Japan’s Day Traders

Japan’s Day Traders Profit From Market Volatility in Abenomics’s Wake (Bloomberg, Aug 10, 2013):

Sitting before a cluster of 10 computer screens in mid-June at his apartment with the drapes shut, Naoki Murakami makes $3,500 in a few seconds betting that Tokyo Electric Power  stock will fall a fraction of a percent. The 34-year-old day trader borrows 50,000 shares from his broker and sells them at 558 yen ($5.58) each. As the stock falls, he repeats the process three times, selling at 557, 556, and 555 yen. When the stock hits 554 yen he buys 200,000 shares, the number he had borrowed. The series of trades—short sales—nets him $2,500. Seconds later he sells Tokyo Electric short again, earning $1,000 more. Within minutes of the market opening, the former water-purifier salesman had made more than the average Japanese worker earns in a month.

Murakami calls himself the smallest player in a group of seven day traders who chat with each other online, vacation together, and cumulatively buy and sell almost $100 million in stocks each day, using borrowed money to increase the size of their bets.

Murakami says he’s made $350,000 this year, about three times his average take in the previous eight years. One of Murakami’s friends, who goes by the blog name Tesuta, says looser margin rules let him leverage $4.5 million in cash into as much as $67 million in daily stock bets. Tesuta holds up a handwritten ledger and shows his account balance at brokerage firm SBI Holdings as proof. He asked that his name not be cited for privacy reasons. On an average day, the group of seven day traders to which Murakami and Tesuta belong buy and sell $80 million to $100 million in Japanese stocks, according to estimates from the members. “These guys are pros,” says Jesper Koll, head of Japan equity research at JPMorgan Chase in Tokyo. “They’re acting like a proprietary trading desk at a major investment bank.”

Making money isn’t easy, Murakami says. With $100,000 in savings and no experience in the market, he started trading stocks from a desktop PC in 2005. Within two months he’d lost half his stake. He kept improving his results, but trading in Japan’s stagnant market was like trying to sail a boat without any wind—until this year. “When shares don’t move, you can’t get an opening for a trade,” he says. “Now that the market is moving, I feel like I have to make the most of it.”

The bottom line: Individuals accounted for more than 40 percent of Japan’s stock trading volume in May, up from 27 percent in November.

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