Not All Day Traders Are Looney Tunes

The instant I heard an Atlanta day trader had killed himself and nine others last July, I thought: Of course. To me, day trading was an occupation for the misinformed, the idiotic, the desperate. Then, 11 days later, I heard from George Henel. ''I am a day trader,'' his e-mail began. ''I don't have spiked hair or a flashy sports car, but I make about 1% daily.'' I wondered: Could this be true?

Mostly, it is. Recently, when I stopped by Henel's place in a leafy precinct of big brick houses in Buffalo, N.Y., I saw no gel in his hair, and a blue Plymouth Voyager sat in the driveway. Gains? Not 1% a day, but in the past year, his account has doubled, now well into six figures. I know because I saw his monthly statements from Brown & Co.

What intrigues me is that Henel's results conflict with my prejudices--and with broad experience. A group of state securities regulators in August found that 70% of day traders ''will not only lose, but will almost certainly lose everything they invest.... Only 11.5% of the accounts reviewed evidenced the ability to conduct profitable short-term trading.'' I had to know: How did Henel find a way into the 11.5%?

By not being your stereotypical day trader, that's how. Now age 55, Henel has been investing since he was 18. At college, he majored in finance before going on to law school and 25 years as an Internal Revenue Service attorney. By 1997, he says: ''I was making more money trading.'' So he quit to trade full-time in an alcove off his kitchen.

That's where I saw him operate in his singular way (table). He keeps it simple--and cheap. His console holds a plain PC plus a TV locked on CNBC. He buys real-time quotes from PC Quote, charts and basic company data from Quotes Plus, and an Internet link from Total annual tab: $1,300. For ''limit'' orders to trade stock at a specific price, he pays Brown $10 a pop.

Instead of hot stocks, he aims to track a handful of quiet ''value'' stocks on the New York Stock Exchange. Quiet, because they're easier to follow. Value, because he limits his risk with stocks whose book values aren't 20,000 leagues beneath their market prices. NYSE, because Henel thinks he gets fairer prices. He also sticks to lower-priced stocks, such as Nike (NKE) and Phelps Dodge (PD), whose trading he knows well, so he can buy 1,000 shares without breaking his bank. The stocks also must trade in a daily range of at least $1--a gap big enough to profit in. His goal: $1,000 a day net.

By the time I visited on Monday, Oct. 11, Henel had made 370 trades this year, netting an average of $689 each trading day. The prior Friday, he paid 34 3/4 each for 950 shares of Cooper Cameron, a drilling-gear maker he had already traded 36 times this year. At 9:25 a.m. he placed his order online: Sell 950 Cooper at 35 15/16.

Next I knew, the market opened. Henel drew his chair closer to the computer. Cooper didn't open for seven long minutes, but when it did, it was up. Each trade streamed across a ticker window on his PC. ''There's 35 1/2. We're coming in on it,'' he said. By 9:49, Henel's 950 shares were gone. Net gain: $1,106.99. ''Good,'' he said. ''I've got the bacon in the refrigerator.'' The next instant, my mind was racing: Why not me, too?

I slept it off, and recalled how my eyes crossed tracking two stocks, much less the several Henel watched. I recalled that some days, he has lost more than $5,000. And that, despite an easy win on Cooper, by 4 p.m., Henel seemed less elated than depleted. Day trading is tense and tedious. ''It's not a 'moving-average-convergence-stochastics-bonzai!' thing,'' he says. ''A lot of the day is sitting on the bank with your fishing rod, waiting for a bite.'' A way of life only for the informed, the sharp, the secure, I'd say.

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Not All Day Traders Are Looney Tunes

TABLE: George's Rules of Day Trading

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