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HEDGER. Part 1. CASINO FUME (swindlers and their victims).

Jack Hedgmond was an ordinary American. He graduated from high school, went to college, and worked part-time at a pizza parlor. It was a time when the personal computer and the Internet were rapidly changing the lives of Americans. Many people were enticed by the opportunity to speculate on the money market and make dollars from the comfort of their own homes. This interested Jack and he found a company offering its services to newcomers through the newspaper. It was a very dynamic international currency market Forex, open 24 hrs and Jack thought it was a chance to kill two birds with one stone – to master the computer and learn the secrets of speculative gambling. He started and soon became a victim of gambling. A thousand dollars, which he had been saving for two years, was a painful loss for him. But it created in him a thirst for revenge. Jack realized he had to learn.

Two more years of studying and gambling flew by. Jack graduated from college but did not look for a job in his specialty. He was old enough to realize that in America only those who have money have freedom. The rest work hard and obey the whims of their employers. By that time Jack had mastered the art of making money on the ups and downs of currency rates, and he had a well-thought-out tactic of the game. This brought him several thousand dollars a month and Jack left the pizzeria.
His ego was satisfied with success in the speculative game, and fight with an invisible opponent on a computer screen, he liked it better than working for his uncle. Once he came across the memoirs of Giacomo Casanova, in which the gigolo jokingly admitted that money satisfies him only when he wins it at cards. Jack liked this philosophy; when he closed a successful deal, he felt the same emotions.

His taut nerves jangled like the strings of a banjo in a risky transaction. Jack had experienced something similar during a storm when he’d choked on a salt wave and shouted to the ocean that it would never take him. The ocean sent wave after wave at him and Jack’s adrenaline shot through the roof. He loved and respected the ocean because it was a worthy and fair fighter. They were friends.

You may think that ambition is a fault. For Jack, ambition was in his spine, driving him to succeed in everything he undertook. Ambition did not rob Jack of self-control, and having set a goal, he set out to achieve it, gaining knowledge and experience. In the game, he learned to snatch his prey like a moray eel – suddenly and confidently. Years of competing with other traders showed him that not everyone could do that. So Jack loved his ambition.

In the early morning hours, as the New York Stock Exchange on Wall Street prepares to open for trading, the Pacific metropolis is just beginning to awaken from its slumber. The night creeps away from the streets and neighborhoods into the ocean, leaving the city to the people. Jack is sitting on the veranda of his house. He is drinking a strong coffee and looking up at the sky. There stars are fading and the outlines of clouds beginning to appear. Purple at first, they lighten and turn pink. Or stay leaden grey if the sky promises rain. The sky gives Jack a sense of calm and determination. Just what he’d need in a few minutes.
He drinks his coffee thick, without sugar, the way America’s conquistadors, cowboys, and bank robbers drank it. A cup of black coffee has become traditional for the modern businessman. Early in the morning, it’s like the whip for a rider to get a horse to gallop.
With the advent of the Internet, it is now possible to rob banks from the comfort of your own home. Jack robs them every morning, five days a week. On his spacious desk, covered with heavy green glass, sits a cup of coffee and a dual-monitor computer. Nothing extra.

His game is all about speed. Jack plays ahead of the curve so that the stock sharks don’t have time to work out who has taken some of their money and how. He enters a trade with a dozen contracts sometimes less, depending on the situation. Each contract earns him between $300 and $500. That’s several thousand bucks in a matter of minutes.
When the game is over, Jack jumps into his Mustang and drives to the ocean, experiencing on the way the same bliss that a bank robber must have felt when he ran away with a bag full of banknotes. Jack needs the money to pay off another robber, the bank who provides him with the loan for a house with a garden and swimming pool, to maintain a beautiful yacht and two cars. And, of course, Jack needs it for a glass of scotch with his friends. In these needs and desires, he is like everyone else. Everyone dreams of matching their aspirations with their opportunities. Jack does.

The ocean loads him with energy and gives him new ideas. In the afternoon, when the heat dies down, Jack sits on the veranda of his house, drinking iced tea, crunching nuts, and preparing for tomorrow. It takes a couple of hours to go through the latest news, analyze the markets, and decide on tomorrow’s tactics. If the markets look unfavorable, Jack takes a wait-and-see approach. Gambling ruins traders in the same way it ruins casino gamblers. In the evenings, Jack hangs out with friends at his favorite bar.

“Hey Hedge, how do you do it?” his friends hint at his luck in gambling.
“The chicken pecks one grain at a time” Jack shrugs his shoulders.
“Your chicken has already grown the size of an Australian ostrich, what kind of burgers do you feed it?” laughs the company.
Jack hides his smile behind a glass of whiskey.

His friends call him ‘Hedge’, simply shortening his surname. They don’t realize that the answer to their question is hidden in that nickname. To use hedge is Jack’s whole strategy as a gambler. In the language of professional gamblers, the term “hedging” means using another financial instrument to reduce the risk of loss. Hedging is one of Jack’s favorite strategies. He spent years learning the secrets of this strategy, eventually honing his game to the point where he could reduce his risk of loss to zero. Later, after becoming a member of the National Futures Association and gaining access to information about the practices of other traders, Jack became convinced of the uniqueness of his methodology and that he had no equal in the industry. His ambitions were satisfied.

***

From the start, as he studied the ins and outs of exchange speculation, Jack realized he was in a casino. It is the same passion when greed and fear cloud the mind. In those days, there were no online trading personal platforms, so players had to stay in the company’s office, where the order for a trade was taken by a clerk who sent an order to the exchange over the phone. The Forex market was a 24-hour market and there were always a few players in the office at the monitors. Jack saw the passions around him, he saw losers with blank stares and shaking hands. When they lost their money, they borrowed it from relatives and friends, piously assuring themselves that they had already discovered the secret of the game and that this time they would be lucky. Once again, they lose every last penny, not knowing that passion must be accompanied by knowledge.
In those days, there were no books on online exchange speculation. Jack learned the secrets of the game by gaining his own practical experience. He soon wrote an introductory course on technical analysis of the Forex market. He found an audience for his lectures. Jack was demonstrating the practical effect of his lectures in real market transactions. It worked, the students began to trust him with their money. Managing client accounts Jack learned that to be a successful trader you should not risk your own money, emotions should not overshadow reason.
All the famous businessmen who made billions and became world famous never risked their money. They borrowed it from banks and declared themselves bankrupt when they failed. The same famous billionaire, ex-US President Donald Trump, has gone bankrupt six times, leaving the banks’ money for his next attempt.

Fast money in currency trading can only be made in one-day trades and only in dynamic markets where the amplitude of price fluctuations is high. It does not matter whether the market is rising or falling, the main thing is that the fluctuations are impressive. This game has nothing to do with investing. It is speculation. It is a game that pumps adrenaline into your blood and can make you rich. Or bankrupt.
Two groups of players are shaking up the market. The “bears” play for a fall and the “bulls” play for a rise. The amplitude that moves the market is created by news. For example, somewhere a military conflict has disrupted grain supplies and there is a threat of famine. And the price of grain shoots up. Or somewhere an oil pipeline has been blocked and the price of oil shoots up. Speculators, also known as stock market sharks, banks, and corporations, are there to take advantage of this price wave and throw tons of dollars into it to catch their prey. The important thing for an individual speculator is to grab his money and get away from the sharks in time. That’s all the theory you need to know in a nutshell.

THE “STUCK FISH” TACTIC.
While studying the peculiarities of the foreign exchange market, Jack noticed that currencies reacted differently to the same piece of news – the price of some currencies fell while others rose. The interdependence of foreign exchange instruments is called ‘correlation’. When the prices of a pair of selected currencies both move up or both move down, such a correlation is called ‘direct’. When the prices of a pair of currencies move in opposite directions, it is called an inverse or ‘mirror’ correlation. All of these things can be seen on charts by watching the markets in real-time. Jack decided to use correlation in his strategy. He discovered it by looking at four currencies tied to the US dollar. These were the Japanese Yen, the British Pound, the German Mark, and the Swiss Franc (there was no Euro currency in those years).
Watching the real-time behavior of the selected currency pairs on two monitors, Jack noticed that one pair was lagging slightly behind the other. The lag was up to 10 seconds or more. Jack realized that the markets themselves were telling him when to enter the trade. The start of the moving price of one currency was a signal to open a position on the currency that, according to the correlation, was about to move in the direction he already knew. Jack also realized that he needed to build a new tactic around this fact.

The most important thing in a speculative game is to enter a trade correctly. If you do it correctly, the position will immediately start making money. The price on the chart looks like a sine wave, like a snake moving within the trend and between its boundaries. At the boundaries of the trend, players close their profitable positions and open new ones in the opposite direction. This is a standard situation and such crowd actions are expected by the sharks of gambling. Traders of corporations and banks watch the activity at trend edges. At the right moment, they throw huge sums of money into the game, provoking a price jump to break through the protective stops set on open positions by players with small capital. This is how big players rip off small players and in the language of traders it is called “sheep shearing”.

In the ocean, a small fish sticks to the shark’s belly and travels with it, waiting for the predator to find its prey. As soon as the shark begins to tear its victim to pieces, the small fish grabs crumbs from its voracious friend’s prey. The fish has to grab whatever she can and get away in time before the shark devours her with prey.
In his new tactic, Jack decided to take advantage of the shark’s throw and the sticky fish’s habits. That is, enter the trade at the moment of the provoked price spike, grab the prey, and escape within seconds. He tracked the moment of the price reversal on three scales: daily, hourly, and five minutes. On the daily chart, he saw the whole trend with the price sine wave inside of it. The hourly chart showed him the formation of price bars at the very edge of the trend. For him was important to catch the moment of the sine reversal. It is marked by a price bar called a “key reversal” or turning key. Jack was catching this “golden key” on a 5-minute chart. The correlation was helping him catch the moment of the reversal.

In the game, Jack used two large monitors. On one, he set the above three scales for one currency: daily-hourly-5 minutes. On the other monitor, he set the same scales for the second currency, which correlated with the first. When the price sine was approaching the trend boundary on the daily and hourly chart and the “key reversal” was appearing on the 5-minute chart, Jack had a few seconds to use the correlation effect to enter the game. And then to get away with the loot in time.
During those minutes, his brain was under tremendous stress. It didn’t let up until the position was closed. After that, his nervous system was exhausted and Jack needed time to return to normal. Such a situation, in which market sharks provoke a price spike in selected markets, occurred several times a day, in the minutes before trading opened on the Tokyo, London, Zurich, and New York currency exchanges. The round-the-clock monitoring of the markets caused Jack insomnia.

In New York, on Wall Street, there is a small park next to the Stock Exchange building where traders go when the markets are quiet. It’s the place where they go to relieve their stress. In that park, under every bush, there are dozens of empty, pocket-sized bottles. Jack saw these mountains of bottles while visiting a friend in New York. He called this place ‘the graveyard of sucked-out hopes’. For himself, working around the clock, Jack realized he had to find tactics that didn’t drain his strength and exhaust his psyche. Otherwise, he could end up in a real graveyard.

Managing the investments of two dozen clients earned Jack between $7,000 and $10,000 a month. The trading game brought in 10 percent of the profits, Jack took half, and that was a term of his deal. The client accounts were small, $10,000 each. With an account like that, it was an unreasonable risk to work with more than one contract. Jack was trading with a minimum risk of loss and it happened sometimes, but in the end, the owner of such an account received an annual profit of $6,000.
This is where Jack encountered greed. Clients wanted more. Jack reminded them that 5 percent a month was 60 percent a year and added that if they wanted more, the risk of loss would be higher. And advised them to find another trader. The unhappiest were shut up.
Soon Jack opened a personal account for $50,000. On this account, he demonstrated an impressive increase in profits. It had the effect of a red rag on a bull for the clients. With these figures, Jack motivated them and offered to increase their investment capital. Greed eats a man from the inside out, especially one whose capital is small.
Jack was sighing: “…Eh, guys… I’m making you money with minimal risk. But with only 10K in your account, you want the kind of profit that would guarantee you a trouble-free life. Do you want to double your money every month? Then try it yourself!”

***

Jack was paying off a bank loan for a house in the foothills of Los Angeles and paid to the marina where he kept his yacht. His property assets gave him a dream of a bright future. Trouble came when he didn’t expect it. The owner of the company waited until rich clients were bringing their money in and the company’s account grew to millions of dollars. With this money, he ran off and cleaned them all out. Jack lost his $50,000. The saddest part was that he lost all his investors, he lost his source of income and he had no money to pay the bank loan on his house. He was bankrupt. Soon the yacht went into foreclosure and the bank took the house. The cash from the sold Mustang should have been enough for several months. The hopelessness of the situation made Jack angry. And when he got angry, that’s when it all started.

***

IN A WORLD OF SWINDLERS.

“Offer them the Christian faith so that they will accept the Messiah, who is their brother and was born of their flesh and blood, and he is of the very seed of Abraham of whom they are proud.” Martin Luther, 18 February 1546.

After the financial collapse, Jack began to think about where he should go. In those years, the Forex currency market was not officially represented on the American stock exchange, so it was taken by “left-wing” companies. Jack realized too late where he was going. Within a few years, he had the level of a professional trader in the market game and wanted to stay there. He had to choose between the stock market and the commodities and futures market.
Jack loved chess when he was younger. Thanks to it, he developed the ability to analyze. And this quality helped him a lot in the Forex market. All financial markets share the same psychology. And the main players in all markets are the same banks and corporations. But the specifics of playing each market are different. The stock market is not for speculators, it is for long-term investors, and the technical analysis that Jack used to predict price movements in the Forex market does not work in the stock market. This market is driven by news and rumors and only those with access to insider information can make money. For example, Warren Buffett and George Soros made their fortunes by being able to get to the top of government and share profits with them in exchange for such information. Jack wasn’t interested in long-term investing. He liked quick trades.
That left the commodities and futures markets. Working on the requirements, Jack passed the exam, got his license, and found a job as a broker in a brokerage firm.

The company was located in the upscale Beverly Hills area, home to wealthy mall owners and Hollywood stars. Across the intersection stood the polished black marble building of Hugh Heffner, owner of Playboy magazine and favorite gigolo of the world’s whores. Further down Wilshire Boulevard, towards the business center of the metropolis, banks and office buildings of companies from all over the world crowded together. Their glossy billboards offered everything money could buy. And here the owner of the brokerage firm where Jack’s feet had led him, had chosen the right place. He smiled a white-toothed smile from the billboard and promised to help make easy money for those willing to buy what the adverts whispered to them.

There were ten or twelve tables in the room where the brokers sat. On each table was a telephone and a stack of cards with the data of citizens to be called and persuaded to become clients of the company. Brokers companies buy these cards with the names and phone numbers of citizens from marketing companies who buy them from banks’ credit card departments. The broker’s main job is to lure the average person with promises of easy money. Hundreds, perhaps thousands, of such brokerage firms are operating in the country. Millions of ordinary people are subjected to their telephone persuasions daily. In front of the broker, dialing the number of the next victim is a piece of paper with a text on which he squints. In broker jargon, this presentation of the text to the client is called “pitching.” The text is designed to arouse the potential client’s greed and convince him to open a commodity market account. The broker guarantees his knowledge of all commodity markets and promises to tell the client which market is the best to invest in at the moment.

Jack had to learn the art of the broker – how to turn an ordinary person on the other end of the phone with ears wide open into a client of the firm. During his breaks, he chatted with his new colleagues and soon became convinced that their knowledge of commodity market trading techniques and strategies was very superficial, almost nil. But this knowledge was not required of them. A broker should be able to make up stories and promise mountains of gold. After the common man opens an account the broker should be able to keep up the greed of the client, impose deals on him, and thus earn commissions for his boss and himself.
The ordinary man living in a big city sees the beautiful life on the streets every day. He sees it on the TV screen and wishes he could have the same life! Envy presses on his brain and drives him to action. And tens of thousands of dreamers, having listened to the broker’s pitch, take the bait.
The main tool of a broker is the telephone and he must hang on it for hours like a fisherman with a fishing rod waiting for a bite. Behind the glass of a large window overlooking the brokerage room sat the owner, who kept his eyes on his employees, who must call incessantly. He pretended to be French, though he looked more like an Arab and more like a plantation overseer just without the cork helmet and whip. This atmosphere depressed Jack, and after two months he ran away from this company of liars and swindlers.

He was on the prowl again. After studying dozens of newspaper advertisements, Jack decided on one. The company called itself the Institute of Commodity Market Trading and guaranteed training in the art of speculation to anyone who could afford to pay for the course and was eager to apply the knowledge gained to the game of trading. Unlike brokerage firms, which imposed their middle-man services, the Institute proudly offered training. And Jack was hooked.
The multi-story building was in a rather respectable part of town and the institute occupied almost the entire floor of it. After an interview, and a review of Jack’s track record, the manager enrolled him.
The business was conducted as follows: a spacious hall was divided into two halves by a plywood partition with a glass top. In one half were the marketing people. It took Jack only a minute to realize that their activities were exactly like the circus brokers of the firm from which Jack had recently escaped. Here the marketers were hanged on the phone, promising the secrets to getting rich quickly. In front of each of them on the desk was a stack of leads with the personal info of credit card holders. And each of them had that same ‘pitch’, promising to potential customers experienced coaches who would reveal the secrets to getting rich tomorrow and the secrets of the strategies of those who had already made millions playing the exchange.

A miracle program was offered for just $5,000, assuring the newcomer that he would learn the art of making money in just two months and quickly recoup the amount spent on training. The lying techniques of these marketers were no different from those of the brokers in the Beverly Hills office. They were masters of bluff, their promises were as pure as the water in a city sewer. What was the catch? If marketers promised a program for a thousand dollars and offered it on credit, no one would fall for it. American business psychology is such that an ordinary person is used to judging the quality of a product by its price. The higher the price, the better the quality!
The entire amount for the training was immediately taken from the newcomer’s credit card. He would then receive the contract by fax, sign it, and send it back. In small letters on the contract, the administration informed him that the money he had paid would not be refunded. But the excited citizen was already in anticipation of the mysteries and secrets of enrichment, and his ears were with the sound of coins. After the money was taken away and the contract finalized, the client’s details were transferred to the other half of the hall.

In the other half were the tables of the so-called coaches. This term refers to a teacher and trainer in one person, in this case, someone who would teach the newcomer the secrets. All the teaching was done by telephone. In the corner of the hall was a stained glass room. There was a special section from where everyone in the hall was visually monitored. An eavesdropping team listened to each trainer during his session, ready to cut the line at a moment’s notice if he said anything unnecessary to a client.
Jack was accepted and, being a gregarious guy, he quickly found out that none of his two dozen new colleagues had any personal experience of exchange trading. They taught others what they didn’t know. There was no requirement for an industry license, so the “experts in the trading market game” were hustlers, losers, seekers of easy profits, and maybe even alcoholics. When Jack asked the manager to introduce him to the training program for clients, he was surprised to learn that there was no program. He was offered to teach newcomers the basics of technical market analysis, which Jack knew from his early days in the Forex market.
Once upon a time, during the gold rush, adventurers sold shovels to prospectors in the Valley of El Dorado. It is known that only the shovel sellers profited from the fever and most of those who were lucky enough to find gold were found with their heads shot off. At this ‘institute’, newcomers weren’t even sold shovels. They had their ears rubbed with stories of the most successful traders in the business and were offered the basics of technical analysis of the markets. Pamphlets describing these basics are available for free in any public library. Here these basics were sold to simpletons for $5,000.

The client was poisoned in portions, with each phone session lasting no more than one hour per day. After a few weeks, the client was confused he did not get what he had been promised, he was doubting the coach’s knowledge and was asking for another mentor. The whole process was repeated with another mentor. After this, the enlightened sucker was demanding a teacher who would finally reveal the secrets he had been promised. He was given a third ‘expert’. Two promised months passed, and the time for training was up. The desperate fool began to realize that he had been deceived and tried to get his money back. But then he was referred back to the contract and offered to refresh his memory on the small print. There was no point in complaining about the swindlers because the relationship between the parties was set out in the contract voluntarily and without any guarantees on the part of the Institute. The contract had been drawn up by experienced rogue lawyers.

Jack tried to read a detailed course to clients but was warned by management not to do so. He was told that the trainer’s job was only to keep the client excited for two months until the contract time was over.
Some frustrated clients complained to the authorities and one day an inspectors from the National Futures Association visited to the institute. It was here that Jack saw the owner for the first time. With his bulging eyes and swarthy skin, he looked Middle Eastern. He turned out to be a Semite from Beirut. As Jack was the only one on the team with an industry license, the inspectors invited him in for a chat. He told them about his brief experience at the brokerage firm and his thoughts on the institution. When Jack asked why there were so many fraudsters in the industry, the inspectors smiled and patted him on the back. They told him frankly that the owner of the ‘institute’ and his lawyer were crooks, but nothing illegal had been found in their practice, and besides, they didn’t have an industry license. And without a license, what demand is there? Today these crooks are reading pamphlets to suckers, tomorrow they will find new ones and sell them the secrets of fishing sturgeon in the Amazon or offer Tibetan diet courses. After coffee, the inspectors left.
Jack was tired of being part of this farce, he realized that the swindlers were just using the image of an industry created in the image of El Dorado to catch those who dreamed of making millions in their nets.

END OF PART 1.

Published inNovels

3 Comments

  1. I don’t think the title of your article matches the content lol. Just kidding, mainly because I had some doubts after reading the article.

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