Short Trader Quotes

Do you do this because you live such short lives? Tell yourselves wild tales of what might happen tomorrow, and feel all the feelings of events that will never happen? Perhaps to make up for the pasts you cannot recall, you invent futures that will not exist.

Long or short, if you worry about every step of a journey, you will divide it endlessly into pieces, any one of which may defeat you. Look only to the end.

Such a storm of emotions as humans can evoke, all on the basis of imagination,” the dragon observed condescendingly. In a more reflective voice she asked, “Do you do this because you live such short lives? Tell yourselves wild tales of what might happen tomorrow, and feel all the feelings of events that will never happen? Perhaps to make up for the pasts you cannot recall, you invent futures that will not exist.

Win, loss whatever emerges in the short-term, place and manage your next trades untouched, unattached... always keeping your eyes on the long-term picture.

Don't think of the obstacles that lie between now and the moment when we confront him." The ship spoke in a low, soft voice. "Long or short, if you worry about every step of a journey, you will divide it endlessly into pieces, anyone of which may defeat you. Look only to the end.

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell. It is far from certain that the typical investor should regularly hold off buying until low market levels appear, because this may involve a long wait, very likely the loss of income, and the possible missing of investment opportunities. On the whole it may be better for the investor to do his stock buying whenever he has money to put in stocks, except when the general market level is much higher than can be justified by well-established standards of value. If he wants to be shrewd he can look for the ever-present bargain opportunities in individual securities. Aside from forecasting the movements of the general market, much effort and ability are directed on Wall Street toward selecting stocks or industrial groups that in matter of price will “do better” than the rest over a fairly short period in the future. Logical as this endeavor may seem, we do not believe it is suited to the needs or temperament of the true investor—particularly since he would be competing with a large number of stock-market traders and first-class financial analysts who are trying to do the same thing. As in all other activities that emphasize price movements first and underlying values second, the work of many intelligent minds constantly engaged in this field tends to be self-neutralizing and self-defeating over the years. The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. He should never buy a stock because it has gone up or sell one because it has gone down. He would not be far wrong if this motto read more simply: “Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.” An

Bubbles aren’t so much about valuations rising. That’s just a symptom of something else: time horizons shrinking as more short-term traders enter the playing field.

Short-term trading is very time-consuming. That is why even “successful” short-term traders can easily have negative real ROI.

Most of these stories are on the tragic side. But the reader must not suppose that the incidents I have narrated were of common occurrence. The vast majority of these people, government servants, planters, and traders, who spent their working lives in Malaya were ordinary people ordinarily satisfied with their station in life. They did the jobs they were paid to do more or less competently,. They were as happy with their wives as are most married couples. They led humdrum lives and did very much the same things every day. Sometimes by way of a change they got a little shooting; but at a rule, after they had done their day's work, they played tennis if there were people to play with, went to the club at sundown if there was a club in the vicinity, drank in moderation, and played bridge. They had their little tiffs, their little jealousies, their little flirtations, their little celebrations. They were good, decent, normal people. I respect, and even admire, such people, but they are not the sort of people I can write stories about. I write stories about people who have some singularity of character which suggests to me that they may be capable of behaving in such a way as to give me an idea that I can make use of, or about people who by some accident or another, accident of temperament, accident of environment, have been involved in unusual contingencies. But, I repeat, they are the exception.

Investing styles may differ among successful market players, but without exception, winning stock traders share certain key traits required for success. Fall short in those qualities and you will surely part ways with your money.

Why do we complain of Nature? She has shown herself kindly; life, if you know how to use it, is long. But one man is possessed by an avarice that is insatiable, another by a toilsome devotion to tasks that are useless; one man is besotted with wine, another is paralyzed by sloth; one man is exhausted by an ambition that always hangs upon the decision of others, another, driven on by the greed of the trader, is led over all lands and all seas by the hope of gain; some are tormented by a passion for war and are always either bent upon inflicting danger upon others or concerned about their own; some there are who are worn out by voluntary servitude in a thankless attendance upon the great; many are kept busy either in the pursuit of other men's fortune or in complaining of their own; many, following no fixed aim, shifting and inconstant and dissatisfied, are plunged by their fickleness into plans that are ever new; some have no fixed principle by which to direct their course, but Fate takes them unawares while they loll and yawn—so surely does it happen that I cannot doubt the truth of that utterance which the greatest of poets delivered with all the seeming of an oracle: "The part of life we really live is small."5 For all the rest of existence is not life, but merely time. Vices beset us and surround us on every side, and they do not permit us to rise anew and lift up our eyes for the discernment of truth, but they keep us down when once they have overwhelmed us and we are chained to lust. Their victims are never allowed to return to their true selves; if ever they chance to find some release, like the waters of the deep sea which continue to heave even after the storm is past, they are tossed about, and no rest from their lusts abides. Think you that I am speaking of the wretches whose evils are admitted? Look at those whose prosperity men flock to behold; they are smothered by their blessings. To how many are riches a burden! From how many do eloquence and the daily straining to display their powers draw forth blood! How many are pale from constant pleasures! To how many does the throng of clients that crowd about them leave no freedom! In short, run through the list of all these men from the lowest to the highest—this man desires an advocate,6 this one answers the call, that one is on trial, that one defends him, that one gives sentence; no one asserts his claim to himself, everyone is wasted for the sake of another. Ask about the men whose names are known by heart, and you will see that these are the marks that distinguish them: A cultivates B and B cultivates C; no one is his own master. And then certain men show the most senseless indignation—they complain of the insolence of their superiors, because they were too busy to see them when they wished an audience! But can anyone have the hardihood to complain of the pride of another when he himself has no time to attend to himself? After all, no matter who you are, the great man does sometimes look toward you even if his face is insolent, he does sometimes condescend to listen to your words, he permits you to appear at his side; but you never deign to look upon yourself, to give ear to yourself. There is no reason, therefore, to count anyone in debt for such services, seeing that, when you performed them, you had no wish for another's company, but could not endure your own.

Take comfort in this, Amber. You are only one small, short-lived creature. You’d have to be a fool to think you could change the course of the whole world.” She was silent until she broke out in a shaky laugh. “Oh, Paragon, in that you are more right than you know, my friend.

So. Which of our troubles torments you most this evening?” Althea surrendered. “They all nip at my heels like a pack of yapping feists, ship. I don’t know which to worry about first.” The figurehead gave a snort of disdain. “Then kick them away as if they were truly a pack of curs and fix your gaze instead on your destiny.” … “Don’t think about the obstacles” … The ship spoke in a low, soft voice. “Long or short, if you worry about every step of a journey, you will divide it endlessly into pieces, any one of which may defeat you. Look only to the end.” “I think we will succeed only if we prepare ourselves,” Althea objected. Paragon shook his head. “Teach yourself to believe you will succeed. … Be now what you must be to succeed at the end of your journey, and when the end comes, you will find it is just another beginning.” Althea sighed. “Now you sound like Amber,” she complained. “No.” He contradicted her flatly. “Now I sound like myself. The self I put aside and hid, the self I intended to be again someday, when I was ready. I have stopped intending. I am, now.” p. 86: Paragon to Althea

We fought with those cocksuckers all the way down,” says one Deutsche Bank trader. And, all the way down, the debt collectors at Deutsche Bank sensed the bond traders at Morgan Stanley misunderstood their own trade. They weren’t lying; they genuinely failed to understand the nature of the subprime CDO.

irrational behavior in the markets may result precisely because individuals are responding rationally according to their incentives. So long as most traders are judged on the basis of short-term performance, bubbles involving large deviations of stock prices from their long-term values are possible—and perhaps even inevitable.

I have what I call my Evel Knievel screen. These are companies that are trying to jump the Grand Canyon and probably won’t make it. There are only two conditions for the screen. First, the company is trading at more than five times book value. Second, the company is losing money. My job is to figure out which stocks won’t make it across the Grand Canyon and then go short those stocks.

[23] Our situation is like that at a festival.* Sheep and cattle are driven to it to be sold, and most people come either to buy or to sell, while only a few come to look at the spectacle of the festival, to see how it is proceeding and why, and who is organizing it, and for what purpose. [24] So also in this festival of the world. Some people are like sheep and cattle and are interested in nothing but their fodder; for in the case of those of you who are interested in nothing but your property, and land, and slaves, and public posts, all of that is nothing more than fodder. [25] Few indeed are those who attend the fair for love of the spectacle, asking, ‘What is the universe, then, and who governs it? No one at all? [26] And yet when a city or household cannot survive for even a very short time without someone to govern it and watch over it, how could it be that such a vast and beautiful structure could be kept so well ordered by mere chance and good luck? [27] So there must be someone governing it. What sort of being is he, and how does he govern it? And we who have been created by him, who are we, and what were we created for? Are we bound together with him in some kind of union and interrelationship, or is that not the case?’ [28] Such are the thoughts that are aroused in this small collection of people; and from then on, they devote their leisure to this one thing alone, to finding out about the festival before they have to take their leave. [29] What comes about, then? They become an object of mockery for the crowd, just as the spectators at an ordinary festival are mocked by the traders; and even the sheep and cattle, if they had sufficient intelligence, would laugh at those who attach value to anything other than fodder!

I decided early in graduate school that I needed to do something about my moods. It quickly came down to a choice between seeing a psychiatrist or buying a horse. Since almost everyone I knew was seeing a psychiatrist, and since I had an absolute belief that I should be able to handle my own problems, I naturally bought a horse. Not just any horse, but an unrelentingly stubborn and blindingly neurotic one, a sort of equine Woody Allen, but without the entertainment value. I had imagined, of course, a My Friend Flicka scenario: my horse would see me in the distance, wiggle his ears in eager anticipation, whinny with pleasure, canter up to my side, and nuzzle my breeches for sugar or carrots. What I got instead was a wildly anxious, frequently lame, and not terribly bright creature who was terrified of snakes, people, lizards, dogs, and other horses – in short, terrified of anything that he might reasonably be expected to encounter in life – thus causing him to rear up on his hind legs and bolt madly about in completely random directions. In the clouds-and-silver-linings department, however, whenever I rode him I was generally too terrified to be depressed, and when I was manic I had no judgment anyway, so maniacal riding was well suited to the mood. Unfortunately, it was not only a crazy decision to buy a horse, it was also stupid. I may as well have saved myself the trouble of cashing my Public Health Service fellowship checks, and fed him checks directly: besides shoeing him and boarding him – with veterinary requirements that he supplement his regular diet with a kind of horsey granola that cost more than a good pear brandy – I also had to buy him special orthopedic shoes to correct, or occasionaly correct, his ongoing problems with lameness. These shoes left Guicci and Neiman-Marcus in the dust, and, after a painfully aquired but profound understanding of why people shoot horse traders, and horses, I had to acknowledge that I was a graduate student, not Dr. Dolittle; more to the point, I was neither a Mellon nor a Rockefeller. I sold my horse, as one passes along the queen of spades, and started showing up for my classes at UCLA.

Back in the 1980s, the original stated purpose of the mortgage-backed bond had been to redistribute the risk associated with home mortgage lending. Home mortgage loans could find their way to the bond market investors willing to pay the most for them. The interest rate paid by the homeowner would thus fall. The goal of the innovation, in short, was to make the financial markets more efficient. Now, somehow, the same innovative spirit was being put to the opposite purpose: to hide the risk by complicating it. The market was paying Goldman Sachs bond traders to make the market less efficient.

Ernestine Warner was working with the same rough information available to traders like Eisman. This was insane: The arbiter of the value of the bonds lacked access to relevant information about the bonds. "When we asked her why", said Vinny, she said "The issuers won't give it to us". That's when i lost it. "You need to demand to get it!" She looked at us like, We can't do that. We were like, "Who is in charge here? You're the grown-up. You're the cop! Tell them the fucking give it to you!!!" Eisman concluded that "S&P was worried that if they demanded the data from Wall Street, Wall Street would just go to Moody's for their ratings.

Snowbound up here with you. Without books or business to occupy my time, I wonder what I’ll do,” he added with a leer. She blushed gorgeously, but her voice was serious as she studied his face. “If things hadn’t gone so well for you-if you hadn’t accumulated so much wealth-you could have been happy up here, couldn’t you?” “With you?” “Of course.” His smile was as somber as hers. “Absolutely.” “Although,” he added, linking her hands behind her back and drawing her a little closer, “you may not want to remain up here when you learn your emeralds are back in their cases at Montmayne.” Her head snapped up, and her eyes shone with love and relief. “I’m so glad. When I realized Robert’s story had been fabrication, it hurt beyond belief to realize I’d sold them.” “It’s going to hurt more,” he teased outrageously, “when you realize your bank draft to cover their cost was a little bit short. It cost me $45,000 to buy back the pieces that had already been sold, and $5,000 to buy the rest back from the jeweler you sold them to.” “That-that unconscionable thief!” she burst out. “He only gave me $5,000 for all of them!” She shook her head in despair at Ian’s lack of bargaining prowess. “He took dreadful advantage of you.” “I wasn’t concerned, however,” Ian continued teasing, enjoying himself hugely, “because I knew I’d get it all back out of your allowance. With interest, of course. According to my figures,” he said, pausing to calculate in his mind what it would have taken Elizabeth several minutes to figure out on paper, “as of today, you now owe me roughly $151,126.” “One hundred and- what?” she cried, half laughing and half irate. “There’s the little matter of the cost of Havenhurst. I added that in to the figure.” Tears of joy clouded her magnificent eyes. “You bought it back from that horrid Mr. Demarcus?” “Yes. And he is ‘horrid.’ He and your uncle ought to be partners. They both possess the instincts of camel traders. I paid $100,000 for it.” Her mouth fell open, and admiration lit her face. “$100,000! Oh, Ian-“ “I love it when you say my name.” She smiled at that, but her mind was still on the splendid bargain he’d gotten. “I could not have done a bit better!” she generously admitted. “That’s exactly what he paid for it, and he told me after the papers were signed that he was certain he could get $150,000 if he waited a year or so.” “He probably could have.” “But not from you!” she announced proudly. “Not from me,” he agreed, grinning. “Did he try?” “He tried for $200,000 as soon as he realized how important it was to me to buy it back for you.” “You must have been very clever and skillful to make him agree to accept so much less.” Trying desperately not to laugh, Ian put his forehead against hers and nodded. “Very skillful,” he agreed in a suffocated voice. “Still, I wonder why he was so agreeable?” Swallowing a surge of laughter, Ian said, “I imagine it was because I showed him that I had something he needed more than he needed an exorbitant profit.” “Really?” she said, fascinated and impressed. “What did you have?” “His throat.

In the two decades after I left, I waited for the end of Wall Street as I had known it. The outrageous bonuses, the endless parade of rogue traders, the scandal that sank Drexel Burnham, the scandal that destroyed John Gutfreund and finished off Salomon Brothers, the crisis following the collapse of my old boss John Meriwether’s Long-Term Capital Management, the Internet bubble: Over and over again, the financial system was, in some narrow way, discredited. Yet the big Wall Street banks at the center of it just kept on growing, along with the sums of money that they doled out to twenty-six-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it and sell off the pieces?

Goldman Sachs itself—and so Goldman was in the position of selling bonds to its customers created by its own traders, so they might bet against them. Secondly, there was a crude, messy, slow, but acceptable substitute for Mike Burry’s credit default swaps: the actual cash bonds. According to a former Goldman derivatives trader, Goldman would buy the triple-A tranche of some CDO, pair it off with the credit default swaps AIG sold Goldman that insured the tranche (at a cost well below the yield on the tranche), declare the entire package risk-free, and hold it off its balance sheet. Of course, the whole thing wasn’t risk-free: If AIG went bust, the insurance was worthless, and Goldman could lose everything. Today Goldman Sachs is, to put it mildly, unhelpful when asked to explain exactly what it did, and this lack of transparency extends to its own shareholders. “If a team of forensic accountants went over Goldman’s books, they’d be shocked at just how good Goldman is at hiding things,

Because so many people were betting against GameStop —and brick-and-mortar retail in general — the overall short position was enormous, almost comically so. At certain points over the past six months, it had bounced between 50 and even 100 percent of the overall float, meaning nearly all the shares of GameStop in existence had been borrowed and sold by short sellers, all of whom had an obligation to rebuy those shares at some point in the future. So, what if Keith was right, and the stock went up instead of down? It would be like watching investors trying to get out of a burning building, through a single, narrow door. The stock would rocket. As a financial educator, Keith knew that short selling could be one of the riskiest plays on the market. You really needed to be certain a stock was going down, because your upside was limited, but your losses could, theoretically, be infinite. The fact that so many competent investors were short selling GameStop could mean the stock really was a dog; but it also meant the stock was loaded with rocket fuel, and it wouldn't take much to ignite and sent it right to the moon.

To summarize my trading strategy for VWAP False Breakouts: Once I’ve made my watchlist for the day, I monitor the price action around VWAP at the Open and during the morning session for the Stocks in Play. A good Stock in Play shows respect toward VWAP. If the Stock in Play sells off below the VWAP but bounces back and breaks out above the VWAP, it means the buyers are gaining control and short sellers perhaps had to cover. However, if it loses the VWAP again in the Late-Morning (from 10:30 a.m. to 12 p.m.), it means that this time the buyers were mostly weak or exhausted. This provides a short opportunity with a stop loss above VWAP. The profit target can be the by then low of the day, or any other important technical level. I try to go short when a Stock in Play has lost the VWAP. Sometimes I go short before the price loses the VWAP, to get a good entry while it is ticking down toward VWAP in the anticipation of a VWAP loss. However, be very careful, for the job of a trader is identification and not anticipation. Take small size and add more shares on the way down if you have truly identified a good trading setup.

And as a long-short fund, he'd also been obligated to take short positions — betting against companies — which was a tactic that, to most experts in finance, was uncontroversial. The thinking went, when companies were performing poorly, or were mismanaged, or were in an industry that was being overrun, or were simply likely to fail, taking a short position wasn't just logical — it protected the marketplace by pointing out overpriced stocks, prevented fraud by acting as a check against dubious management, and poked holes in potential bubbles. Short sellers also added liquidity and volume to a stock — because they were obligated to buy the stock back at some point in the future. Yes, short sellers profited when companies failed, but usually a short seller wasn't banking on a company failing — just that the stock's price would eventually correct toward its true valuation. Sometimes, though, a trader picked up a short position because the company in question really was going to fail. Because, perhaps, it was in an industry that was dying; had management that seemed completely unable or unwilling to pivot; and had deep fundamental issues in its financing that seemed impossible to overcome.

Which meant, if somehow GameStop did start to go up, the people who had shorted the company would begin to feel pressure to buy; the more the stock went up, the heavier that pressure became. As the shorts began to cover, buying shares to return them to their lenders, the stock would rise even higher. In financial parlance, this was something called a 'short squeeze.' It didn't happen often, but when it did, it could be spectacular. Most famously, in 2008, a surprise takeover attempt of the German automaker Volkswagen by rival Porsche drove Volkswagen's stock price up by a factor of 5 — briefly making it the most valuable company in the world — in two quick days of trading, as short selling funds struggled to cover their positions. Similarly, a battle between two hedge fund titans — Bill Ackman, of Pershing Square Capital Management, and Carl Icahn — led to a squeeze involving supplement maker — and alleged pyramid marketer — Herbalife, which cost Ackman a reported $1 billion. And perhaps the first widely reported short squeeze dated back a century, to 1923, when grocery magnate Clarence Saunders successfully decimated short sellers who had targeted his nascent chain of Piggly Wiggly grocery stores.

To summarize the VWAP Reversal Strategy: After I build my watchlist in the morning, I closely monitor the shortlisted stocks in the first five minutes after the Open. I identify their opening range and their price action. The stocks will either move higher or below the VWAP. Depending on the price action, I may be able to take an Opening Range Breakout to the long or short side. I monitor the price when it moves away from the VWAP and look for a sign of weakness. If it is above the VWAP, failing to make a new high of the day may be a sign that the buyers are exhausted. If it is below the VWAP, failing to make a new low of the day or a new 5-minute low can be a sign that the sellers are gone, and the stock can be ready for a squeeze back to the VWAP. I take the trade only if I can get a good entry and a good risk/reward ratio. Remember, most of the time stocks move really fast without offering a good entry and a good risk/reward ratio. If I am short above the VWAP, I cover my short at the VWAP and bring my stop loss to break-even. If I am long below the VWAP, I sell part of my position at the VWAP, and keep the rest for a squeeze above the VWAP (or as some traders would call it, a VWAP Pop). Do ensure you bring your stop loss to break-even, because sometimes the stock can bounce back from the VWAP as well.

DOES HARVARD MAKE YOU SMARTER? Swimmer’s Body Illusion As essayist and trader Nassim Taleb resolved to do something about the stubborn extra pounds he’d be carrying, he contemplated taking up various sports. However, joggers seemed scrawny and unhappy, and bodybuilders looked broad and stupid, and tennis players? Oh, so upper-middle class! Swimmers, though, appealed to him with their well-built, streamlined bodies. He decided to sign up at his local swimming pool and to train hard twice a week. A short while later, he realised that he had succumbed to an illusion. Professional swimmers don’t have perfect bodies because they train extensively. Rather, they are good swimmers because of their physiques. How their bodies are designed is a factor for selection and not the result of their activities. Similarly, female models advertise cosmetics and thus, many female consumers believe that these products make you beautiful. But it is not the cosmetics that make these women model-like. Quite simply, the models are born attractive and only for this reason are they candidates for cosmetics advertising. As with the swimmers’ bodies, beauty is a factor for selection and not the result. Whenever we confuse selection factors with results, we fall prey to what Taleb calls the swimmer’s body illusion. Without this illusion, half of advertising campaigns would not work

THE CURIOUS CASE OF THE LEMBA       One of the most outstanding cases of  Black diaspora Jewry is the case of the Lemba of southern Africa. The Lemba have long claimed that they are Jews or Israelites who migrated to Yemen and from there to Africa as traders. Amazingly, DNA evidence has backed the Lemba claim of Jewish ancestry.   Today, the Lemba can be found in southern Africa countries like Malawi, South Africa and Zimbabwe. Many of their customs are similar to Jews such as the wearing of  yarmulke-like skull cups and observing kosher laws such as the requirement not to eat pork. Interestingly they also avoid eating rabbits, scaleless fish, hares and carrion. In short, the Lemba follow the requirements in the Torah, which is the first five books of the Old Testament.     The Lemba claim that about 2500 years ago, their ancestors left Judea for Yemen. Only males are said to have sailed to Africa by boat. The migrants took local wives for themselves. They built a city in Yemen called Sena. From Sena they traveled to Africa where they dispersed. Some remained in East Africa and others traveled to southern Africa. Lemba women do not have 'Semitic' admixture, and this is in line with their oral history.     Professor Tudor Vernon Parfitt, a professor of Jewish Studies then at the University of London, spent several months among the Lemba. He later travelled to Yemen and to his

Ship Protected From Storm The students of the great Ghawth (r.a) state that once he was delivering his lessons as usual to them when suddenly his blessed face turned red and beads of perspiration covered his blessed forehead. He then placed his hand into his cloak and remained silent for a short time. The students state that after he removed his hand from inside his cloak, drops of water began to drip from his sleeves. Due to his spiritual state, the students say that they did not ask him any questions but rather, they recorded the date, day and time of this astonishing event. The students say that two months after this incident, a group of traders, who had come by sea to Baghdad, arrived and presented various gifts to al-Ghawth al-A’zam (r.a) The students were very confused by this as they had never seen these traders in Baghdad before. They asked the traders the reason for them bringing the gifts. The traders said that two months previously, whilst they were sailing to Baghdad, their ship was caught in a fierce storm. When they realised that there was a real danger of sinking, they called out the name of “Sheikh Abdul Qadir Jilani” (r.a). When they called out his name, they found that from the Unseen a hand lifted their ship to safety. When the students compared this narration to the incident in the Madrassa, it was confirmed that it was the same date, day and time in which the great Saint (r.a) had put his hand into his cloak. Suhban-Allah! This incident shows that although Sheikh Abdul Qadir Jilani (r.a) seemed to be placing his hand into his cloak, but in reality, he was stretching his hand into the sea to assist those who called for his assistance!

All of us have a right to our lives. But what if, for lack of guidance, we take the wrong paths? Take Wintrow for instance. What if he was meant to lead a different life? What if, because of something I failed to do or say, he became King of the Pirate Isles when he was meant to be a man leading a life of scholarly contemplation? A man whose destiny was to experience a cloistered, contemplative life becomes a king instead. His deep spiritual meditations never occur and are never shared with the world.” Paragon shook his head. “You worry too much.” His eyes tracked a moth. It fluttered earnestly by, intent on battering itself to death against the lantern. “Humans live such short lives. I believe they have little impact on the world. So Wintrow will not be a priest. It is probably no more significant than if a man who was meant to be a king became a philosophical recluse instead.” He felt a shiver run over her body. “Oh, ship,” she rebuked him softly. “Was that meant to be comforting?” Carefully, he patted her as a father might soothe an infant. “Take comfort in this Amber. You are only one small, short-lived creature. You’d have to be a fool to think you could change the course of the whole world.” She was silent until she broke out in a shaky laugh. Oh, Paragon, in that you are more right than you know, my friend.” “Be content with your own life, my friend, and live it well. Let others decide for themselves what path they will follow.” She frowned up at him. “Even when you see, with absolute clarity, that it is wrong for them? That they hurt themselves?” “Perhaps people have a right to their own pain,” he hazarded. Reluctantly he added, “Perhaps they even need it.” “Perhaps,” she concluded unhappily." p. 781: Amber and Paragon:

In his job as a financial educator, Keith had spent a fair amount of time breaking down the act — and sometimes art — of short selling, in a way that less savvy customers could understand. When a trader believed a company was in trouble, and its stock was overvalued, they could 'borrow' shares, sell them, and then when the stock went down as they'd predicted, rebuy the shares at a lower price, return them to whoever they'd borrowed them from, and pocket the difference. If GameStop was trading at 5, you could borrow 100 shares, sell them for $500; when the stock hit 1, you bought back the 100 shares for $100, returned them, pocketing $400 for yourself. You paid a little fee to the lender for their trouble and came out with a tidy profit. But what happened if the stock went up instead of down? What happened if GameStop figured out how to capitalize on its millions of nostalgic customers, who spent billions on video games every year? What if the stock went to 10 instead of 1? What happened was, the short seller was royally screwed. He'd borrowed those 100 shares and sold them at 5. Now the stock was at 10, but he still needed to return his 100 shares. Buying them on the market at 10 meant spending $1000. And what was worse, when he'd borrowed the shares, he'd agreed on a timeline to return them. There was a ticking clock hanging over his head, so he had a choice — buy the shares back at 10 now, losing $500 on the deal — or wait a little longer, hoping the stock went back down before his time limit was up. And what if he waited, and the stock kept going up? Sooner or later, he had to buy those shares back. Even if the stock went to 15, 20 — he was on the hook for those 100 shares. Theoretically, there was no limit to how much he could lose.

The fragility of the US economy had nearly destroyed him. It wasn't enough that Citadel's walls were as strong and impenetrable as the name implied; the economy itself needed to be just as solid. Over the next decade, he endeavored to place Citadel at the center of the equity markets, using his company's superiority in math and technology to tie trading to information flow. Citadel Securities, the trading and market-making division of his company, which he'd founded back in 2003, grew by leaps and bounds as he took advantage of his 'algorithmic'-driven abilities to read 'ahead of the market.' Because he could predict where trades were heading faster and better than anyone else, he could outcompete larger banks for trading volume, offering better rates while still capturing immense profits on the spreads between buys and sells. In 2005, the SEC had passed regulations that forced brokers to seek out middlemen like Citadel who could provide the most savings to their customers; in part because of this move by the SEC, Ken's outfit was able to grow into the most effective, and thus dominant, middleman for trading — and especially for retail traders, who were proliferating in tune to the numerous online brokerages sprouting up in the decade after 2008. Citadel Securities reached scale before the bigger banks even knew what had hit them; and once Citadel was at scale, it became impossible for anyone else to compete. Citadel's efficiency, and its ability to make billions off the minute spreads between bids and asks — multiplied by millions upon millions of trades — made companies like Robinhood, with its zero fees, possible. Citadel could profit by being the most efficient and cheapest market maker on the Street. Robinhood could profit by offering zero fees to its users. And the retail traders, on their couches and in their kitchens and in their dorm rooms, profited because they could now trade stocks with the same tools as their Wall Street counterparts.

To summarize my trading strategy for VWAP Moving Average Trend trading: When I am monitoring a Stock in Play and notice a trend is establishing around a moving average (usually 9 EMA) in the Late-Morning session, I consider VWAP Moving Average Trend trading. If the stock has already lost the VWAP (from a VWAP False Breakout), it most likely will stay below the VWAP. Similarly, if the stock squeezed above the VWAP in the Late-Morning session, it is most likely that it will stay above the VWAP, as it means the buyers are in control. Once I learn that either 9 or 20 EMA are acting as either a support or resistance, I buy the stock after confirmation of moving averages as a support, but only if I can clearly see it “held” the VWAP. Similarly, I go short below the moving averages if I have the confirmation that it has “lost” the VWAP in the Late-Morning session. I buy or sell short as close as possible to the moving average line (in order to have a small stop). My stop will usually be 5 to 10 cents below the moving average line or, if a candlestick, close below the moving average (for long positions). For short positions, a close above the moving average would stop me out. I ride the trend until the break of 9 or 20 EMA. Usually, 20 EMA is a stronger support or resistance, so it is better to wait for that. I usually do not use trailing stops and I constantly monitor the trend with my eyes, but I know that many traders also use trailing stops. If the stock is moving really high away from the moving average, offering me an equally really nice unrealized profit, I may take some profit, usually at the 1/4 or half-position. I do not always wait until the break of moving average for my exit. Traders will say: you can never go broke by taking good profits. If the price pulls back to the moving average, I may add again to my position and continue the VWAP Moving Average Trend trade. Remember, when you take profit, you should always bring your stop loss to break-even. Never go red on a stock that you already booked some profit on.

If Jim was back at the imaginary dinner party, trying to explain what he did for a living, he'd have tried to keep it simple: clearing involved everything that took place between the moment someone started at trade — buying or selling a stock, for instance — and the moment that trade was settled — meaning the stock had officially and legally changed hands. Most people who used online brokerages thought of that transaction as happening instantly; you wanted 10 shares of GME, you hit a button and bought 10 shares of GME, and suddenly 10 shares of GME were in your account. But that's not actually what happened. You hit the Buy button, and Robinhood might find you your shares immediately and put them into your account; but the actual trade took two days to complete, known, for that reason, in financial parlance as 'T+2 clearing.' By this point in the dinner conversation, Jim would have fully expected the other diners' eyes to glaze over; but he would only be just beginning. Once the trade was initiated — once you hit that Buy button on your phone — it was Jim's job to handle everything that happened in that in-between world. First, he had to facilitate finding the opposite partner for the trade — which was where payment for order flow came in, as Robinhood bundled its trades and 'sold' them to a market maker like Citadel. And next, it was the clearing brokerage's job to make sure that transaction was safe and secure. In practice, the way this worked was by 10:00 a.m. each market day, Robinhood had to insure its trade, by making a cash deposit to a federally regulated clearinghouse — something called the Depository Trust & Clearing Corporation, or DTCC. That deposit was based on the volume, type, risk profile, and value of the equities being traded. The riskier the equities — the more likely something might go wrong between the buy and the sell — the higher that deposit might be. Of course, most all of this took place via computers — in 2021, and especially at a place like Robinhood, it was an almost entirely automated system; when customers bought and sold stocks, Jim's computers gave him a recommendation of the sort of deposits he could expect to need to make based on the requirements set down by the SEC and the banking regulators — all simple and tidy, and at the push of a button.

IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.

Indeed, is not the homecoming amateur with his vast number of artistic snaps more contented than the hunter, returning laden with the game which is only of value to the trader.

Turning a losing trade into an “investment” is a common disease among small private traders, but some institutional traders also suffer from it. Disasters at banks and major financial firms occur when poorly supervised traders lose money in short-term trades and stick them into long-term accounts, hoping that time will bail them out

Fund management is a skill—you cannot run money through consultants or committees. If you have a committee, you should buy an index fund and stop trying. Committees settle to the lowest common denominator, which is the lowest risk. A committee will not take risk. By the time a committee decides to buy tech, it is already March 2000. Fund management is like cooking, whereby 10 chefs have the same ingredients but make 10 different things. You have great chefs who get three stars and lousy chefs who make horrible food. Fund management is similar in that what is important is what you make out of the mix, how you interpret information, how you structure trades and build portfolios. But with committees somehow the results are always the same. When you have a committee, you cannot be the only guy making the decision because, at some stage, you will be wrong in the short-term and everyone will get fired. So the whole groupthink model makes things very difficult, as does the visibility of these posts. Making or losing a lot of money always makes headlines—there is no upside or solution for that.

I was once asked in one of those meetings to express my views on the stock market. I stated, not without a modicum of pomp, that I believed that the market would go slightly up over the next week with a high probability. How high? “About 70%.” Clearly, that was a very strong opinion. But then someone interjected,“But, Nassim, you just boasted being short a very large quantity of SP500 futures, making a bet that the market would go down. What made you change your mind?” “I did not change my mind! I have a lot of faith in my bet! [Audience laughing.] As a matter of fact I now feel like selling even more!”The other employees in the room seemed utterly confused. “Are you bullish or are you bearish?” I was asked by the strategist. I replied that I could not understand the words bullish and bearish outside of their purely zoological consideration. Just as with events A and B in the preceding example, my opinion was that the market was more likely to go up (“I would be bullish”), but that it was preferable to short it (“I would be bearish”), because, in the event of its going down, it could go down a lot. Suddenly, the few traders in the room understood my opinion and started voicing similar opinions. And I was not forced to come back to the following discussion.

Using his models, his computers look for moments when the short-term traders are moving opposite to the long-term investors-and then he bets that the imbalance will correct itself.

The Different Trading Methodologies   In this part of the book, you'll learn about the different methodologies that day traders use.   Basic Moving Averages   Moving averages indicate the average stock price for a specific time period. Traders call these averages “moving” because they reflect the latest information while sticking to the assigned period of time.   The main weakness of this approach is that it lags the stock market, so it doesn't really show trend changes. You can solve this problem by using a short timeframe (e.g. 5 days). This way, you can make sure that the information you're using shows the recent trends in the market. Here are the concepts you need to remember while using this approach:   When the closing price is higher than the average, you should buy shares from that company. When the closing price is lower than the average, you must sell your shares (if any).

The most remarkable thing is that even in Adam Smith’s examples of fish and nails and tobacco being used as money, the same sort of thing was happening. In the years following the appearance of the Wealth of Nations, scholars checked into most of these examples and discovered that in just about every case, the people involved were quite familiar with the use of money, and in fact, were using money- as a unit of account. Take the example of dried cod, supposedly used as money in Newfoundland. As the British diplomat A. Mitchell pointed out almost a century ago, what Smith describes was really an illusion, created by a simple credit arrangement: In the early days of the Newfoundland fishing industry, there was no permanent European population, the fishers went there for the fishing season only, and those who were not fishers were traders who bought the dried fish and sold to the fishers their daily supplies. The latter sold their catch to the traders at the market price in pounds, shilling and pence, and obtained in return a credit on their books, which they paid for the supplies. Balances due by the traders were paid for by drafts on England or France. It was quite the same in the Scottish village. It’s not as if anyone actually walked into the local pub, plunked down a roofing nail, and asked for a pint of beer. Employers in Smith’s day often lacked coin to pay their workers; wages could be delayed by a year or more; in the meantime, it was considered acceptable for employees to carry off either some of their own products or leftover work materials, lumber, fabric, cord, and so on. The nails were de facto interest on what their employers owed to them. So they went to the pub, ran up a tab, and when occasion permitted, brought in a bag of nails to charge off against the debt. The law making tobacco legal tender in Virginia seems to have been an attempt by planters to oblige local merchants to accept their products as a credit around harvest time. In effect, the law forced all merchants in Virginia to become middlemen in tobacco business, whether they liked it or not; just as all West Indian merchants were obliged to become sugar dealers, since that’s what all their wealthier customers brought in to write off against their debt. The primary examples, then, were ones in which people were improvising credit systems, because actual money- gold and silver coinage- was in short supply.

Crises are good for traders! High fluctuation, public panic, and the ability to execute shorts are important tools in the hand of an experienced trader.

An inner dialogue of negative thoughts will be toxic and self-destructive, because it will cause you to doubt what you previously thought was obvious or doable. It will poison you against your goals and your self-worth. It will keep you from acting when you need to. In short, it will make it impossible to live up to your full potential.

the last stage of a bear market "is caused by distress selling of sound securities, regardless of their value, by those who must find a cash market for at least a portion of their assets." The market player who avoids being invested near the top of bull markets-where he can really get hurt in a panic crash-and plays the short side in bear markets can be in the position to take advantage of such distress selling. You might miss the last 10 or even 20% of the gains to be made near bull market tops (while making T-bill yields), but you'll definitely still have your capital when the time comes to buy value with tremendous upside potential and almost no downside risk. In my view, the way to build wealth is to preserve capital, make consistent profits, and wait patiently for the right opportunity to make extraordinary gains.

Only a stock that many traders were selling short could be cornered; a stock that was in the throes of a real bear raid was ideal. In the latter situation, the would-be cornerer would attempt to buy up the investment houses’ floating supply of the stock and enough of the privately held shares to freeze out the bears; if the attempt succeeded, when he called for the short sellers to make good the stock they had borrowed, they could buy it from no one but him. And they would have to buy it at any price he chose to ask, their only alternatives—at least theoretically—being to go into bankruptcy or to jail for failure to meet their obligations. In the old days of titanic financial death struggles, when Adam Smith’s ghost still smiled on Wall Street, corners were fairly common and were often extremely sanguinary, with hundreds of innocent bystanders, as well as the embattled principals, getting their financial heads lopped off. The most famous cornerer in history was that celebrated old pirate, Commodore Cornelius Vanderbilt, who engineered no less than three successful corners during the eighteen-sixties. Probably his classic job was in the stock of the Harlem Railway. By dint of secretly buying up all its available shares while simultaneously circulating a series of untruthful rumors of imminent bankruptcy to lure the short sellers in, he achieved an airtight trap. Finally, with the air of a man doing them a favor by saving them from jail, he offered the cornered shorts at $179 a share the stock he had bought up at a small fraction of that figure.

The Global Financial Crisis of 2007–08 represented the greatest financial downswing of my lifetime, and consequently it presents the best opportunity to observe, reflect and learn. The scene was set for its occurrence by a number of developments. Here’s a partial list: Government policies supported an expansion of home ownership—which by definition meant the inclusion of people who historically couldn’t afford to buy homes—at a time when home prices were soaring; The Fed pushed interest rates down, causing the demand for higher-yielding instruments such as structured/levered mortgage securities to increase; There was a rising trend among banks to make mortgage loans, package them and sell them onward (as opposed to retaining them); Decisions to lend, structure, assign credit ratings and invest were made on the basis of unquestioning extrapolation of low historic mortgage default rates; The above four points resulted in an increased eagerness to extend mortgage loans, with an accompanying decline in lending standards; Novel and untested mortgage backed securities were developed that promised high returns with low risk, something that has great appeal in non-skeptical times; Protective laws and regulations were relaxed, such as the Glass-Steagall Act (which prohibited the creation of financial conglomerates), the uptick rule (which prevented traders who had bet against stocks from forcing them down through non-stop short selling), and the rules that limited banks’ leverage, permitting it to nearly triple; Finally, the media ran articles stating that risk had been eliminated by the combination of: the adroit Fed, which could be counted on to inject stimulus whenever economic sluggishness developed, confidence that the excess liquidity flowing to China for its exports and to oil producers would never fail to be recycled back into our markets, buoying asset prices, and the new Wall Street innovations, which “sliced and diced” risk so finely, spread it so widely and placed it with those best suited to bear it.

He made $3 million in a single day, went bankrupt four times, and was blamed for the crash of 1929. Jesse Livermore tells how he did it. Considered to be one of the greatest traders of all time, stock market legend Jesse Livermore made and lost vast fortunes and lived a life that typified the highs and lows of the 1920s and 1930s. So influential was he that many credit him with having caused the crash of 1929. And while America sank into ten long years of the Great Depression, Livermore went short--and made $100 million. Written by Livermore in 1940, the last year of his life, "How to Trade in Stocks" distills the wisdom of his 40 years as a trader. It combines fascinating autobiographical and historical details with step-by-step guidance through the Livermore trading system. Investors learn his prescriptions for analyzing the leading sectors, understanding timing, money management, emotional control, and more.

the traders of Saxony are little beholden to count Brühl’s dissipations; his shoes come from Paris, 100 pair at once, and his wigs by the dozen; and even his tarts used to be sent by post from the same city, that mother of abominations of the earth. Dresden and Leipsic make very good chocolate, but that for his Excellency must come from Rome or Vienna; in short, I scarce saw anything in his house which was either the produce or manufacture of Saxony.

And short-term traders operate in an area where the rules governing long-term investing—particularly around valuation—are ignored, because they’re irrelevant to the game being played.

The important point to understand about commodities is that they have extreme cycles. That’s why the best traders make their money in this sector. And sudden weather patterns or mining strikes can cause tremendous short-term fluctuations, often exploding like a bomb! Unless you’re working with someone who has a proven system, don’t trade commodities. You can invest in them, but tread cautiously. Remember that commodities are all different in their ability to ramp up supply (elasticity) when demand accelerates. It’s easier to cultivate more land for crops or livestock in an era of urbanization, but it’s not so easy to drill deeper for more oil or unearth more industrial metals like iron ore, coal, lead, nickel, and copper. Pulling uranium and the rare metals out of the ground is even harder.

The sequence of thinking before acting is the exact definition of the word plan. Therefore, speculating and planning are the same thing. A plan allows you to speculate with a long time horizon (as an investor), a short time horizon (as a trader), or on a spread relationship (as a basis trader or hedger).

There have been too many times when I have been shaken out of a good position by looking at the short-term time frame.

An iron rule of finance is that money chases returns to the greatest extent that it can. If an asset has momentum—it’s been moving consistently up for a period of time—it’s not crazy for a group of short-term traders to assume it will keep moving up. Not indefinitely; just for the short period of time they need it to. Momentum attracts short-term traders in a reasonable way.

The expression "Red Man" was used to describe the Indian by the white traders. It came from the fact that some of the Indian tribes painted themselves with red oxide. Actually, the color of Indian skin varies from very light yellow or olive color, to very dark brown. Their eyes vary in color from black, brown, or hazel to gray or even blue; their hair from straight, coarse black to soft brown. Some Indians are tall and straight with high cheek bones, while others are short, round, and squat.

brought by the U.S. Department of Justice against Cioffi and Tannin sought to prove that the two men had knowingly deceived their investors, overlooking the possibility that they simply had no idea what they were doing, and failed to grasp the real risk of a triple-A-rated subprime-backed CDO. The case was weak, and turned on a couple of e-mails obviously ripped from context. A member of the jury that voted to acquit the Bear Stearns subprime bond traders told Bloomberg News afterward not only that she thought they were innocent as charged but that she would happily

You have 30 to 50 times better chances of creating a successful business than at succeeding as a short-term trader.

it did not so much judge the quality of a trader’s performance as encourage him to game the system by working for short-term profits at the expense of possible blowups—like

perfect for the daughter of a seed trader, he persisted—it took some time to convince his parents, who found the name unusual. Girls in Gönningen were named Klara, Martha, or Liesel. But Flora? “What about Seraphine’s name?” Helmut retorted, but his parents just shrugged. Hannah followed their exchange wearily but happily from where she sat on the long bench in the kitchen. She had not known that Flora was the name of a goddess. Nor had she ever heard of a father arguing so vehemently for the name of his child. Helmut seemed to be at least as overjoyed about the birth of a daughter as he would have been about a son. Unlike Hannah herself. She had been so certain that she was carrying a boy. But her disappointment was short-lived, and Flora won her heart

One of the basic rules of classical charting is that you should not trade against the trend, so in a bull flag you should be looking to go long at the bottom of the channel, rather than looking for spots to short at the top of that channel.

The tagline “thanks for listening,” which has been so copied and admired, derived from the successful 1976 senatorial campaign of S. I. Hayakawa. Hayakawa was a professor of linguistics at San Francisco State University (before he became university president). He knew how to use the English language. The calm manner of his radio commercials, his thanking the listener for staying tuned, really impressed me and, six years later, provided the chassis and the closer for Trader Joe’s commercials. We used the commercials to keep us in front of the public between editions of the Fearless Flyer. We didn’t do both at the same time, or else the stores would have been overwhelmed with business. In short, the radio commercials were and are extremely effective. In the course of this, my voice became one of the best known in California.

But we were still way short when I went to see Tom Deane at Bank of America. I presented my case; and—on the spot (!)—he loaned me the money on our (Alice’s and mine) personal signatures. Years later, I asked him how he had been so ballsy. “It’s simple,” he replied. “Rexall was on Pronto’s leases, and I figured they wouldn’t let you go bankrupt.

This massive increase in the mailing massively increased our advertising costs in the short run. I don’t believe, however, in advertising budgets that are based on a percentage of sales. You figure out the dollars needed to do the job right, and go ahead and spend them. As it turned out, the big sales generated by the Fearless Flyer dropped the cost of advertising as a percentage of sales after the fact. By the time I left Trader Joe’s, we were mailing millions of copies five times a year.

The interest rate on the loans wasn't high enough to justify the risk of lending to this particular slice of the American population. It was as if the ordinary rules of finance had been suspended in response to a social problem. A thought crossed his mind: How do you make poor people feel wealthy when wages are stagnant? You give them cheap loans.

The numbers shocked even him. They didn't need to collapse; they merely needed to stop rising so fast. House prices were still rising, and yet default rates were approaching 4 percent; if they rose to just 7 percent, the lowest investment-grade bonds, rated triple-B-minus, went to zero. If they rose to 8 percent, the next lowest-rated bonds, rated triple-B, went to zero. At that moment--in November 2005--Greg Lippmann realized that he didn't mind owning a pile of credit default swaps on subprime mortgage bonds. They weren't insurance; they were a gamble; and he liked the odds. He wanted to be short.

Who are we, the people who have ADHD? We are the problem kid who drives his parents crazy by being totally disorganized, unable to follow through on anything, incapable of cleaning up a room, or washing dishes, or performing just about any assigned task; the one who is forever interrupting, making excuses for work not done, and generally functioning far below potential in most areas. We are the kid who gets daily lectures on how we’re squandering our talent, wasting the golden opportunity that our innate ability gives us to do well, and failing to make good use of all that our parents have provided. We are also sometimes the talented executive who keeps falling short due to missed deadlines, forgotten obligations, social faux pas, and blown opportunities. Too often we are the addicts, the misfits, the unemployed, and the criminals who are just one diagnosis and treatment plan away from turning it all around. We are the people Marlon Brando spoke for in the classic 1954 film On the Waterfront when he said, “I coulda been a contender.” So many of us coulda been contenders, and shoulda been for sure. But then, we can also make good. Can we ever! We are the seemingly tuned-out meeting participant who comes out of nowhere to provide the fresh idea that saves the day. Frequently, we are the “underachieving” child whose talent blooms with the right kind of help and finds incredible success after a checkered educational record. We are the contenders and the winners. We are also imaginative and dynamic teachers, preachers, circus clowns, and stand-up comics, Navy SEALs or Army Rangers, inventors, tinkerers, and trend setters. Among us there are self-made millionaires and billionaires; Pulitzer and Nobel prize winners; Academy, Tony, Emmy, and Grammy award winners; topflight trial attorneys, brain surgeons, traders on the commodities exchange, and investment bankers. And we are often entrepreneurs. We are entrepreneurs ourselves, and the great majority of the adult patients we see for ADHD are or aspire to be entrepreneurs too. The owner and operator of an entrepreneurial support company called Strategic Coach, a man named Dan Sullivan (who also has ADHD!), estimates that at least 50 percent of his clients have ADHD as well.

Shadow will be long or short depending upon volatility.

Traders, as a group, always fall short of investors.

Bubbles do their damage when long-term investors playing one game start taking their cues from those short-term traders playing another.

He was engaged to a local girl. Their departure was tentatively scheduled for shortly after the wedding.

The popular appeal of WSB means that millions of ordinary people, not just high-flying financial traders, can participate in it. A new front in America’s class war opened up. As Robert Reich tweeted: “So let me get this straight: Redditors rallying GameStop is market manipulation, but hedge fund billionaires shorting a stock is just an investment strategy?”141 Who would have expected this: a class war transposed into a conflict among stock investors and dealers themselves?

Perhaps nowhere is this clearer than in the economic calamity that gripped the world economy in 2008 and 2009. Each player in the system focused only on the short-term reward—the buyer who wanted a house, the mortgage broker who wanted a commission, the Wall Street trader who wanted new securities to sell, the politician who wanted a buoyant economy during reelection—and ignored the long-term effects of their actions on themselves or others. When the music stopped, the entire system nearly collapsed. This is the nature of economic bubbles: What seems to be irrational exuberance is ultimately a bad case of extrinsically motivated myopia.

Many people lost their livelihoods several times over in the 1990s and 2000s: first their salaried jobs, then a portion (or all) of their livestock owing to rapid privatization during the winter, and finally money invested to launch a business that subsequently failed. Some of the reasons behind the bankruptcies and losses of private entrepreneurs are clear… Upon receiving their livestock, the townspeople panicked and rushed to locate a relative or friend among the herdsmen in the countryside who would agree to take care of their livestock. The herdsmen themselves, however, had not known to prepare extra hay or fences and could provide little help to their relatives from the sedentary center. More disconcerting, many people simply did not understand that privatization signaled the end of the SF jobs and salaries, and that the livestock was given to them to enable them to subsist independently of the state. They either slaughtered and ate their share of the livestock or sold their animals to traders. Some even assumed that the livestock distributed to them was a one-time gift from the state; others thought it was an annual bonus or a reward from the state. Overall, people were confused about the distribution of animals. Purvee lamented to me: ‘No one explained to us that from now on we would be on our own and that the state would not provide us with the services and direction it had for many decades. We did not know that we now had to take care of ourselves, without any support from the state! We did not understand what privatization really meant!”… State socialism… tried to make economic production, transactions, prices, and exchanges as predictable as possible. Because the state was the main and often the only client, the marketability and competitiveness of products were not a concern for CFs so long as they met established standards. Similarly, the CFs were not worried about appealing to buyers, competing with other CFs for customers, or, in general, predicting demand and adjusting their strategies. Although the system limited (and sometimes prevented) individuals and enterprises from making a profit, it also freed people from having to search for a market and from traveling long distances with highly perishable products for which the sales outcome was uncertain. For many, the CFs were a better system than individual domestic herding of private livestock. Of course, the CFs had many shortcomings, both systemically and as individual enterprises. But in the context of post-socialist impoverishment and uncertainty, many herders missed the security and safety that CFs provided… The distinction between the haves and the have-nots was sharpened, but the distance between the two was as short as one zud, flood, or other natural disaster. Without state support, livestock was constantly under threat. For instance, without state extermination brigades, wolves and foxes regularly raided the herds. The price of a bullet almost equaled the price of a sheep, so many herdsmen could not afford to shoot the attackers regularly. Family members took turns guarding their livestock, and it was rare for a nomadic family to pass an uneventful night. Both men and women complained about the backbreaking labor and about not being able to get away from their household duties in order to see a doctor or visit a sick relative in the hospital… The privatization of SFs was a matter not only of property ownership, as Verdery revealed (2004), but also of the ownership of risk, liability, and debt against properties that were losing value. And specific to Mongolia, the new owners also most likely took on a share of the debt. Some of the economic programs instituted during socialism were never intended to generate profit; their purpose was political and ideological—settling the vast land, managing the population, and creating an illusion of prosperity and development…

If the end of a trend features a large candle with much higher volume than other recent bars, then watch out! You may be looking at a blowout (top or bottom). If so, the trend is likely to be over in the short term and may even reverse soon. Your chances of success in trading the “action” move are therefore lower, as a reversal is underway and the new trend is developing in the other direction.

2. Don’t trade penny stocks. A penny stock is any stock that trades under $5. Unless you are an advanced trader, you should avoid all penny stocks. I would extend this by encouraging you to also avoid all stocks priced under $10. Even if you have a small trading account ($5,000) or less, you are better off buying fewer shares of a higher-priced stock than a lot of shares of a penny stock. That is because low-priced stocks are most often associated with lower quality companies. As a result, they are not usually allowed to trade on the NYSE or the Nasdaq. Instead, they trade on the OTCBB ("over the counter bulletin board") or Pink Sheets, both of which have much less stringent financial reporting requirements than the major exchanges do. Many of these companies have never made a profit. They may be frauds or shell companies that are designed solely to enrich management and other insiders. They may also include former “blue chips” that have fallen on hard times like Eastman Kodak or Lehman Brothers. In addition, penny stocks are inherently more volatile than higher-priced stocks. Think of it this way: if a $100 stock moves $1, that is a 1% move. If a $5 stock moves $1, that is a 20% move. Many new traders underestimate the kind of emotional and financial damage that this kind of volatility can cause. In my experience, penny stocks do not trend nearly as well as higher-priced stocks. They tend to be more mean-reverting (Mean reversion occurs when a stock moves up sharply from its average trading price, only to fall right back down again to its average trading price). Many of them are eventually headed to zero, but they are still not good short candidates. Most brokers will not let you short them. And even if you do find a broker who will let you short a penny stock, how would you like to wake up to see your penny stock trading at $10 when you just shorted it at $2 a few days before? I learned that lesson the hard way. It turned out that I was risking $8 to make $2, which is not a good way to make money over the long term. To add injury to insult, a penny stock might appear to be liquid one day, and the next day, the liquidity dries up and you are confronted by a $2 bid/ask spread. Or the bid might completely disappear. Imagine owning

When the news is wonderful and a market can’t go up, then you want to be sure to be short.

When a young employee gasped at his blue language, Simons flashed a grin. “I know—that is an impressive rate!” A few times a week, Marilyn came by to visit, usually with their baby, Nicholas. Other times, Barbara checked in on her ex-husband. Other employees’ spouses and children also wandered around the office. Each afternoon, the team met for tea in the library, where Simons, Baum, and others discussed the latest news and debated the direction of the economy. Simons also hosted staffers on his yacht, The Lord Jim, docked in nearby Port Jefferson. Most days, Simons sat in his office, wearing jeans and a golf shirt, staring at his computer screen, developing new trades—reading the news and predicting where markets were going, like most everyone else. When he was especially engrossed in thought, Simons would hold a cigarette in one hand and chew on his cheek. Baum, in a smaller, nearby office, trading his own account, favored raggedy sweaters, wrinkled trousers, and worn Hush Puppies shoes. To compensate for his worsening eyesight, he hunched close to his computer, trying to ignore the smoke wafting through the office from Simons’s cigarettes. Their traditional trading approach was going so well that, when the boutique next door closed, Simons rented the space and punched through the adjoining wall. The new space was filled with offices for new hires, including an economist and others who provided expert intelligence and made their own trades, helping to boost returns. At the same time, Simons was developing a new passion: backing promising technology companies, including an electronic dictionary company called Franklin Electronic Publishers, which developed the first hand-held computer. In 1982, Simons changed Monemetrics’ name to Renaissance Technologies Corporation, reflecting his developing interest in these upstart companies. Simons came to see himself as a venture capitalist as much as a trader. He spent much of the week working in an office in New York City, where he interacted with his hedge fund’s investors while also dealing with his tech companies. Simons also took time to care for his children, one of whom needed extra attention. Paul, Simons’s second child with Barbara, had been born with a rare hereditary condition called ectodermal dysplasia. Paul’s skin, hair, and sweat glands didn’t develop properly, he was short for his age, and his teeth were few and misshapen. To cope with the resulting insecurities, Paul asked his parents to buy him stylish and popular clothing in the hopes of fitting in with his grade-school peers. Paul’s challenges weighed on Simons, who sometimes drove Paul to Trenton, New Jersey, where a pediatric dentist made cosmetic improvements to Paul’s teeth. Later, a New York dentist fitted Paul with a complete set of implants, improving his self-esteem. Baum was fine with Simons working from the New York office, dealing with his outside investments, and tending to family matters. Baum didn’t need much help. He was making so much money trading various currencies using intuition and instinct that pursuing a systematic, “quantitative” style of trading seemed a waste of

Short sellers profit when the price of the stock they borrowed and sold drops. Short selling is important because stock prices usually drop much more quickly than they go up. Fear is a more powerful feeling than greed. Therefore, short sellers, if they trade right, can make astonishing profits while other traders panic and start to sell off.

The people of the Kumuhonua and Pa‘ao genealogies probably left at a later date. Their genealogies continue on through Lua Nu‘u and his descendants up until the twelve sons of Kinilau-a-Mano (Jacob). The story of a Jonah-like character, Naula-a-Maihea, is the last of the Hawaiian legends which correspond to the Hebrew. However, there is a large gap in the legends between the Kāne-Apua (Moses) story which occurred around 1450 B.C. and the story of Naula-a-Maihea (Jonah) which occurred around 760 B.C. The absence of any of the great Biblical events that occurred during this 650-year period in any of the Polynesian legends is glaring. Why were great events of Hebrew history like the story of Joshua and the walls of Jericho, Samson and Delilah, and David and Goliath missing? Why was there only the story of Jonah which occurred long after these events? The answer to this problem could be that these Proto-Polynesians (whether they were actually a part of Israel or were a people of the area who adopted the Hebrew genealogies and legends) probably left the Middle East shortly after the time of Moses. They then traveled to their next stop in Irihia (India). Sea trade had been flourishing between the Middle East and India for over a thousand years. Vessels would sail down the Tigris and Euphrates rivers to the Persian Gulf and from there sail along the coast of the Arabian Sea to the Indus River and other trading ports of India. The unusual story of Jonah would surely be told by Ninevite traders (Nineveh was the city Jonah went to) and could have been picked up by the Proto-Polynesian seamen of Irihia.

Traders, when they make profits, have short communications; when they lose they drown you in details, theories, and charts.

For more than twenty years, the bond market’s complexity had helped the Wall Street bond trader to deceive the Wall Street customer. It was now leading the bond trader to deceive himself.

A now-classic example of the failure of this sort of HFT took place in September 2008 when the investment bank Lehman Brothers (ticker: LEH, now delisted after bankruptcy), Federal Home Loan Mortgage Corp (ticker: FRE), and many other mortgage holdings and investment banks all suffered a massive drop in price. Programs tried to buy their already broken stock to squeeze and burn the short sellers, but the stock price never went higher. Day traders and huge institutional sellers dumped their shares on the program. The programs and their developers were obliterated and left holding huge quantities of worthless shares of LEH and FRE, as well as other bankrupted holdings.

After three months in the class trainees circulated wearily around the trading floor for two months more. Then they went to work. All the while there was a hidden agenda: to Salomonize the trainee. The trainee was made to understand, first, that inside Salomon Brothers he was, as a trader once described us, lower than whale shit on the bottom of the ocean floor and, second, that lying under whale shit at Salomon Brothers was like rolling in clover compared with not being at Salomon at all. In the short term the brainwashing nearly worked. (In the long term it didn’t. For people to accept the yoke, they must believe they have no choice. As we shall see, we newcomers had both an exalted sense of our market value and no permanent loyalties.) A few investment banks had training programs, but with the possible exception of Goldman Sachs’s, none was so replete with firm propaganda.

There's nothing wrong with a little delusion. Sometimes it helps you get through the day.

Repo is a true market. Repo rates are determined by the interaction of supply and demand. Supply is the number of securities outstanding and the amount of those securities available in the marketplace. Demand is the amount of cash in the market. It’s also the number of shorts in the market – the traders who have sold Treasury securities short and must borrow them. Repo stands for “Repurchase Agreement,” which means that if I loan a security to you, you agree to give it back. The opposite of that is officially called a Reverse-Repurchase agreement. It’s the opposite of a Repo. If I borrow a security from you, I agree to return it back to you. In basic terms, Repo is a collateralized loan. One party borrows cash and holds a security as collateral.

David Heuwetter was the head trader at Drysdale Government Securities and had a great trading idea. It was really more of a scheme to take advantage of the difference in the market convention between outright Treasury purchases and Repo trades. Still at this time, when someone bought and sold a U.S. Treasury outright, the securities settled with the coupon accrued interest added to the purchase price. That is, when you bought a U.S. Treasury, you had to pay for the amount of interest which had already accrued on the security since the last coupon payment date. When interest rates were low, the accrued interest was small, even negligible. However, in the early 1980s, interest rates shot up above 10%, which meant there was a lot of interest accruing on bonds each day.  Heuwetter realized he could short-sell U.S. Treasurys outright and deliver the securities to the buyer and receive the price plus the accrued interest. Then, when he borrowed the securities in the Repo market, he only had to pay the purchase price. He was getting the full use of the accrued interest on the bonds at no cost.

At the same time, a single-issue current 10 Year Note can get very Special, and no one likes to pay the Special Repo rates. Thus, the dilemma. Traders want to be short the current issue and buy it back at the reopening auction. However, if too many shorts roll into the current issue, it will trade extremely Special. It’s a game of cat and mouse. “Did the shorts roll forward?” When all the stars are aligned, there’s a deep short base in the 10 year sector, and a majority of the shorts roll into the new issue. That’s when a severe shortage occurs. Most 10 Year Notes won’t trade extremely Special, but when one does, it can be big! The graph below illustrates the 1.125% 2/15/2031 as a current 10 Year Note. During the week before the first reopening settled, it averaged below -3.00%, and even traded as low as -4.25% one day.

That was because of the uptick rule. The rule was part of the Securities Exchange Act of 1934 (rule 10a-1). It specified that, with certain exceptions, short-sale transactions are allowed only at a price higher than the last previous different price (an “uptick”). This rule was supposed to prevent short sellers from deliberately driving down the price of a stock. Seeing an enormous profit potential from capturing the unprecedented spread between the futures and the index, I wanted to sell stocks short and buy index futures to capture the excess spread. The index was selling at 15 percent, or 30 points, over the futures. The potential profit in an arbitrage was 15 percent in a few days. But with prices collapsing, upticks were scarce. What to do? I figured out a solution. I called our head trader, who as a minor general partner was highly compensated from his share of our fees, and gave him this order: Buy $5 million worth of index futures at whatever the current market price happened to be (about 190), and place orders to sell short at the market, with the index then trading at about 220, not $5 million worth of assorted stocks—which was the optimal amount to best hedge the futures—but $10 million. I chose twice as much stock as I wanted, guessing only about half would actually be shorted because of the scarcity of the required upticks, thus giving me the proper hedge. If substantially more or less stock was sold short, the hedge would not be as good but the 15 percent profit cushion gave us a wide band of protection against loss.

By making no decision, OPEC had ceded control to what might be called the “swing investors”—the financial markets—the hedge funds and traders and other financial players that dealt in “paper barrels.” “Sentiment” among these investors—whether they were optimistic or pessimistic, bullish or bearish about prices and the market—would determine whether they went “long” or “short” on futures contracts. And their cumulative decisions would in turn accentuate price moves in one direction or the other. At this point, sheer bearishness predominated. Prices fell below $30 and seemed headed toward $25 a barrel. Some investment banks warned that oil could fall below $20. “The oil market is much bigger than just OPEC,” Naimi said in February 2016, but other countries had demonstrated “no appetite for sharing the burden.

By then there was a long and growing list of pundits who claimed they predicted the catastrophe, but a far shorter list of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong, to believe that most important financial people are either lying or deluded—without being insane.

Jacquetta Hawkes famously wrote that 'Every age gets the Stonehenge it deserves', by which she meant that Stonehenge has been a Druid temple, a landing site for flying saucers, or an astronomical calendar, according to the interests of the times. The same could be said about our stories about Vikings, and they have been alternately, noble savages, raiders, marauders and rapists, peaceful traders, entrepreneurs, explorers, early democrats, or IKEA sales personnel, according to what we want them to be.

By now, though, it had been a steep learning curve, he was fairly well versed on the basics of how clearing worked: When a customer bought shares in a stock on Robinhood — say, GameStop — at a specific price, the order was first sent to Robinhood's in-house clearing brokerage, who in turn bundled the trade to a market maker for execution. The trade was then brought to a clearinghouse, who oversaw the trade all the way to the settlement. During this time period, the trade itself needed to be 'insured' against anything that might go wrong, such as some sort of systemic collapse or a default by either party — although in reality, in regulated markets, this seemed extremely unlikely. While the customer's money was temporarily put aside, essentially in an untouchable safe, for the two days it took for the clearing agency to verify that both parties were able to provide what they had agreed upon — the brokerage house, Robinhood — had to insure the deal with a deposit; money of its own, separate from the money that the customer had provided, that could be used to guarantee the value of the trade. In financial parlance, this 'collateral' was known as VAR — or value at risk. For a single trade of a simple asset, it would have been relatively easy to know how much the brokerage would need to deposit to insure the situation; the risk of something going wrong would be small, and the total value would be simple to calculate. If GME was trading at $400 a share and a customer wanted ten shares, there was $4000 at risk, plus or minus some nominal amount due to minute vagaries in market fluctuations during the two-day period before settlement. In such a simple situation, Robinhood might be asked to put up $4000 and change — in addition to the $4000 of the customer's buy order, which remained locked in the safe. The deposit requirement calculation grew more complicated as layers were added onto the trading situation. A single trade had low inherent risk; multiplied to millions of trades, the risk profile began to change. The more volatile the stock — in price and/or volume — the riskier a buy or sell became. Of course, the NSCC did not make these calculations by hand; they used sophisticated algorithms to digest the numerous inputs coming in from the trade — type of equity, volume, current volatility, where it fit into a brokerage's portfolio as a whole — and spit out a 'recommendation' of what sort of deposit would protect the trade. And this process was entirely automated; the brokerage house would continually run its trading activity through the federal clearing system and would receive its updated deposit requirements as often as every fifteen minutes while the market was open. Premarket during a trading week, that number would come in at 5:11 a.m. East Coast time, usually right as Jim, in Orlando, was finishing his morning coffee. Robinhood would then have until 10:00 a.m. to satisfy the deposit requirement for the upcoming day of trading — or risk being in default, which could lead to an immediate shutdown of all operations. Usually, the deposit requirement was tied closely to the actual dollars being 'spent' on the trades; a near equal number of buys and sells in a brokerage house's trading profile lowered its overall risk, and though volatility was common, especially in the past half-decade, even a two-day settlement period came with an acceptable level of confidence that nobody would fail to deliver on their trades.

Is it really safe to invest in stocks? To answer that question, we would really first need to ask ourselves: what is safe after all? More so, what is safe in business? The answer would be “NOTHING”. Here it is – the stark reality: all businesses have their risks and as far as risks are concerned, the stock market is just another kind of business; that is it! All deep-rooted and unbeaten stock market will advise you on the affirmative. Yet the faint possibility remains that you, at the same time, will without doubt happen upon other stock market players who have done pathetically in the stock market. These traders, when their opinion is sought, will not leave a stone unturned in advising you to steer clear of the stock market. Mystified whose advice you should take? Fine, both are correct in their own points of view. To cross the threshold into well-paid stock market share trading in the marketplace of any place in the human race, it is to a great extent compulsory that you are geared up with the inclusive fluency of the sod above and beyond in receipt of rationalized with the up to date market shifts so that you prefer no less than probable stocks. In essence then can day businesses bear out valuable? If you are in a job in a different place and are unable to have a look at the trade area under conversation well again, it is advisable that you should not make your mind up on daylight trading. You will in point of fact happen upon other forms of trade which do not necessitate your day and night inspection. You in all probability will chew over those as well. Affecting the traders It would also be a reasonable word of warning to say publicly that the stock market affects different types of traders differently. There are cases in point of a lot of investors who have become cleaned out. Putting on next to nothing information and gambling into the share market perceiving others producing immense wealth possibly will provide evidence of being hazardous for you. You could wind up bringing up the rear to your richly deserved wealth and habitual failures will very soon plead your case before you to make your way out from the stock market panorama. Stage-managing and putting on unconditional awareness previous to putting money in will certainly twirl the bazaar in your prop up. Outline your objectives You will of course call for to outline your objectives and endeavor to come across the varied working expenditure alternatives in the stock market. At the beginning decide on fragile investments with the intention that even though you put on or incur fatalities, you will in next to no time gain knowledge of the ins and outs of the deal. Just the once you are contented, you can settle on volume funds. You in all probability will decide on each and every one of the three dealing preferences, specifically day business, short-term trading and enduring investment. At one fell swoop given your institution of resource of profits is exclusively the stock market; you will be able to broaden the horizons of your venture ambitions to a larger extent, for instance conjecture in mutual funds, money futures, product futures, and supplementary endeavor goods. You can accordingly keep up equilibrium of your ventures and disappointments if a few will by a hair's breadth inconvenience you. Seeking singular venture alternatives will additionally comply to you eloquent which one goes well with you the most excellent and you can in that case put in funds in capacity in the unwritten prospect. Make the best use of stock market It often comes to our notice that the stock market if used fine provides us with an exceptionally excellent occasion to put together loads of wealth and in addition utilize the stock market as our principal foundation of revenue. There are also the risks yet the faint possibility remains that risks are everywhere, in every trade.

Keith was sophisticated enough to understand the inherent risk of options; buying options wasn't as dangerous as short selling, because your potential for loss was capped, because you could always let the options expire. You paid a fee for the right to buy a certain number of shares of a stock at a certain price by a certain date. Sold in 100-share blocks, the fee was based on demand, which related to where people thought the stock price was going. Because the fee you paid for those 100-share blocks was a fraction of the pegged price, you could leverage yourself into a very large position with a relatively small amount of money. If the price went up, you could make a lot; if it went down, your options were worthless, but you only lost what you initially paid. A full 80 percent of the options bought by retail traders like him expired worthless; but when you only had a little to work with, there was no better way to shoot for the moon. Fifty-three thousand dollars was a lot, considering he had a two-year-old, a house, a wife. It was as much money as his dad earned in a year when he was younger. But Keith was that sure, even when the stock was hovering around $5 a share, that he had found value that others had missed.

If you live in New York City, for example, chances are you will not be going outside for a leisurely stroll down Fifth Avenue in shorts and a T-shirt and flip-flops in the month of February. Why is that? Because, if you’ve lived there for a while and experienced the local seasons, you’ve already identified that in February it will be pretty darn cold. To appropriately adapt, you will want to wear a heavy winter coat and maybe gloves and a scarf and earmuffs. It’s the same with the markets. You need to have “lived there for a while” and experienced a variety of market cycles so you know what “to wear,” or rather how to adapt, so that you are financially comfortable. Instead of knowing to wear a winter coat in February, you will know that in a choppy, sideways, bracketed market you need to adapt your system and rules so that you do not get whipsawed and stopped out a lot. Or you may need to recognize a bull market changing to a bear market so that you can exit your position in a timely fashion to lock in profits.

Vanilla arrived in Europe shortly after the Conquest, specifically as a flavoring agent for the chocolate that the Spaniards were already imbibing, as a drink, in large quantities. Through the royal courts, the vine took hold in France, where the House of Bourbon prized vanilla for its scent. The demand increased enough that small vanilla plantations existed by the eighteenth century from Veracruz to northern Guatemala—but how to pollinate the plants and thus make a profitable industry out of harvesting vanilla remained with the Totonacs, who worked the fields. Scientists, investors, traders, and others vainly attempted to decipher the pollination puzzle, going as far as to bribe the Totonacs and even spy on their methods. But still, the secret remained intact, and the Veracruz area continued as the center for the vanilla trade, Papantla its main port of commerce.

Identifying Market Direction Market direction, popularly known as “trend” in trading, is one of the most important concepts that you must follow for you to succeed in this industry. Just like you should sell at resistance zones and buy at support areas, you should always trade along the main market direction. You cannot be trying to sell when the majority of traders and the big players are pushing the market up. There is a common phrase that you will hear traders throwing around; that the trend is your best friend. Many traders hear about this concept, but they fail since they do not understand how to identify the main trend. Luckily for you, this guide will show you the best way to do it. Now, in the market, there are things known as peaks and troughs. The peaks are the highest points that you can see the market reaching before turning back. Troughs are the lowest points that the market reaches before going back up. Both of these are minor support and resistance points. If you connect the points using straight lines, you will end up with a zigzag formation. Peaks and troughs Uptrend When the peaks are formed in higher succession, we say the market is in an uptrend. If a new peak is formed higher than the previous one, we call it a higher-high. During an uptrend, the troughs are also formed in higher succession. In short, each new trough is positioned higher than the previous one. When this happens, we say a higher-low has been formed. Collectively, when a market is forming higher Highs and higher Lows concurrently, then an uptrend is formed. During this time, you should only look for buy trades. Downtrend A downtrend happens when the market starts making lower peaks and lower troughs in succession. In short, when a trough is formed lower than the previous one, we have a descending zigzag direction that we call a downtrend. During a downtrend market direction, lower Highs and lower Lows are formed. In a downtrend, you should only be looking for sell trades.

Iron Butterfly Strategy is built up using package order for all the spreads simultaneously to avoid slippage. Never opted for making one of the spread before the other or buy and sell all the four individual options separately. Sometimes, the market or any particular stock rally considerably and went to overbought or oversold region. In such cases, the market or stock price is anticipated to take reversal and bounce back. The traders or investors may use MACD or RSI indicator to identify the MACD cross over (bullish or bearish) and overbought or oversold zone in RSI indicator. If the RSI indicator goes below 30 level and bounce back crossing the level of 30 from below, it indicates market going up and time to initiate long position. If it is confirmed by MACD bullish crossover, the Bull Put spread of the Iron Butterfly may be initiated first and subsequently the Bear Call spread at higher level. If the RSI indicator goes above 70 level and bounce back crossing the level of 70 from above, it indicates market going down and time to initiate short position. If it is confirmed by MACD bearish crossover, the Bear Call spread of the Iron Butterfly may be initiated first and subsequently the Bull Put spread at lower level.