A Livermore-style trader who started with $10K USD in 2000
|Aug 8, 2015||Public post|
The 16 Billion Yen Man: A “Livermore-style” trader who started with $10K USD in 2000
I wanted to share some notes based on a Bloomberg profile about a “Mystery Man” trader and I was mesmerized. What kept me thinking about this trader was not the gains made (AND KEPT) by this lone wolf trader (although even during this age of Unicorn startup and crypto investors it was still amazing). What grabbed hold of me and did not let ago was reading about someone who truly knows how to trade with an eye to controlling losses.
I want to post some quotes from the piece which reminded me so much of what informs the experiences of many traders.
“A careful chronicler of his own trades who spares himself no embarrassment in posting his results online”
TRANSPARENCY in the best form, at its most risky and rewarding format, is definitely found in live real-time reports on social media.
The funny part is that although the “Mystery Man” shares on twitter, almost no-one knows what he looks like. Sadly, it’s usually the reverse. We see lots of grandstanding from many traders with virtually no focus on the process and craft of trading.
PROCESS not PRODUCTS, TRADING not TOYS:
“The kind of person who wastes money on that stuff would never have made it this far,” says Uemura, whom traders know as Kemu. “Self-control is so important. You have to conserve your assets. That’s what insulates you from the downturns and gives you the ammunition to make money.”
It seems regardless of the investment approach, some of the best players in the market and in business are not motivated by the material trappings which their success can pay for. Many are fine with investing most of their available time on continued excellence, passion projects including charities and simple pleasures during their leisure time. In fact, one thing the mystery man spent a lot of time on, almost at the expense of graduating from college, was video game playing.
CUTTING your LOSSES short is not an cliche, it is essential
“…just like in the real world, the more opponents you have, the worse your chances are,” he says. “You lose nothing by running.” (quoting a colleague of the mystery man)
“That’s how he now plays the stock market. [The mystery man said] he bets wrong four out of 10 times. The trick is to sell the losers fast while letting the winners ride. For him, a well-played stop-loss is just about the most beautiful trade there is.”
“He began by betting on what he thought were undervalued companies, and he lost money…He found success after a friend gave him a piece of advice: Forget the fundamentals. [HE] doesn’t subscribe to the Nikkei or any other newspaper. Nor does he scrutinize earnings reports or parse central bank statements or spend much time looking at moving averages or other price chart patterns normally associated with technical trading.”
“Instead, he keeps his ears open in chat rooms and his eyes glued to bid-ask screens, on which he monitors the market’s appetite for its 300 most heavily traded stocks. If there’s one basic principle, he says — repeatedly and slowly, as if instructing a child — it is this: “Buy stocks that are being bought, and sell stocks that are being sold.”
“According to Hersh Shefrin, professor of behavioral finance at Santa Clara University in California (and author of Beyond Greed and Fear, a 2007 book about the role of psychology in investing) ..the human mind is hard-wired to bet on reversals…[a/k/a] the gambler’s fallacy. At a craps table, for example, players tend to shift their bets toward numbers that haven’t come up, even though the odds don’t change with each roll of the dice. In the same way, even the savviest investor has a built-in bias for buying when stocks fall and selling when they go up…If you can get yourself out of that mindset and bet against the crowd, who act instinctively, then you have an opportunity to make money,” Shefrin says.”
“Two years after learning to follow the momentum, [the mystery man said] he’d made 80 million yen day trading on the sly at the office. In late 2003, he quit the salaryman life to work the market full time.”
The mystery man, started in 2000 with 1 Million Yen (or about $10,000 USD) and “has amassed a fortune that he says now exceeds 16 billion yen.” THAT’s roughly about 125 to 130 MILLION USD based on exchange rates during the writing of this post.
This was a person, not from business school, who was motivated for “love of the game” (whether it was pachinko, poker or publicly traded stocks) and able to remain focused and cool while taking managed risk decisions and keeping losses under control. The biggest trade he took was to leave behind a “safe”, steady job of designing shock absorbers and pursue, in the words of Paulo Coelho, his “personal legend”. His story is inspiring and educational.
Originally published at www.rooster360.com on August 8, 2015.