Hanging Tough:  Day Trader Rich Crist has seen his profits tumble this year; but he isn't about to give up
By Kate Kelly

[[From:  A Dow Jones InteractiveOnline Investing Special Report - 06.11.2001 The Wall Street Journal R5 (Copyright © 2001, Dow Jones Company, Inc.)]

LONGMONT, COLO. -- Rich Crist still gets a kick out of day trading, even after it has occasionally kicked him.

From a small office in his commercial print shop here, Mr. Crist trades all day by computer, using a quarter of the shop's earnings. His partner, Scott Richardson, takes care of customers who call or walk in to buy personalized envelopes and other products. The two split the trading profits equally.

Mr. Crist, a 38-year-old father of two, began trading in earnest with an initial $20,000 investment in early 2000, investing mostly in technology stocks listed on the Nasdaq Stock Market. By year's end, even after weathering the crash in tech shares and a 39% drop in the Nasdaq Composite Index, he finished up sixfold at $120,000. In 2 1/2 years of trading, he and Mr. Richardson have bought a recreational vehicle for fishing trips and a lakeside cabin in Saskatchewan together, and they each have added $9,000 to their individual retirement accounts. Last year's take wasn't the kind of killing Mr. Crist might have made in 1999. But it wasn't shabby either.

He didn't know that things would get worse in 2001. Tech stocks continued to fall in the beginning of the year, and by mid-April, Mr. Crist was up just $15,000 for the year, a far cry from the $90,000 he says he made in the fourth quarter of 2000. While market volatility can be a boon to day traders like Mr. Crist, who call themselves "scalpers" because they like to skim profits off stocks that move dramatically in three-minute or four-minute sessions, this particularly volatile market has proved a hard call.

Still, Mr. Crist is determined to keep trying. Like many other day traders, including some who have taken a beating in the current market, he is convinced that now is not the time to back down. Their attitude is to ride out the market's ups and downs, which Mr. Crist sees as a test of his mettle. "If you can make money in this market, you can make money in any market," he says. Despite its gains in recent weeks, the Nasdaq is still in the dumps for 2001. By the time the Nasdaq moves into positive territory for the year, Mr. Crist will know how good he really is, he says. After all, when it comes to day trading, he says, "you're either going to lose all your money first, or you're going to get the game."

Like many day traders, Mr. Crist got into the business to supplement his income. He and Mr. Richardson, former colleagues from International Business Machines Corp., have run their print shop, Dynamic Designs Printing Inc., for the past nine years. The shop is a short drive from Boulder, where the company prints envelopes, fliers and business cards, mostly for local businesses. It's not a bad gig: Both Messrs. Crist and Richardson earn $60,000 a year from the business, and during the summer, they take Fridays off to fish for walleyes and rainbow trout on a nearby lake.

But a few years ago, with two young boys and a wife to support, Mr. Crist started thinking about tuitions, early retirement and more time with his kids. In 1998, he took a three-day course in day trading. The following year, he invested $1,200 in a personal computer and a monitor, signed up with an online brokerage firm and started trading stocks at a cautious pace from the inner office of his print shop.

"That first year, I only made a hundred trades," he recalls. "I just watched." Taking that wait-and-see attitude, he broke even that year on a $10,000 investment.

The following year, Mr. Crist upped the ante. In late 1999, he had discovered Jea Yu -- a day-trading coach who goes by the name Jay in an Internet chat room he runs for traders, who pay $285 a month to be in on the discussions. That winter, gaining confidence from Mr. Yu's advice, Mr. Crist invested $10,000 of Dynamic Designs' $40,000 in profit that year (supplemented by a $10,000 margin loan from myTrade, Mr. Crist's online brokerage service). Focusing on a handful of Nasdaq-traded tech stocks -- among them Check Point Software Technologies Ltd., Juniper Networks Inc. and Applied Materials Inc. -- he began trading in earnest, mostly taking "long" positions in which he bought at low prices and sold at higher ones to make a profit.

The strategy worked. And as the market got shakier, Mr. Crist, who remembers his hands sometimes trembling with anxiety when he first started out trading, began making some serious money. The tech stocks he picked hadn't taken a hit yet, and the thought of losing even a fraction of his hard-earned profit was still nerve-wracking.

The trick, he says, was in the scalping strategy. A scalper is someone who buys or sells a stock after its price moves in large increments in a short time. A scalper, Mr. Crist says, "is someone who jumps out the minute it looks like the market's going to turn. You could scalp points all day long when it was really good last fall." Last November, for instance, Juniper was still priced as high as $240, experiencing price moves of 25 points, or $25, "all the time," he recalls. By purchasing hundreds of shares at a time and accurately predicting those moves, Mr. Crist made good money -- as much as $3,470 on a given day. Things got even more interesting after the Nov. 7 elections. As court actions kept the presidential race undecided until mid-December, the market fluctuated wildly based on which candidate might win. With the combination of volatile but high tech-stock prices and political uncertainty, Mr. Crist remembers October and November as being "a blast." He saw that the market would respond positively to news of a court ruling in George W. Bush's favor, and decline if there was a ruling in Al Gore's favor. So, he began to buy long positions immediately after pro-Bush rulings and then watched the market climb. If there was a ruling that went to Mr. Gore, Mr. Crist would short stocks, or borrow shares and sell them, expecting to replace them later after they declined. He ended up making $70,000 in those two months.

But a lot has happened since then: George Bush has won the presidency, and the prices of many Nasdaq tech stocks have nose-dived. Mr. Crist's daily earnings are more often in the three-figure range.

On a recent morning, Mr. Crist sits in his office at the print shop, wireless mouse in hand. The one-PC setup has been replaced with two servers and five computer monitors, showing Nasdaq 100 stock futures, performance charts for his five favorite stocks and trading updates. CNBC reporters drone on in the background from a small television set.

"My first daily goal is to make a profit," Mr. Crist explains. "If I get up to $1,000, somewhere in that range, I slow down my trading. The most you want to give back is $300." If he has a net loss of $300 for the day, he stops trading. This day proves frustrating. Mr. Crist starts with a promising $400 return on a buy of Check Point, which he bought at $61 and sold at $63 after a few minutes. But shortly after that, a technical glitch on Terra Lycos, his Internet service provider, shuts down Mr. Crist's market-data screens, rendering him unable to trade. "It's 20 minutes into the market and I have no data," he complains. "I cannot trade without the futures" markets data -- which Mr. Crist uses to predict price moves in stocks. CNBC shows the Nasdaq up slightly at 1927.56. He dials the help line at Terra Lycos and gets voice mail. At 8:22 Mountain time, the market data pop up. "Only an hour lost," Mr. Crist groans.

He looks at the Check Point chart: The stock price is rising. "Rats!" he says.

"I probably could have been out closer to $64" and gotten a $3-a-share profit instead of $2 a share when he sold at $63.

A short while later, looking to buy another stock, he accidentally clicks on an order for 100 shares of Applied Materials at $49.10. "Oh, dang it!" he says. "I bought the wrong stock. That happens."

Then he adds: "AMAT's not bad," referring to the stock by its ticker symbol. "We didn't get a good entry" price, though.

He points to the rising price on his Applied Materials stock chart. The chart shows that bidders are boosting the price, he says, which should make the sellers wonder whether it isn't better to hold onto their shares a little longer. "That's a beauty," he says of an increase in one minute to $49.50. "Let's go ahead and dump this." His profit is $24, after he paid a $16 commission.

Mr. Crist relaxes for a few minutes, glancing occasionally at the chat-room screen, where Mr. Yu is warning his traders to "chill out" because of the day's high volume. Mr. Crist acknowledges that between the market's lack of predictability and the power wielded by professional Nasdaq dealers known as market makers, times are pretty tricky for day traders like himself.

"There's a lot of discussion in Jay's group about how it's hard to navigate a bear market," says Mr. Crist. He types a note out to Mr. Yu, asking whether he has seen many traders back off in recent months. Mr. Yu replies that they have.

"This market is tough," he writes. "Many people took time off."

"What the market did," Mr. Yu says later in an interview for this article, "was go through its own filtering mechanism and got rid of the hobby traders, the gamblers and the dart throwers. The traders who are in this game now are going to be here for a long time."

Mr. Crist says he isn't about to drop out now -- he's having too much fun with day trading. It's not as if his livelihood depends on it, he adds, and he's learning and getting better at it all the time. He would drop out of trading only "if I didn't think it was fun anymore, if I didn't have the desire to learn it," he says. "It's a game. And I want to win the game."

Back at his computer screen, Mr. Crist looks at the Juniper stock chart, which has zigzagged in three discrete price pops over the course of minutes. "There's too much resistance," he says of the stock's dogged attempts to rise in value. "It's going to drop. Uh...those dogs. The shorts [short sellers] are trying to push it down."

He looks at Instinet, an electronic trading system that anonymously matches up stock buyers and sellers. There are several large sell orders, or "offers," which he figures are coming from market makers.

"They're coming in with size," he says. "They're trying to scare the bidders to push it back down by showing size on the offer." Mr. Crist's theory is that the market makers are trying to trick other traders into selling the stock so they can make money on short positions.

It appears to be working: In a matter of seconds, the stock sinks to $51.01 from $51.40. "We're in a panic situation now," Mr. Crist says. "Everyone's bailing for the door, and market makers are going, `Ha ha ha.' They'll just keep cranking it up and down; they'll do this all day."

An hour later, turned off by the trading activity, Mr. Crist takes off for Boulder to say hello to his wife and kids. That afternoon in the office holds more of the same: some Juniper trading; some haggling with his brokerage firm over a delay in fulfilling an order that resulted in an inferior stock price; a few customer phone calls; and more chatting with Mr. Yu. He finishes $30 down for the day, but isn't discouraged.

"Today was a good day for me, all things considered," he says. "It takes a lot of trades to learn a bear market."