Day traders hang
with the big boys

Illustration by David Swann, Star-Bulletin

In a Hawaii Kai office,
small investors buy and sell large
blocks of stocks in pursuit
of quick profits

By Rick Daysog
Star-Bulletin

SITTING on white plastic lawn chairs and working off of fold-out tables, about half a dozen traders anxiously stare into their computer screens, buying and selling thousands of dollars worth of stocks.

Harbor Securities LLC's second-floor office at the Hawaii Kai Shopping Center may have a garage-like feel to it but it's every bit as active as the typical Wall Street trading house.

These are day traders, a hearty band of small investors who are riding the electronic revolution that's sweeping Wall Street.

These online traders invest like the big boys on Wall Street, darting in and out of big blocks of stocks that are traded on the New York and American stock exchanges.

Simply put, a day trader is an investor who buys large blocks of stock and sells them in the same day. The traders often hold their stocks as briefly as 5 to 10 minutes and rarely own a stock for more than three hours. They never hold a position overnight.

The traders make their money on the minute-by-minute movements of a stock. For example, Procter & Gamble Co.'s stock, which trades at about $133, may go up $4 in morning trading, then drop $2 later that afternoon. The day trader attempts to anticipate those price moves by buying and selling 500- to 1,000-share blocks.

The profits can be huge. One day trader, 19-year-old University of Hawaii student Titus Szymanski, said he made $14,000 when he bought 1,000 shares in Yahoo! Inc. when it went public in April 1996.

Szymanski, who traded the stock through a California day trading operations, recalled that Yahoo!'s stock rose for more than 45 minutes, more than doubling its price that day.

"That was intense," Szymanski said. "I just rode the damned thing."

According to Bill Dannheim, Harbor Securities local manager, a good day trader can make $3,000 to $4,000 in a day doing this. Some can make up to $10,000 a day, he said.

The potential for losses are limited to some extent, Dannheim added. Anytime a stock moves about 50 cents a share against the trader's position, the trader usually is required to get out of the stock, he said.

Harbor Securities trader Tate Rolfs recalled one investment that didn't work out. He bought 500 shares of a stock that he thought would rise $1.50 a share, giving him a potential profit of about $750. But the stock dropped 37.5 cents a share, resulting in a loss of about $200, said Rolfs, whose overall investments are up about 25 percent since January.

Day traders say they don't care where the market is going or whether a stock is going up or down. They only want it to move.

If a stock goes up, they take a long position, meaning they buy then sell. If they know it's going down, they short it, meaning they sell borrowed stock at the market price and repay the borrowed stock when its price drops.

ByKathryn Bender, Star-Bulletin
Tytus Szymanski, left, relays market activity to to
other day traders as Tate Rolfs, foreground, studies
the graphs of ups and downs to make his play at
Harbor Securities' trading center in Hawaii Kai.

---

"We like movement and volatility," said Rolfs. "Whether it goes up or down, we don't care."

Harbor Securities' traders aren't employees in the traditional sense but are similar to independent partners who, for a relatively small trading commission and a 20 percent cut of the trading profits, get to use the company's computerized trading system and benefit from the company training programs.

The traders, who ranged from stock market novices to sophisticated investors, don't need a license to trade. But they must provide at least $25,000 of their own capital to set up an account. Harbor Securities, in return, leverages the trader's account 10-to-1, meaning that they can invest with an additional $250,000 of the firm's money.

Harbor Securities also screens applicants through an interview process to see if they can meet the requirements of traders, Dannheim said.

Day trading isn't for everybody. It requires a robot-like discipline. Emotion and fear have no role in the business. Risk management is the rule.

Dannheim recalled that one novice at Harbor Securities' New York office froze up after losing some money on trades. He kept showing up for work but was too scared to trade.

"Once you allow emotion into the trade you have to stop trading because you're just going to get hurt," he said. "The markets are a study of human nature. It tells a lot about how a person responds to hope, fear and greed."

Harbor Securities began in Hawaii in December as a so-called SOES trading business but is being converted into a day-trading operation.

SOES, an acronym for Small-Order Execution System, is a computerized trading system created in 1985 that allows the small investor instant access to stocks traded on the Nasdaq market. It allows them to bypass the traditional mark-ups charged by market makers who list the over-the-counter stocks.

The day traders have a wider access of investments: besides the Nasdaq market, the day trader can invest in the better known stocks that are traded on the New York and American stock exchanges.

They also aren't under the same criticism that has dogged the SOES trading community. SOES traders, dubbed "SOES bandits" by the Wall Street establishment, have been criticized for making excessive profits by abusing a system designed to help the small investor.

Some market makers are no longer honoring trades with SOES traders or are delaying their trades, thereby taking away their advantage, Dannheim says.

For some investors, day trading is like a second career.

The 3:30 a.m. to 10 a.m trading hours allow Hawaii day trader Tate Rolfs to work a second job as a chiropractor, which he's done for about 18 years.

Rolfs, 49, said he fell into day trading after he decided he needed a change from his chiropractic practice.

"When life offers you a fork in the road, you take it," said Rolfs, invoking a Yogi Berra-ism.

Economic forces propelled Aina Haina resident Delores Sandvold into day trading. Since the 1970s, Sandvold has run a real estate development company, which once developed homes in Hawaii Loa Ridge and condominiums on the North Shore.

But when the local real estate began to go south in 1992, Sandvold decided to get out of the local development market and focus on mainland projects.

Sandvold, whose company continues to manage vacation rentals here, decided to get into the stock market about a year ago to augment her income.

Since February, Sandvold said her stock market investments have done well, noting that she once netted a $3,000 profit in one day.

"This is what's keeping me in Hawaii," she said.