by Arnold Snyder [In the Summer 2000 issue of\u00a0<\/em>Blackjack Forum,\u00a0we ran a small advertisement for Bright Trading, a Las Vegas stock trading firm specifically seeking card counters to become professional day traders. Many readers asked me what I knew about this company, and my answer was zilch.<\/em><\/p>\n\n\n\n Day trading is considered to be among the more high-risk (if not the most high-risk) methods of attempting to make money in the stock market. Then again, as investment opportunities go, counting cards at casino blackjack is not exactly considered \u201cmoney in the bank.\u201d I figured\u00a0<\/em>Blackjack Forum\u00a0readers might be interested in Bright Trading, which in its small\u00a0Blackjack Forum\u00a0ad stated it was \u201cstarted by a professional card counter.\u201d I also wondered if these guys were on the level.<\/em> BJF: Were you with any investment companies prior to starting your own? I toned my bets down, and then I got up from the table, walked over to the cage and cashed out. When I turned around I saw him standing there. I thought he was with the casino, and was probably going to ask me not to play. I was certainly surprised when he showed me his I.D.<\/p>\n\n\n\n He said, \u201cThat\u2019s the best play I\u2019ve ever seen as a lone wolf.\u201d He asked me if I would teach him how to play as a lone wolf, because all he had going was the teams. I joined his team for a few weeks. Ken showed me everything about his team play, and I showed him how to play lone wolf style.<\/p>\n\n\n\n That was the last association I ever had with him. In 1978, my reputation had grown to the point where casinos around the world were barring me. The Horseshoe, in Las Vegas, finally barred me. They had always maintained a position where they welcomed any and all action. Many casinos do not bar counters; they are inclined to deal the proficient player worse and worse games by shuffling frequently.<\/p>\n\n\n\n After being turned away from a number of casinos, I saw the handwriting on the wall. I looked around for another game where I might have an edge. That\u2019s when I joined the Pacific Stock Exchange. Eventually, he left that job and headed up a blackjack team that played not only in the United States, but in various casinos around the world. From 1978 until 1990, I basically traded the market and played blackjack on the side. I made more money in the market than I did with blackjack because in the market, you don\u2019t have to tone your bets down. If you\u2019ve got something good, you just go with it.<\/p>\n\n\n\n BJF: When you started playing the market were you just doing this completely on your own money? As a market maker, you get extremely high leverage. As a market maker on the options floor, options are leverage instruments of their own. Then, as a professional market maker on the floor, you get even more leverage. So, with that I was able to get in with $50,000 front money and it grew from there. I retired from the market in \u201987 and didn\u2019t get back in until \u201992. We use various kinds of derivative products to give us indicators as to entry points and exit points in the market; just like you might use a count system to make your entry points into a game of blackjack. High count, you know the edge is in your favor, you jump in. With derivative trading in a certain manner, we have the same feel in the market. We jump in when they\u2019re giving us a so-called high count.<\/p>\n\n\n\n Most good day traders will make money on 70 or 80 percent of their trades. Just imagine playing blackjack and only making a bet when you have a count in your favor. It doesn\u2019t mean you win every bet, but you\u2019re going to win more than you lose. You see derivatives starting to move, or some type of indicator that you\u2019re watching, and it gives you a good idea that the stock that you\u2019re watching will probably move in a certain direction. So, you jump in. When those indicators or other things tell you it\u2019s too risky to hang onto the position, you get out. That could be 15 seconds later or hours later. BJF: So you\u2019re not watching the stock price itself, but you\u2019re watching the options and futures? If you\u2019re watching the British pound and it\u2019s strengthening, the drug companies might do well because most drug companies are somewhat more related to the British pound than they are to the U.S. dollar. You\u2019re watching the S&P 500, which represents the top companies in the country. Everything relates to the other side, too, because we trade both sides.<\/p>\n\n\n\n If the futures start to go up and the stocks haven\u2019t moved yet, it\u2019s highly likely they\u2019re going to pull the stocks up with them. It just means the big institutional firms are in there buying the futures ahead of their institutional orders. And we just get in before they\u2019ve placed those institutional orders to buy some stock in whatever direction they are going. Those are the types of indicators that tell us when to get in or when to get out. And then there are a hundred and some million investors in the market mainly through pension funds, 401Ks, etc. As day traders, we make our money largely from trading against the online traders at home and trading against the mutual funds and pension accounts. You can imagine a Dreyfus or a Fidelity, they want to go in there and buy 100,000 shares. They don\u2019t care about a quarter point. They say, \u201cBuy it around 90, 91.\u201d We do care about a quarter point. If we make a quarter point once a day, it\u2019s $100,000 a year. So, the timing could be days for them to make decisions, and they\u2019re not as interested in an eighth or a quarter point or so. We will go in and then jump right back out if it doesn\u2019t look like we\u2019re right; or if it\u2019s not going to move like we anticipated it would. Our cost is so much lower than what the funds pay. As professional traders, we have the lowest costs around. You couldn\u2019t even get close to the cost as a public customer or as a mutual fund if you were trying to get soft dollars back. Professional day traders understand the risk involved. They understand how you can really get hurt if you\u2019re stubborn, and they understand that you need to do some size with a small profit potential to make the real money. Just like blackjack, you\u2019d rather play 500, 1000, 2000 dollar hands than the ten dollar hands. Same way with professional traders. They want to trade 2-, 3-, 4-, 5000 shares at a time, not 200 shares at a time. Bright: At 100 shares a crack, you\u2019re probably not even going to pay the overhead. Or say there\u2019s a news item. Somebody in the room\u2019s going to notice it and yell it out. We encourage our people to mention facts that occur. We don\u2019t want to hear opinions. We don\u2019t want to hear, \u201cOh, I think General Motors is going to go up.\u201d But if Ford Motors just did a one point down-tick on a three million share block print, it\u2019s nice if someone saw that and mentioned it to the room in case anyone else has similar stocks and might want to take some action. It\u2019s just that the people in the room, they get to know what the other people trade so they share information. You know that John down the aisle there is trading drugs, maybe trading Merck or something, and you see some news item on one of them, you\u2019d say, \u201cHey, John, did you see the news on Merck?\u201d<\/p>\n\n\n\n You\u2019ve got to remember that every trader isn\u2019t watching everything. He can\u2019t see everything by himself. If he\u2019s watching an indicator, he might not be watching the news tape. You have a news tape, you have futures indicators, you\u2019ve got options that you\u2019re looking at, you\u2019ve got indexes of various segments of the market you\u2019re looking at. And you\u2019re watching your individual stock so you don\u2019t let a trade get by without seeing it.<\/p>\n\n\n\n We see every trade on the stocks that we\u2019re watching, every quote change. You might see 5,000 bid for, 8,000 offered. That means something to us. We work with people. It takes them a year or so to learn even what to watch for. We have a one-week training program that we put them through to get them a so-called \u201cbasic strategy\u201d on trading. We teach them who the players are. They have to understand who the players in the market are to try to be able to identify those players by watching a tape.<\/p>\n\n\n\n When you see a tape of a trade or a quote change, after a while you get to visualize the actual people who are doing these things, and it helps you with your trading. You learn to anticipate, to push that button and be in there early to make that trade, because you\u2019re not the only one seeing certain things.<\/p>\n\n\n\n Let\u2019s say there are 10,000 shares offered, and you go in to buy 5,000, and you don\u2019t get it. We have people who say, \u201cI should have had it. Why didn\u2019t I get it?\u201d Because 75 other professional traders out there, plus a lot of other people, saw the same thing you did. What makes you think you\u2019re the only one who saw it? Speed is very important. So, whenever they take $75, we take $25 and put it in a reserve. Say they make $10,000 the first month. They want to take a draw. They take $7500. We take $2500 and put it in a reserve account. At the end of the year, if their account never went below $15,000, they get the $2500. Or if they average $25,000 for the trading account for the year, we give them their bonus. So, in effect, if they manage themselves responsibly, they do get their bonus, they do get the other 25%. It\u2019s very difficult to lose that kind of money. We have parameters that new traders can\u2019t exceed 5,000 shares of any one stock per trade. Now, how does a person lose $25,000 if they\u2019re only doing 5,000 shares of a New York listed? Most of the time, by the time a stock moves a point, it shows up in the red area on our software that they\u2019ve lost $5,000. Especially a new guy, we\u2019re going to call him and find out what he\u2019s doing.<\/p>\n\n\n\n We don\u2019t even encourage new guys to trade 5,000 shares. We want them to trade 100 shares to start. The one time that we did lose was a guy that sat there and bought 5000, 5000, 5000, 5000, 5000. He had 25,000 shares. He ended up doing it on two other stocks. He had a total of 75,000 shares before either one of the stocks moved. Once one of them started moving, it showed up on our list and then we forced him out because it was in complete violation of all our risk policies.<\/p>\n\n\n\n He was a trader from Bear Stearns, and he came over and traded with us. He was just trying to take a shot with us\u2014with our money. He lost his $25,000 and he lost a bit more than that of which we had to eat the difference. There are no good books on day trading. We provide a school; we teach people; it\u2019s in our interest to make sure our people stay around a long time. We make money when they\u2019re trading 2000 shares at a time, maybe doing 100,000 shares a day a couple, three years down the road.<\/p>\n\n\n\n So, we put a lot of time and effort into retaining people. We call it R&R, recruit and retain. We put more of our effort into retaining them because we make our money down the road when they\u2019re doing large volume because we get such a small amount of revenue from their volume.<\/p>\n\n\n\n We charge them the same thing as what they would pay if they were on the trading floor. You want to trade, go buy a $2 million membership in New York, or a $400,000 one in Chicago, and you stand there on the trading floor and trade for a penny a share. Or you can join us without having to buy the membership and trade for a penny a share. During a visit to San Francisco, Eddie demonstrated electronic trading. It was just becoming feasible in the early 90s. He said, \u201cPretty good. Technology is about there. About ready to do it.\u201d So we joined forces in 1992. I had the capital and we had the networking ability to do it, both in people and in getting it done with the computers. We\u2019re 50\/50 owners.<\/p>\n\n\n\n He was a blackjack player in the 70s also. I joined the Exchange in September of \u201978, and he came out about six months later. Eventually, I retired, but Eddie stayed and continued trading. When he was playing $10 blackjack, I was playing $50. When he was playing $50, I was playing $500. The same way in the market. So, we formed Bright Trading with his knowledge of technology and my capital. It\u2019s grown ever since. Our first trader joined us the same month we started. He\u2019s still with us. We have a lot of people come and go, like any other business. Everyone can\u2019t be a card counter, and the same thing can be said for the day trading business. Again, you have these indicators and these things that work. They slowly work or not work over time. And as more traders see indicators that are working, more people jump into it. Pretty soon they don\u2019t work. So, whatever way you design the computer to make decisions, the computer will have to react to those changes also. Blair and I traded in San Francisco for a few years, and then he moved back to Chicago, around 1980. I went back in \u201983. He retired in \u201983. When he saw how I was doing in \u201984, he jumped back in again and he built a very large arbitrage type company in Chicago. He eventually sold it to Goldman about a year ago for $600 million.<\/p>\n\n\n\n But even in \u201992, when I was beginning to form this company where traders could come in and trade from an office instead of having to stand on the trading floor, he had already developed computers that would make the entry point decisions on the stocks. So, he was way ahead of the curve on that.<\/p>\n\n\n\n So, yes, there are people that do that. But no computer will do exactly what it\u2019s supposed to do, where you can fly away somewhere and come back a month later and count your money. It doesn\u2019t work that way. In \u201987, they thought it would, but that was the cause of the \u201987 crash\u2014computers were doing a lot of stock selling themselves regardless of the price of the stock\u2026<\/p>\n\n\n\n Exchanges will change rules when they discover certain things happen. So, there were all new rules about using computers. If the market moves more than a certain amount, you can\u2019t utilize computers to program trade. I do better when I travel to another office to audit the office or see how things are going. There are 35 offices. We\u2019re adding a few offices this summer. It\u2019s hard to keep up now. We may have to hire some additional help. We only have three employees in the whole company. We have 400 traders. The first 100 traders we had were mainly experienced who may have had a year to ten years or so experience. Then some of them said, \u201cWell, I\u2019d like to run an office for you in San Diego or Kansas City or wherever.\u201d Fine, so we were looking for people who knew how to make money trading to run offices so we could build other offices.<\/p>\n\n\n\n We knew the technology was there, but not the expertise within the non-exchange cities to be able to get the traders. So, that\u2019s how we grew. Whenever we had someone willing to run an office in another non-exchange city and they wanted to go back home and do it, fine. Do it. We\u2019ve gotten some pretty good offices that way.<\/p>\n\n\n\n BJF: How often do you have a class, and how long is the training period? A lot of them will come back in three months and take it again. We charge a one-time fee for the class and it\u2019s a lifetime fee. We believe in continued education. We want to retain our traders. So, they go through the class, most of them come back three months later, a year later. And they continue to come back. We had nineteen people who attended our last two classes, plus some of our own people who came back for a refresher course. They try to come back once a year anyway to keep up on any new strategies that we\u2019ve developed or that we\u2019ve seen. People who are making less than a quarter of a million a year, we strongly encourage them to attend, because they\u2019re obviously not making what they should be. So, of the 19 people that have never traded with us before, 13 signed up, and six decided not to. So, it\u2019s like eight out of a hundred made a career out of it. Here, we used to have about 15 out of a hundred. Since we started the school, we\u2019ve got about 25 out of a hundred that are making a career out of it. But that\u2019s the same in any business. How many succeed in card counting? The cream of the crop, they make a great deal of money. I would guess 2% of the people\u2026 This is one of the reasons we started the school. We saw that many of the people were just not getting it. They weren\u2019t being retained. There are a half dozen major firms tht are doing that as a team where the people are being paid salaries for the company. They\u2019re not independent. I remember Blair Hull had numerous people\u2026 He would hire these 6\u20196\u201d guys to trade on the CBOE floor because they were tall and had loud voices. All they had to do was read off what was on the computer\u2026<\/p>\n\n\n\n Once they got together, and they told Blair he had two weeks to come up with a better pay for them because he was paying them $30,000 a year. After about eight trading days went by, they got worried that he hadn\u2019t gotten back to them. So, they appointed one of them to go up and see what he was doing and give him a date when they were all going to quit. They found him in a room training 30 new people. He just said the heck with it. He hired new people. When you tell people exactly what to do, you don\u2019t need to pay them much. We just took a different way because I learned from being on the trading floor that the bigger traders were backing the smaller traders and it was working out okay. So, we began to do that here. And we started off giving traders like 50-60% instead of 30-40%. It went up to 75%. Then we eventually went to 100% because we were able to do it and get traders to come directly to us from the trading floors, even the ones who were highly profitable.<\/p>\n\n\n\n Through the economies of scale, we were able to offer them the same income, in fact, more net income, but the same gross income with lower costs and there\u2019s still something for us. We charge everybody $600 a month for a workstation. They were paying $20,000 a month on the trading floor for their overhead just to show up. They had to make $20,000 in a month to pay their overhead. With us, they have to make $600 to pay their overhead. Therefore, we get dealer transaction fees, not broker commission fees. So, our people pay transaction fees. We get some of that back from the clearing firm because of the economy of scale. The clearing firm looks at our firm rather than every individual. They don\u2019t care about the individual. If an individual trader loses half a million dollars, they don\u2019t care. Just take it off my account, under the firm account. They give us back the cost so to speak. They saw me as a novice who knew nothing about stocks. But options were more mathematics-related. I went up there. One of the clearing people asked me, \u201cHow are you going to trade?\u201d I said, \u201cI haven\u2019t the slightest idea, but I will figure it out. I will take some of my blackjack abilities and discipline and apply it to the market.\u201d And they said, \u201cThere\u2019s already one blackjack player doing this. Why don\u2019t you contact him? It could save you some time.\u201d It was Blair. He already had a computer model for what we needed and I shared costs with him. Since \u201988, I probably haven\u2019t run into Blair more than once or twice. Then, in \u201992, Eddie and I started Bright Trading. Blair was a dominant force in Chicago. There were two of them. He was one of the two who were really in control of everything out there just because he was smarter than everyone else.<\/p>\n\n\n\n He wasn\u2019t really dominant in San Francisco, but he was one of the sharpest. I\u2019d love nothing more than to get poker players and blackjack players to come trade with us, especially now that the casinos are all putting in perpetual shoes. There have to be a lot of counters out there who could use their abilities with us, and probably make a lot more money.<\/p>\n\n\n\n I don\u2019t know if you have a clear sense of the similarity between blackjack and the stock market, but it\u2019s pretty much the same. You go from red chips to green chips to black chips to pink chips. In the market now\u2026 the casino scene is small potatoes. Every time we make a bet here, you can make or lose thousands of dollars. Typically, our trader, after about two years, are making six figures or more. Not everyone can do it. The ones that pick up on it, are with us for life. This is what keeps our firm growing. \u2660<\/p>\n","protected":false},"excerpt":{"rendered":" Meet the Bright Brothers: Card Counters Turned Stock Market Billionaires by Arnold Snyder(From\u00a0Blackjack Forum\u00a0Volume XX #4, Winter 2000)\u00a9 Blackjack Forum 2000 [In the Summer 2000 issue of\u00a0Blackjack Forum,\u00a0we ran a small advertisement for Bright Trading, a Las Vegas stock trading firm specifically seeking card counters to become professional day traders. Many readers asked me what […]<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[631,1],"tags":[],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/posts\/123230"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/comments?post=123230"}],"version-history":[{"count":0,"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/posts\/123230\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/media?parent=123230"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/categories?post=123230"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/shop\/wp-json\/wp\/v2\/tags?post=123230"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
(From\u00a0Blackjack Forum<\/em>\u00a0Volume XX #4, Winter 2000)
\u00a9 Blackjack Forum 2000<\/strong><\/p>\n\n\n\n
Shortly thereafter, I learned that Don Bright writes a regular Q\/A column in\u00a0<\/em>Stocks and Commodities\u00a0magazine. His older brother, Bob, is the CEO of Bright Trading, and was the card counter\/founder of the company.<\/em>
On the Bright Trading web site (www.stocktrading.com), I learned that they had some three dozen offices throughout the country. It appeared to be a fairly large firm, with some 350 traders, well-known and reputable within the industry.<\/em>
I visited their Las Vegas offices personally. Bob Bright agreed to be interviewed for\u00a0<\/em>Blackjack Forum. (Some technical questions were answered by Don, but all responses to my questions are simply identified as by \u201cBright.\u201d) I was surprised at the size of their Las Vegas operation. I saw some two dozen traders in various large rooms on two different floors, watching a hundred different computer screens. \u2013Arnold Snyder]<\/em><\/p>\n\n\n\nBob Bright’s Start as a Card Counter<\/h5>\n\n\n\n
Bright: No. I played blackjack in the 70s, on my own. I didn\u2019t like the team action. Ken Uston spotted me one night and watched me for over two hours. I didn\u2019t know who he was. All I did know was there was a man, dressed in a suit, standing behind me for over two hours.<\/p>\n\n\n\n
BJF: This is after Uston had been long gone?
Bright: Yes, this is after he left the exchange. Actually, he was at the Exchange as a bureaucrat, not a trader. He was in telecommunications.<\/p>\n\n\n\nBob Bright on the Switch to the Stock Market<\/h5>\n\n\n\n
Bright: Yes.
BJF: Did you have a lot of money?
Bright: No. I moved to town with $3000 in my pocket and I left with somewhat more than that. I was able to put $50,000 in the market. That was all I needed as a market maker to start with.<\/p>\n\n\n\n
BJF: How would you compare day trading to card counting?
Bright: Both take focus and discipline. In the market, you need to be a little more flexible than you do in card counting, but focus and discipline are the two key ingredients, and understanding numbers is the means of access for both of them, especially with derivative products.<\/p>\n\n\n\n
BJF: In day trading, is what you\u2019re doing purely mathematical, or are there psychological factors also?
Bright: It\u2019s not mathematically \u201cby the numbers.\u201d You\u2019re a day trader until you open a position. Then you\u2019re a risk manager. You\u2019re not \u201cinvesting.\u201d You\u2019re in for a short term.<\/p>\n\n\n\n
BJF: I\u2019m an investment dummy. What are \u201cderivatives?\u201d
Bright: Options and futures.<\/p>\n\n\n\nThe Bright Trading System<\/h5>\n\n\n\n
Bright: You\u2019re watching various indicators including the index values. Say you see crude oil, which is a future. If it starts to go up, it may tell you that the drillers have a chance of\u2014in just a few minutes\u2014going up, or big oil companies.<\/p>\n\n\n\n
BJF: In other words, you\u2019re watching an indicator that has historically shown that when this indicator moves this way, this stock, or this type of stock, moves up or down, and you execute a sale.
Bright: That\u2019s right.
BJF: So your ability as a day trader would have to do with your ability to isolate the indicators that actually are indicating something.
Bright: And they change from day to day. An indicator telling you one thing one day might be different the next day. So, that\u2019s why you have to be flexible in the market. The market requires focus, flexibility, and discipline. Playing cards for a living requires focus and discipline.
BJF: Yes, but generally speaking, if the count goes up at blackjack, you would assume you have an advantage on the next round because you can stick it into a computer and run a simulation, and every simulation is going to come up showing the same thing. You may win or lose the hand, but you do have the advantage.
Bright: There is a period when certain indicators will tell you to jump in and you will probably make money. Then at some point in time, it could be three days later or three months later, those indicators become less and less valuable. They don\u2019t work as well because as more day traders see the indicators that are working, they jump in and eventually those indicators are no longer viable. You have to constantly stay ahead of the curve.
BJF: So, you have to stay ahead of the other day traders who are also looking at the same indicators.
Bright: Right.
BJF: In a sense, there\u2019s more of a similarity with sports betting or betting on horses where your success depends on staying ahead of the public.
Bright: To a degree. The only difference is we have the edge over the rest of the public because we have direct access and faster data feeds. There are 7500 professional day traders. There are also 13 million online day traders. 13 million traders are always going to be behind the curve on the professionals.
BJF: And these 13 million are people sitting at their home computers?
Bright: Sitting at their home or office and trading occasionally.
BJF: Trying to predict from the same indicators?
Bright: When I say 13 million online traders, those are all electronic traders. There are probably another 30 million that have a brokerage account somewhere that haven\u2019t gone online yet, but they will.<\/p>\n\n\n\n
BJF: These funds move slowly?
Bright: They move very slowly. A good example\u2014institutional brokers tend to hear every morning, from their own firm\u2019s squawk box, what stocks they want to tout that day. For example, they might recommend IBM. The broker would call the bank trust department and say, \u201cOur firm is recommending IBM.\u201d They\u2019d say, \u201cFine. We\u2019ll talk about it at our next meeting,\u201d which might be Wednesday. On Wednesday they approve it and on Thursday they call back and say, \u201cYeah, go ahead and buy us 100,000 shares.\u201d<\/p>\n\n\n\n
BJF: I would imagine most of the 13 million day traders out there sitting at home at their PCs are not hugely bankrolled.
Bright: No, and they\u2019re not sitting there all the time. These are online traders. How many of those 13 million are actively sitting there wanting to trade that day? Maybe 10 million trade once a month. So, there might be three million that periodically will look at their terminal during the day at work or at home and make some trades. Probably not more than a million are sitting there really thinking they\u2019re going to make a living out of it.
BJF: That\u2019s still a pretty sizable number of people. Three million people that would be doing this fairly seriously. The majority of these would be doing this \u201clone wolf\u201d style though, right? They would be on their own using their own money, whatever resources they themselves have. Would the majority of these probably be under-bankrolled, in your opinion?
Bright: For trying to day trade, yes, they would be. Most of them don\u2019t understand the risk involved in day trading and the capital that it takes to do it. The market has made a lot of smart online traders in the last few years. It\u2019s been pretty straight up until this year. Thirty percent a year for three years running. A lot of people thought they were professionals because they made money. They were called swing traders. They buy it until it swings their way. And if it doesn\u2019t work that day, well, they just hold onto it for a couple of weeks, and as long as the market would go up, they made their money.<\/p>\n\n\n\n
BJF: Technically, though, a person could do 100, 200 shares at a time.
Bright: We recommend to our new traders that they do 100 shares at a time until they get comfortable with that. Then they go to 200.
BJF: But if you\u2019re trading 100-200 shares at a time, is it unlikely that you\u2019re going to be able to make any sizable amount of money?<\/p>\n\n\n\nThe Bright Brothers Trading Room<\/h5>\n\n\n\n
BJF: In other words, it\u2019s like playing nickel blackjack. You won\u2019t make your travel expenses even if you have an advantage. So how much of a bankroll does a person need to have a chance at making a living from day trading himself? Let\u2019s say he wants to do it by himself and he\u2019s very smart, understands the indicators, really follows everything, watches everything. How much money does he need behind himself?
Bright: And he\u2019s going to be a lone wolf trader at home? He probably couldn\u2019t do it, no matter how much money he had, long term. Even if he had a million dollars to trade with, he\u2019s not going to make the money he would if he was in a professional environment.
BJF: In other words, it\u2019s better to be in a group situation where there are a lot of people watching a lot of indicators, sharing information? Is it similar to a blackjack team?
Bright: Right. I didn\u2019t want to join a blackjack team, but in a trading environment, it\u2019s much better to have 20 or 30 pairs of eyes looking out for you than doing it all by yourself. If you\u2019re trading General Motors, you may miss that trade in Ford that just down-ticked a buck or up-ticked a half.<\/p>\n\n\n\n
BJF: In an environment like this, where you\u2019ve got 30-40 traders\u2026
Bright: This is our biggest room. Most of our rooms have typically around 15 traders.
BJF: So, if they are all working in the same room and watching a lot of the same indicators, how often do you have a problem where two traders are competing with each other?
Bright: That\u2019s not a problem because, even in the same room, where there might be 12 traders, two of them might be trading the drillers, but there are 12 different drillers. You\u2019ve got to remember most traders won\u2019t do more than two or three stocks in the same day. So, you\u2019ve got a couple trading the drillers, you\u2019ve got a couple trading the high techs, a couple trading the drug companies.<\/p>\n\n\n\n
BJF: When you say you should have half a million dollars or more to do this as an occupation, how much of that capital is required because you must buy in large quantities, and how much is needed because there are very large fluctuations where you\u2019re going to make purchases that lose money?
Bright: Almost all of it is due to having the dollars needed to buy in large quantity. That\u2019s what we provide the capital for, for our traders. They provide a small deposit to cover their fluctuations. So, they come in with a $25,000 deposit. That, in general, will cover most fluctuations. And we put up the half a million or million or whatever someone can handle effectively. That way, we\u2019re providing them with the capital to trade with, but we\u2019re certainly not expecting them to lose any part of it. If they lose, it comes off of their security deposit.
BJF: In other words, if they lose, it comes off theirs; if they win\u2026
Bright: It adds to their deposit.
BJF: If they win, if they make money on their trades, is that win completely theirs or is there a percentage that goes to your company?
Bright: The win is 75% theirs the day they make it and they get the other 25% at year end, assuming they kept out of trouble. We let people manage themselves as far as risk and things like that. We have it designed that if they never go below $15,000 in their trading account, they automatically get a 25% bonus of what they made. If they made $100,000 for the year, that\u2019s $25,000\u2026<\/p>\n\n\n\n
BJF: So, what if on day one somebody comes in, puts in his $25,000 deposit, and then loses $30,000 in the first week or something?
Bright: In our eight years that has happened to us once.
BJF: Is that because you stay on top of people at the beginning or\u2026?
Bright: It\u2019s because we stay on top of people. We have the software watching them, and every office has a manager who\u2019s supposed to watch them closely, especially the first few weeks.<\/p>\n\n\n\n
BJF: In a major negative swing where all the stocks go down\u2026
Bright: Our traders love that. Like the days the market was down 500 points, they usually make two or three times as much money as on an up day.
BJF: Why would that be?
Bright: Because stocks go down faster than they go up. Our traders don\u2019t care which way the market goes, as long as it moves. They don\u2019t want a flat line because there\u2019s no way to make money. Market\u2019s going down, they jump on board and they get short. So, a typical bad day in the market, a stock might be down four points. A typical up day in the market, it might be up one or two points. So, you can see they can make twice as much on the down side.
BJF: Are there any good books or publications for day traders?
Bright: No.
BJF: Nothing?
Bright: Were there any good books before 1962 in blackjack? How about in the 50s? I never saw one. There were some people even here in town playing blackjack in the 50s. They\u2019re not going to write a book until the game is over.<\/p>\n\n\n\n
BJF: How many offices do you have right now?
Bright: 35.
BJF: All in the U.S.?
Bright: All but one; we have one in Canada.
BJF: How long has Bright Trading been in business?
Bright: Since 1992. I\u2019ve been involved with the market since \u201978. I joined with Eddie Franco in \u201992 and we formed Bright Trading. I had retired after \u201987 and I was trading a little bit from home. But it\u2019s really difficult to make much money trying to trade as a lone wolf from home.<\/p>\n\n\n\n
BJF: Is it conceivable that a day trading system could be set up in which a computer itself made all the trades?
Bright: To a point.
BJF: A computer can play blackjack better than a human player, but the casinos won\u2019t allow it. But technically, in the stock market, if you could just go in\u2026
Bright: It is allowed in the marketplace. I know a lot of people who have been working on that for years. They do have some computers that trade the market. Every year they get a little better, but the main thing they\u2019ve learned is that if they unplug the computer for two days, it doesn\u2019t do as well as if it stayed online all the time, because you have to keep the continuity going.<\/p>\n\n\n\n
BJF: In other words, you would have to have a program that was flexible in which trends it watched changing and which indicators changing?
Bright: Right. We have traders in our firm who are 99% computer. They sit there and watch the computer and they override it once in a while or they don\u2019t. We have a guy in Chicago that we call \u201cthe computer system.\u201d Hal. He has just himself and a few other people that just watch the computer and make sure it\u2019s doing what it\u2019s supposed to do.
BJF: Are they using their own program?
Bright: Yes. A proprietary program. They asked to work with us. Blair Hull, you may know, back in \u201992, had a computer doing it. He was showing me 30,000 orders a day going into the New York Stock Exchange. Back then, if you had left the order in more than two minutes, they could charge you an extra penny per share. So, he had the program set for a minute and 45 seconds to kill the order.<\/p>\n\n\n\n
BJF: Do you yourself sit down and trade personally anymore?
Bright: As the company has grown, I have been trading less and less. My partner hardly trades at all anymore. Our average trader will trade about a million shares a month. I used to trade maybe 5 million shares a month. I\u2019m down to about 2 million.<\/p>\n\n\n\n
BJF: How long have you been teaching classes in day trading?
Bright: Not quite two years. For the longest time, we were bringing people from the trading floors. It was cheaper for them to join us and trade than it was to trade off the trading floor.<\/p>\n\n\n\nThe Bright Trading Training Process<\/h5>\n\n\n\n
Bright: Right now we have a class about every 4 to 5 weeks. They\u2019re four hours a day for five days. Taking the course is to day trading what reading your book one time would be for a blackjack player. That\u2019s all it is. At the end of the week, you know just the basics, whatever you retain.<\/p>\n\n\n\n
BJF: Are most of the people who take the class doing this with a view to trading with your company?
Bright: Not necessarily. Some of them take the class just for their own benefit. We open it up for anybody, but it really doesn\u2019t apply to at-home people. They can\u2019t utilize the techniques we teach because the cost is prohibitive. A lot of them get a lot of value out of it even if they\u2019re not going to do this\u2026 It opens their eyes up. It helps them save a lot of money over the long run on their investments.<\/p>\n\n\n\n
BJF: How many students in total have you trained over the years?
Bright: Oh, I don\u2019t know. I don\u2019t think we\u2019ve ever had a class over 19 or 20\u2026 Say 18 times 20, 360.
BJF: How many of these 360 do you think are now serous professional day traders?
Bright: I\u2019d say 25% of them. When I joined the San Francisco Stock Exchange on the trading floor, I was appointed to a committee where I was able to see the turnover. For every hundred new people that came, 80 were gone within six months. Half of the remaining 20 were gone within the year. Of the ten who were there for the full year, eight of them were still there three years later.<\/p>\n\n\n\n
BJF: Are there day traders who form teams in the way that blackjack players do, where they combine their bankrolls?
Bright: Yes, there are. That\u2019s what Blair Hull did. He hired a lot of people and had them work as a team. He had people on various trading floors. He interconnected all the computers so that if someone in the CPQ pit or the General Motors pits bought or sold a lot of options, it would reflect the bids and offers for his people in the S&P pit or in the IBM pit.<\/p>\n\n\n\n
But our traders here are all independent traders and they make what they make based on their own efforts. There are a lot of traders for Goldman Sachs and for a lot of firms on the trading floor that get to keep maybe 30-40% of what they make. And they use the firm\u2019s capital. They don\u2019t put up anything. These are people who came up through the ranks and were given the ability to trade and they get a percentage of what they make for the firm.<\/p>\n\n\n\n
It\u2019s like you have a lot of players out there on a team, and they keep all their winnings, but you get all the comps. You can resell the comps. On a bigger scale, a wider scale, with more traders and a bigger thing, it\u2019s probably better to have individual traders make money. Our people don\u2019t pay commissions. They pay transaction costs. You bypass brokers completely. We\u2019re a broker-dealer acting as a dealer, not as a broker, because we have no retail accounts.<\/p>\n\n\n\n
Much of what we do at Bright Trading is modeled after blackjack, because since I left Johns-Manville in 1974, blackjack and the market have been roughly 50\/50 of my time. And one models the other. We took the blackjack model and moved it into the stock market in \u201978, trading stocks and options. Actually, I went to L.A. I said, \u201cI want to join the stock market.\u201d They said, \u201cWhat do you know?\u201d I said, \u201cNothing.\u201d They said, \u201cWhat have you been doing?\u201d \u201cPlaying blackjack for a living.\u201d They said, \u201cWhy don\u2019t you go up to San Francisco and trade options?\u201d<\/p>\n\n\n\n
BJF: How long did you work with Blair Hull?
Bright: I didn\u2019t work with him, but we worked as independent traders sharing information from \u201978 until\u2026 I left in \u201982. And then in \u201984 and \u201985, we talked a bit back in Chicago. I retired in \u201985 and then he kept his company going. Then I jumped back in \u201987. I saw it was a great market opportunity. And then I retired again in \u201988.<\/p>\n\n\n\n