BUSINESSWEEK ONLINE : MAY 22, 2000 ISSUE
COVER STORY So You Plan to Read Your Way to Online Riches... From sizing up e-brokers to day trading, these books cover the ground Make no mistake, we are a nation of wired investors. If you haven't joined the charge online--or have, but are in the market for better advice--there's no shortage of new investing books that promise to show you the path to understanding, if not enlightenment and riches. The latest titles suggest investors have become much more savvy, or at least more daring. While the first generation of online investing books mostly comprised guides for ''dummies'' and ''idiots,'' many of the latest volumes cover day-trading strategies. Even venerable publishers have been swept up in the craze: John Wiley & Sons, for example, has launched a series called ''Wiley Online Trading for a Living,'' with seven books, including Electronic Day Trading to Win. But day traders aren't the whole story. Many people still need a good online investing primer, and some of the new offerings are already garnering some buzz. It's Your Money: The E*Trade Step-by-Step Guide to Online Investing, by E*Trade Chairman Christos Cotsakos (HarperBusiness, $15), is a guaranteed best-seller--if only because E*Trade's publicity machine will help drive it to the top of the charts. But readers will be disappointed. It's Your Money is an uninspired collection of investing basics like dollar-cost averaging and asset allocation--that is, when Cotsakos isn't putting in plugs for E*Trade. Worse, he devotes too little attention to issues unique to cyberinvesting, such as researching investments on the Web or devising trading strategies to minimize transaction costs using limit orders. A better choice for beginners is Online Investing: The Wall Street Journal Interactive Edition's Complete Guide to Becoming a Successful Internet Investor (Crown Business, $25). Written by Dave Pettit and Rich Jaroslovsky, both Journal Interactive editors, this book offers novice investors a candid guide to using an online broker, finding helpful research sites, and other topics. It also explores several broker practices that Cotsakos glosses over, such as payment for order flow (in effect, a legalized bribe most cyberbrokers take for routing your orders to certain Wall Street trading desks), and what to do if you have a dispute with your broker. NOTORIOUS. Unfortunately, the Journal guide fails to help, except in a generic manner, with the most burning question most new investors have: ''Which online broker should I use?'' You won't get much help either from Larry Chambers' The Online Broker and Trading Directory (McGraw-Hill, $19.95). Chambers performs a yeoman's job of cataloging basic data for more than 100 online brokers, including a rundown of commissions and other fees. But he fails to proffer any useful commentary--such as which sites are notorious for outages or for gouging customers with hidden fees. Nor is there much advice on how to screen for brokers that fit your particular needs. To see what current and past customers of major cyberbrokers think, your best bet is still to log on to www.sonic.net/donaldj/, where self-styled critic Don Johnson provides consensus views on leading e-brokers from the firms' customers. If you're thinking of becoming a day trader, even in the wake of the springtime Nasdaq sell-off, you need to learn about the dark side of the business as well as the profits some folks have made. Start by picking up Dumb Money: Adventures of a Day Trader (Random House, $23.95), a cautionary tale for anyone envious of housewives, cab drivers, and college students who claim to have made millions day trading. In Dumb Money, Joey Anuff, the 30-year-old co-founder of the irreverent humor Web site, www.suck.com, offers a riveting diary of his year of trading dangerously. Anuff introduces you to trader rituals: CNBC blaring in the background, a PC monitoring chat rooms for tips, a supply of Nicorettes for those midday swoons, and the requisite pot of coffee before the opening bell (a ''laxative precaution,'' notes Anuff. ''An unwelcome bathroom break can be damaging to your net worth.'') Averaging hundreds of trades a month, Anuff scored big at the beginning with a $50,000 profit on eBay in just four weeks. But he found himself constantly tormented by missed opportunities as some stocks continued to soar after he sold. ''To be a day trader is to make regret into a lifestyle,'' he muses. And while Anuff emerges with a profit, in the end he repudiates day trading, drained by the emotional and psychological toll. ''BIG DOG.'' Equally engrossing is John Emshwiller's Scam Dogs & Mo-Mo Mamas: Inside the Wild and Woolly World of Internet Stock Trading (HarperBusiness, $25). A senior writer for The Wall Street Journal, Emshwiller reveals the personalities behind such legendary or notorious chat-room and message-board posters as ''Tokyo Joe,'' ''Pluvia,'' ''anthony@pacific'' and ''Big Dog,'' who turns out to be a 370-pound former textile-coating salesman. If you are looking for advice on how to trade, rather than a journalist's observations, a growing number of titles claim to share the secrets of day-trading masters. But they remind me of late-night TV infomercials for get-rich-quick schemes. Just as those ''no money down'' real estate ventures always seem too good to be true, so do these trading tales. Indeed, some of these books do offer a sobering disclaimer that should give pause to any aspiring day trader: More than 90% of all traders lose money, and most of the survivors are veterans who took years to find a winning formula. The most worthwhile title of this group is Joshua Lukeman's The Market Maker's Edge: Day Trading Tactics from a Wall Street Insider (McGraw-Hill, $34.95). Lukeman discusses how market makers--of which he's one--sometimes work to protect their interests and stay ahead of other investors. Lukeman offers entry and exit strategies, as well as tactics for minimizing risk. For one, Lukeman advocates strongly that you limit losses from any one stock to 2% of your portfolio. He also introduces such concepts as ''following the ax''--determining which is the most influential market maker in a stock and then following that firm's lead whenever possible. This is only possible for sophisticated traders with access to Nasdaq Level II quote screens. Gary Smith's How I Trade For a Living (John Wiley & Sons, $29.95) offers intriguing insights. A luckless trader for more than a decade, Smith shifted in the mid-'80s to a more conservative approach--and claims he has rarely had a losing month since. Smith looks for changes in momentum in the broad market that can portend a top or bottom for stocks. He uses the system to trade mutual funds and stock indexes exclusively, although his strategies may work also with individual stocks. What's more, Smith trades mostly Invesco mutual funds, which allow only four fund switches a year. Critics might sniff that four trades isn't trading, but investing. That may be out of favor in the day-trading age, but then again, prudence never really goes out of style. By DEAN FOUST _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS So You Plan to Read Your Way to Online Riches... TABLE: War Stories and Primers INTERACT E-Mail to Business Week Online

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