Daytrading is one of those great hidden mysteries of HSX. Everybody knows that if you really want to make big money, daytrading is the way to go. Yet we never talk about it. In the two years I’ve been playing HSX, I think there have been perhaps two articles about daytrading and I haven’t got a clue where to find them. Yet if daytrading is hard to fathom, there’s a specialised, secretive form of daytrading which barely even gets mentioned.

Reset trading. You want to make money fast? This is as good a method as any. You want to lose money fast? Heck, we can do that too.

What exactly is reset trading?

Here’s the definition I used when I put together my HSX glossary: “Form of Day Trading where Trading decisions are made on the basis of the change in the value of a stock following the Reset.”

So again, what does that mean? Search for any stock on HSX, and the results will give you not only the name and the current price, but also ‘today’s change’. That ‘today’s change’ number isn’t calculated on a rolling 24 hour basis. Instead, at a arbitrarily chosen time, HSX resets all change figures to zero (this event is known as – wait for it – the reset). The ‘today’s change’ figure is the change in the stock price since the latest reset. Typically, resets occur at approximately 0130 PST, but HSX has been known on occasion to forget to reset.

Reset trading is based on the premise that the movement in a stock price immediately following a reset is indicative of the direction in which that stock will move for the next few hours. In other words, if a stock moves up straight after the reset, buy it (or short it if it goes down), because it’s likely to carry on going in that direction.

But why?

In all honesty, I’m not entirely sure. However, any explanation presumably falls within one of two categories.

• -> Mechanical: Some reason connected with the internal dynamics of the Virtual Broker trading programme.
• -> Trading: The cumulative result of players’ trading decisions.

If I had to pick a reason, I’d say thousands of sheep-like traders waking up, logging on and piling into whatever the biggest movers are but, hey, maybe that’s just cynical old me.

How do you do it?

First off, you have to be around the numbers reset. It also helps if you’re around immediately before as well, to check out the previous day’s biggest movers. OK, so the number have reset. You check out the Market Lab, and immediately invest in all the stocks that have gone up by 1/8th of one point. Congratulations, you’ve discovered a fabulous new way to lose money. Not every stock that moves on reset is a reset trading opportunity. If it isn’t, you may not lose much on it, but the commission is going to gnaw away at your reserves. First, you have to know which stocks to invest in.

There are a number of different reasons stocks will typically move immediately following reset:

• -> Normal price fluctuations. You really do want to avoid these. You won’t really lose much, but those 2% hits sure add up.
• -> News driven price movements. The likes of Variety and Hollywood Reporter tend to update at approximately the same time of night as HSX resets. This can dramatically impact on the stock price. Although this has nothing to do with reset trading, it can have a large impact on share prices. If you’re going to be around anyway, you might as well take advantage of it.
• -> Old news items. Price movements on stocks are not instantaneous – there tends to be a lag. Question is, when does that lag stop and the stock move into reverse?
• -> Pure in-play stocks. Stocks whose share price has been fluctuation wildly. Often, the initial price movement will have been fuelled by some news, but the current share price probably bears no resemblance to the news or any kind of recognisable stock valuation.
• -> Manipulated stocks. Txredd: For some reason know only to the manipulators, some stocks make upward or downward runs early in the day or late in the evening just before reset. For example, today’s mover is MOVIE. Some days it is IMADE. There are now about 10 stocks that, if you know what to watch for and can catch them, you can get in and out of quickly with a 1-3 point gain. Even in big ports, this adds up. Gotta watch and gotta be quick.

If you want to reset trade, it’s that last four categories you should be paying attention to.

But does it work?

Sort of. As I write this, today’s three biggest movers are K-19 (K19), Black Hawk Down (BHAWK) and America’s Sweetheart (AMSWT). They were also the biggest three movers when the numbers rolled, approximately six hours ago. The difference between now and then is approximately $9. Even accounting for commission, on an ROI basis, that ain’t bad.

Problem is, it doesn’t always work like that. All three of the above stocks benefited from updates at Upcomingmovies, which doesn’t always happen. Equally, not every stock continues to move in the same direction as it did immediately post reset. It may be that reset trading was more prevalent the previous versions of HSX, because it certainly isn’t a sure thing any more.

Txredd: Reset trading has it’s perils and IPOs are one of the biggest. As I am an early bird, I see IPOs going up almost every day and then dropping like rocks once they hit +2 or so. The exception, of course, is something like K19 which is driven by real news. If you watch the early trading, you can catch IPOs at the top and short. DON’T BOTHER BUYING ON THE WAY UP. I once said that the biggest money makers are those you catch on the upward or downward swing. Most stocks (except in crash mode or pure manipulation categories) don’t swing far enough to cover the price of commissions and the “chuck” will kill you. Get it one way or don’t bother. There is always another one coming along soon.

Summing up

There’s certainly money to be made from reset trading, but equally there are no guarantees. If you don’t like gut feelings and make the occasional (or not so occasional) loss, then this probably isn’t for you. Furthermore, the profits really aren’t regularly enough or large enough for you to want to disrupt your sleep patterns (or whatever else you may be doing at the time) to find out what you’re missing. But if you’re around, and you have the requisite balls of steel, give it a go. You could find yourself converted.

(A big thanks to Txredd for her additional comments.)

-Huy