Then there is the fact that companies that fail disappear. The averages must therefore over time rise (see the composition of the Dow a hundred years ago). There is also the explosive growth of mutual funds during the 70s and 80s. These funds, intentionally or not, inflated values because promises of riches brought in business. When companies began massaging their results to curry favor with fund managers, the die was cast.
So this was like trading in the late 90s?
- Thread starter Pekelo
- Start date
Any rookie trader (not saying you are one, but with such a statement do assume so) who doesn't backtest is like a person who has never bothered to study history.
Backtesting illuminates perceptions and misconceptions about market behavior.
Go into a trading career without backtesting is like starting a business without doing your homework.
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Sounds like it was much easier to make money in the late 90s than today.
1999 was insane
My favorite trade was to buy tech stocks right before earnings and sell on the report.
Cisco,Dell,JDSU, Brcm, qcom, pmcs, yhoo were like shooting fish in a barrel. Was nothing to make 5 to 10K per trade nearly every single time.
Glad to hear you were making lots of money then. I'm curious how did you manage the risk with this strategy when the dot-com bust arrived?
I started watching the markets in early 1999 and eventually opened my first account in late 1999.
The first six months overall were quite choppy from what i recall, and looking at historic data to confirm i see there were 3 down months in the first half of the year for the Nasdaq composite.
The second half of the year was all up and the Nasdaq went up 100% from mid 1999 to march 2000.
I was working in IT full time back then and there was another programmer sat next to me who was trading IPOs with market orders at the open.
He made a total of about 100K in 1999 and then he traded an IPO in early 2000 and lost it all plus more.
He bought 5000 shares with a market order and it opened at its high and crashed 30 dollars in a few days.
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Everybody was making money. Cab drivers were trading on laptops between fares. Waiters gave hot stock tips. It was so easy that you knew that something was not right.
The Nasdaq started crashing in March of 2000.
From your description, it seems Nasdaq had far more volatility at that time even though the upsurge was higher than today. I wonder why volatility has disappeared from the stock markets today. It is not just U.S. It is a phenomenon happening in global stock markets.
Any one heard stories of people quitting their jobs to trade stocks in the late 1990s? So far, do you know people who did just that today? That could be the ultimate warning sign.