Warnings Aside, Day Trading Still an Enticement; 2,000 Expected at Expo

Despite loud and repeated warnings from government regulators about the dangers of day trading, a significant number of individual investors apparently remain fascinated by the notion of being able to make money through rapid-fire stock trading.

The latest example of that interest comes today when an estimated 2,000 small investors are expected to turn out for a day-trading conference in Ontario that is being billed as the largest-ever gathering of its kind.

Many day traders seek to profit by darting in and out of volatile stocks dozens or even hundreds of times a day by using souped-up computers at specialized brokerage firms.

The practice has come under intense scrutiny following a disgruntled trader’s shooting rampage at two Atlanta day-trading offices in late July.

Regulators have railed against day trading, claiming that trading firms profit by charging for training classes and assessing commissions on each transaction, but that the vast majority of day traders lose money.

In a report by state securities regulators last month, a sampling of traders at one firm found that seven of 10 people lost money.

Last week, Securities and Exchange Commission Chairman Arthur Levitt said preliminary results of investigations at day-trading firms found widespread problems, including deceptive advertising and poor record-keeping. But he added that his agency had not turned up evidence of fraud.

Bradley Skolnik, the Indiana securities commissioner, said the Ontario conference may “make money for the person who puts it on” but that day trading is “highly inappropriate for most small investors.”

However, to sponsors of the International Day Trading Expo and others in the industry, the projected turnout suggests that day trading is profitable for many people who are doing it. The industry contends that after a three- to five-month learning curve for newcomers, about two-thirds of traders are profitable.

The industry bitterly disagrees with the state securities regulators’ profitability study, and points to Levitt’s comments about no findings of fraud in the industry as proof that day trading is legitimate.

About 1,600 people have signed up for the conference today and Sunday at the Ontario Convention Center, and 500 are expected to register at the door, said Tim Bourquin, expo co-founder. The cost is $249 per person.

“Obviously, people still think there’s an opportunity” in day trading, Bourquin said. “People want to give it a try.”

Bourquin said he hopes to run conferences several times a year, and wants to establish day-trading groups around the country similar to the one he co-founded in Orange County in 1995. This summer, he changed that group’s name from the Day Traders of Orange County to DayTraders USA, and the group’s Web site (https://www.worldwidetraders.com) points to more grandiose aspirations. An inscription at the site reads: “ . . . where long-term investing is holding a stock over the weekend.”

A former full-time Los Angeles police officer, Bourquin said he supports himself through trading and through profits generated from advertising on the Web site. The expo will turn a small profit, he said.

There are about 5,000 full-time day traders, according to the Electronic Traders Assn., an industry group. However, the group estimates that there are 250,000 active online investors at mainstream brokerage firms who will help the day-trading industry grow as many of them graduate to more advanced trading techniques and equipment.

“The real potential growth is not in the 5,000 [on-site day traders], but in the quarter-million ‘day-trading lites,’ ” said Jim Lee, ETA president.

However, there is some indication that the fascination with day trading may have peaked. Several how-to day-trading books were among the hottest-selling investment books late last year and early this year on Amazon.com, said Harry Edwards, the electronic bookseller’s business and investing editor. But sales peaked in April, he said. That was also the month that Internet stock prices topped.

“They’re not dominating the best-seller lists like they were,” he said.