The Day Trader (19 page)

I actually saw a woman try to snatch her chips off a craps table and make a run for it after a bad roll of the dice—she was nabbed quickly. And Melanie watched a man dissolve into tears standing in front of a slot machine, clasping an empty plastic change bucket with both hands. As soon as the man used his last quarter and stood up, another guy slipped onto the stool in front of the same one-armed bandit and on his fourth pull won a huge pot, filling
his
plastic bucket with the exact same quarters the first guy had lost. It was sad. For no apparent reason, one guy was a huge winner and the other guy was a total loser, but I suppose that’s just the way life is.

Most Atlantic City blackjack tables have ten- or twenty-dollar per-deal minimums, so the few five-dollar tables are usually pretty crowded. Melanie and I camped out near one of the cheaper tables to watch, and when a player at the end closest to us left in disgust after the dealer scooped up his last chip, Melanie shocked me by stuffing two hundred dollars in my palm and pushing me toward the vacated seat. I slipped in front of a pudgy woman wearing a loud orange jumpsuit who was scrambling to get to it too. I gave the woman a quick wink as I claimed the seat just ahead of her, then got my two hundred dollars exchanged for chips.

Like I said, I’m not a regular gambler so I don’t know the ins and outs of a complex game like craps, but blackjack is pretty straightforward. Get as close to twenty-one as you can, but don’t go over. Go over, you lose. Beat the dealer without going over, you win. Aces count one or eleven—it’s the player’s choice—all face cards like kings and queens count ten, and every other card’s value is its face amount. The key to blackjack is knowing the odds cold. Knowing when to hold and when to take a hit, and never deviating from the probabilities no matter how good or bad the cards are treating you.

I’m fairly disciplined, I’ve always been good with numbers, but I was still surprised when I walked away thirty minutes later with five hundred dollars in chips. As soon as I started to feel the cards going against me, I picked up and left. Which is almost as important as knowing the odds. Knowing when to walk away, and having the discipline to do it. Otherwise the casino will end up with everything.

As soon as I had exchanged my five hundred dollars’ worth of chips for cash at the window, Melanie slipped both hands around my neck and kissed me deeply. Then she whispered in my ear that she was going upstairs to our room, and that I should follow in a few minutes. That if I did, she’d give me the fuck of my life. Then she tapped the money in my hand and told me that such a good time would cost me exactly five hundred dollars.

As I watched Melanie walk toward the elevators, turning heads as she always did, I remember trying to figure out where in the world she could have gotten the two hundred bucks. I kept the checkbook and I would have known if she was taking money from the account. There were never any ATM withdrawals or cash checks on the monthly statements other than mine. But sometimes there were crumpled tens or twenties lying on her bureau in the morning after one of her late nights. I figured Taylor had given it to her in case she had car trouble on the way home and needed to call a cab.

There were some winners at the casino, a few people with piles of chips that seemed to constantly grow. But they were few and far between, and they weren’t at the center of a wild crowd and with a gorgeous woman on each arm like you see in the movies. They kept to themselves, most of them wore sunglasses so you couldn’t see their eyes, and their expressions didn’t change whether they won or lost.

I’ve been thinking about that weekend ever since it occurred to me that Bedford & Associates is exactly like that Atlantic City casino. It’s government sanctioned, enables the general public to recklessly thrill-seek, and chews up and spits out inexperienced players in a heartbeat. Since I go there every day, maybe I’m a gambling man after all.

Of the hundred day traders who were at Bedford the day I started nearly two weeks ago, eleven are already gone because they couldn’t pay off their debts to Michael Seaver. But they’ve been replaced quickly because there are always more people who believe they can beat the odds, who want in on this action that they think will make them rich.

I suppose I shouldn’t be surprised that so many people in our society want to play the day trading game. Day trading defines us perfectly. We’re a nation obsessed with risk in the pursuit of huge reward, and we have absolutely no patience. Things have to happen for us at light speed or we’re bored to tears. Nowadays people day trade their
careers
, for crying out loud. Monday your neighbor is working for ABC-dot-com, Wednesday he’s at MNO-dot-com, and by the end of the week it’s XYZ-dot-com. No more forty years to a gold watch and a pension like it was for our fathers. We want it now, and if you can’t give it to us, we’ll find someone who can. If people are willing to day trade their careers, they’ll sure as hell day trade stocks.

Once in a while a newspaper runs a story about somebody losing everything after investing their life savings in a dot-bomb like SweatersForRats.com or in plans for a south Texas ski resort, but you’re more likely to hear about the original eBay investors who turned four million into four billion. The eleven day traders who left Bedford over the last two weeks without a dime aren’t good PR for the machine, so we assume
they
screwed up, not the system.

I don’t know for certain, but I think Daniel is about to become the twelfth person to disappear from the Bedford trading floor. He looked terrible this morning when he arrived—his eyes were bloodshot and his purple hair was a mess. I mean, even more of a mess than usual. He told me yesterday that he was having a bad run with his portfolio, and I caught him popping pills in the men’s room a few minutes before noon today. I feel bad for him, but it’s none of my business and I don’t want to meddle where I’m not wanted. Sometimes people who need help the most will devote more energy to covering up their problems than to saving themselves. It’s strange how that works, but I’ve seen it before. Mom tried to help my father so much, but every day he receded a little farther into his shell until at the end he barely even spoke to her. He was a broken man. Now I know why.

Up to now I haven’t technically been day trading. Aside from Teletekk, I’ve been buying and holding my securities for at least a couple of days, whereas classic day traders are in and out of their positions in minutes, sometimes seconds. They use strategies with names like “hi-mom” as they search for identifiable high momentum—hence the name—in a particular stock or index like the S&P 500 or the Nasdaq 100. Day traders closely track trading ranges of a specific security or index over short time periods, and when they see an aberration or identify high momentum in either direction—up or down—they take advantage of it. Say XYZ Co.’s share price has traded in the range of $20 to $25 during the last month. A day trader may snap up XYZ Co. when the price nears $20 and sell as it approaches $25. In fact, he may buy at $20, sell at $20.25, buy at $20.50, sell at $20.75 and so on all the way up the range. He’ll do the same thing as the price declines by shorting the stock. He’ll do it on the way up and on the way down, over and over all day long. That’s day trading. There are lots of unique strategies within that framework, but that’s the basic idea.

A few years ago this kind of rapid-fire trading wouldn’t have been possible. The creaky mainframes the stock exchanges used back then would have melted under the weight of today’s volume. But now the supercomputers the American exchanges have installed can handle almost everything we throw at them. Which, ironically, isn’t necessarily good because most of the individuals out there who are trading shouldn’t be. But that’s the double-edged sword of capitalism. We cheer those who take risks and make millions and mock the idiots who take risks and lose it all.

Day trading sounds simple, which is the problem. The average Joe figures he can easily identify a historical trading range in a security by himself and be an instant success. He figures he doesn’t have to be able to understand a complex set of financial statements or be completely up to speed on all of XYZ Co.’s latest products. In fact, he figures it might hurt him if he were. Then he might think
too
much. All he’s trying to do is stay on the alert for major announcements about the companies he’s invested in that could propel his stocks violently in either direction. The challenge for the average Joe is that securities don’t remain in the same trading range forever, even when there are no major announcements—which might seem obvious. But in the minute-by-minute chaos of the market, day traders can lose sight of the bigger picture. Then they lose their shirts.

The trader who buys XYZ Co. as the share price approaches $20—the bottom of the identified range—may be shocked when the shares suddenly plunge past $20 to $17 or $16. What he doesn’t know is that some huge portfolio manager in Omaha, Nebraska, arbitrarily decided to dump a ton of shares, causing a sell-side imbalance—and there’s no way the trader could have ever anticipated this. As a result there are many more shares trying to find a home than there are homes—more sellers than buyers—so the price drops below the $20 resistance point until enough buyers surface to stabilize the price. And the day trader may not see the cause of the imbalance on Trader One because the portfolio manager’s dealer may be able to hide the transaction—if it’s a Nasdaq-traded issue—until it’s too late for the day trader to react.

The portfolio manager in Omaha may not have learned anything bad about XYZ Co. He may have dumped the shares simply because he had liquidity issues at his mutual fund—a decision unrelated to anything that’s going on at XYZ. But it doesn’t matter to the day trader. All that matters to him is that he’s suddenly underwater. If he’s used margin lending to increase his position and the stock price hasn’t rebounded by the end of the day, he’ll have to pay the piper at the closing bell. And if he doesn’t voluntarily pay the piper, his Seaver equivalent will make him pay—or shut him down. The stock might pop right back into its range the next day, but it doesn’t matter to the day trader. He’s already shit out of luck.

The most important thing to understand is that the odds are stacked heavily against the individual in the stock market. But most people don’t get that, or they choose to ignore it. It’s exciting—for a while. Then reality sets in.

It’s almost three o’clock and I’m heading for the men’s room—only a couple of hours until Vincent stops by Bedford to pick me up and we head to the Oriole game in Baltimore to meet his high-roller buddies. When I enter, Daniel is standing in front of the mirror, staring at himself. He doesn’t acknowledge me as I come through the door and move to a urinal. When I go to the sinks, he still hasn’t moved. “You all right?” I ask.

No answer.

“Daniel?”

He turns his head slowly to look at me. His face is pale. “I never thought it would be like this, Augustus,” he says. “I thought I could win. I got great grades at Georgetown, but I didn’t see any point in sticking around. It wasn’t getting me anywhere and I wanted to make some bucks in the real world.”

“Sit down, Daniel,” I say gently, leading him slowly by the arm to lean against a wall. He looks like he might need medical attention. “Take it easy.”

“No,” he says, flailing at me suddenly when he feels the wall against his back.

“Relax.”

“Get off me!”

“All right, all right,” I say quietly, not wanting to agitate him any further.

“I need money,” he blurts out. “You’ve got to lend me some.”

“Daniel, I—”

“Please.”

“I—”

“I know you made a bunch of cash on that tip you gave Mary a few days ago. The one you wouldn’t share with the rest of us.”

“That was wrong,” I say. But I don’t really think so. Who I choose to give information to is my business. But if that’s what Daniel needs to hear me say right now, I’ll say it. “I should have told everyone in the group. If I ever have information like that again, I promise I’ll share it with you.”

“That’s so nice of you,” he says sarcastically, “but it doesn’t help me right now.”

“What do you want me to do?”

“Lend me ten grand,” he replies, as if that amount of money is nothing to me. “That’s all I need,” he says, his voice desperate. “Just ten grand, Augustus. I’ll pay you back in a few weeks. If I’m not back in the black by then, I’ll call my parents and ask them for the money. They’ve got plenty of dough.”

“Why don’t you go to your parents now?” I’m standing very close to him, and I notice a small vial in his shirt pocket, but I can’t see exactly what’s inside it. Looks like white pills—probably the ones he was popping this morning—but I can’t tell. “If you’re in trouble, they’ll help.”

Daniel reaches for the ring protruding from his eyebrow, then pulls on it hard enough to make me cringe. “My father is my last resort. He’s such an asshole.”

“You should talk to him any—”

“Lend me the money, Augustus,” Daniel interrupts. “I know you’ve got it. I saw the way Mary was jumping up and down in her cubicle the other day. That wasn’t any ten percent pop. That was a big win.”

“I can’t lend you the money, Daniel.”

It’s strange. I’m willing to give Father Dale and ultimately someone I don’t even know ten thousand dollars, but I won’t lend this kid the same amount even though I can clearly see the desperation in his eyes. We haven’t talked much since I’ve been at Bedford, but Daniel was helpful my first few days, showing me around and making me feel comfortable. So why won’t I lend him the money? I was a kid not too long ago. I know how things are when your father takes about as much interest in you as he does in cleaning the garage. And it isn’t that I don’t believe Daniel when he says his parents will repay me. Beneath his purple-haired, body-pierced facade, he’s got a silver spoon way about him, like he’s always had a safety net when he really needed it. Georgetown University isn’t exactly cheap either.

“Come on.”

“No.” Someone has to teach the kid a lesson. Someone has to teach him that life isn’t always fair. That there won’t always be someone around to pick up the pieces for him when he’s in trouble.