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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story
Thrillseekers in Hong Kong
A band of professionals tries day trading

By Alejandro Reyes Hong Kong

Dan Groshong for Asiaweek
NIGHT RIDERS Yip (in cap), Eric Wong (middle) and Leong wait for the action to start
THE DRESS CODE IS casual. American Paul Heffner, 34, wears a yellow-and-blue striped polo shirt, khaki shorts and Reeboks that look like astronaut boots. The 20-something-year-old Hong Kong men turn up in jeans, short-sleeved shirts and trainers. They are day traders, stock jockeys who buy and sell online, clearing most if not all their positions by the end of the session. They play the U.S. market in the brightly lit trading room of the brokerage where Heffner works during the day. When Wall Street opens, it is 9:30 p.m. in Hong Kong. When New Yorkers lunch, the Hong Kongers have take-away noodles for supper. They switch off their monitors when New York closes at 4 a.m. Hong Kong time.

The married Heffner has been day trading (or is that night trading?) since he left Morgan Stanley Dean Witter last year. The others - all single Western-educated Hong Kong-born Chinese - joined him in January. They are former forex dealers Charles Leung and Andy Wong, experienced stock traders Phillip Yip and Eric Wong, and Gary Leong, who was working as a sales representative for a financial-information company when he met Heffner. All five work at night and sleep afterwards. Heffner barely rests - he helps develop his employer's online trading division during the day.

a trader's diary
Asiaweek asked Hong Kong day trader Paul Heffner to keep a diary of a recent hectic night. Excerpts:
• 7:00:00 Rush home, have dinner, see wife and son.

• 8:30:00 Arrive at the trading room. Read e-mail and check connection to the U.S. Ping times [time in milliseconds it takes for a message to travel through the network] are 230 to 270. Not bad. Read the news, listen to Bloomberg Radio, run through daily charts, pick out stocks to trade.

• 9:30.00 The market opens down.

• 9:45.00 [AMZN] up four points from yesterday's close. Merrill Lynch and Goldman Sachs both selling the stock

• 9:45.13 AMZN is 116 13/16 to 117.

• 9:45.15 Short-sell 500 AMZN at 116 13/16 [$116.81]. Click. Confirm? Click.

• 9:45.17 Someone takes me up. Now I need to buy 500 AMZN [at a lower price] to turn a profit.

• 9:45.30 AMZN is trading higher. I'm losing $125. I wait and feel the pain.

• 9:46.00 Losing $250. AMZN fell to 116 3/8 [$116.37] but I missed it while looking at the one-minute chart of

• 9:46.10 AMZN at 117 3/16 to 117 5/16

• 9:46.11 I give up. Buy 500 AMZN at 117 5/16 [$117.31, meaning a trading loss of $250]. Click. Confirm? Click.

• 9:46.13 Oops. AMZN is dropping. 117 to 117 3/16

• 9:46.15 Cancel order. Click. Confirm? Click. Whew. Trade canceled.

• 9:47.00 AMZN still falling.

• 9:55.00 AMZN is down to 114 7/16 to 114 5/8.

• 9:55.01 Buy 500 AMZN at 114 5/8 [$114.62]. Click. Confirm? Click.

• 9:55.05 Trade is filled. Profit: $1,093. Total cost: $25.

• 9:55.15 On to the next play, or should I go home?.

Banter in Cantonese and English flows fast. Each man sits in front of a computer terminal (used during the day by traders dealing on the Hong Kong market). A Bloomberg Radio broadcast via the Internet blares out news and market reports. Many U.S. traders are on summer holiday, so there are only a few moments of high tension. During long stretches, the six Hong Kong day traders surf the Net, send e-mail or smoke. All but non-smoker Leung slip out regularly to the elevator lobby for a cigarette break. "Marlboro could be our sponsor," Yip quips. Take them away from the office furniture and these fresh-faced guys could fit in well in a video-game arcade.

At 9:15 p.m., Heffner makes sure his network connection is ready. (The group trades primarily through the Archipelago network in the U.S., which gives them direct access to the New York Stock Exchange, Nasdaq and Amex.) It's a dozen or so hops to the server in the U.S. that handles the trades. Ten minutes later, the group listens in on an Internet conference call among market analysts. Heffner studies yet another briefing paper that suggests some possible market-moving stocks.

Movement and volume are the two things a day trader looks for. There's no money to be made on a stagnant stock, and it can be hard (and take painfully too long) to execute a quick trade without the heavy traffic. " is one of my favorites," says Heffner. "It's so volatile." He's not so much interested in why a company may be a good investment. What he studies is the trading pattern of a stock, how it moves up and down in a day and what might cause a surge or a plunge. It's science - physics (what goes up must come down) and probability - combined with good old gut feel. The key: go long when a climb is just starting and short when a fall seems imminent.

Typically, the group executes less than 50 trades in one night. Collectively, they have lost $50,000 in one session - that was when U.S. Treasury Secretary Robert Rubin announced his resignation just as New York began trading - and have made as much as $37,000 in 20 minutes. Day trading is not for the faint of heart. It might be described as an extreme sport for serious investors. In the U.S., most day traders lose money. But they prize the freedom direct access brings. "When you trade on your own, you're fully in control," Leong says. "That's what's attractive. It's also the adrenaline."

You don't get that trading with an online brokerage, which routes your order to a dealer. To illustrate, Heffner logs on to an Internet broker he has an account with and buys 12 shares of Intel. The process takes a few minutes. Cost of the trade: $38. "This leaves me so unsatisfied," he sniffs. He could do the same on his direct-to-market system in seconds, with commission figured at only $0.03 per share.

The most intense parts of the trading day are usually the first hour and the last. If he has no overnight positions, Heffner normally waits out the first few minutes as the market finds a trend. On his screen is a wealth of information on a universe of more than 9,000 U.S. stocks. He can see who's buying and who's selling and how prices are moving by the millisecond. Layman punters can get access to the same system so long as they are willing to pay. (Heffner spends $646 a month on fees for Archipelago and financial-information providers; day traders must also have trading capital of at least $25,000.) You may need six months to a year, however, to really feel confident you have mastered everything.

Heffner checks out one of the stocks recommended in a market report, but shakes his head. "I don't like the pattern of this because it's so thinly traded." During the session, the group concentrates on a handful of heavily traded counters:, Sun Microsystems, Microsoft, Intel Corp., and Costco. At 10:35 p.m., Amazon is on the rise. "Buy Amazon now!" Leong shouts. "I don't play Internet stocks," Yip retorts. Heffner is out of the room when Amazon surges. Back at his screen, he swears when he realizes he missed an opportunity to ride an upswing. Later, he buys a few hundred shares, only to see the stock fall.

After midnight, Leong curses his screen and gets up for a smoke, then ducks into the pantry to eat and scan a Formula One racing magazine. He has had to take a loss on a Microsoft trade. Meanwhile, Andy Wong is nursing a position in Costco shares. But the stock isn't budging. He waits. Still nothing. He steps out for a cigarette. Then the stock begins to jump. Leung runs to the lobby for Wong, who rushes to his screen and sells his shares. He makes a reasonable profit, but the stock rises even higher. Don't look back, counsels Heffner. "If a stock goes up by a dollar, you cut out. If you wait for it to rise another dollar, you could lose big." He adds: "You can't think about the ones you lost. You have to look ahead, be unemotional and think about the next trade. If in 10 trades, I make money on just four, I'm happy."

Trading is light all day, but even more so when New York breaks for lunch. It picks up a little after 2 a.m. Hong Kong time. As the trading day ends, the market starts to tank. The Dow Jones index reverses a 136-point gain. Leong shorts Microsoft. Heffner tries Amazon again, thinking the falling stock will recover before the close. It doesn't. "Amazon, you suck tonight; you're the worst," he growls. He decides to hold on to 800 shares. When Wall Street finally closes, he's down about $1,600, including the paper loss on the Amazon shares he keeps. (The following night, Heffner makes $1,500 on those shares in the first few minutes of trading.) As a group, the other five are up $500. "It's not easy making money," says Heffner as he steps into the elevator. He needs to sleep. In less than four hours, he has to be at a meeting - in a suit and tie.

Prices reported in Asiaweek are in U.S. dollars unless otherwise specified.

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