At 12:02 PM 2/24/99 -0500, you wrote:
>Max,
>
>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
>
>