Investing in the Stock Market.

Reyaj

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Bible I appreciate all your help. I am totally a newbie at this so I am going to ask a lot of stupid questions. I hope you dont mind, but it will definitely help me learn.


On this post, you say you when you trade the firms money you have to pay commissions.... But if you are trading for them... shouldn't they pay the commision

I guess you made these firms money as a whole.
 

Bible_Belt

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The business model came from Schonfeld first, but Broadway and Worldco copied it later. Those were the 'big three' day trading firms. They let you trade firm money, but you paid commissions to the firm on every transaction as well as gave them about half of your profits. They made most of their money off commissions. Worldco was charging .02/share when brokers like interactivebrokers.com were at .01/share. Thus, they really like traders who did a lot of volume. I only did a couple of hundred thousand shares a day in total volume, and I probably traded less shares than most other traders. When the market volatility died down, these firms suffered. Worldco and Broadway closed, and I'm sure Schonfeld scaled back drastically.

Did you read the 'how I got rich' thread? Forex is interesting. Day trading stocks requires $25K and they give 2:1 margin. Forex only requires a few thousand and they give 100:1 margin.
 

Bible_Belt

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I was as margined as margin gets. Normally, the margin limit is whatever you can get your broker-dealer to agree to. But if you own the B/D, then the limit to your traders' margin was limited only by the about of risk that the firm chose to take, and these day trading firms were not exactly risk-averse. It's also easier to margin intraday than overnight, so I have no idea how much real money was on deposit in relation to the amount of shares that we were buying, probably very little.
 

SELF-MASTERY

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Bible_Belt, why did you stop trading???
 

Bible_Belt

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I had three consecutive employers go belly-up. The last one's CEO put all traders on deferred comp where he would pay half now and the other half six months later. Then, about six months after the deferred comp started and he was about to start having to pay out that money, he ran away to Thailand with most of the traders' money. There is no extradition for white collar criminals there. Day trading is a sleazy business.
 

Bible_Belt

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The big players tend to hire only Ivy League grads. An ex-gf's childhood friend graduated from Harvard and traded for MLCO for a while, before transferring from trading to investment banking. The trading jobs are almost all in the NYC area. Schonfeld is about the only prop firm left, and they are in South Florida. And 'trading' means a different thing to big firms life MLCO- they are executing orders. Millions of dollars are involved, but a lot of the traders actually get bored of what they are doing. A small prop shop gives a trader money and tells them to find something to buy and sell to make the firm money. That's exciting and fun. Working at MLCO, on the other hand, a trader would get much more specific tasks from his boss, like "sell one million shares of MSFT today, and get the best price you can." The job pays well, but it is too much like work.

And anyone you see on TV is just that - a TV personality. Being on TV seems to exempt them from giving bad advice in the eyes of the SEC.
 

Reyaj

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Thanks again bible. I hear what you are saying with the tv thing.. but I'll tell you, it seems like this guy Jim Cramer really can influence the market with his picks..... was just wondeirng if he maybe was the real deal.
 

Bible_Belt

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Yes, Cramer can move some stocks. The smaller the capitalization of the stock, the more it would be affected. But you have no way of knowing when he will turn around and tell people to sell the same stock, or at least I don't. If you can do enough research and become good at predicting what he will recommend before he recommends it, and knowing which stocks would move on the recommendation, then in theory that might work but there have got to be easier ways to make money.

Back in the nasdaq madness 90's, some traders and I would make trades specifically based upon the stocks being mentioned on CNBC at the time. Lots of traders were doing this, but we were making money at it. The difference between us and the average losing traders was that we were predicting the news mention ahead of time. We knew that the nasdaq guy did a 10:15 report, so at 10:00 we would put our minds in the 'frame' of being the nasdaq market reporter guy. If I was a reporter and had to mention the biggest stock movers of the day, what would they be? I'd pick two or three, look at the chart, load up the buy orders, and watch CNBC intently. Typically, I was right on at least one stock to be mentioned, when I saw the reporter's lips forming the first syllable of the company name, I would hit 'buy', and I would own the stock before most of the word has left his mouth. Keep in mind that he talks quickly, too, so all of this is happening in fractions of a second. Then, all of the schmucks arrive. They did not do their homework, and had to spend three seconds loading up their buy orders. They bid up the stock like fools, and after only 10-20 seconds I sell my stock for points more that what I paid. When practically everyone was a day trader, this was how easy it was to make money. I doubt that trading off CNBC still works.
 

Reyaj

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wow... good stuf

You must have made a killing for someone :)

I think using the media to your advantage like that will always cause an effect whether its bullish or bearish...
 

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A big secret to getting rich is investing in a technology that is already available, but hasnt become in wide use yet. The reason why, it becuase its demand is very low right now, and so it will be a cheap investment, but will be expected to explode in the near future, and so the stock value goes up, and so you made a cheap investment to get something that will grow into millions. Its a long term thing, so you dont get rich right away, you have to wait.

An example: ethanol. right now, its not in big use, but in 10 years, cars should pretty much all be runnning on it. An awesome investment.
 

Bible_Belt

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I like defense better than Ethanol.

The companies that make equipment to fight IEDs and other specialized war materials are the sector I'd look to for small-cap investments. V-shaped hulls, radio frequency jammers to make the IED remote-control not work, and bomb robots are the best ways that the military has found to counteract IEDs.

Here is one article. This company is selling a remote-control car for 10 grand, and it is supposed to be a bargain price.

http://www.wvec.com/news/local/stories/wvec_local_082206_ied_robot_.25bf32a8.html
 

Reyaj

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Most ipos which get media attention will rise in the first couple of days. I think investing in these and then selling quickly is a smart option.

Anyone have any exerperience or advice with IPOS?
 
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