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The trading floor starts filling up fifteen minutes before the opening bell. But these aren't stockbrokers wearing three-piece suits and chomping on antacid tablets. They're mostly middle-aged men in golf-casual clothes. Above them are four clocks: London, New York, Denver and Tokyo. They stare intently at stock charts and listen to the latest financial rumors spewing out of the two TVs tuned to CNBC. At 7:29 a.m. the speakers on the trading floor blare, "Let's get ready to ruuummmble!!!" followed by some techno music.
The opening bell sounds, and they're off.
The traders chatter at one another as they punch orders into the computers in front of them. A banner atop each person's screen displays a running tally of how much the person is up or down at the moment. It looks like a sophisticated version of video poker in Las Vegas, but this is Denver, and these people are trading stocks--without licenses. They're just ordinary Joes (rich ones) playing a sort of computerized jackpot game that is shaking up some of the traditional brokers on Wall Street.
These sixteen people, mostly men, are referred to as "day traders" because they rarely hold on to stocks for more than a few hours. They may not be on the floor of the New York Stock Exchange, and they may not know squat about the companies they're dealing, but they definitely know how to talk the talk.
"Sienna's running again!"
"Better watch out when Goldman jumps in there."
"Jesus, I'm already down a stick and a half."
"Thank God I got out yesterday at 22."
Their conduit to the action on the East Coast is Insight Securities and Trading, located next to a home furnishings store in Cherry Creek. Inside the nicely appointed office is a long boardroom table with about twenty computer terminals resting upon it. These Cybertrading machines allow the day traders to make instant deals on the NASDAQ market using Small Order Execution Systems. SOES were created in 1984 by the National Association of Securities Dealers to ensure that small investors had better access to NASDAQ but really came into their own only after 1987, when the market crashed and people couldn't reach their brokers.
Extensive financial knowledge isn't a prerequisite for trading. "Some of the best traders are people who don't know anything about the market," says Dave Lipman, a 29-year-old day trader wearing a T-shirt, shorts and a University of Arizona baseball cap. "In a lot of cases, people don't even know what companies are represented by the stock symbols. An example is HBOC--everyone thought it was a cable company. It's actually a medical software company. But who cares? You're just looking at supply and demand."
Lipman says he's held on to a stock overnight only three or four times. That seems to be the general pattern among the traders at Insight, who each pay the firm $22 per trade but have to establish a minimum balance of $50,000 to even get a seat at the table.
On the screens in front of them, the day traders can see exactly what the big boys, the "market makers" such as brokerage houses Goldman Sachs and Morgan Stanley, are bidding on stocks. Using the Cybertrading technology, they can jump right in--and out--as opposed to having to go through brokerage firms. Trades can be made in a split second instead of a few minutes.
Josh and John, ages 28 and 24 respectively, traveled up from Sedona, Arizona, for exactly this reason. The two say that they've been playing the stock market professionally for a couple of years. "But we were using E-trading and getting screwed left and right," says John. "The E-trades just take too long to go through. Basically, you e-mail in your order, a broker picks it up, makes the trade and e-mails you back. Here, you enter the order and it's live. You're hooked up directly to the market."
And that's how day traders try to make money. Sometimes they hold on to a stock for only fifteen minutes before selling it off for a quick profit--or a quick loss. The dean of this trading floor, everyone says, is a guy named Cliff, who hasn't been in this week. The traders talk wistfully about the day Cliff made $210,000, the biggest one-day bonanza anyone can remember. Nobody knows for sure who's had the biggest losing day. "Everyone knows about Cliff's big day," says Lipman, "but people don't really brag about it when they lose. They tend to creep out without telling anyone about it." Lipman says that on his best day, he raked in $4,500. His worst day? Down $3,000. "That hurt," he says.
The Denver Insight office isn't unique. It's an offshoot of Block Trading, based in Houston, which was formed in the early Nineties by a couple of disenchanted brokers about the same age as Josh and John who wanted to get closer to the Wall Street action. The company now has franchises across the U.S. Rocky Gonheim, the manager of Insight's Denver office, got his start in SOES trading four years ago.
"I look at SOES traders like athletes," says Gonheim. "They've got to have full devotion, discipline and be willing to work hard. The people coming in here are trying to make a living. This isn't a hobby. If you're going to panic when your stock starts to drop, forget it. If you're shaking before you punch the key to execute a trade, this isn't for you."