Read about the Academy Experience
08/02/2011: Subotnik Trading Floor
Posted by Administrator on July 27, 2011 at 5:19 PM EDT
When You're a Shark, You're a Shark all the Way
When trading securities, the game is to make as much money as possible. The central problem is that we're playing the game with incomplete information, which means that keeping information to one's self helps to make a profit.
Today the Entrepreneurship Track of the Baruch Leadership Academy studied trading strategies. Two simple strategies are the basis for several analysts and casual investors market behaviors. There is the "long strategy": buy low, sell high. This is a pretty straightforward approach. If a security's price looks like it will end high, it's better to have a long position.
The other basic strategy, known as the "short position" or the "short strategy" or sometimes "shorting," reverses the order of the transaction: buy high, sell low. This market stance is a little more complicated. Usually, the securities have to be borrowed from a third party. When selling short, the trader hopes to profit from a drop in prices of assets between the sale and the repurchase of the security. The seller will pay less to buy the assets than the seller received for selling them, for example borrow at $25, sell at $24, and keep $1 from the sale. The short stance will incur a loss if the price of the assets rises. If a security's price looks like it will end low, it's better to have a short position.
We were introduced to several components of marketing analyst software and the kinds of securities orders they're related to. We ran multiple simulations practicing with these tools and concepts, placing limit orders and market orders when needed, and we found out how small mistakes can lead to severe consequences in this kind of highly competitive environment. When sharks are sharks and blood is in the water, traders must watch where they swim.