BBC2. 9pm. Million Dollar Traders

WTF?_2

alared wrote: »

Just remember that these "traders" can short sell,something that ordinary people CAN`T do.

Short selling is selling "borrowed" shares that you don`t actually own,to buy back at a later date to "repay" them.

So in this experiment they can play the market both ways,but as I said,the likes of you and I can`t short sell.

You can spread bet and do pretty much the same thing.

alared

!!!!!!? wrote: »

You can spread bet and do pretty much the same thing.

We know about spread betting but it`s not the same as having an instant trade and price available as when buying.

WTF?_2

purch wrote: »

I think you are getting this slightly out of context.

Trading Floors/Dealing Rooms have existed for decades in Banks and Brokerages and the traders/dealers and what they do is part of the normal everyday function of these institutions.

They will have continued with what they normally do, buying, selling, trading and making or losing money as they have always done. Some will lose their jobs if they can't 'hack' it, just as they have always done.

I think you would be surprised how little has changed on your average trading floor in the City.

I was thinking more in terms of the rise of the all-powerful hedge fund.

The hype is that they were a win-win proposition with clever, fiendishly complex strategies that meant you were covered whichever way the market went. Thus people were willing to pay silly amounts just to have their cash managed plus forfeit large parts of their gains as bonuses.

In actual fact, I reckon they just took advantage of fantastically favourable credit conditions to leverage and buy (with the same credit conditions fueling market growth). Nothing clever or scientific about it and as long as the markets only went up, a lucrative strategy.

Not so easy now, though. From the sounds of things, if the programme was made a year earlier all the participants would have come out smelling of roses. A bit like the way all those numpties on property !!!!!! programmes always seemed to do well - a rising tide floats all boats and all that.......

(Plus, I wonder how many other Madoff type funds are out there....)

tradetime

!!!!!!? wrote: »

Obviously there aren't many traders worth their salt then because with the markets heading lower over the last 12 months, very few people seem to have been making money regardless of the possibilities offered by increased volatility.

I have no idea how many traders out there are "worth their salt" when volatility is low and markets trend a lot of people enter this business, and can make money placing one way bets, anyone can follow the crowd, as long as the crowd keeps moving in the same direction. Volatility is the traders best friend, swings are bigger and less trades are required to make your money. Direction of the market is irrelevant, unlike an investor I don't care which way the markets go just as long as the moves are of decent size.

tradetime

alared wrote: »

Just remember that these "traders" can short sell,something that ordinary people CAN`T do.

Short selling is selling "borrowed" shares that you don`t actually own,to buy back at a later date to "repay" them.

So in this experiment they can play the market both ways,but as I said,the likes of you and I can`t short sell.

I'm not sure what constitutes an "ordinary" person, any margin account can short sell.

PasturesNew

Mostly in the programme, they weren't hedging though.
They forgot that bit.
They went into the markets naked and sat and waited/watched with fingers crossed. It didn't seem to occur to them to cover their 4rses, which surprised me.

You'd have thought one would have gone "ooh! hey guys, I just remembered something we're supposed to do".

kennyboy66_2

!!!!!!? wrote: »

Thanks for the heads up - will check for that on iPlayer.

I think they're finding out that hedge funds only really work when the market is going consistently up (despite the hype that they cover against all conditions) and credit is easy to get.

In that case it's not difficult - Leverage. Buy. Profit. Take big management fee and bonus. Repeat.


Not quite as easy when markets are unstable and tending to head downwards.

It's only a few months ago that many hedge funds were short selling banks and making a handsome profit - not too mention Paulson & Co making $3bn by betting that sub-prime would bust.
Most traders & hedge funds want volatility. The idea that they only win in rising markets is a bit daft - it will depend on their individual strategy (selling Sterling perhaps!).

The point about leverage is fair though - most hedge funds will find that borrowing are both more expensive and they won't be able to gear up as much in the future.

The other point is that statistics on hedge fund profitability seem skewed because of survivor bias.

purch

In actual fact, I reckon they just took advantage of fantastically favourable credit conditions to leverage and buy (with the same credit conditions fueling market growth). Nothing clever or scientific about it and as long as the markets only went up, a lucrative strategy

Perfectly true, although this huge leverage helped them not just in buying but also selling. Momentum trading is "easy" with the sort of leverage these Hedge Funds were able to access, just pile in whenever the trend gets close to support or resistance and 'force' the market through !!!

We only recently witnessed this kind of thing in action with GBP/EUR, as soon as GBP fell to the 1.15/1.16 range, the momentum traders just piled on and pushed it close to parity when there was no real fundamental reason for the move to be quite as quick.

Nothing clever or scientific about it

Thats true :eek:

WTF?_2

alared wrote: »

We know about spread betting but it`s not the same as having an instant trade and price available as when buying.

Traders always have the advantage of being able to buy/sell instantly but ordinary punters can gain from falling prices.

The real secret of hedge funds was their ability to leverage. Take a hundred mil of your investors money, leverage up tenfold using cheap credit and the gains are potentially massive as long as your bets pay off.

Of course, the average punter was never able to borrow 10x their stake to gamble, unless of course it was to speculate on house prices......

chucky

!!!!!!? wrote: »

Traders always have the advantage of being able to buy/sell instantly but ordinary punters can gain from falling prices.

you're missing the key bit here - they have information and research information that most would ignore and not see relevent to the trade in question.