KEN IGE / KIGE@STARBULLETIN.COM Day traders Clyde Igarashi, left, and Wade Matsumoto checked out data at Igarashi's home in Mililani.

The sun still
shines for some
Hawaii day traders

Years after the end of the market
frenzy, a few quietly go about
the business of making money

---

By Dave Segal
dsegal@starbulletin.com

It's been three years or so since day trading hit its frenzied peak, and many players have folded their hands and returned to their real jobs.

Some, of course, were wiped out as fast money turned into big losses.

But traders Clyde Igarashi and Wade Matsumoto, both of Mililani, are still very much in the game.

Igarashi, 36, has an MBA from New York University, while the 31-year-old Matsumoto graduated from University of Hawaii in 1994 with an accounting degree.

Despite the diplomas, both are full-time day traders. And they're not alone.

Although it's difficult to obtain exact figures on the popularity of day trading in Hawaii, it's worth noting that Igarashi and his day-trading partner, Matsumoto, attracted about 35 people when they took out advertisements recently to form the Hawaii Daytrading Club.

Some of the members are holdovers from Harbor Securities LLC, a Hawaii Kai day-trading firm that went out of business a few years ago. Others are simply traders who have been chasing wealth from the comfort of their own homes.

"The people who survived are probably the real traders as opposed to those who were just lucky," Igarashi said. "Those around now are probably bearish and buying put options. Those people around now have been more skeptical and chose not to follow what all the analysts were saying during the tech bubble."

A 1999 U.S. Senate subcommittee report found between 4,000 and 5,000 active day traders. More telling, though, was the finding in the report by securities regulators that in excess of 75 percent of retail investors who engage in day trading lose a substantial percentage, if not all, of their capital.

Day trading typically is defined as placing multiple buy and sell orders for securities and holding positions for a very short period of time, usually minutes or hours, but rarely longer than a day. Swing traders, such as Igarashi, generally hold their position for a few days.

"I started maybe four years ago with $14,000 and borrowed off my credit card so my net worth was negative because of a lot of debt," said Igarashi, who mostly sells stocks short, meaning that he borrows shares and then sells them in the hope of benefiting from a market decline.

"At the time, I gave myself a couple months to make money or get out of it. During the time I've been in the market I was able to make a $120,000 down payment on a house and I was able to buy my sister a van. I have a positive net worth now but it fluctuates with the market. During the four-year period I made more than I would have as an MBA graduate. For me, it's been a good decision."

Day trading, though, obviously isn't for everyone.

The Senate study, which surveyed 15 day-trading firms, found that an average day trader at those firms executed 29 trades per day at an average commission of $16 per trade. Thus, the study concluded, the average trader, based on 20 trading days a month, must generate a yearly trading profit in excess of $111,360 to achieve profitability. Or, taken another way, the study said the average day trader must make $464 a day to break even.

Matsumoto, who averages about 30 to 50 trades a day, is charged $10 a trade and thus spends up to $500 daily on commissions. But he said the money is well spent.

"I've been doing OK," he said. "When I left my job six years ago, I was a controller for a credit union. I had no intention to trade full time. I had about $10,000. I thought maybe I'd trade for awhile and see how it goes for a couple weeks. It turned into well over $150,000 to $200,000, but from there I took some licks.

"I live off of that money so I'm constantly withdrawing. I have a hard time determining how much I make a year, but conservatively I'd say it's about 50 to 100 percent (gains)."

Matsumoto, who typically trades 1,000 shares at a time, describes himself as more of a technical trader, meaning he relies more on charts than the fundamentals of a company.

"I used to make most of my money swing trading until a few months ago when I ran across this guy who ran a service in Hawaii teaching day trading," Matsumoto said. "He taught me an unbelievable strategy that has turned things around for me in the past three months. A stock will make a range in the first hour of the day, and as it breaks out of that trading range, you try to time your entry to get into the stock, or short it if it's breaking down."

Igarashi, on the other hand, is a contrarian and said he's adopted a "prove it type of attitude."

"I look for stocks that go up too much on unrealistic expectations or fundamentally seem overpriced," he said. "And that served me well in 2000."

Igarashi said one of the hardest things about day trading is to admit defeat when things aren't going well. He said a lot of traders get married to their positions and ultimately end up getting wiped out or owing money.

"It's important not to fall in love with stocks and positions and basically be honest with yourself and try to ferret out good information," Igarashi said. "It's a disciplining endeavor."

Matsumoto from the outset wanted day trading to be his career, but said getting the degree was a back-up in case something went wrong.

"The excitement is there, but if you're trading on emotion it can get a bit much," he said. "If you have a strict system that you follow, then it's more mechanical and the emotion gets taken out of that. But even though you have a strict system to follow, if you put in a really large position, you still feel that anxiety when you get into a trade. It's at those times that you have to taper off the amount of shares you do."

Tytus Szymanski, a 2000 UH graduate with a finance degree, began day trading in 1995. Szymanski was 17 and in high school at the time, starting out with $50,000, including some money he received from his father. Szymanski was putting money into mutual funds and stocks and happened to get in at the bottom when the Mexican stock market collapsed. His investment returned 30 percent in one month.

"It struck my curiosity that I could get a fast return if I time it right," he said.

Now, Szymanski is 24 and invests about $170,000, or 2,000 shares at a time, in the exchange-traded fund, known as a spider, that mimics the Standard & Poor's 500 index.

"I'm going for smaller moves but trading a fairly large size now," said Szymanski, who lives in Moiliili and plans to make his career in day trading. "Even small moves can translate into a pretty good profit. If the average range is about a point and a half on the day, that can translate to a $3,000 profit if you time it right. Even if I catch a third of that move, I can make $1,000 in a day."

Szymanski said despite his large investments, he's comfortable with them because the daily point range of the spiders is usually one to two points a day.

"If the stock moves 10 to 15 points a day I wouldn't bet that size because I can't feel comfortable with a move that size," he said. "In my case, $500 is the maximum I'm going to give up on a trade."

"That's the key," Szymanski added. "One of the most important things to use as a day trader is stop losses. For me, the stop loss is a mental point. I don't physically put it out there. Usually, stock losses correspond to technical levels."

Kaneohe's Tate Rolfs, a 54-year-old chiropractor who's been day trading for about five years, said he does it as a hobby and averages maybe one trade a day.

"I've made some and I've lost some," Rolfs said. "I haven't made enough for it to be my sole means of livelihood, but it hasn't been bad enough to be blown out of the game."

Rolfs said the bear market has had nothing to do with his results, since day traders rely on volatility.

"From a day trader's perspective, anything beyond the activity of a single day is irrelevant," Rolfs said. "The fact that the market makes long leaps over a period of weeks doesn't concern me."

Rolfs said day trading is just as difficult now as it was during the bull market. He trades futures contracts of the Dow Jones industrial average, S&P 500 and the Nasdaq composite index, looking at the one-, five-, 15- and 30-minute daily point changes of those indexes throughout the day. Lately, he's been focusing on the Dow.

"It's kind of like having three girlfriends, seeing which one is conducive to a nice swing on the dance floor," he said.

Delores Sandvold, who both builds homes and provides vacation rentals on Oahu, got into day trading in the late 1990s when the Hawaii real estate market was in a slump. She did it for 1 1/2 years but quit 4 1/2 years ago after an extended stay visiting her grandson in Saipan.

"I made a little money but not a lot," she recalled. "It was a major thing to be on top of everyday. You're in and out and never hold overnight. But mostly because of our time difference it was difficult. You have to get up at 2 in the morning and it wasn't profitable enough for me to continue doing that."

Sandvold said she now invests in the stock market for the long term.

"In two years of day trading I saw a lot of people lose a lot," she said. "There were stories that everybody was making lots and lots of money, but I didn't see that."

Still, investing in these bearish times hasn't been the best strategy for long-term investors either as the indexes are at anywhere from four- to six-year lows. Igarashi said he and Matsumoto, who both also happen to be brokers for ProphetTrader.com, formed the Hawaii Daytrading Club as a social forum and as a venue for exchanging ideas. He said most of the traders in the club are neutral or bearish.

"It's not that we hope the market crashes but, as a trader, we just see it as an opportunity," Igarashi said. "We don't want to get caught in the norm which is to buy stocks and hope they go up. In our generation, we've only seen stocks go up for the past 30 years in a big bull market. It's a lot different this time. All the rules have changed and the buy-and-hold strategy might prove to be devastating to people.

"When we formed the club, we thought we'd bounce off some ideas and see how many people feel the same way we do and maybe come up with ideas so we can all survive this market."

Hawaii Daytrading Club Contact: Clyde Igarashi Telephone: 630-2485