New York, NY —
Maybe you’re checking the stock market every day, a few times a day, or never … particularly in a week like this. Investors saw another bottom yesterday, when the Dow closed at its lowest level in six years. WNYC’s Lisa Chow went to an office filled with day traders … to find out how their reacting to the volatility.
REPORTER: Serge Milman is surprisingly calm, given his occupation.
MILMAN: I’m sitting here right now not aggressively trading, but I’m watching for spikes like this. See this spike right here. This is a real time up movement in the market.
REPORTER: The 36-year-old trader points to one of the six computer screens in front of him, a graph of red and green bars.
MILMAN: I’m looking at real time quotes of every New York stock exchange stock, every NASDAQ stock.
REPORTER: There are a lot of arrows and numbers, and they’re constantly changing.
MILMAN: Dow Jones, NASDAQ, pretty much everything I need to know to make an informed decision where I think the market is going.
REPORTER: Milman is looking for specific patterns. At the same time, he’s instant-messaging with other traders, watching news stories come in, getting messages on Facebook, and placing orders.
MILMAN: I bought a little Goldman Sachs near lows. I just added to it. Very small very small. We’re still at these points where it’s catching a falling knife. It’s more like praying for these stocks to go up instead of being reasonably assured that you might be right.
REPORTER: Catching a falling knife. That’s what Milman is doing as he buys a half an hour before the Dow closes at one of its worst levels in years. He realizes his mistake 8 minutes later.
MILMAN: Goldman about to make a new low. Yeah. And Dow is about to make a new low, and I’m selling my goldie. I’m out. Yuck. Yuck Yuck.
REPORTER: And that’s the secret to making it in this job, Milman says. Knowing when to cut your losses.
MILMAN: I’ve been wrong often but this is where your discipline, focus comes into play you’re wrong, you suffer. That loss that you’ve given yourself, and you move on. You wait for that next opportunity.
REPORTER: Milan trades his own money exclusively, and he’s been doing it a little over 10 years. He won’t say how much he’s accumulated, but he says he has made money this year, the same time the S&P 500 and Dow have been totally battered. Milman revamped his trading strategy after the collapse of Bear Stearns this spring, and decided to stop holding financial stocks overnight.
MILMAN: There was no reason to expose yourself to gambling basically in my opinion. Buying these things and believing oh my god it's Bear Stearns it's $30 a share. What a bargain. It opens up $2 over the weekend. So there are no bargains out there. Panic has certainly taken over this market.
REPORTER: And yet panic hasn’t prevented traders from capitalizing on market movements. They can make money, whether the stock market is up or down, because they can bet on either direction. Tim Sykes trades from his studio apartment in the West Village.
SYKES: I need the price jumping a lot. I also need it to be low priced, because that’s my specialty.
REPORTER: Sykes only trades stocks that are less than $10 a share. The 27 year old is worth $750,000. He managed his own hedge fund until last year, when he suffered a 35 percent loss. Nowadays, he trades a small fraction of his assets. He says he mostly ‘shorts’ stocks, that is, he bets the company stock price will fall.
SYKES: We’re shorting fundamentally flawed companies. There’s usually a reason behind it. Unfortunately lots of people don’t like that because we’re betting against America. We don't expect to be popular. You're not going to be like, hey, did you make money on that failing company, 50,000 people out of work, yeah! You're not going to be popular at parties whereas lots of people like stock tips, yeah, I found this company in great company, great technology. It’s going places and people like to be on the ground floor.
REPORTER: Betting against America may not make Sykes popular, but his portfolio has doubled since last year.
SYKES: What is risky has a total new definition. Mutual funds were thought to be safe. Short selling was supposed to be dangerous. Now short selling is the only thing working.
REPORTER: At least until the markets change direction. With the Dow down more than 40 percent this year, nobody knows when that will happen. For WNYC, I’m Lisa Chow.