STOCK HACKS
Black Monday: The Day That Changed The Stock Market
On October 19th, 1987 the Dow Jones fell by 508 points — the single worst one-day drop in the history of the market — causing the NYSE directors to implement a new rule in 1988: Trading Curbs. Did they hurt us, or help us?
October 19th, 1987 people awoke thinking it was just another mundane Monday. Tired, grumpy, and resenting the thought of another long work week. Then, at 9:30 am pst, the opening bell to the Stock Market rang. Shortly after, virtually everyone in America, (and around the world), knew this was no ordinary Monday.
It would later be dubbed: Black Monday
The Day That Changed The Rules
That ordinary Monday turned out to be the worst single-day percentage drop the Dow Jones Industrial Average (DJIA) has ever experienced. Worse even than the Stock Market crash in 1929 which caused the Great Depression.
Ironically, that one happens to be called Black Tuesday.
On Black Monday, the DJIA fell 508 points (22.6%), accompanied by crashes in the futures exchanges and options markets. — Source: Wikipedia
Let me stop here for a second.
I’m not writing a historical account of Black Monday. That’s what we have Wikipedia for. Instead, I’m writing a story about the repercussions of that day were, and how they still affect us to this day.
In my opinion, the crash that shook the world was just the tip of the iceberg. Underneath, deep down in the depths of those frigid waters, is where the real problem lies.
When Wall Street regulators of the time decided to peek below the surface and see how deep this chunk of ice grew, they were shocked to find an entire ecosystem thriving down there in the depths.
Anyway. . .
There are a few theories as to how the crash came on so suddenly. Leading among them, (and likely the cause), is the theory that large-scale Index Arbitrage Trading was the driving force behind the crash. It’s not 100% proven that high-frequency trading caused the Black Monday market crash.
But if I were a betting man — and I’m most certainly a betting man — then I would put my life savings on those arbitrage firms being the cause.
Many changes came about because of Black Monday. Highest among them being the new rules put in place by the NYSE Directors in 1988, called Trading Curbs, as an attempt to get a handle on arbitrage trading.
As I’ve said, I won’t bore you with a history lesson, so we’ll sum this section up and move on to the exciting stuff.
Starting with the crash in 1987 — Then some key events over the next year
- Dow Jones Industrial Average fell by 508 points, or a(22.6%), making it the highest one-day drop by percentage in the index’s history
- Federal Reserve provides market liquidity to meet unprecedented demands for credit
- Dow Jones begins to recover in November 1987
- NYSE Directors institute new rules regarding trading curbs in 1988
- The initial threshold for a trading curb to occur was if the Dow Jones fluctuated either up or down by 50 points, roughly 2% of its market cap at the time.
- In 1988, the Directors of the NYSE voted to change it to 175 points n order to keep it around roughly 2%.
Abuse of Power
Look, I understand what the trading curbs are supposed to be for, and it did start out as a good thing. It was so these high-frequency traders — or rather, computers — couldn’t keep slamming the markets and the little guys and gals with their massive trades.
For example, and I’ll make this as simple as possible so that in case someone like myself is out there reading this they’ll understand: These firms will buy millions of shares of a stock, then sell them all seconds later for a penny or two more.
They repeat this over, and over again.
One of the justifications for allowing this to happen is because they have grown so large that they provide liquidity to the markets. I can’t argue with that point either.
I mean, think of this. Who would buy the 3 1/2 shares of ROKU that you are trying to sell on Robinhood if not them?
It would take a very long time for us to get our orders filled if there weren’t market makers out there.
For the experienced traders reading this, no I haven’t mixed up Market Makers and Arbitrage Firms. What I’m getting at is that in 2020, (perhaps it happened earlier but this is the year that I really researched it), the Arbitrage Firms are making individual deals with big brokerage firms and are essentially becoming Market Makers.
Robinhood has many lawsuits against them at the moment, but let’s not forget this one:
The Automated Clearing House that Robinhood was using gave us the bad deal 80% of the time and the cheaper, good deal only 20%. It’s supposed to be the other way around — legally.
Let’s not forget how the stock market as a whole, (of course Robinhood happens to be at the center of this controversy as well), screwed over hundreds, maybe thousands of average, everyday traders like you and me:
When the Millennials’ favorite investing app Robinhood halted trading on Jan. 28th, 2021 — during the GameStop (GME) Short Squeeze — not allowing them to buy any more shares, a lot of people began to question the obscure rules that Wall Street has tucked away in their pockets.
And this leads us to my favorite act of corruption that wall street has been employing. . .
The Magical Lever
It’s when a stock, or group of stocks, are trading with abnormal amounts of volume and the regulatory body in charge of monitoring these things decides it’s time to pull the plug so to speak. They halt trading on whatever stock is experiencing the issue.
Now I got your attention, huh?
Many people think that this power is being abused, rather than a deterrent for a market crash. I tend to agree with that sentiment.
How many times have you read in recent months about a stock that got it’s brains squeezed out, causing the Wall Street elites to lose millions — and the average retail trader like you or me to finally have a good day, and then. . .
Click
Robinhood, Webull, whoever — shuts it down
That magic lever intended to protect the market. Yeah, looks more like it’s meant to protect their cooperate friends from loosing to much money.
Conclusion
I’m not saying to stay out of the markets or fear that the system is too corrupt to participate. In fact, I’m implying the opposite.
Just go in knowing that it’s corrupt and rigged against the average retail trader. Do this and you’ll start think differently about your investments.
Logical picks no longer seem logical — why buy Apple (a great company with a fantastic balance sheet) when you can buy some no-name, Penny stock that you looked up and noticed the top board members and other significant share holders have been loading up on?
That’s a tell-tell sign something internal is going on with that stock. Something that the top brass know that we don’t.
They’ll dump the shares eventually, so don’t look at these opportunities as the long term type of investments, but rather the “get in and sell as soon as Shit gets shaky!” type of investments.
Use a website like Finviz.com or whatever your favorite one is to track the recent insider buying going on with stocks.
Look for stocks with large amounts of buying or selling by individuals close to the company. The closer the better.
You’ll find the rhythm of it after a few trades, get the feel for how these inside trades work and how long they typically last.
Once you do and you begin to make nice profits of off them, they’ll get less annoying and irritating. I mean, we all hate corruption as watching the rich get richer.
Yet — we love it more when we are able to get our own slice of the pie.
Just be careful when though. . .
Remember what happens when too many people get their slice of the pie.
Click
Magic lever will turn off your ability to buy/sell said stock that you discovered, thereby making you sustain losses, while the elites straight out their accounts.
This is not financial advice — be careful and watch your own ass before anything else!
