The following are some of the top traders who love the market. They will talk about their own experience and explain the mental process of moving towards successful trading. What are the similarities between the strategies and cognitive structures of these excellent traders? How do readers use this information to improve their trading skills and operational performance?

In the footsteps of the master of foreign exchange: Bernard Appetit

BNP Paribas is part of the BNP Paribas Group, an international bank with branches in more than 60 countries worldwide. The total assets of Paris Bar Group exceed US$269 billion. Bernard Appetit is the head of BNP Paribas’ global equity derivatives trading. He is mainly engaged in trading derivative products such as stock options and index options, covering all major markets and some emerging markets, such as Brazil, Argentina, Mexico, and most of the Southeast Asian countries, and now Hungary, Russia, and Poland have been added.

"We made a lot of money very steadily!"

Discussion topics:

Bottom-up analysis

Dynamic Analysis

The "Swiss Method": Objective and Neutral

Risk and probability analysis

Best dispersion combination

Traits of top traders

Stop loss

Bottom-up analysis: Experts who master the odds

Bernard Opetit emphasized that the main target was individual companies; he studied a company and became an expert in that company. The opposite strategy is from top to bottom, first analyzing national policies and industries and then individual companies. Bernard Opetit spent countless hours researching trading partners, trying his best to grasp the mentality of the company's management, shareholders, employees, correspondent banks, creditors, debtors, and the company's stock traders. He calculated the possible future development and stock price reaction. The odds of winning will naturally surpass those analysts who rely on second-hand information by cutting in from this perspective and directly collecting information.

Case study: Northwest Airlines

"In 1993, we intervened in Northwest Airlines. The company had a financing merger and acquisition in 1989. Then, the entire aviation industry fell into a severe recession, with an overall loss of billions of dollars, and Northwest Airlines' performance plummeted. As observed from the balance sheet, Northwest Airlines had high bank debt at the time. Still, the number of bond issuances was minimal (if memory is correct, the total debt is about six or seven billion U.S. dollars, except 500 million U.S. dollars in bonds. The rest are bank debts). Due to the short-term trouble again, the company threatened bankruptcy. The company’s senior executives held strong negotiations with the bank group, employees, and suppliers. As long as the negotiating opponent would suffer from the bankruptcy of Northwest Airlines, the company’s attitude is callous."

"Northwest Airlines began to win some concessions. The bank agreed to cancel interest charges and the share price of the collateral, and Boeing also agreed to delay the delivery of the aircraft payment. To achieve these significant results, Northwest Airlines assumed a posture of bankruptcy. Every day, They always say through the media:'We intend to declare bankruptcy.' This is also the reason why the price of corporate bonds continues to fall. In the end, the price of a dollar worth of bonds is only 10 cents."

"According to my analysis, it is impossible for the company to go bankrupt. I think all this is a scary method. Of course, this method is very beneficial to the company, forcing the negotiating opponent to make concessions. For us, it is meaningless to engage in bond trading because of the scale. It’s too small. So we started buying Northwest Airlines’ debts. Of course, the results may be disastrous, but I believe the odds are higher. In short, we believe that Northwest Airlines is playing scary tricks."

"Once the negotiating opponent made concessions, everything miraculously returned to normal. The company began to announce some beautiful data. The bond price rebounded to parity, and we also made four or five times the profit. Later, the company went public, and the operating performance was still excellent. ideal."

"The whole transaction involves a lot of basic analysis. Modern basic analysis requires dynamic research, especially in such special circumstances."

"Euro Disney is another very similar case. At that time, there was a type of Euro Disney convertible corporate bonds in circulation; when they were in trouble, just like Northwest Airlines, they used the media to create various noises to exaggerate the situation. Degree. They play with banks, shareholders, and everyone. But they don’t touch bonds, and the whole event has the same development, including our profits."

"In the case of Euro Disney, bonds are convertible bonds, which are derivative trading instruments. It may be for this reason that allows us to grasp trading opportunities with price chaos because many derivatives traders are not familiar with fundamental securities, and fundamentally Securities traders are not familiar with derivatives. If you understand both aspects at the same time, you can gain an advantage."

In-depth strategic thinking allows you to see things that others cannot see and profit from it. Of course, this may not always be the case. An event may not have information or hidden issues that everyone has overlooked. In addition, hard work may not give you unique insights. Special insights need to be cultivated through experience. Tracking the company's development through media reports is an excellent way to gain experience.

Know all the players and pay attention to their words and actions. The so-called players refer to people with a non-negligible influence, including groups. For example, the union may be an essential player.

Understand what they should say for their benefit or what benefits they say may bring. What is the motivation? What is the hidden issue? As long as interest is involved, any conversation cannot be trusted.

Who is the biggest loser?

Who are the biggest beneficiaries?

For each interest group, what are the best, second, and third outcomes they hope to happen?

Where is the focus and influence of each interest group's manipulation of the development of the incident?

How will each group react to each result? If one person does this, how might other people's reactions and subsequent development be?

Thinking about company events in this way is a skill that needs time to develop. However, this can also add to the fun of trading. Finally, remember that for Opetit, prices are driven by corporate events, and some influential people shape corporate events. Power represents influence. Therefore, in the entire causal relationship of price changes, you should first consider: "Who has influence?" It is important to remember that many people have an influence on a particular company or a specific situation. Always keep an open mind and an objective stand. Like the story described by Opetit, the market is often a game of power. The Northwest Airlines case involved many people, including banks. The constant flow of power and influence makes it more difficult and more enjoyable for you to track company events.

Dynamic Analysis

Bernard Opetit introduced an exciting concept. "Basic analysis is critical, but so is what I call dynamic analysis'. You want to know what happened to a particular company, what someone did, what the purpose is when you plan to do it, and to what extent. Anything. There must be a story behind the incident, and you must understand this story."

According to Bernard Opetit, corporate events cannot develop in a vacuum. There must be a context. It is essential to understand the entire causal relationship and background.

"As far as stock trading is concerned, I think 99% of technical analysis is nonsense. This statement may not apply to foreign exchange, most commodities, indices, and interest rates. Technical analysis is critical in these latter areas because There is no correct uniform approach in this market. Even if your operation is quite unsatisfactory, the result may be better than simply ignoring it. However, I still want to emphasize that it is important to figure out the story behind it who is going to do what." The protagonist may be Not the suppliers and shareholders of banks and companies, but the government, supply/demand relations, and producers.

"All roads lead to Rome, and you can also make money through technical analysis alone. Although I don't know how to do it, I believe it can be done."

In the case of Northwest Airlines, Opetit used dynamic analysis. He wants to know the "story" in it. What is the motivation? Where is the focus of influence (in other words, who is the protagonist)? The analysis is dynamic because the situation is not static. What he cares about is not last year's income statement and balance sheet. Operate deals with living and developing objects, which may change at any time and significantly impact stock prices.

However, the dynamic analysis may not always be the most suitable analysis tool. Bernard Opetit changed the method of accounting with different situations and types of transactions. This is very important; you must understand the kind of market and time structure you are trading. For example, technical analysis is more appropriate than fundamental analysis in a highly liquid market for a day-off transaction. From another perspective, if the basis of the transaction is based on the economic outlook of a particular country in the coming months, fundamental analysis should be more appropriate.

"I engage in many different types of transactions. For example, convertible arbitrage is one of them. This is a relatively pure derivative transaction. The motivation may be to buy implied price volatility and short historical price volatility. This type of transaction is more suitable for technical analysis. For risk arbitrage, the nature of the transaction is quite different."