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Shock Markets: Trading Lessons for Volatile Times

Shock Markets: Trading Lessons for Volatile Times

          
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About the Book

Don't fear crises: use them as opportunities to make money! Shock Markets shows traders and investors exactly how to do it -- with exceptional detail, not vague handwaving. Robert Webb and Alexander Webb offer meticulous breakdowns of recent crises, revealing how they impacted both individual stocks and the market as a whole -- and helping you create detailed game plans for profiting from future shocks. By fusing real-life trading examples with rigorous moment-by-moment analysis of price changes, they give you tools to survive and thrive in even the most volatile markets. This accessible, actionable book answers crucial questions like: What moves stock prices? What moves the overall market? How can you profit from understanding catalysts that precipitate sudden sharp changes in stock prices? From the actions of corporate executives to regulatory decisions, earnings announcements to merger deals, lawsuits to settlements, macroeconomic reports to the policy actions of foreign governments, seemingly remote factors can have a huge, sudden impact on stocks in today's interconnected markets. Shock Markets illuminates these catalysts, and demonstrates their shifting behavior during fads, fashions, bubbles, crashes, and market crises. The focus is completely practical: helping savvy traders uncover profit where others find only peril.

Table of Contents:
Chapter 1  The Nature of Trading      1 Why Study Market Shocks?     2 The Nature of Trading      3 Different Perspectives of Trading      4 Market Conditions and Sentiment     7 Making Trading Decisions     8 Looking Ahead     9 Chapter 2  Five Simple Questions     13 Which Market(s)?     13 Which Direction?     16    Bear Stearns     17    The Market Reacts to the Employment Report     22    Trading Lessons     28 How Much?     28 How Long?     30    The Market Reacts to the Fed     30    The Market Reacts to the November 2012 Employment Report     32    How Quickly? Mad Cow Disease     34    How Quickly? CME Group Stock Price     35 How Risky?     36 A Sixth Question     38 Additional Trading Lessons     39 Chapter 3  Fads, Fashions, and Bubbles     43 Is It Really a Bubble?     44 Can You Profit from “Bubbles”?     48 Is the Market Smart?     51    Market Efficiency     53    Irrational Speculation and the Limits of Rational Analysis     54    Irrational Pricing     57 Trading Lessons     59 Chapter 4  Earnings and Corporate Announcements     63 Earnings     63    Google     64    Apple     66    Facebook and Zynga     67    Sudden Drops     70 New Products—Videogames     71 Mergers and Acquisitions     76    Anatomy of a Deal: Bank of America and Countrywide Financial     76    Quaker Buys Snapple     79    Merrill Buys FRC     80    Deals That Fail     81 Changes at the Top     82    RIMM Shot     82    Best Buy     83    Wellpoint     83 Regulatory Actions and Lawsuits     84 Trading Lessons     85 Chapter 5  Rumor Has It     95 Rumors     96    United Airlines Takes a Nosedive     96    Nokia Misdials     98    Hyundai Motors     100    HBOS     100    Steve Jobs’ Health     102    Audience Inc.     102 Position Announcements     103    “The Oracle of Omaha”     103    David Einhorn     104    Carl Icahn     105    Muddy Waters     105 Shorted Companies Bite Back     106 Trading Lessons     107 Chapter 6  Political Economy     113 Political Shocks—Terrorist Actions, Wars, Assassinations, and Policy Actions     114 The 2000 U.S. Presidential Election     115 Expropriation     116 Cooling the Economy and Markets     120 Central Banks to the Rescue     121 Central Banks as Speculators     124    The Swiss National Bank     124    The Bank of Japan     125    Bank of England     128    Bank Negara Malaysia     129    Trading Lessons from Central Bank Interventions in the FX Market     129 Trading Lessons     131 Chapter 7  Predatory and Insider Trading     139 Predatory Trading     140    Porsche as a Hedge Fund     140    Whales in Trouble     144    It Only Takes a Moment     149 Speculative Attacks—“If at First You Don’t Succeed...”     150 LIBOR     152 Gunning for Stops     153 Informed Trading     154    Puts on Bear Stearns     155    Dow Jones & Company Stock     156 Trading Lessons     157 Chapter 8  Crashes, Trading Glitches, and Fat-Finger Trades     163 The May 6, 2010 “Flash Crash”     163    Trading Lessons     167    Other Flash Crashes     168 October 19, 1987 Stock Market Crash     169 Other Stock Market Crashes     174 Fat-Finger Trades     176 Trading Glitches     177    Trader Errors: “Algos Gone Wild”     178    Interruptions of Trading on Exchanges     179    Trading Glitch Case 1: The Tokyo Stock Exchange Suspends Trading     183    Trading Glitch Case 2.A: The TSE Fails to Cancel Clearly Erroneous Trades     183    Trading Glitch Case 2.B: The TSE Fails to Cancel Clearly Erroneous Trades     184    Trading Glitch Case 3: The TSE Suspends Trading     185 Trading Lessons     186 Chapter 9  Man Versus Machine     191 Algorithmic and High-Frequency Trading     192    Old Strategies     193    New Technology     196    “New” Strategies     198    Ramifications     200 Avoiding HFT     206 Trading Lessons     207 Chapter 10  Flight to Safety     211 Reducing Risk     211 Credit Default Swaps     212 Nature of the Crisis     217 Gold     218 Treasuries     224 Currencies     225 The Paradox of Wealth Preservation     227 What Is Safe?     228 Trading Lessons     229 Chapter 11  Why Most Traders Lose Money     233 The Banks     234 Behavioral Finance     236    Overconfidence     237    Risk Aversion     237    Loss Aversion     238    Disposition Effect     238    Mental Anchoring     238    Heuristics Not Statistics     239 A Tale of Two Losses     240 Warren Buffet and EFH Bonds     241 Trading Lessons     243    Failure to Cut Losses Short     243    Failure to Let Profits Run     244    Failure to Listen to the Market     246    Confusing Trade Conviction with Trade Retention     246    Excessive Leverage     247    Trade Size Is Too Large     247    Trading Too Frequently     248    Would You Rather Be Right or Rich?     249    Failure to Have a Viable Trading Game Plan     249    Failure to Follow a Viable Trading Game Plan     249    Remaining in a Trade After the Reason for Entering the Trade No Longer Exists     249    Good Trades That Lose Money Versus Trading Badly     250 Chapter 12  Developing a Trading Game Plan     255 Trading Edge and Trader Type     255    Trading Edge     256    Trader Types     256 Trading Thesis     257 Making a Trading Game Plan     257    Trading Thesis and Trade Identification     257    Trade Selection     258    Choice of Security     259    Size     259    Trade Horizon     260    Risk Control—Stops     260    Crowded Trades     261    Correlated Bets     262    Risk On/Risk Off Markets     262    Trade Execution     262 Trade Monitoring and Contingency Plan     263 Trade Completion and Evaluation     264 The Message in the Behavior of Market Prices     265 Trading After a Market Shock     265 Shocks: Scheduled and Unscheduled     266 Trading Maxims     266    Control Yourself, Because You Can’t Control the Market     266    Get Prepared to Play, Don’t Play to Prepare     267    Limit Risk—Not Reward     267    Learn from the Past—Don’t Live in It     268    There Are No Martyrs in the Market— Only Casualties     269    Don’t Bet More Than You Can Afford to Lose     269    Hope Is Not a Plan     269 Index     271


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Product Details
  • ISBN-13: 9780133345803
  • Publisher: Pearson Education (US)
  • Publisher Imprint: Pearson
  • Language: English
  • ISBN-10: 0133345807
  • Publisher Date: 26 Mar 2013
  • Binding: Digital download
  • Sub Title: Trading Lessons for Volatile Times


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