TAKING STOCK OF DAY TRADING; WHILE SOME WIN, REPORT SAYS 70% ON THE LOSING END.
Amir Bienstock is a profitable day trader. But his success didn't come overnight.
The 42-year-old day trader from Valley Village said he lost about $13,000 in his first three months of day trading. At first, his losses discouraged him from continuing. But his love for the market drove him back in.
``I love it,'' he said. However, ``It's the toughest thing I have ever done in my life.''
Through determination and discipline, he eventually reversed his losses. After almost three years, Bienstock says he averages a 25 percent annual return. Thus far this year, he's already up by 25 percent.
``Day trading teaches you about yourself,'' he said. ``It's a struggle against yourself and the market.''
Apparently, many people lose that struggle.
Seventy percent of day traders lose money overall on their trading, according to a report issued Monday by the North American Securities Administrators Association in Washington, a group comprising state securities regulators. Furthermore, only 11.5 percent of day traders showed the ability to generate profits on short-term trades, the report said.
The study comes at a time when the nation has started focusing more attention on day traders because of the recent tragedy of day trader Mark O. Barton, who shot and killed nine people at two day-trading firms in Atlanta where he had traded and lost thousands of dollars.
The NASAA, which began conducting the study months before the shooting, accused day-trading companies of exaggerating the rewards and downplaying the risks of day trading. In addition, the report also disapproved of a practice among day-trading firms to help customers by lending them money to continue trading.
``We want to help regulators and investors understand the day-trading industry and the problems we found with it,'' said NASAA spokesman Marc Beauchamp.
Day traders are people who trade securities daily. They might make dozens of trades each day, buying and selling thousands of shares of a dozen different companies. But by the end of the day, they close out all their positions and move into cash.
Day traders make their money by buying or selling a lot of securities and profiting from small movements in its price. Day-trading companies provide systems and equipment so day traders can buy and sell quickly.
There are 4,000 to 5,000 active day traders in the nation, the NASAA said, citing figures from the Electronic Traders Association. There are 62 companies with 286 branches nationally offering day-trading services.
Day-trading companies need to make about $30,000 per customer to cover their costs, the report also said.
The NASAA sampled accounts at All-Tech Investment Group, a Monvale, N.J.-based day-trading firm. It used an independent consultant to conduct the study.
But Harvey Houtkin, chairman of All-Tech, is fuming about the report.
``It's a self-serving and poorly done document,'' said Houtkin. ``It's a piece of trash. It's inaccurate and it's wrong.''
He said the NASAA didn't call All-Tech to clarify any of its findings. Houtkin also said his firm routinely warns customers of initial failures.
``We tell all our people to expect to lose money,'' he said, adding that All-Tech serves more than 2,000 customers. ``Are all these people idiots? No.''
PHOTO (Color) Amir Bienstock, 42, a successful day trader from Valley Village, says the risky practice is ``a struggle against yourself and the market.''
David Sprague/Staff Photographer
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Aug 10, 1999|
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