The day of the day trader
At Tradescape, the 20-somethings say they know what they're doing
NEW YORK (CNNfn) - Like most of the customers at Tradescape.com, Dan Ripoll is sick of reading stories criticizing his career of choice. "The people writing it don't have any idea what we do," he says. "This isn't gambling."
Ripoll quit Merrill Lynch's market-maker training program a year and a half ago to day trade. The 25-year-old Los Angeles native recently allowed CNNfn.com to observe him on a typical work day.
7:00 a.m. -- Ripoll wakes up "earlier than I have in years," in Jersey City, N.J., and starts his commute into Manhattan. He splits his time between New York and Miami, where he also trades.
Normally he starts his day around 8, but last night he took home a couple of positions. That violates Day Trader Cardinal Rule No. 1, Thou Shalt Not Take Overnight Positions. But after big gains the day before, he figured they'd get a boost the next day. He wants to make sure he's in the office to watch them.
8:00 a.m. -- New York is underwater. The rain runs in torrents, pauses to catch its breath, then floods the gutters again. "Chaos Rains" will be one newspaper headline the next morning. The streets are awash, and the main thoroughfares are flooded and closed. The subways start shutting down. Commuters hail buses, cabs, private cars, garbage trucks.
9:05 a.m. -- The day traders aren't easily dissuaded. At the company's headquarters on Park Avenue, in midtown Manhattan, they scurry in cursing the weather, casual in their baseball caps, T-shirts, cargo pants and sneakers.
A day trader at Tradescape.com mulls his next move soon after the opening bell rings.
9:15 a.m. -- Ripoll is stuck in traffic and calls from the cab on his cellular phone. He won't make it to Tradescape.com's headquarters on Park Avenue, in midtown New York, by the open. He decides to catch the start of trading at a branch in One World Trade Center, then make his way uptown. He boots up his PC just as the market opens.
9:30 a.m. -- At the headquarters, nine traders stare at their screens. The room is dim, and the traders' faces are lit by the glow of their computer screens. An overhead television screen flickers with the image of the opening bell on Wall Street, the sound is turned down.
"What are you watching?" one asks. "RHAT, Red Hat," another answers, referring to a software developer that recently went public. But there's little talk, and the tight room rustles with the click of 90 fingers flicking keyboard keys.
9:55 a.m. -- Ripoll has had what he calls "a nice opening." The positions he took home, 500 shares of ZOOX, Gadzooks Networks Inc., and 300 of EFNT, Efficient Networks Inc., took off. After buying more shares and selling as they approached their highs, he's up around $12,500. It's important. "I make 80 percent of my money in the first hour," he says. That's when the trades placed after the previous day's close are entered. "The morning is almost like an inequity," he said. Ripoll also looks for strong demand for runaway stocks of the previous day. He heads uptown.
Dan Ripoll makes 80 percent of his profits in the first hour of trading. He trades 57,000 shares a day.
10:15 a.m. -- At Tradescape.com's headquarters, the traders are less frantic after the opening-bell bustle. One stretches his leg over a chair. Stragglers are still arriving, cursing the weather and the shut subways. There's a lot of banter, but they're focused on their screens, flicking rapidly between the stocks they follow, looking for ones that are moving rapidly.
11 a.m. -- There are now 16 traders in the trading room, a narrow, shabby hall with offices off one side. Though there's a wide ethnic mix, they're all in their mid to late 20s, all men. They've latched onto Bamboo.com Inc., or BAMB, a company that just went public. "The bambino is good stuff," one yells. "C'mon!" another shouts.
11:20 a.m. -- Scott Friedman is trading OCLI, or Optical Coating Lab. "I've been following it for weeks and weeks," he says. He monitors around 100 stocks and tracks 20 to 25 actively, watching how the market makers that trade them change their prices, looking for patterns. He buys 100 shares of OCLI at $80, then notices the direction shift against him. "If these guys at $79 start to disappear, I'll sell it," he says, pointing to the bidders on the stock. They do. He sells. "So I just lost $100," he says.
11:22 a.m. -- OCLI is back at 79-3/4. "That sale has not been very good," Friedman admits. But he says he is glad he cut his potential loss by selling quickly. "I tend to be a very consistent trader. I make money nine days out of 10." He starts watching for OCLI to drop again. "I'll wait for a pullback and buy it," he says.
11:25 a.m. -- Friedman runs through his portfolio, looking for movement. He has two long-term investments, in Pfizer and AT&T, but mostly he jumps in and out of stocks rapidly, trading 500 share blocks, or 100 shares if he feels it's riskier. He looks at MVSN, which he feels sure will have a big run. By watching how they trade, he feels he learns stocks' characteristics. So he doesn't think trading is gambling, and he doesn't believe most traders lose money.
11:30 a.m. -- Ripoll arrives and starts trading next to Friedman. He pulls out a list of around 20 stocks he'll watch, which he puts together every night, using Omega software to pick out patterns to trade on. If a stock had a big run-up one day, for instance, he looks for a follow through the next day. "This is almost predictable," he says. "That's why you can make a lot of money most days and not be gambling." Like many traders, he likes to trade breakthroughs, stocks hitting new highs. He pulls up his account. He has made money 17 of the last 19 trading days, more than $110,000, averaging $5,900 a day. "August has been a good month," he says.
Scott Friedman (left) and Ripoll talk stocks at the company's Park Avenue headquarters.
11:35 a.m. -- "Red Hat, do it to me!" one trader yells across the room. But trading volume is low, so after his successful morning, Ripoll isn't keen on trading actively. Light volume "is dangerous," he says. "If there's not a lot of volume, the chances of buying something and it moving three or four points are slim."
11:40 a.m. -- Friedman buys OCLI again at 80. Ripoll buys 1,200 shares of QCOM, QualComm Inc., at 190-3/4. He sits on it for a minute while the price runs up. "I could sell it here but I don't want to," he says. Then he sees it starting to pull back. "If it doesn't act right I'm going to get out of it."
11:45 a.m. -- Friedman sells OCLI at 81-1/4. "So I made back the $100," he says. Minus Tradescape's commissions, $1.50 per 100 shares, of course, but even on 1,000 shares he's paying $15. So he says the costs are negligible compared with the loss or gains on the trade.
11:50 a.m. -- Ripoll sells 1,000 QCOM shares, then closes out his position selling 200 at 192-1/2, netting $1,000. He keeps watching the trades scroll across his screen, waiting to see if it will take off. "It's about to fly right now," he says. "It was taking time to go through that 191 level." If he's confident a stock is moving in a certain direction, he buys 2,000 or 3,000 shares.
11:58 a.m. -- Ripoll's friend Luis Sierra is trading behind him. "GRIN, you see this?" Sierra asks. "I haven't traded this stock yet, man," Ripoll replies. Though Tradescape.com, like several day-trading companies, lets customers trade remotely using their software, Ripoll likes the camaraderie and tips he gets in a trading room. "It's important to be around good traders."
12:00 p.m. -- He decides not to get into GRIN, Grand Toys International, unlike many of the day traders, who are abuzz about it. It's not a stock Ripoll follows. With those he does, sometimes he just knows the ticker symbol and its trading pattern. "It's not necessary to know anything about the company," he says. "Just look at the ticks, man. You see buyer or seller interest, you get in."
Ripoll often trades with Luis Sierra, who loses $700 in the afternoon trading Knight/Trimark Group.
12:45 p.m. -- Ripoll and Sierra break for lunch. Ripoll trades most actively in the morning and for an hour or so at the close, averaging volume of around 57,000 shares a day. That's $855 in commissions. In between, he bides his time at the computer or talking to friends. But he rarely misses a day of trading. On vacation, he'll drop into an office to trade. He and Sierra once traded from a Kinko's in San Francisco, downloading the software onto the computers and paying $150 for the time. Well worth it, they say.
2:45 p.m. -- Ripoll returns for the close of the markets. The trading room is full now, with 24 traders tapping away at their computers. Ripoll, who studied economics at Stanford, also thinks most of them make money. Many of the Tradescape.com traders came from Ivy League schools, Ripoll says, and learned to trade at Datek's proprietary arm, what's now Heartland Securities Corp. Day trading is best left to young people with good memories for prices, he says, and he thinks his research accounts for most of his success. If a stock has been trending strongly and then pulls back, for instance, he watches for it to rebound. "It's important to have a system."
3:00 p.m. -- The market has turned down, so he starts looking for stocks to sell short. "None of these are on my setup, so I have to be careful," he says. "You can short stocks and lose 2 points like that," he says with a snap of his fingers. He scrolls through ELNK, BAMB, ARBA, ELNK, EXDS, looking for stocks near their highs. "I'm always looking for a good risk-reward strategy, otherwise it's gambling."
3:15 p.m. -- Ripoll notices that Net.Bank's stock, NTBK, is racing away. "What's the news on Net.Bank, why's it so hot?" he asks. "No news on Net.Bank, none at all," a trader replies. Ripoll moves on.
3:20 p.m. -- Sierra is spending the afternoon trading NITE, the Knight/Trimark Group. But the First Boston market maker is holding the price down. "Go NITE," he shouts, and Ripoll turns around to watch what's going on, then clicks to NITE on his screen. Ripoll and Sierra talk strategies, like they do all day, trying to help each other. "It's in a tight range," Ripoll points out.
3:26 p.m. -- Ripoll buys 500 shares of GTSG at 35-1/2. But his quote screen starts looking worrisome. "Oh that's not good," he says, and immediately tries to sell.
3:28 p.m. -- He gets out at $36. In selling his shares, he accidentally sells more than he means to, and ends up shorting the stock. He covers the trade as quickly as possible, then asks where the action is. "You guys short BAMB?" he asks the traders around him.
3:30 p.m. -- Ripoll starts making a number of trades in BAMB, some of which turn out profitable and some that turn into small losses. He scrunches into an apple and trolls for stocks that are moving again. When his cell phone rings, he turns it off. "No phone calls right now," he says.
3:37 p.m. -- He scrolls through MEDI, PHCM, URSN, ARBA, looking at all the market maker quotes on the stocks and the direction they're headed in. "INKT, I thought about shorting it at $115. Now it's back up at $116, so I would have lost a point," he says happy. He's content to sit back and trade less aggressively in the summer, when it's quieter.
3:43 p.m. -- Ripoll watches OCLI. He notices one of the market makers has a bid price a point higher than the next-best price. "It always trades like this," Friedman says next to him. Ripoll is wary that the market maker may drop and the demand will vanish. "Unless it's really looking good I'm going to avoid it," he says.
Ripoll ends the trading day happy at 4. "I didn't have to spend a lot in commissions to make money."
3:50 p.m. -- Ripoll tries to buy shares of TLAB but he misses the price he wanted and his trade expires. He notices ZOOX, the stock he held in the morning, has pulled back from over $109 to $96, and the EFNT he sold at $64 is now below $51, so he's happy he got out when he did. Nearly all the money he's made came from the stocks he held overnight. "It's a good day. I didn't have to spend a lot in commissions to make money."
3:55 p.m. -- The trading room gets tense again as the end of trading approaches. One of the traders slams his keyboard with a crashing sound, and everyone looks round, startled. Ripoll turns 200 shares of ETEK for a quick profit and checks to make sure he's out of all his positions. "If you don't start selling by 3:58, you'll be stuck."
4:00 p.m. -- The markets close, and Ripoll is up $14,874. Sierra has lost $700 in the afternoon, trading NITE, though he's also up for the day. Ripoll clicks his computer off immediately and heads home.
He spends two hours or so talking with other traders on the phone each evening, discussing what stocks to watch. Then he scouts Tradehard.com, a news site, and runs his research.
He loves his job, he says, and is thinking about starting a course to teach others how to trade. With the right system and information, he says, trading is more of a science than a gamble. "Trading is all about being in the right stocks at the right time."
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