SCHONFELD WAY; PLAIN TALK, PLAIN IDEAS AND REALLY BIG MONEY

Talk to trading-heavyweight Steven Schonfeld and you might think you are listening to the lyrics of "The Gambler."

"You have to learn how to protect your wins, how to trade out of a loss and when to trade more and when to trade less," he said.

Not exactly shocking advice for Wall Street veterans. But Schonfeld's words go out to a lot of people - about 1,200 - and it has made him and some of his traders buckets of money amidst manic markets.

Founded in 1988, the Schonfeld Group has become a trading giant, with the many pieces of the business doing about 500,000 transactions a day - more than two and a half times that of Ameritrade or Charles Schwab.

The company specializes in short-term trading, which explains the high volume.

The various pieces of the business allow him to get money around every aspect of the trade - deployment of capital, trading, clearing and returns.

In all, Schonfeld has 500 proprietary traders, about $600 million in hedge fund investments, an institutional brokerage business, a clearing and execution business and a retail trading arm where individuals come to trade for themselves.

That business has generated interest on the Street recently, with heavy hitters like E-Trade said to have approached the company for a potential acquisition.

Schonfeld has seeded one of the hedge fund industry's rising stars, and just bought 112 acres in Old Westbury to build a home with - what else? - his own golf course

"The more successful we make the trader, the more we will be able to profit from his journey," said Andrew Fishman, president of Schonfeld Group.

While Schonfeld is not the most popular man on Wall Street - he is known for tough negotiations on fees and using his trading weight to get his way - his faith in buying and selling stock and shepherding people through the learning process has minted him a "few hundred million," say industry watchers.

"His return on capital is probably 50 to 60 percent versus a hedge fund, which might get 20," said one industry expert who asked not to be named. "It's a good strategy."

"Whether they trade their own money or proprietary money, we try to give them an edge," Schonfeld said.

"Whatever is better for the trader is better for us."

Schonfeld believes in trading the way George W. Bush believes in good and evil - absolutely.

He allows people to come in and trade their own money, trade his money and -if they are good enough - start a hedge fund that he might seed.

As his company has grown, his philosophy toward talent has changed.

The best traders, he said, "used to be the dude from Tulane who was very confident, good looking and good at picking up girls," Schonfeld said.

"Now it's the mathematical and computer literate guy - a MIT graduate in statistics."

Schonfeld will leverage his talent scouting (and money) in a fund of hedge funds that he is planning to launch soon.

The firm uses technology aggressively to analyze the markets, deploying "black box" trading that applies algorithms to trades.

His success in picking talent is unknown, but at least one Schonfeld alumnus is a huge hit: Dimitry Balyasny, a 31-year old trading wonder whose $1 billion Atlas Fund has three-year net gains of more than 30 percent (after fees) - a rock star performance in a ultra-competitive market.

"Pure trading skill isn't stock calling or market calls; it's timing in and out of positions, its allocating trading around positions, risk-management controls and disciplines," Schonfeld said.