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Tuesday, February 9, 1999 Published at 10:37 GMT

Business: Your Money

All in a day's work

A new trading day dawns on-screen for many US investors

BBC North America Business Correspondent Richard Quest reports on the boom in share trading over the Internet in the US and problems it's causing in an overloaded electronic 'day trade' market.

What's in a day's work?

Richard Quest's report
In the case of 25-year old Nicholas Birbas, a working day means making around $10,000. That's the amount he expects to earn from trading on the Internet.

He is is part of a new breed of investor who knows nothing about the companies, doesn't care about the balance sheet and even less whether it will still be around next year.

Mr Birbas, and thousands like him, have learned the art of trading on line. They spend all day in the internet chat rooms like Tokyojoe or Silicon Investor swapping tips and gossip. Then they trade buying and selling hour by hour, watching for every small movement in the price.

[ image: Online trading systems may be prone to breakdown]
Online trading systems may be prone to breakdown
"I just play on momentum" he says. "When I see the volume taking off, fundamentals don't mean anything at that point. I get in and get out and just keep doing that.

His ideal trade is around 2000 shares at $20 (for an investment of $40,000) Then he waits for the stock to rise $3 or $4 and sells: An instant profit of around $8000. Bibas is a former waiter. "I used to make $500 or $600 a week, I was on my feet all day, it was stressful. It wasn't good. Now I work from home and make around $50,000 a month."

The number of people investing like this is growing. There are 5m Internet investment accounts in America. And the number is forecast tripple in the next three years. Although most don't 'day trade' there are certainly more people investing more often.

Trading overload

And that's created huge problems for the systems. Last Thursday, E*Trade, the largest online broker, had a computer breakdown that effectively paralysed thousands of accounts. No-one could buy, or more importantly sell, positions they already held. It created frustrations, anger, losses and without doubt law suits.

The US authorities are now worried. The New York State Attorney General has launched an investigation into on-line investment problems. And the main regulator the Securities and Exchange Commission is only too aware that investors are about to get burned.

Nancy Smith, the head of investor education and the SEC said: "What is happening is that investors are pouring their money into anything that has 'dot com' after it. Nobody knows where it is going to end, who is going to be standing at the end of the day."

Greenspan's warning

It was a point neatly made by the Chairman of the US Federal Reserve Alan Greenspan, who on Capitol Hill two weeks ago warned that some Internet stocks would clearly succeed and make money but 'most would fail, undoubtedly."

For those involved in the 'day trades' this is all in the future. Today there is another stock that's being ramped and more money to be made.

And even if the Internet stocks bubble does burst they're not worried. They can turn their new-found tools to other sectors - bio-tech, cellular communications - merger companies - after all, tomorrow is another trading day.

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