He started losing money right away. At first, it was $1,000 here and there--no big deal. Then came Oct. 28, 1997. The market had taken a beating the day before, closing early, and Palmer was sure the next day would be worse. So he sold short--in essence, selling stock he didn't own with a promise to provide the stock at a future date. Instead the market roared right back up, recording one of its best days ever. He just sat there watching the screen and holding his head, too proud to admit he'd been wrong. But he was wrong--and $21,000 in the red.

While he had a few good days--on one, he earned $16,000--after five months he was still down and was forced to borrow money to cover his expenses. "My biggest problem was that I didn't set aside money to pay my bills," he says.

He hung it up, took a job as a shop manager and soon after that became part owner and manager of Palo Alto Trading in Palo Alto, Calif. After two years of managing a roomful of day traders, Palmer has these words of advice: Don't confuse day trading with investing. Just watch where the stock goes; if it goes up, buy; if it goes down, sell. When you're wrong, admit it quickly--pride only makes you lose more. He says two styles work: "bottom fishing," which is buying a stock you think has bottomed out and is on the way back up, and "momentum," which entails buying a stock as soon as it reaches a new high, because that usually means it will keep on going.

But even with his hard-won wisdom, Palmer isn't tempted to go back to day trading. He's content to manage the shop and says, "This is the best money I've made."

--REPORTED BY MELISSA AUGUST/WASHINGTON, DEBORAH FOWLER/ HOUSTON AND LAIRD HARRISON/SAN FRANCISCO

Read 'Em and Reap
HOW TO GET STARTED IN ELECTRONIC DAY TRADING By David Nassar; McGraw-Hill; $25. A primer on e-trading technology and systems: explains E-DAT rules and regulations and how to spot and profit from market inconsistencies. Also translates traderspeak like "handle" (the nonfractional part of a stock price) and "shave" (to reduce the quantity).

DIGITAL DAY TRADING: MOVING FROM ONE WINNING STOCK POSITION TO THE NEXT By Howard Abell; Dearborn; $40. Are you psychologically prepared for day-to-day market pressures? This book gauges your mental state and gives lessons in how to control anxiety and quicken trading reflexes for better results. Prepares newbies for those complicated trading screens.

ELECTRONIC DAY TRADERS' SECRETS By Marc Friedfertig and George West; McGraw-Hill; $30. Conversations with 13 pros--how they got their start, their biggest wins and most humiliating losses. Dispenses tips on how to anticipate a market maker's next move and how to fight fear. All this plus bonus quips such as, "There is no bad market, there are only bad price levels" and "Day Trading is the church of what's happening now."

THE DAY TRADER'S QUICK REFERENCE TO THE STOCK MARKET By Frank Carroll; Alcor Press; $20. Can't tell AUX from OIX? This pocket-size guide helps keep industries, indexes and market sectors straight. Includes market caps by sector and by company. Winter 1999 edition available now; updated and reprinted every quarter.

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