucks."
"This is like 10 lunches right now, sandwiches up at the zoo." I had been worrying about where to get lunch for us today, but suddenly that seems dumb.
"54 1/2. 54 11/16."
"It's been steadily climbing since I got in."
"Yup. We got you in right at the bottom." Hey, I guess maybe I have a knack for this. "5438. 5412 coming through. 5438. That's a slight down. Now it's coming down a little bit. And so what it's doing is it's going up to 55 and it's meeting resistance."
"So you can be strong and say, 'All right, it's going to come back down, but I'm going to hold on and wait for it to come back up.' Or you can be like, 'Oh, my God, it might go down to 50. I'm going to flush it right now.' "
"Right." What would Arnold do?
"Whatever you think is the right decision. But it has changed its trend now. It's 5412 on the ask, 54 11/16. There, it's getting strong again. You want to have a bunch of shares on the bid side. You want them to keep fighting for the stock."
"There's 2,700 on the bid side."
"It's looking good for you. If you break through 55, it could go to 60. Then you have 800 bucks. Break through 55, c'mon. Look at the chart."
"Should I look at the big chart?"
"Yeah. You're at 54 15/16. You're up 300 bucks."
It didn't feel like $300. It felt like a penny with the potential to burst into a million dollars. "I'd like 54 1/2 or something," I say.
"It's going to be at 56 before you know it. Here it comes."
"O.K., at 56, I make 400 dollars."
"That's a psychological thing if it can break and get through to 56," Dave says. "Then everyone's thinking the next major area is 60. That's what all the day traders are thinking."
"These are all small numbers, though. Is there any institutional interest?"
"No, I think they're all day traders. They're all people just like you and me. Here you go. It's getting close to 56. You're almost 400 bucks up." Why does that sound so crummy? He says, "It's getting weak."
"More than slight weakening," I say. "It's falling off a little."
Dave says, "I think it's going to make a little turn here. You're already back down to 55. See how fast that went?"
"Notice on the chart, it's tailing off."
"Right. Do you think I should get out?"
"I'll let you call it. I'll let you make the call."
"54's 200 bucks."
"It's good to have 54 on your finger right now because it could be there in a heartbeat. Oh, no, it's 54 1/2 now. It's dropping. I'd, I'd flush it right now."
"I can't do it." This is so depressing. Pride shrieking -- maybe not pride, but I know I can do better than this. I can't cash in such a measly amount: 54 3/8; 54 1/16. "It's going down." It's going to turn around or I kill myself. "I agreed to go, but I couldn't do it."
"You don't know how valuable this experience is for writing this article." That's not what I want to hear.
"Man," I say. "Now it's down to 53. This is a downward trend."
"And you're frozen."
"Yup. Damn. What are you seeing?"
"Well, the reason I wanted to flush it right there is because that's a reversal. So you probably want to do something now because, otherwise, you're going to be back at 52. I mean, it's going to 52." Dave laughs.
"Yeah. And now you've got to deal with the technology. I think it's open. You just have to page down. Now it's going in reverse, coming back up, and it's going to hit your 53 so you're going to get ticked because the stock's going to probably go up again and you got shaken out."
"So, should I cancel?"
"You can try. Click 'open orders' again. That's easier because then you can see if it got filled. It probably got filled. Whoops."
"There, you sold. You made a hundred bucks."
"O.K. Sorry," I said. "Was I up $400?"
"You were up like 390."
"52," I say. "And it almost hit 56."
Dave looks at me. "Want to go for another round?"
was wrong about day trading. It's not boring. I now understand what Dave means when he says it's the ultimate. Gambling with big money is fun; just imagine leveraging everything you own. Add this to the arsenal of American addictions. Of course
I want to go another round.
This time I lose $50. I imagine thousands of other day traders at their desks, getting ready to pull the trigger, trying to identify the real momentum. I don't have a knack for this after all; I feel like a piece of livestock with an ulcer waiting for some food to come down a chute. Dave takes the controls back and nets $350. He makes it look so easy. Maybe, I think to myself, he really does know a few things. I hate to admit it, but over the next week, I think very seriously about taking money out of my savings account and following a few of Dave's tips. Why not?
And yet, most day traders I talked to seem not to adore this life -- one foot out the door, so focused on what comes next; they seemed almost afraid that they would end up trading for the rest of their lives. Less than a year into his new "career," Dave is the same way.
"There are things that I'm missing that I really like," Dave says to me one day. "I like working with a team, on a mission, creating something of value -- and here I'm not doing any of that." After all of his celebratory chatter about piling up easy money, the comment seems sort of shocking. He talks more about fundamentals now, about gathering information the way Peter Lynch might, about how well his long-term picks are doing.
And he talks about his Web site for day traders, boiling down all the advice out there for day traders into one simplified, straightforward newsletter, "A newsletter of newsletters." He's brought in experts from various fields to contribute content -- but one attraction is that they are not professional money managers, since those people are part of the problem. The new experts are people like Dave, revolutionaries, who happen to work in hot sectors like biotechnology and can comment on the entire industry. Like a good Amway salesman, Dave is looking beyond the drudgery of the daily grind. He needs bodies. If he is an expert on trading, he can leverage what he knows; he can charge people for it.
I listen to him now and I realize that this revolution was over before I got here. Maybe the giant brokerage houses resisted the rise of the small investor for a time, and little guys like Dave were some sort of threat, trading for 20 bucks or 15 bucks or 6 bucks a shot, thumbing their noses at the mystique of Wall Street. But the brand-name firms all wised up pretty quickly. They'll all take your 20 bucks a shot, if that's the way you really want it. The online trading industry spent more than any other during this year's World Series, in a frantic race to draw prospective online traders. And much of the corps that cover investing in the media seem to have given up skepticism completely, praising a "new set of rules that can make you rich"; they're more breathless than the ads.
Whatever happens with his Web site, or his occasional existential crises, I don't imagine that Dave will quit day trading anytime soon, and I think he is right when he says that day traders are simply part of the landscape now. He once pointed out to me that, really, day trading is just a new variation on a pretty old theme. "Since the beginning of time there have probably been ways that you could take your money and make it into a lot more money without having to work very hard," Dave said, and I couldn't disagree with him. "Day trading is like that. Except it's on steroids."