You've got to know when to trade 'em


Friday, May 25, 2001

With his long hair, full beard, sunglasses and cowboy hat, Chris Ferguson looks more like a hippie than a professional gambler and stock trader. Yet he epitomizes what has become of day trading, the once red-hot craze that lured everyone from students and grandmothers to plumbers and jockeys to spend their days and sometimes nights trading stocks at a frenzied pace.

Even during the roaring bull market, many lost money at the brutally tough game, and more than a few were completely ruined. But the handful of spectacular success stories spurred thousands of others to try their luck. Then the tech bubble burst, the margin calls came flooding in and the amateurs fled in droves back to a staid but infinitely more secure existence.

Dozens of small securities firms that sprang up in the United States solely to feed the gambling fever joined their empty-pocketed customers on the sidelines. But day trading itself lives on, now largely in the hands of firms that cater mainly to cold-eyed professionals such as Mr. Ferguson.

The 38-year-old does his trading at the Los Angeles office of Bright Trading, which was started nine years ago in Las Vegas by Robert Bright, a former professional blackjack player who became an options trader before turning to day trading, which he says netted him about $1-million (U.S.) a year.

The firm has since expanded to 40 offices and about 400 traders, all of them licensed. It opened its first Canadian beachhead in Vancouver last year and says Toronto is next on its list, although the Ontario Securities Commission has yet to receive an application.

Mr. Ferguson also happens to be a card player of some renown, possessing just the kind of risk- and odds-weighing skills Mr. Bright looks for in a trader.

In fact, Mr. Ferguson, a math whiz who has a PhD in computer science, did far better at cards than the markets last year.

While losing about $500,000 at his day job, he took home $1.5-million after winning the World Series of Poker, the world's most prestigious poker tournament.

"At night, I play poker," the affable, low-key Mr. Ferguson says. "In the morning, I get up and gamble. You could say that poker supports my gambling habit."

He is not entirely kidding. He learned his cards through computer programs, using his math skills and game theory to produce winning results.

The markets are much less predictable. Mr. Ferguson is not particularly active, at least by day-trading standards. A heavy day for him may mean 30 trades. He usually doesn't turn over enough volume to get the rebate on the $600 monthly fee he and other traders pay to Bright for the use of a work station. The minimum requirement is 50,000 shares a month.

He avoids momentum trading, plays market swings and tends to hold positions overnight, a rarity in the business.

That technique has cost him dearly in the current market conditions, but he is adjusting, taking more short positions in tech stocks, for instance, and clearing out of holdings faster.

Mr. Ferguson, who has been trading professionally for two years, says he was drawn to Bright not by promises of fast, easy money but because it was the only firm that emphasized the pitfalls and risks and warned that not everyone was suited to the business.

"They went out of their way to make it sound hard."

Rob Friesen, who runs Bright's Vancouver office and its 17 traders, laid out the case for day trading when applying to the B.C. Securities Commission for registration, which was approved in March, 2000. "If someone chooses trading as a career, then this product needs to be in the marketplace."

The cost of trading has to be low, the use of capital high, direct access and professional tools available for anyone to be able to make a living at the business.

Among the Vancouver traders are a former real estate agent, a construction worker, fruit farmer, garbage man, pizza delivery guy, and of course, a former executive with a now defunct dot-com.

Most traders make little -- if any -- money the first year while they learn and apply tried-and-true trading techniques.

"There's a steep learning curve," Mr. Friesen acknowledges. "This market is tough. There's no free lunch. But the probabilities are much greater here than if you trade at home."

Bright accepts no retail business, Mr. Friesen says. "That's for investing, not trading."

Mr. Bright has remarked previously that "day trading has been around for 200 years, and is practiced daily by professional floor traders on many stock exchanges. What we have tried to do is make professional trading available to those with the desire to dedicate themselves to the profession."

As in cards, stock trading means not fretting about occasional losses, Mr. Ferguson says.

"You have to not worry about losing a couple of hands or making a couple of bad trades. You can't worry about the money."