Navinda Sarao: The Bedroom Trader Who Wiped out $1 Trillion
In less than 5 minutes, more than $1 trillion of value is wiped out from American companies,
“look at a price chart it looked like a a kind of runaway elevant”
{getToc} $title={Table of Contents}
but behind all this is not a devastating event or even the doings of a giant financial institution, instead The chaos is orchestrated by someone that belongs more to Wall Street bats than actual Wall Street.
It is caused by a single loone Trader operating from a bedroom, in his parent's house, he’s nickname is “The Hound of houndslow” he has become a legend among man, he regularly makes more money in a day of trading than his parents' house is worth,
“you know if he really did as the US prosecutors alleged make 40 million bucks you know three people have now said to me well then why the heck is he still living on our street.”
This is the story of the legendary traitor, who beat Wall Street, oh and the second miracle that day Jim Kramer for once made a right prediction by wanting to buy the dip,
“so remember I buy $1,049 I Now flip it at 9 I just paid I just paid 500”
From India to UK: starting the Conquest
Amidst a desolate town in Punjabi, is a young family striving to survive with their four-year-old son named “Navinda Sarao”,
feeling the full brunt of poverty they decide to look for greener pastures, their plan giving their son the best opportunity to make lots of money at some point and their search lends them in London the City of Dreams.
After landing in London they quickly realize it's going to take more than just one job to make ends meet
Says By Stredy
“if I learned one thing from my poor private Equity buddies in London it's life here needs a lot of money.”
On most days, they struggle to put a meal on the table and the house prices are nowhere near affordable,
Says by Stredy
“you have to remember that the'80s was when we had a global economic boom and with that asset prices were shooting through the roof.”
To make ends meet, Navinda mother is forced to work two jobs, one of the them as a pharmacy assistant but even that isn't enough for the young family, they are forced to move to Hounslow, where they buy a cheaper house next To the Heathrow Airport,
this is where Navinda entire life show more from an average citizen to one of the world's greatest Traders.
Nav Grew up in Hounslow
Hounslow was is a typical middle-income neighborhood, no flashy Ferrari no extravagant Mansions just friends, neighbors, children playing in the local park and cozy cafes where locals gather for a cup of coffee and that’s there main character
Man Calling 📞
“but Navinda was just totally totally unique really he was just such an odd and unusual character.”
He often avoids hanging out with people, he spends most of his time in his bedroom watching football and sometimes burying himself in meaningless chores. but there's one seemingly meaningless activity that will teach him how to make millions, playing FIFA when they buy a PlayStation it becomes his only hobby, he locks himself in his bedroom and learns everything about the game so much so that he becomes one of the top 200 best FIFA Players in the world.
What Navinda does, is he observes his opponent's game checking their tactics and strategies, then does the complete opposite.
Says by Stredy
“exactly how George Soros or Peter Tail became billionaires.”
For an instance if a player is playing on the left wing a lot he attacks on the right wing and puts his best defenders on the left wing.
It's these FIFA skills that will catapult him to the world of trading and make him a legend among men,
similar to how a set of Legends will get together in Bali very soon, you wake up in a beautiful Bali Villa, go for a workout get some deep work done and have some stimulating discussions in the evening with people who are as ambitious as you are, in short you get infinite amounts of work done and you build friendships that will change your life forever.
How Navinda Started as Young Adult with just $300
Computer Science, Student Loans and Autistic Trading
In 2001 Navinda joins University to study a degree in computer science and he lines for the government's cheap student Loans, to help his parents with upkeep
“so Navinda was in a lot of ways quite an ordinary kid from a working class neighborhood underneath the Heathrow flight path, had a bit of a a Gob on him, was always is very kind of fast and quick witted, but also a little bit quick to kind of anger he had this gift for multiplication and for for Rapid thinking and for arithmetic.”
How Navinda start Trading
while in college he rents out a room and shares it with a roommate and thanks to his Persistent desire to learn new things, his roommate introduces him to trading, something he will become obsessed with over the next one decade.
Says by Stredy
“ you see, just like I have slightly Psychopathic Tendencies Navinda has been diagnosed with an autism spectrum disorder, that amplifies his obsessive nature, this allows him to do one task over an extended period of time without stopping.”
and this ability means only one thing he can make millions minting the markets.
And so he embarks on a journey, he has a quick stint as a telephone salesperson and as a bank admin at Bank of America, but he soon realizes that being a normie is not his vision for life, he wants a seat at the table and his ambition brings him to a job ad
“he opens a newspaper and it's the evening standard, uh and there's an advert in there uh which says wanted Futures Traders must work well under pression.”
Exactly what he's looking for.
Navinda First Trading Job
Getting started with trading and his scalping strategy;
Navinda had already started learning trading, while still on campus with his student loans and he lost most of his money, a small price to pay for his gigantic Mission, but if he thought working as a Trader was going to be a walk in the park boy is he wrong, because no sooner has he applied to the job advert then he finds himself in the hot seat.
“so Navinda was one of the very first people through their door and it was a bit of an experiment at that point in Time,”
The firm only picks the top 1% of applicants, after which they're subjected to a vigorous interview process,
With three stages;
- Mental Agility Stage.
- Math & Pattern Recognition.
- Hypothetical Trading.
Says by Stredy
“Many of my former colleagues work at hedge funds and it's a very common thing for hedge funds to put their newb Traders through a rigorous application and training program, before they can start the job, they pay you hundreds of thousands to go through months of trading and not even everyone gets accepted after the training, but the people who do they they have a bright future at the fund.”
No applicant is a match for Navinda, after the interview process, Navinda together with a bunch of other rookies, join the firm and begin trading.
Navinda First Day As a Trader
“yeah well we're on Fee Text of trading floor, just outside of London here you can see there's about two dozen Traders here this morning most people start at about 7:00 a.m. and they carry on right until uh the market that They're trading in closes uh.”
Navinda Followed his dream
The firm is located in the outskirts of London, while his parents still think he works at the Bank of America, our boy is busy following his dreams, every morning he uses his parents old Volkswagen car to commute, sometimes stopping by at a nearby McDonald's to chill and wait for his trades to go through,
After the 8-week intensive probation at the trading firm, he gets a seat at the table, now he has full access to the markets, no!! Not the charts The full raw Market aka “THE LADDER”
What is the ladder in Raw Market Trading?
a ladder is an electronic list of open buy and sell orders for a specific financial asset, it's organized by Price levels and updated in real time.
IMG (8)
“here you can see the orders coming in from buyers and sellers in real time with each Trader bidding their price, you can see each individual trait and how they are interacting with each, other you can place your order directly and wait for the other side to react,”
To Navinder this is just another game.
“now Navinder had this kind of background in computer games, he was incredibly focused and gifted at games like Halo and FIFA, um and you know he was able he found to sit for hours and hours at a time, just focusing on one task until he mastered it.”
For a person who was top 200 against 3 million players, in the Fifa World this is just another challenge, a challenge he will absolutely Crush.
After the training and working on Probation for a few weeks, where he proves his worth and starts making money, Navinder is given his own workstation, but his Asperger's syndrome does not allow him to be in such an environment, there's too much noise from everyone.
“Navinder is almost like a kind of enigmatic figure, at futex he has decided that he can't stand the disruption of his colleagues chatting amongst themselves getting very excited with Market moves So he moves himself to a desk completely isolated, where he can work on his own, he buys himself a pair of ear Defenders they're not headphones they're literally ear Defenders of the type that road workers use.”
he enters the office at 2 p.m. sharp on his Lambo and leaves at 9:00 p.m. trading e mini S&P futures in the Chicago Mercantile Exchange
Says by stredy
“Think of e mini S&P futures as just derivatives of the S&P 500 Index”
All day everyday he's just sitting behind a screen Carefully observing the raw Market,
“I mean by all accounts Navinder you know he didn't immediately take off but he was good and he was very patient and he had what a lot of people don't have which is amazing Focus so he could sit there and watch the ladder without placing a trade patiently for hours and hours at a time and pick his spots”
How Navinder make Thousands within seconds by Scalping.
while everyone is following the highest bids Navinder is looking for minor changes in habits and once he spots a recurring habit, He swooshes into action and quickly places a trade and in a matter of milliseconds, he makes thousands this is called “scalping” and it's what he's good at but it's equally high risk.
Working at The Firm means two things you make a few very risky trades and make a killing or you make tiny numerous trades with low risk, but lower returns everyone is doing the ladder Navinder wants the big fish, this means he has to watch the screen constantly all day waiting for that one opportunity, remember he can hyper focus for hours on end, but this means risking huge Capital, luckily his emotionless way of trading allows him to keep going with Big Lot sizes making thousands of profits per day,
In no time he's a legend in the office reverred by both “Rookies and Veterans, until something happens that drives his profits down something that he vows to address.
Navinder
“it's all a mirage”
Navinder‘S Friend
“UNI is the Matrix. they trick you Into getting into debt and make your life dependent on the job so you never question the matrix.”
Navinder
“it's depressing, Innit? I feel like the only way to get out is to get into millionaire status and then I win. I won't have to follow their rules.”
Navinder Friend
“nah, fam. even the money is fake they print all that money. they want you to chase it.”
Navinder
“I'll make the Matrix bow down to me.”
Notice Spoofing
Going all in on spoofing
Navinder has risen through the ranks of Futex to become the undisputable king of scalping, but he begins noticing his profitability in the SNP mini is declining, despite Traders being anonymous they have habits and when Navinder looks closely he realizes nine out of 10 orders go unfilled by the same Traders, people are bluffing essentially spoofing the market.
IMG (9)
“spoofing is an interesting Market structure issue basically Traders will flood the market with the intention of them with orders of a certain Security with the intention of them cancelling those orders and what that does is it artificially drives the price of that security up or down and it puts all the other traders that are working you know basically looking to trade that security in a frenzy and it just creates a very false, um price and demand and output for that security.”
These spoof orders, are extremely huge large enough to affect market prices, they are being placed automatically on the laddey by Bots and it's not just your typical day trader it's the big boys think City group getco and jump trading.
“well for Navinder he wasn't so interested in the kind of equality of the markets, he was more frustrated that his profits and his ability to kind of make money was getting squashed by these robots. we have executed 21 million shares already wow and we are not not even 3 minutes in.
The people supposed to police the market are the ones that own these Bots, Navinder Realizes to beat them, he must join them and do exactly what they are doing “spoofing the market”
Spoofing The Market
Technology has advanced super fast, the world has moved from penum computers to super fast mainframes, suddenly trades are happening at lightning speed and nine out of 10 trades are executed by Bots these algorithms have extremely high execution speeds and pattern recognition that makes scalping a joke,
They do this by following the market, if there are more sell orders, the Bots cancel the sell orders and vice versa, taking advantage of the slight changes in prices at lightning speed,
While this is not good for day Traders, certainly not for the point and click Traders like Navinder,
Navinder comes up with a genius strategy to take advantage of it, and his computer science degree comes to his rescue, to beat these Bots Navinder plan involves using a self-made algorithm placing large sell orders, with no intention of fulfilling them, Then cancelling them just before they are hit.
“uh what it would do is uh it would Place large blocks of orders, like you could specify the amount of uh ticks away from the current best bid so he would place blocks of orders usually four five and six price points away from the current best bid and they would sit there and there would be very large orders like you know 600 Lots on Each price point.”
Then when the Bots noticed that there are more sell orders on the sell side, They execute their sell orders and move to the buy side. The vendor makes a killing this way he constantly puts these large orders in the letter and just before they're executed he cancels them.
Navinder One Little Problem
But there's one little problem he must Place genuine orders using the firm's capital and wait for Market action, if he's too slow and his spoof orders get executed he risks Losing Millions.
Says by stredy
“see Navinder Carefree demeanor means he's not easily swayed by emotion, he even makes trades with volumes as large as has 5,000 Lots, while talking.”
Money to him is nothing but a game score in a matrix, it's like hitting and maintaining the highest core just like FIFA. Until Someone Notices his Mischief.
Quitting Futex
As Navinder account grows so does the firm's profits initially rookies share their profits with the firm 50/50 but Navinder is is making tens Of thousands of dollars per day, secretly spoofing the market because of his skills, Navinder is promoted to senior Trader gets an increased risk limit and leverage but his profit sharing ratio is reduced from 50:50 to 10:90, why because even one very large leverage trade can wipe down the entire firm and the firm needs to take that risk, Navinder thinks that's bulls***t, they just want his money his high score. he throws tantrums at the boss every day it's a toxic relationship That none of them wants to quit, because they are both benefiting.
The firm is getting huge commissions and profits, Navinder is getting access to the raw markets and equally more Capital but when he receives a call from authorities with a spoofing warning Navinder immediately assumes, it's his bosses,
“famously at one point in time he gets a letter from from uh The Exchange asking him to essentially explain what he's been up to and he tells them to kiss my as*”
In 2008 5 years later, Navinder quits the firm with $3 million in the bank, now his next phase will turn him into a legend among Traders.
Meeting Fake Investment Manager
He’s now free to pursue his mission, he begins concentrating on his wins, he has set up a company in the Caribbean island of Nav’s and named it conveniently “NAV SARAO MILKING MARKETS”.
his work milking the markets, his office his Houndslow bedroom but while he's doing so his accountant is planning something Sinister behind his back.
“at some point, his accountant notices that he's making millions and millions of dollars uh and says hey Navinder you know you should meet some of my friends they can help you invest your money.”
JOHN DU PONT a director at the London arm of an aisle of man-based financial advisory firm called “Montpelier” tax consult Consultants is the guy to manage his money. Du Pont tells him that as it is the banks will only give him 0.5% return on his money. but if he invests with them they could make more than 30% of course he agrees and channels all his proceeds to this Du Pont guy, he receives interests amounting to hundreds of thousands as promised. but what he doesn't know is Du Pont is secretly squandering his money and when Navinder gets arrested he will fail to raise Bail, because Du Pont will be nowhere to be found. but before that Navinder is about to make a huge killing the biggest win in His entire trading history.
Reaping Big From The 2008 Financial Crash.
2008 Crisis and Jim Cramer going nuts
IMG ()21:41
“we're down by between three and 4 and a half% generally across these markets let's talk about the speed with which we are watching this Market deteriorate Leman Brothers is going bankrupt it's JP Morgan chased to the rescued just as investment banker rival Bear Sterns seemed headed for bankruptcy.”
it feels like the end of the world banks are collapsing stocks are falling, people Are homeless the only constant are the outbursts by Jim Kramer
IMG ()22:14
“my people been in this game for 25 years and they are losing their jobs and these firms are going to go out of business and he's nuts they're nuts they know nothing”
While everyone is panicking ninder is plotting his next move and on Thursday November 28th 2008. the S&P plunges to the lowest level in a decade having rented a desk at a trading firm CFT, Navinder realizes that a tsunami is coming, if the Government bails out these Banks. the S&P will rise exponentially and bounce back or will it.
This is the biggest risk he has ever taken, but if he's right his account balance will increase by tens of millions and on the following day Navinder places his order and Bets big.
Milking The Crisis
IMG 23:04
“This bill commits up to 700 billion taxpayer dollars because a large amount of money Is necessary to have an impact on our financial system.”
after the government announces the bailout program, the next week the markets Really hard and what does our boy do. he places even more orders pumping more money into his trades, by the end of the next 2 weeks the prices rise 19% Navinder account grows from 2 million to 11 million in Just 2 weeks.
Says by stredy
“most people would retire and go spend their money or do other things but most people are not the Target demographic of This Channel and Navinder 2 is a real megalomaniac and his net worth is about to explode.”
Creating His Own Trading Software
Navinder comes out of the 2008 financial crisis unscathed, but the system has reorganized itself and has something else in store for him by 2009 Quan and Bots dominate the market. almost every trade is being done by an elgo in one way or another, they are basically scalping on a large scale leaving day traders like Navinder biting the dust.
while Fuchs and other trading companies employ humans, the big firms like “GETCO” and “JUMPtrading” employ coders and Quant making human Traders obsolete.
To Navinder, these Bots are just tools, used by the wealthy and faceless billionaires and he's here to take them down but if he's to compete with these Bots he has to become one himself.
How Navinder create his own bot🤖
How? He go to Antonio hadr Galis a software engineer
IMG 24:57
“uh in 2009 2010 he makes this Kind of fateful decision that he's going to build his own robot that's going to fight back against the hft firms and what he was planning to do was to essentially manipulate the market.”
He Partners up with Antonio to build a trading software that can outsmart the elos, the goal is simple, if he can't make his own robots he will disrupt theirs and he will do so by altering the market enough that it disrupts their ELO's Function.
Beating The Market.
you see the elos, are not like humans they don't think they just follow the market blindly. so if Navinder could design a software that can flood the market with spoof orders large enough to sway the market and then it automatically cancels them he could beat them in their own game. so together with Antonio they begin writing the code.
“the functionality that he sort of uh designed and got someone else to create for him was such that every time the Price moved higher or lower the this sort of block of sell orders would move in lock step so they would never get any closer to the current price and would therefore never be hit and what that did in a quite a rudimentary way is just add huge amounts of selling pressure you know to to the market.”
if here's how it works it creates a large amount of limit orders on either the buy or the sell side Traders and elos notice this influx of orders prices move up or down Due to this massive order changing supply and demand.
Then swiftly he would buy or sell based on this information, taking advantage of the minute price differences and just before the trade is executed, it's automatically cancelled and the elos are left biting the dust.
Says by stredy
“This is similar to insider trading as he already knows the moves that will happen next in the market.”
The strategy Works our boy goes from making a few Thousand Dollars a day to sometimes half a million per day
Who do you think is Suffering the most from the losses?
The big Trading firms whose Bots are left scattered around, basically getting a taste of their own medicine.
In that one year alone Navinder account grows from 11 million to more than $40 million and all this while, no one, even his own parents have an idea that he is a multi-millionaire until,
The Flash Crash Day
IMG 27:24
“it's been the most exciting Unpredictable election for a generation over the next few hours we'll discover what's happened welcome to election night here on the BBC,”
At 9:34 AM the financial markets are already volatile the country has just come out of a financial crisis, Greece has defaulted on its debt the EU is planning a bailout but today is just another day for Navinder.
Something Big happening
After having a bowl of cereal and playing FIFA for most of the morning in his bedroom he gets up and takes up his laptop he's going to do His daily trades only this time something big will happen. at 3:20 p.m. he activates the cancel if close option and places 2,100 contracts with $120 million. in 6 minutes these orders are automatically closed and reopened 604 times, 2 hours later he places another six sell orders worth $200 million this time he activates his trader for 10 minutes, but then a lady knocked at the door tells him “dinner's ready honey”
$1 Trillion Wiped
IMG 28:50
“what the heck is going on down Here that is not a real. a price chart it looked like a a kind of runaway elevator.”
At exactly 2:32 P.M EDT the markets crash the prices continue plummeting for the next 36 minutes
Says by stredy
“Now you have to remember that at this point nine out of 10 orders, are executed by the elos and Quant. so whatever is happening is a situation of robots versus robots.”
WADDEL & REED is One large US firm in particular has used a cell algorithm to drop $4.1 billion worth of e-mini S&P futures into the Market,
Liam Vaughan on Phone 📞
“What I found is that this big us pension fund had placed a massive massive um non-price sensitive sell order into the market, in an already extremely volatile day, um and that was exactly at the point at which the market began to fall.”
Ideally such a trade should take a few hours, but the firm allows the elos to dump their Futures without caring about time or price. so it starts selling contracts as fast as possible to whatever price is out there in the Market.
All elos in the market follow the trend and begin executing sell orders, to avoid losses remember Navinder trading elgo is still running in his bedroom, Navinder is peacefully having dinner but his elgo is unique not like the big firms HFT, it's basically adding more pressure for the price to go down by creating even bigger fake sell orders that keep staying below the highest price. so in essence misleading Citadel and Jumptrading elos to pump even more Sell orders, A middle finger to them in essence and since Navinder elgo knows that the market will recover, they begin placing genuine buy orders which are executed and as the market Rises so do nav's profits. for 30 minutes the prices keep going down until more than $1 trillion are wiped off the market, but at exactly 2:45 p.m. EDT everything stops.
1 Trillion Regained
The Chicago Mercantile exchanges stop logic functionality has been activated. What this does is when everything starts going nuts, they force trading to stop for a minute so that everybody can have a juice box and think about what they've done, after 5 minutes the prices begin to climb everyone has realized it was all a hoax that nothing catastrophic had happened in the market. They begin buying back their positions and the market regains all the One trillion lost.
In those 36 minutes Navinder makes upwards of $800,000 and no one, not even the SEC (Security and Exchange Commission)can explain what just happened. it was all surreal and unexpected until the SEC (Security and Exchange Commission) goes on a hunting spree for its next scapegoat.
Navinder The Scapegoat
2015, London. for 5 years now Navinder has been milking the market kids the same way, but he's managed to stay under the radar, he still lives in his parents house bedroom, still goes to the nearby McDonald's to chill, still Rides His mopet and he's still making millions of Dollars trading in his bedroom with his Auto Trader algorithm. All the money he earns goes to his accountant's offshore accounts for Investments, All the $65 million earned in his entire trading career, unbeknownst to him something terrible is brewing.
The SEC (Security and Exchange Commission) has come up with all excuses they could find for the 2010 flash crash, but the public is not buying it they are running out of time they need a scapegoat, someone they could pin the fall on and their prayers are Answered by another traitor who alerts them of spoofing orders in the CME, When these orders are traced a pattern is revealed that goes all the way to the 2010 flash crash 💥, Guess the owner of the spoof orders our boy Navinder SRA.
Navinder Was Arrested
Police man
“Navinder SRA you do not have to say anything but it may harm your defense if you do not mention when question something which you later rely on in court anything you do say may be given in evidence.”
IMG 33:33
Flash Crash Arrest “the man accused of singlehandedly triggering a massive 2010 stock plunge is appearing in a London courtroom this morning the Dow Jones Industrial Average dropped 600 points in 5 minutes in what was called “a flash crash” the United States is seeking his extradition.
IMG end
I think it's ridiculous to say that this
Guy in this house in the suburbs in England down the market it's ridiculous
