Very interesting story from Bloomberg on Youtube: The Wild $50M Ride of the Flash Crash Trader (24 minute video)
In 2010, American stocks had a 'flash crash'. Regulators believed a home-based day trader Navinder Sarao played a role in the crash, though later studies found he probably didn't cause the crash. Anyway, his back-story is interesting. He came from a humble, working-class English neighbourhood and had an amazing knack for trading futures.
He worked at a futures trading firm for a while, then quit and became a day trader while living in his parent's house. He made several million dollars legitimately day trading, all from his upstairs bedroom. Then unfortunately he began using a technique which the regulator decided was illegal, and they prosecuted him. (I actually think this part was bad luck and a bit of scapegoating, since spoofing had only freshly been made illegal)
Here's a part I wanted to draw attention to ... because there is a big lesson here ...
He made ~ $70 million along the way, most of it legitimate business profit. He had a very unique skill and knew how to make money. But he was clueless about how to store capital. Tragically, he "invested" the money into various scams, and lost all of it! Something like $50 MILLION of legitimate business income, all lost, because he didn't know how to store or invest the money, and fell for various scams.
One might think that a very skilled trader should know that he should store his hard-earned money into diversified mutual funds or any standard stock or bond ETF.
But he didn't know. He had a very particular skill, and that's how he made money. This is similar to professional athletes and pop stars. My point is, these are different skills!
It's one thing to know your particular trade, skill, or business niche very well. But it's entirely another thing to keep that money and store capital.
In 2010, American stocks had a 'flash crash'. Regulators believed a home-based day trader Navinder Sarao played a role in the crash, though later studies found he probably didn't cause the crash. Anyway, his back-story is interesting. He came from a humble, working-class English neighbourhood and had an amazing knack for trading futures.
He worked at a futures trading firm for a while, then quit and became a day trader while living in his parent's house. He made several million dollars legitimately day trading, all from his upstairs bedroom. Then unfortunately he began using a technique which the regulator decided was illegal, and they prosecuted him. (I actually think this part was bad luck and a bit of scapegoating, since spoofing had only freshly been made illegal)
Here's a part I wanted to draw attention to ... because there is a big lesson here ...
He made ~ $70 million along the way, most of it legitimate business profit. He had a very unique skill and knew how to make money. But he was clueless about how to store capital. Tragically, he "invested" the money into various scams, and lost all of it! Something like $50 MILLION of legitimate business income, all lost, because he didn't know how to store or invest the money, and fell for various scams.
One might think that a very skilled trader should know that he should store his hard-earned money into diversified mutual funds or any standard stock or bond ETF.
But he didn't know. He had a very particular skill, and that's how he made money. This is similar to professional athletes and pop stars. My point is, these are different skills!
It's one thing to know your particular trade, skill, or business niche very well. But it's entirely another thing to keep that money and store capital.
