(MONEY Magazine) – In a Florida beach town crowded with palm trees and hibiscus plants lies evidence of America's latest obsession. The Wall Street Pub, a restaurant in a peach-colored, teal-trimmed building on a charming commercial avenue, looks at first glance like any other dining spot in Delray Beach. Young men in shirtsleeves down lunchtime beers at the shiny mahogany bar, while tourists sample burgers in the plush booths.

Then you notice that the young men are watching an electronic ticker scrolling over the bartender's head. And that the message board on the wall advertising today's hot soup (corn chowder) also lists today's hot stocks (eBay, Disney). And that the patrons jabbering at the back of the restaurant aren't having a private party. They're gathered around computer terminals, buying and selling stocks.

You know a fad has reached fever pitch when it spawns a theme restaurant. (Wall Street Pub's owner, Patrick Gostley, says he plans 25 outlets and an IPO.) In the coffeehouse, at the gym, on the commuter train, people everywhere are talking about stocks. And more and more of them are toying with a new idea: day trading. Thanks to the rise of inexpensive online brokerages, almost anyone can become a part-time or full-time stock trader, living out the fantasy of trying to make a killing like a Wall Street pro. There are now scores of books, gurus and seminars devoted to day trading, not to mention countless Internet chat rooms. The momentum is only building. "No one," says Nancy Smith, education director for the Securities and Exchange Commission, "anticipated this kind of massive appeal."

That's because no one anticipated the extraordinary confluence of events--a gravity-defying bull market, changes in regulation, the explosion of the Internet--that brought day trading to everyday folks. Although the classic definition of a day-trader is someone who uses a firm's money to flash in and out of stocks hundreds of times a day, seeking to squeeze profit out of tiny price movements, the new breed of day-traders generally use their own money and may make only a handful of buy-and-sell trades (called round trips) each day. Some deploy cutting-edge technology from terminals at specialty shops, but most trade through electronic brokerage accounts via personal computers at home or at work.

The allure is obvious: no bosses, complete control over how and when you trade and the potential--or so it seems--to make a lot of money. Mary Jo Pena is among those enticed by this vision. Pena, 28, is a classical pianist in New York City who ekes out a living teaching and playing at parties. Hoping to boost her income, she plans to liquidate a small retirement account and start trading stocks--even though she admits she's got little experience as an investor. (The risk, she says, is no different than walking out onto a stage.) On the other end of the spectrum, meet Sam Duthoy, 35, who recently quit a $200,000-a-year job as an ad exec in Chicago to trade stocks at home, using the five-figure portfolio he's amassed: "How else can you have no inventory and no employees, pay no rent, tap-tap-tap on a keyboard and make a living?" Similarly, David Mederrick, 27, left a Big Five accounting firm to trade his own account in a specialty shop. (His diary of his tumultuous first 10 months on the job begins on page 103.)

There are experts out there, predictably, who see great danger in all this. "It's very hard to rein in the human emotions set loose when people think they can make a lot of money very quickly," says the SEC's Smith. "But just because you can trade in a nanosecond doesn't mean you can make good investment decisions in a nanosecond." Smith's point, if a bit preachy, is sensible. Still, such cautions won't halt the ongoing stampede toward day trading.

Should you consider grabbing the reins? We'd be extremely wary. Anyone tempted to take the plunge should first pause to consider the experiences of not just those who have tried and failed as day-traders but even those who, so far, have come out ahead. What the tales of people on the front lines show is that while there may be money to be made at day trading--as long as the unprecedented upward trajectory of stocks continues--there's also much to be lost. Day trading, it turns out, is neither as easy nor as fun as it seems.

"WE CARE ONLY IF IT MOVES"

Ronnie Rushneck and Bill Reilly make their living the old-fashioned way: selling cars. But on a Thursday morning at the Rushneck Honda and Subaru dealership in Tarrytown, N.Y., owner and salesman are interested only in selling a stock. They've each just bought Cisco Systems at $105 a share through their online accounts at Waterhouse Securities, and they're huddled over a computer in a wood-paneled office watching the tech stock gyrate. "It'll hit $110 today--that's when we'll sell," says Reilly, with the confidence of an old pro.

Which he's not. Until last year his broker handled all his trades. The summer of 1998 changed Reilly's hands-off approach: As the stock market plunged 19% between mid-July and October, his retirement account at Prudential Securities dropped $66,000. Reilly says he heard from his broker only after yanking his account from Pru. "He said, 'But I thought you were a long-term investor!'" remembers Reilly. "I said, 'I'm 65--how long term do you expect me to be?'" (Prudential claims its broker was in regular contact with Reilly during the market decline.)

Since he started trading on his own, Reilly, now 66, has further modified his definition of long-term investing to "between 9:30 a.m. and 4 p.m." He's increased his account from $280,000 to $345,000 since October by moving in and out of stocks like Excite, Lucent and America Online. Not every day has been perfect--back in December he lost $7,000 on a single day, after buying Ericsson just before the cell-phone concern announced negative earnings news. But as the market bounced back, so did he: Reilly says he made $21,300 in the month of January. He and Rushneck, 47, don't trouble themselves with details such as a company's products or its price-to-earnings ratio. "We care only if it moves," Rushneck says. They glean tips from CNBC and Bloomberg radio and hunt for stock splits and merger rumors. Every weekday morning, between customers, the two spend at least two hours chasing stocks. "We learn a little, make a little, and we're having a great time," says Rushneck. "What's wrong with that?"

This bravado is common among the new breed of day-traders. Rebecca Morales has it in spades. Morales, 29, earns a six-figure income as a sales rep at Dell Computer and has amassed $500,000 in Dell stock, thanks to her employer's generous options. But rather than count her blessings, Morales is counting on more. In fact, she is confident enough about her finances that she has borrowed against her Dell stock to set up a $400,000 margin account for trading, which she does right from her desk at work. "It only takes a few clicks," she says.

The idea that she might lose money barely fazes her. That may be because so far it hasn't happened. Morales typically darts in and out of high-profile Internet stocks like eBay and E*Trade, which she likes because of their volume and big price swings. Her worst trading loss: just $225, on Gymboree stock, which she sold quickly after it dropped a quarter of a point. Her biggest gain: $6,500, when she loaded up on 500 shares of eBay at $297 and sold later in the day at $310. In the second half of 1998, she says, she pocketed $54,391 (after commissions and taxes), which covered mortgage payments on her custom-built four-bedroom house in Austin, loan payments on her Toyota 4Runner, and frequent gifts to her parents and siblings.

Morales aims to accumulate $3 million within five years so she can retire from sales. "I've always wanted to teach," she explains. But what if the market deflates in that time? "So I'll work for a few more years."

PROMOTING THE DREAM, LIVING THE NIGHTMARE

On a weekday evening in January, more than 200 would-be day-traders gather at a banquet room in a Manhattan hotel. They range from a gang of young men in jeans and Knicks jackets to a silver-haired lady carrying half a dozen plastic bags, and they encompass a rainbow of ethnic groups--black, white, Asian, Hispanic, Hasidic Jew. All are listening raptly to Harvey Houtkin, CEO of a New Jersey day-trading firm, who is issuing a fast-paced, impassioned spiel.

"Maybe you're a college grad working at Radio Shack," rasps Houtkin, microphone clipped to his shiny tie. "Maybe you're about to be retired. This is a tremendous opportunity for you." The crowd leans forward, enthralled. "No longer will you be treated like garbage by a broker," he goes on. "We give you the ability to go into direct competition with the marketmakers." The hook in, Houtkin delivers his pitch: By attending All-Tech Investment Group's monthlong training course ($5,000) and trading on its system ($25 per trade), anyone--well, four out of 10, Houtkin slips in later--can become a "successful" trader. "Sure, there might be stupid people doing stupid things, but is that a reason to say they can't trade?" Houtkin asks. "People go to Atlantic City every day!"

Seminars like this are taking place across the country, as trading firms and self-appointed gurus play up the appeal of instant riches to reel in the hopeful masses. And the hopeful are responding--much to the dismay of regulators like Matthew Nestor. "We don't have a problem with day trading per se," says Nestor, chief of enforcement for the Massachusetts Securities Division. "We're not here to protect people from their own stupidity. As long as they're told about the risks up front, we don't care." But that's not always the case, he says. He calls Houtkin's claim of success for four out of 10 day-traders "nonsense" and fraudulent: "The vast majority of people lose money day trading."

Nestor cites the example of Tom Jones--or at least that's the name Jones wants us to use. He's so embarrassed by what day trading did to him that he spoke only if we wouldn't use his real name. Jones, 43, is hardly an investment novice. Formerly an administrator for Tufts University, he took $80,000 in savings and, using an online account, built it into $350,000 during the mid-'90s. Then, on a broker's tip, he lost most of it in a single, disastrous investment in tech stock Iomega. "At that point, I said to myself, 'I did this before on my own, and I'm sure I can again,'" Jones recalls. "I was so eager to make back the money I had." In 1997, he opened an account at a day-trading firm. His immediate results were encouraging: $18,000 in profit on his $50,000 account in the first month, he says. He soon convinced friends to let him trade for them as well, gathering $160,000 of their money. That's when the tide turned.

"From that point on, I didn't do too well," says Jones. "My trading was horrible. I felt a sense of urgency, which added more pressure." Within six months, Jones had wiped out his friends' money as well as his own, practicing a strategy called "dead cat bounces": scooping up obscure, down-and-out companies--dead cats--and waiting for them to bounce back. "But they never did," says Jones.

Things got worse. Investigators from the Massachusetts Securities Division swooped down, charging Jones with illegally trading other people's money without a license. The state has since reached an agreement with Jones, who says he never knew he needed a license. The firm where he was trading was also charged, but Jones doesn't blame anyone but himself. His relationship with his friends, he says, was "wrecked." Jones says he'll never trade again.

THE NEXT WAVE

To Jones, day trading may have become a nightmare, but to those watching the Dow surge relentlessly upward, trading for profit seems like bliss. Robyn Levin, 41, is a regular at the Wall Street Pub in Delray Beach. A former competitive ice skater who owned and ran a moneymaking Florida rink, Levin agrees that you need a high tolerance for risk to be a day-trader. But for her, that risk comes with a coveted reward: freedom. When she's bored with trading on her home computer, the petite blonde heads in to the Pub to exchange ideas with other traders, keeping an eye on her account while nibbling a salad. Levin likes to say she's "taking my office to the beach," slapping on a beeper and a cell phone as she tears around Lake Boca on her Wave Runner jet ski.

All this sounds perfect to Sam Duthoy, the 35-year-old ad exec who recently quit his job to trade stocks. "I was bored," he says, explaining that he found himself daydreaming about starting a small business. Day trading sounded even better. "I believe that if you do your homework, you have a strong chance of outperforming a lot of mutual fund managers," Duthoy says confidently. "Almost none of them do better than the market anyway. What have I got to lose?"

Only money, Sam. Only money.

Beginning on page 103: "The Diary of a Day-Trader"