1) News arbitrage” and I’ll demonstrate via an example. Let’s say some data about oil reserves was going to come out at 10am. Trader A would pick a basket of relatively low volatile oil stocks. He’d have an idea of how the data was going to come out and how the stocks would react. He’d make his bet. If the data came out differently than he expected, he’d get out instantly. If the data came out as he expected but the stocks reacted differently than he thought they should, he’d be out within five seconds. He had no religion when it came to the markets. If they didn’t move the way he wanted he didn’t come up conspiracy theories to support his case. He was out. He didn’t lose money. That was his only religion. “The market is too tough,” he told me. “if something happened different than I expected, I was out.” I was about to write that he said, “I’d get the hell out.” But Trader A didn’t say “Hell”. If the stocks reacted like he wanted them to, he’d stay in for about two minutes tops, because he knew eventually they’d reverse direction when the traders had their fill. 2) The Trader A Technique, part 2. He always went into stocks that were low volatility. He didn’t want to take the chance he’d go to the bathroom, and then come back to his computer and a stock would be 10% against him. He’d get comfortable with a stock like HPQ. He’d learn how it works. He’d watch how the specialists on the floor of the NYSE would play the stock. He’d learn who the major players were in the stock. If someone was selling 3,000,000 shares he’d watch and wait for the selling to be over. Then he’d start buying. If the seller started again, he’d get out. Otherwise, he’d ride the stock for a few minutes and then get out. He had about five stocks like this and he told me it would take a few months to really learn the behavior of some stocks. 3) The Trader A Technique, part 3. He studied his own statistics every night. For instance, one time he noticed that for several months he had basically broken even on Ford stock. Ford was one of the stocks he had spent months studying to get used to its behavior. He thought Ford was going to be a big money maker for him. But when he saw that over time he had broken even on Ford over a several month period, he dropped it. “I didn’t understand it like I thought I did,” he said. 4) TTAT, part 4. He would take a basket of stocks, like all the natural gas stocks. They all traded together. If one of them was veering off, i.e. not trading with the rest, he’d look to see if there were big sellers or any big news. If there was no big news, he’d go long the stock. If he lost money on it after a few seconds, he’d get out of it. Otherwise, he’d wait for it to trade with the rest of the group.