As I mentioned in my very first post about wealth creation, I have been a proprietary trader on Wall Street for several years before focusing exclusively on web development. My love affair with stocks, trading, and Wall Street started at a relatively young age. In fact, at the age of 16 while my friends were hanging out, I would spend my time reading the Wall Street Journal, trying to decipher financial jargon and understand how to make money trading. I was particularly fascinated with the latter. I wanted to try and make sense of the stock fluctuations, to find patterns and capitalize on them.
Back then commissions were very high when compared to what they are today. I remember being somewhat puzzled by such high commissions and how they could affect profitability on high frequency trading. I was also very curious as to how one could capitalize on fast moving markets if you had to call your orders in. Remember that back then there was no direct access trading available to the little guy. All of this intrigued me very much and I told myself one day I would learn how to make money trading.
Make Money Trading
Fast forward 10 years, I was fresh out of college with an undergraduate degree in Business Administration. Needless to say, I majored in Finance and Investments! By that time, I had already made quite a few stock transactions.
In mid 90s IPOs were all the rage. I remember opening up multiple accounts under different names with different brokers. I had one account, my girlfriend had another one. Then, we both had a third one as joint account holders. Multiply this by 5-6 brokers and you get the picture. Why, you may ask? Because brokers considered each account separate. As a result, I was able to put in multiple indications of interest for the hottest IPOs. This increased our overall chances of shares allocations which we would then flip the very first day of trading for a quick profit. Remember that back then IPOs would jump considerably on the first day of trading. Gap ups of 30+ points were not unheard of. All of this lasted for a good 5 years until year 2000 came, that is.
By that time, I had already been observing several discrepancies in the stock markets. In fact, bid/ask spreads from different exchanges on certain stocks were not always “in line”. It seemed to me there were risk free profits up for grabs. More specifically, under certain market conditions and times of the day, one could buy the same stock cheaper or sell it higher than the prevailing market price at that exact time. I literally had to pinch myself multiple times when I first saw this. I had just found a pure arbitrage opportunity! And I was definitely not gonna let it go!