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Shock Markets: Trading Lessons for Volatile Times

Book Description

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

  1. Title Page
  2. Copyright Page
  3. Dedication Page
  4. Contents at a Glance
  5. Table of Contents
  6. Acknowledgments
  7. About the Authors
  8. 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
    5. Making Trading Decisions
    6. Looking Ahead
    7. Endnotes
  9. 2. Five Simple Questions
    1. Which Market(s)?
    2. Which Direction?
    3. How Much?
    4. How Long?
    5. How Risky?
    6. A Sixth Question
    7. Additional Trading Lessons
    8. Endnotes
  10. 3. Fads, Fashions, and Bubbles
    1. Is It Really a Bubble?
    2. Can You Profit from “Bubbles”?
    3. Is the Market Smart?
    4. Trading Lessons
    5. Endnotes
  11. 4. Earnings and Corporate Announcements
    1. Earnings
    2. New Products—Videogames
    3. Mergers and Acquisitions
    4. Changes at the Top
    5. Regulatory Actions and Lawsuits
    6. Trading Lessons
    7. Endnotes
  12. 5. Rumor Has It
    1. Rumors
    2. Position Announcements
    3. Shorted Companies Bite Back
    4. Trading Lessons
    5. Endnotes
  13. 6. Political Economy
    1. Political Shocks—Terrorist Actions, Wars, Assassinations, and Policy Actions
    2. The 2000 U.S. Presidential Election
    3. Expropriation
    4. Cooling the Economy and Markets
    5. Central Banks to the Rescue
    6. Central Banks as Speculators
    7. Trading Lessons
    8. Endnotes
  14. 7. Predatory and Insider Trading
    1. Predatory Trading
    2. Speculative Attacks—“If at First You Don’t Succeed...”
    3. LIBOR
    4. Gunning for Stops
    5. Informed Trading
    6. Trading Lessons
    7. Endnotes
  15. 8. Crashes, Trading Glitches, and Fat-Finger Trades
    1. The May 6, 2010 “Flash Crash”
    2. October 19, 1987 Stock Market Crash
    3. Other Stock Market Crashes
    4. Fat-Finger Trades
    5. Trading Glitches
    6. Trading Lessons
    7. Endnotes
  16. 9. Man Versus Machine
    1. Algorithmic and High-Frequency Trading
    2. Avoiding HFT
    3. Trading Lessons
    4. Endnotes
  17. 10. Flight to Safety
    1. Reducing Risk
    2. Credit Default Swaps
    3. Nature of the Crisis
    4. Gold
    5. Treasuries
    6. Currencies
    7. The Paradox of Wealth Preservation
    8. What Is Safe?
    9. Trading Lessons
    10. Endnotes
  18. 11. Why Most Traders Lose Money
    1. The Banks
    2. Behavioral Finance
    3. A Tale of Two Losses
    4. Warren Buffet and EFH Bonds
    5. Trading Lessons
    6. Endnotes
  19. 12. Developing a Trading Game Plan
    1. Trading Edge and Trader Type
    2. Trading Thesis
    3. Making a Trading Game Plan
    4. Trade Monitoring and Contingency Plan
    5. Trade Completion and Evaluation
    6. The Message in the Behavior of Market Prices
    7. Trading After a Market Shock
    8. Shocks: Scheduled and Unscheduled
    9. Trading Maxims
    10. Endnotes
  20. Index
  21. Financial Times Press