
Mystery Man Moving Japan Made More Than 1M Trades (2014) - 3eto
http://www.bloomberg.com/news/articles/2014-09-25/mystery-man-moving-japan-made-more-than-1-million-trades
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ChuckMcM
A friend of mine was a pretty active day trader during the dot com days, he
used to call it "the only gambling legal in all 50 states" and talked about
earnings in units of "Boxters" [1]. Unlike the person in the article he had
not invested in real estate or other holdings and so his net worth changed
dramatically during the 2000 recession. I always felt it was like a teen who
drives recklessly until they almost die in an accident and then can't bring
themselves to drive above the speed limit after that.

I always felt that being single and without dependents gave him an edge. I was
never comfortable not having a really really safe hedge as a stop loss. Of
course it could be I was just too chicken to "go big" :-)

[1] The Boxter from Porche was going for about $50,000 each at the time.

~~~
TACIXAT
Why did he lose money in a recession? It is my understanding that day traders
can profit off of any volatility, up or down.

~~~
NhanH
In short term, day trading is effectively a zero sum game. During a recession
the stocks crashed in a really short period hence for any to gain, some has to
lose money.

~~~
marincounty
I would really like an honest explination of what it's like to be a Day Trader
these days? No--B.S.--no chart mumbo jumbo; the truth of what your day is
really like, and how you make money competing with the Big Boys(who obviously
have insider information), and the unknow number of HFT'ers?

I have know two Day traders in my life. One blew his inheritance on day
trading, and is currently living in his van. The other, I met in a bar. He
wouldn't give out much information, except he was always bragging about this
office electrical grid is on the same main feeder that supplies San Quentin. I
haven't seen him in years.

So yes, I would love to know the truth about this line of work, from someone
who has actually done it? I don't expect details, or any incriminating
information. I see so many people loosing money on Stocktwits daily? I all
looks like gambling to me--so much so, If I got into the game, I would
seriously consider being a contradiction investor.

~~~
uhwhat
Be aware that the stock market is a game of "dumb money" (casual investors)
and "smart money" (hedge fund managers, HFT groups, bots watching info feeds,
and 'insiders').

How does one determine the 'true' value of a share of stock? — what is the
current perceived market value of that stock and how are anticipated
influences going to change that perceived market value?

I don't trade as I believe it's a bit rigged in favor of HFT & hedge funds
with deep insider sources. [1] [2]

I'd recommend investing in tangible business assets and infastructure. Do
something real, make real things happen.

[1]
[http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/24/t...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/24/traders-
may-have-gotten-last-weeks-fed-news-7-milliseconds-early/)

[ _2_ ] [http://www.zerohedge.com/news/2013-09-20/gold-einstein-
and-g...](http://www.zerohedge.com/news/2013-09-20/gold-einstein-and-great-
fed-robbery)

* ZeroHedge is an introduction to the insane culture of stock trading.

~~~
kasey_junk
ZeroHedge is an introduction to an insane culture of people who occasionally
trade stocks.

~~~
uhwhat
ZH is a good example of the role information and news plays into the stock
market machine game.

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ScottBurson
_CIS’s first big score came on Dec. 8, 2005, when someone at Mizuho Securities
Co. made a costly typing mistake. Rather than selling a single share of a
small recruiting company called J-Com Co. for 610,000 yen, Mizuho offered
610,000 shares for 1 yen each._

Wow. Such an error could _easily_ have been detected by software before the
order went out. Does a professional trading company really not do _any order
sanity checking at all_? I bet they do now, ha :-)

~~~
patio11
It was noted at both Mizuho and the exchange by actual humans, all of whom
made the decision that they lacked personal authority to overrule the trader.
The report by the regulator later was _frosting_ when noting this, AFAIK.

~~~
ScottBurson
Wow, again! I don't know what their system looks like, but it doesn't seem to
me that it should require a lot of authority to bounce the trade back to the
trader for a second confirmation -- or maybe send it to a second trader in
case the first one has a hangover or something.

I had to stop and think about what actually happens when someone posts an
order like that, well outside the current bid/ask. What price(s) does it get
filled at? Apparently -- if it works the same in Japan as here -- each bid
already in the book would execute at its existing price, despite the fact that
the asking price on the new order is far below that. You might think that they
would execute at the average of the two prices, but that doesn't seem to be
the case, from what I've managed to dig up. An example like this suggests to
me that an even better choice would be the geometric mean. But the difference
would matter only when someone had screwed up very badly.

~~~
log_n
Yup, orders that are placed well outside the bid/ask just fill every order in
the order book until they are filled. It's commonly called sweeping the market
and happens on 1-2 ticks (price levels) around the best bid/ask pretty
commonly throughout the day depending on the product. Limit order books are
actually really fun things to model and the rules around different exchanges
books are quite neat.

The problem with disallowing your trader from ripping through a lot of the
levels of an order book is that it can be a risk reducing move and what you
intend to do sometimes. This trade is a clear fat finger but there are times
when you will want to sweep the book to get hedged.

For instance, let's say your desk just got slammed with a ton of risk on an
OTC (over the counter) option trade. You can immediately alleviate a lot of
that risk (while paying through the nose) by selling 2000 contracts or 5 price
levels of the ES (SP500 future). You can immediately place that order and get
it filled and be hedged. If there were multiple points of human intervention
required then you might lose a substantial amount of money. 2k contracts on
the ES is $25,000 a tick. If word leaks that people are going to need to start
hedging big then it could easily move 10 or 20 ticks away from you while
waiting for your risk management team to approve your trade as not a fat
finger.

Generally it's cheaper to just fire error prone traders. Heh, and anyone that
is about to execute a 2k contract option trade generally has their hedge order
queued up and ready to send to the market as soon as they hear the other side
agree to their price.

~~~
ScottBurson
Ah, very interesting. I had wondered how option writers managed their risk. I
wonder how often this is the cause of the spikes I see on charts.

 _If word leaks that people are going to need to start hedging big then it
could easily move 10 or 20 ticks away from you while waiting for your risk
management team to approve your trade as not a fat finger._

That's why I would expect it to be done in software. Yes, I understand that
software can be buggy, and hard-and-fast rules sometimes need to be bent, but
I would still expect it to be cheaper overall. But I haven't actually worked
in the business, so this is just my $.02 :-)

~~~
log_n
Heh it's options writers or buyers (just options market makers in general). A
lot of stuff is electronically traded but there are still some very large
orders with huge deltas that are put up on telephone calls.

And yeah it makes sense to have an extra prompt pop up if it's an order over X
contracts or Y ticks from the market. And I've seen a lot of systems set up
like that.

A lot of times traders will just punch the "OK" box and do their trade though.

That's of course if traders are manually hedging their portfolio/trade. A lot
of times they just set their portfolio to auto-hedge based on certain
parameters (ie at Z deltas or we've moved C ticks in a time period).

------
TazeTSchnitzel
For those unfamiliar with the Yen: it's worth about 2 orders of magnitude less
than the major Western currencies. As a rule of thumb, insert a decimal point
2 digits from the right to make figures make more sense.

~~~
gcr
For those in the US, a Yen is about a penny.

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hkmurakami
A couple of important thing to note about the Japanese taxation system for
stock capital gains: (1) Japan has no concept of short term vs long term
capital gains for stocks. The tax rate is a flat 20% no matter how long you
have held the security, and (2) from about 2003-2014, said rate was only 10%.
These two factors make personal trading in Japan a potentially much more
lucrative affair than in the United States [1].

 _> Another day trader, Takashi Kotegawa, who’s known as BNF, made more than 2
billion yen, according to a Bloomberg News report at the time. Efforts to
reach Kotegawa were unsuccessful, and it isn’t clear whether he still trades._

IIRC "BNF" now owns a prominent building in Akihabara (he likely still
trades). I forgot the details of the reasoning, but I remember reading
something about the purchase about 5 years ago on 2chan.

[1]
[https://en.wikipedia.org/wiki/Capital_gains_tax#Japan](https://en.wikipedia.org/wiki/Capital_gains_tax#Japan)

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toothbrush
Hm, call me a Luddite or a communist or whatever, but i fail to see how this
type of pursuit, broadly speaking, is of any benefit at all to society at
large. In fact, i would argue (while simultaneously admitting that i am not an
expert / economist, so i am open to comments) that trading this way is dubious
to say the least. All i mean is, where is this guy's massive profit coming
from? Surely to a certain degree there must be a law of conservation of cash?
Is it really only coming from other traders like him, but who in that instance
happened to make a bad decision? In other words, i would say it would perhaps
not be that bad if the pool of cash from which such traders were fishing were
entirely made up of inlay by other such traders, such as would be the case at
a casino at a poker table... What i'm trying to enunciate is a vague
uneasiness that somehow, making so much cash without contributing anything to
society seems... Unfortunate, to say the least? Isn't there something useful
somebody like that could do, instead of amassing a fortune by "gaming the
market"?

I have nowhere near enough knowledge on the subject to suggest a workable
method of regulation or anything like that, but i really wonder how something
that boils down to somebody gaming the market (as somebody else said, the only
gambling which is legal in all states) to the tune of millions is anything but
detrimental.

~~~
chrisbennet
Warren Buffet said:

 _It has always been a fantasy of mine that a boatload of 25 brokers would be
shipwrecked and struggle to an island from which there could be no rescue.
Faced with developing an economy that would maximize their consumption and
pleasure, would they, I wonder assign 20 of their number to produce food,
clothing, shelter, etc., while setting 5 to trading options endlessly on the
future output of the 20?_

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hellbanner
Forgive my ignorance of stock trading. For stocks that do not give dividends,
then stock has no inherent value EXCEPT what a buyer thinks they can sell it
for later (bigger fool theory)?

~~~
tranquil
Not quite. The stock IS the company. If the company makes profit, or is
perceived to have other value (assets, knowhow, etc.), then the stock is
priced according to those parameters.

Simple example; company issues 100 shares and makes $1000 profit per year. If
you could buy those 100 shares for $1 each, you'd basically own 100% of a
company that makes $1000 per year cash profits for $100. Good deal. Usually
too good in fact, and that's why this stock would not be priced at $1 per
share for long.

~~~
hellbanner
Ok, so stock ownership directly means ownership of company then? So if you had
enough stock, you could become de-facto CEO?

