How about a bet that there will be a stockmarket crash sometime between 9/9/99 and January, 2000 ?
Charles
>>> Tom Lehman <uswa12 at lorainccc.edu> 02/24/99 11:47AM >>>
Dear Henry,
Your talking about some big bucks trades when you get into currency speculation!
Your email pal,
Tom L.
"Henry C.K. Liu" wrote:
> Doug Henwood wrote:
>
> > Regardless of the social/economic effects, people who day trade on the web
> > will be lucky to break even. There's a lot of nonsense in financial theory,
> > but the near-impossibility of beating the market and the counterproductive
> > nature of excessive trading aren't part of the nonsense.
> >
>
> This is the conventional wisdom, but so far it has not ben borne out by empirical
> data.
> The odds of beating the market has improved due to the increased inefficiency in
> markets of immense complexity. Also the markets are now structured so that there
> are million, almost endless, of segments that individual specialists can exploit,
> outside of the major trends. Its like catching the bubbles when every wave breaks
> and each bursting bubble is worth $1K to someone.
> Day trading is designed to take advantage of these new market conditions by
> 1) by providing instant entrance to large numbers of independent traders who are
> very specifically focused, both in substance and timing, and
> 2) these day trades constantly eliminate market inefficiencies or irrationality and
> at the same time create new ones.
> These trades are both the exploiters and creators of conditions that validate chaos
> theories that begin to even the traditional inequality between the big boy and the
> little guy.
> One thing about the market, if there is no money in it, it won't happen. The
> growth of day trading is not based on ideology or charity. People have been making
> out well in it and it will continue to expand.
>
> I personally have made a bit of money trading on the convergence between the
> Japanese yen and the Austrian dollar (shilling), in June 1998, which without the
> trading model I would not have known a relationship existed between the two
> currencies. The opportunity window lasted only 6 weeks, but the profit from 5
> trades could carry my operation for the next 6 months without further trading.
> The upside return is 60% and the down side loss is 15% and the probability of
> winning if one can find the trades is 80%. It represented very good odds. A 60%
> return on investment over a period of 6 weeks is unbeatable.
> Traders move from bonds, to currencies, to interest rates as the markets shift.
> The big institutional closed out the proprietary trading units after the LTCM
> debacle.
> So right now there are thousands of laid off traders making very good living with
> their severance pay as trading capital.
>
> For example, one day trading strategy on the high volatility British pound tested
> with March 1995 price data, yielding a high percentage success rate and average
> profits of $253 per trade of $1000. Active, speculative trading on coffee in June
> 1995 yielded before cost profits of more than $6,000 from $10,000 trading capital.
> And an even more sedate trading style on coffee trading produced a $378 profit per
> trade of
> $1000. These outstanding results are replicated and documented across numerous
> commodities, including a variety of currencies, grains, meats, metals, stock
> indices, foods, fibers, energies and interest rate contracts. Most of these trade
> carry a 20% loss cut off.
>
> These trade are relatively risk free over time, but they do require focus and time
> and disciplined effort to locate trading opportunities. The big houses cannot
> afford to do them because their high overhead will cause them to lose money during
> period of dry opportunities when the strategy finds no or too few tradable
> opportunities. So the big houses either has to stretch the model beyond its
> paradigm validity to assume higher risks just to keep trading. Individual day
> trade generally have low fixed overhead. Many looking to net less the $200k/year,
> so they can generally afford to wait or shift into other sectors. The general rule
> is that when more traders focus on a particular sector, the degree of inefficiency
> decreases and trading opportunity dries up. so the market is constantly shifting.
> As inefficiency is reduced in one sector, it produces inefficiencies in other
> sectors, and it the the job of day traders to find hem and reduce them for profit.
> Of course, leverage increases one risk. But individual traders are generally
> protected by heir inability to borrow excessively, a blessing in disguise.
>
> The NASD chief has repeatedly raised concern over day trading.
> The head of Wall Street's so-called self policing group has added his voice to a
> rising chorus of concern about the growing popularity of risky day trading among
> ordinary investors.
> But the conflict of interest is very obvious: don't risk your money yourselves, let
> us risk your money for a fee.
>
> The big attraction of day trading is that one person, sitting and watching a screen
> all
> day and trading for his own account has the potential to make large sums of money
> on upswings in the stock and other markets. While some of these upswings are large
> from daily price movements, others are tiny and are called "teenies". One teeny
> equals 1/16 or 6.3 cents on 1,000 shares of anything- but one can make money on
> thirty-seconds and even sixty-fourths of a point per share with this specific
> method of daytrading.
> (New rules mean these tiny fractions must appear on trading screens, instead of
> remaining invisible to the public so the exchange marketmaker can lock in all the
> profit on the increased spread.)
>
> It is not important to know even what the stock symbol stands for, much less what
> the company does or it's long range prospects. The only important thing is whether
> you can lock in a couple of teenies by seeing the numbers hit the screen and
> executing quickly as the tide moves in the right direction. At some firms, 30
> trades a
> day is the average and long term is 30 minutes. Bottom line: if you make 30 trades
> and lock in 10 "teenies" a day over 25 working days, you're taking in about $15,000
> a
> month. And unless, you are hooked to a life style, you can always walk away when
> you have enough.
>
> Market reforms inspired by exposees of excessive spreads in Over the Counter
> markets triggered the new day trading dynamics with its far reaching effects. For
> one
> thing, the reduction in tradings spreads is saving investors $20 billion a year.
> New
> software has leveled the playing field. And there are 25 year olds making over a
> million bucks a year on tiny price fluctuations.
>
> Although the trend started as a kind of male mentality, video game kind of thing it
>
> has since spread to everyone wanting to work from home, savor independence and
> take a risk. Women definitely are included in this hot new trend. Some pool their
> money and one will trade for all of them from home with some recent women college
> grads have grossed as much as a hundred thousand in 6 months time.
>
> A sample strategy - Gap & Snap:
> Often, when a stock gaps up at the opening of trading, it can be an
> indication that the stock is very strong and will continue to rise. However,
> gapping stocks might also be met with strong resistance, only briefly
> trading up from their open and then falling to trade at lower levels for the
> remainder of the day. As a day trader, you will want to identify and trade
> those gapping stocks that are more likely to continue to trade strongly
> while ignoring those that are weak after opening strong.
>
> Our Gap & Snap strategy identifies the best gapping stocks, and traders use
> models to assist their execution of the strategy.
>
> This strategy works by identifying stocks that gap up by at least 5/8 at the
> opening of trading. We then let those stocks trade for a full 30 minutes and
> mark the high that each of them reaches during that period. The stocks are
> bought that day only after they trade above their 30-minute high. When traders
> have purchased a stock, they should determine their stop based on the degree
> of risk they are willing to take. However, their stop should be no lower than
> 1/16 below the low reached during the first 30 minutes of trading.
>
> Finally, if a stock trades below its first 30-minute low before it breaks its
> 30-minute high, the strategy is invalid.
>
> This strategy has had a high degree of reliability to give gains of 1/2 point or
> more.
>
> All the above are for information only. It is not a recommendation to do day
> trading or to follow the strategies. Like everything else, a certain amount of
> research and learning is necessary to be successful. But certainly there are worse
> jobs around.
>
> As I said, I think this is a progressive trend. It is about time for the average
> person with a certain level of skill and basic intelligent to be able to claim a
> fair share in the control of capital by risking their vacation money. And because
> of advanced in communication technology, the freedom permitted by this line of work
> is unprecedented, not tie to locations, no bosses supervising over you, etc., etc.
>
> Henry