What it takes to trade
At All-Tech, it's money, and the feeling you're smarter than the rest
MONTVALE, New Jersey - (CNNfn) - The trend is your friend. Trade with your head, not with your heart. Don't chase stocks
The catch phrases are spewing out on day one of All-Tech's training class, a sort of Day Trading 101. But most of the students paying $5,000 apiece to take the four-week course don't seem to mind.
They're here for one simple reason: They want to get rich.
All across the country, hundreds of housewives, school teachers and middle managers are quitting their jobs to take on the pros of Wall Street.
OK, so maybe it's not that romantic after all. But, for many would-be day traders, the lure seems to be the excitement - and the potential riches - associated with buying and selling thousands of shares at a moments notice.
"I was bored," Don Ptalis, a student at All-Tech's latest class admits. At 56, he's a retired executive who has bought and sold more companies than he cares to remember. After retiring, he found he was working seven days a week as a director of a company and with his wife's antiques business.
Like his fellow class members, he's had some success investing, and he figures he'll try his hand at trading. And, like many of the people taking All-Tech's course, he doesn't plan to lose.
"If I thought I was going to lose money, I wouldn't do it," he said.
Jitendra Patel, 60 and a retired civil engineer with an Asea Brown Boveri division, has set aside 10 percent of his assets to trade. He has invested for 30 years and plans on keeping that separate. "Day trading, I'm going to go by their philosophy. I'll open an account with them, and then this other [investment] account will be long term," he says.
He considers his new career risky, but he feels OK because he's not going to trade more than he can afford to lose. "We have the sense to put X amount of money aside for the gambling - playing day trading. And if you don't touch the rest of it, you're all right, you know."
Ptalis and Rogers disagree with Patel. Neither consider it gambling. Ptalis says he just won't lose any money. He knows most day traders lose money but he thinks that's because they don't follow the strategy. "I'm smarter than the average bear," he says.
Rogers has only set aside $50,000. He says he can't afford to lose it and will stop before he gets to that point. "If I get down $20,000 I know I'm going to have to quit, because if not my wife will kick me out of the house," he says.
Week One: The Basics
Phase One of the class, a week, covers basics, from how the markets operate to how not to day trade stock. It's part pep rally, part analytics, a lot of basics and a hefty dose of anecdotes and aphorisms.
"The trend is your friend," the instructors like to say. By the end of the week, the customers are running drills to get in and out of trades quickly.
"You're using a very dangerous tool," Director of Training Jai Ramoutar says by way of introduction. "And it's also very profitable if it's used the right way." Trading isn't easy, he points out. "How much can I make day trading? How long will my learning curve be? The length of your learning curve depends on the thickness of your skin."
The instructors rattle through the primary ways day traders lose money. Don't take home overnight positions, they drum into their customers. "That is the No. 1 reason why traders fail," Ramoutar says. Don't chase stocks. Don't trade on your emotions. Don't make predictions. Stay disciplined. Take quick profits and cut your losses.
Don't trade Cisco, Dell, Intel, Microsoft and something.com, Ramoutar says. "These stocks have the personality of a schizophrenic drunk." But several of the examples the instructors give do mention those stocks.
Rogers sees the contradiction. "You're going to get that, I'm sure," he says at lunch, "because everybody has got their individual approach. The fact of the matter is, the vast majority of day traders are trading tech stocks. It's 'Do as I say, not as I do.' "
At the end of the first day, Rogers is still worried. "I feel like I've fallen off the cliff into the abyss," he said. Others are more confident. "I don't feel like I went into the abyss, I feel ready," says Mary Ellen. She's a financial software consultant "in her mid-30s" who didn't want her last name used because she might want to go back to software consulting.
She's looking for a change after working for the same client for three years and making good profits position trading stocks like America Online. "If I can't make $500, $600 dollars a day, I might as well work," she says. But she's heard women make good day traders.
Week Two: I think I can
Phase Two, another week, covers setting up a computer screen using All-Tech's Attain system and how to place trades. For those who can't come for all four weeks of training, All-Tech also runs week-long bootcamps at $3,000, that cram in the four weeks of training into seven days. Customers are free to come back for training if they don't feel ready.
By the end of Phase Two, Ptalis is even more convinced he can make it trading. "I read a lot about how this is gambling. If you follow their curriculum it's far from it." Why? He'll cut his losses at 1/8 to 1/4 of a point if a trade starts going against him, he says. "Minimize your losses, maximize your gains," he said. "Gambling is buying a stock and holding it for a few days, hoping that it's going up."
Rogers is also more confident. He's not going to hold stocks overnight, he says, and he's learned that he shouldn't get in or out of a stock too late. How will he know? "You'll know based on what you see on the screen with experience, hopefully," he said. "I feel like I'm a long way from being ready to trade." He plans on contradicting some of what he's learned by trading on news about stocks, though, something the All-Tech instructors tell him not to do.
Phase Two also covers some trading techniques. But the "Strategies" part of All-Tech's training manual only covers the mechanics of making trades. The advice the customers get is more general than anything. You can be a grinder, who watches many stocks, or a specialist, who sticks to a few, Rogers says he has learned. Rogers plans the latter, perhaps watching as few as four or five stocks.
Week Three: Charts and Indexes
In Phase Three, All-Tech's customers learn more about charts and how to recognize when a stock is ready for buying. At this point, the trades are strictly on paper - no real money is actually changing hands - and those who need more time to master the art of trading can stay in this phase for as long as they like.
On a day when the market is heading down, Ramoutar notices Apple Computer Inc. and Genzyme Corp. are diverging with the market. If the Nasdaq 100 starts to rebound, look for the chance to get in, he advises. "There's a reason why the stock is heading higher. Why is the money going into Apple? I don't care."
Jitendra Patel practices at All-Tech. He plans to risk 10 percent of his assets trying to trade.
Watch for four things when you're trading, he teaches: support, resistance, trend and direction. But don't watch too long, he says. "There's a very fine line between being an analyst and being an ANAL-lyst," he jokes.
Mike Dessoye, a free-lance consultant for AT&T, says he made $60,000 in a year investing, first through a broker and then online. "I knew more about stock than my broker," he said. After his last stint with AT&T ended in June, he decided to try day trading for the summer.
He feels he knows most of the information in the course, but it helps to hear it again. The four weeks don't teach you everything you need to trade. "It's really probably two, three, four, six months before someone who's never traded before would get this." After the paper trading of Phase Three, he starts supervised live day trading with his own money in Phase Four.
Back at the end of Phase Two, Patel isn't ready yet. He says he's started to recognize how to watch a stock's volume and he knows to watch if it's rising or falling.
He's got All-Tech's training guide, which warns of the risks while hinting at great rewards. "Most people are shocked when we tell them we cannot turn them into a winner," it says. "Because day trading involves so many trades, you will be paying a lot of money in commissions," it warns, $25 per trade. "It is estimated that approximately only 20-30 percent of those who commence day trading will be successful."
Harvey Houtkin insists his company just gives people the tools to go up against Wall Street. "We're not telling you if you're making the right decision," he said. Stick to the discipline. Don't take home positions. Most people who lose money aren't real day traders. "If you truly day trade, approximately three out of 10 people will ultimately
be successful at it," he insists.
Like Rogers, like Ptalis, like Dessoye, Patel hopes he'll be one of the lucky ones. "Two weeks ago, I was not a day trader. I'm not one now. But I'm in a better position to be a day trader," he said. And he turned back and stared at his screen.