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September 30, 1999

The Electronic TraderJoins the Marketplace

By Gregory Bresiger

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  • The Electronic TraderJoins the Marketplace

The Day Traders: The Untold Story of the Extreme Investors and How They Changed Wall Street Forever

By Gregory J. Millman

(Random House, New York, 1999, 288 pages, $25. )

Everyone who thinks that day traders are vermin who should be squashed should read this book.

Everyone who thinks that day traders are revolutionaries, who are attacking a venal, dying order of big brokerages that will soon be consigned to the ash heap of history, should read this book.

Everyone with even a minor interest in trading should read this fascinating book.

One of the benefits of this book is that the writer, a journalist and business author, chronicles both the successes and the disasters of day trading. He talks both to its Horatio Algers and the regulators who swear - without credible and complete documentation - that most people who enter the field are being rooked.

A Texas securities commissioner brags: "This agency has never given a clean bill of health to any day-trading firm."

Actually, I am inclined to believe the regulators have their points. However, I also believe that many of the early entrepreneurs who risked capital on factories and railroads lost a hell of a lot of money before they got the trains to stop running off the tracks.

Extreme Investing

Millman refers to day trading as extreme investing. He defines it as for those who forget "about studying companies...or even knowing what they make or do, or whatever their price was yesterday. This is only about what's happening right now, in the market on the screen."

A day trading firm seems to be typically run by someone with a chip on his shoulder; someone who has declared war on market makers because they tried, and failed, to crush the firm.

Marc Friedfertig, co-founder of Broadway Trading, exhorts recruits trying to learn day trading: "Every dollar you take out of the market is a dollar you have to take away from someone else who wants it badly. Someone bigger than you, who doesn't like you and doesn't like what you're doing and wants to screw you if he can. Market makers don't like us!"

Day trading - for good or ill - is inevitable in an electronic age. The market makers will have to swallow their high-blood pressure medicine and learn that the Luddites - the violent groups that thought they could burn the early factories to the ground - will lose every time.

The complaints made by market makers, regulators and big brokerage officials in this book may have some merit, but they seem irrelevant. The complaints remind me of the complaints made by executives of big news media outlets who don't like the Drudge Report. They remind me of a segment of that silly show "60 Minutes" in which that poor fish Lesley Stahl learned that anyone - oh, my God anyone! - could start up a web page and begin their own news service. They could write anything they wanted, true or not, and no one could stop them! Mon Dieu! The first amendment in cyberspace!