http://washingtonpost.com/wp-srv/business/longterm/biztalk/grasso1/101987-2.htm One Trader's Ghastly Day

-- John Ainsworth (ainsje@cstone.net), September 21, 1999

Answers

Speaking of which --

a/o 8:00 AM Pacific, Dow down almost 200, gold up about 5.00 an ounce. Might be an interesting day.

-- ariZONEa (watching@dow.drop), September 21, 1999.

Another source of stories on "Black Monday" '87 crash

http://cnnfn.com/markets/crash/

-- Chris (#$%^&@pond.com), September 21, 1999.

I was there! Luckily I was a junior trader with not much to lose and alot to learn!

"This market's going to be tested again," Mehl said, turning to a visitor to explain his strategy. Still, Mehl said, while the Dow was already at a record low, and while he believed it would go lower again before the day was through, he was confident that he had seen the worst, and that now was the time to be a buyer of stock.

(Thought process contradicts actions, if he thinks it may go down again, he should not buy yet)

"Let's put our money where our mouth is and find some stocks to buy," Mehl said.

(Put money where the mind is would work better. (turned out that his mind was right if he had waited to buy later in the day or the next day)

Mehl huddled with Hunter and two other traders. "Unless the world's coming to an end six months from now and we just don't know it, this market's out of whack," Mehl told them. "If the world's coming to an end, I don't feel so bad."

(Markets crashing don't mean the end of the world. We have survived market crashes before)

The traders grew more angry, more profane.

(Good traders should ideally not be emotional)

The Dow Jones industrial average was down about 250 points, a drop so steep it was almost unimaginable on Friday. Mehl, who directs stock trading for his firm as well as its clients, thought the worst was over.

(In general people don't think that 10 standard deviation events can ever occur in their lifetimes. However, in reality, 10 standard deviation events occur much more frequently than is estimated by a normal bell curve. Moreover, instead of "hoping" for mean reversion, one should have contingencies for extreme cases)

"Eight days ago that stock was at $82," Mehl snapped. "I don't feel like shorting it at $59."

(Profit and loss are not determined by absolute prices but by the relative changes in prices however irrational)

"I can't imagine it going any lower than that," Mehl said when the Dow was down 400. "I guess I should learn to imagine anything."

(Imagine all worst cases, ignore best cases)

-- Sandwich (anon@anon.com), September 21, 1999.