My view of the game

Trading is a game. Your wins are not measured W/L rather they come in dollars and cents. You quickly learn that it doesn’t matter if you win on every trade, but it matters how quickly you stop your losers.

I’ve always been told that the average length of an NFL career is 3.5 years. Though I have no specifics, I’d be willing to bet that a most trading ‘careers’ have a similar lifespan. It used to be that you just couldn’t get into the ol’ boys club to play. Now those barriers are gone and the barriers of longevity and profitability stand firmly in the path to the mountain peak.

I guess I’m what you would call a veteran of this industry. I’ve worn the trading coats of no less than 6 member firms or banks. I’ve work in the blistering NASDAQ pits as the tech bubble shattered. I’ve seen grown men weep as we all watched 9/11 from the S&P pit monitors. I’ve watch Goldman Sachs work their magic in equity stocks I traded and I helped pay their salaries. I’ve traded against some of the most brilliant fixed income derivative traders around all the while trying to glean whatever nuggets I could from these titans. I’ve dipped my toes in the opaque pools of the OTC energy markets only to realize that under-capitalization is a painful way to die. And I’ve found that there are many levels to contract know as ‘the Euro.’ Just because you have learned how to trade one, doesn’t necessarily make you competent to trade its other layers.

So as the games begin and the strategies unfold, there are a couple of talking points I feel are essential to understand prior to trading. Perhaps these are a few ‘rules’ of the game.

• Trading is a taught skill. Most anyone with patience and discipline can be successful. I’ve seen meat-head athletes, nerdy quants, high school dropouts, and philosophy majors all succeed in making a fabulous living in the market place. Their common thread was discipline.
• Your risk tolerance level is an inherent trait. You might be able to modify it, but you’ll never truly change it.
• It takes money to make money. The bigger the bank roll, the further you’ll go.
• The tails of the market are fat. By tails, I’m referring to the cataclysmic events that are greater than a 3 sigma move. These world market movers happen a whole lot more than the .25% of the time they are predicted to occur.
• It takes time to make money. Whether its time spent reading the paper, historical research, or simply the hours put invested in front of your screen, money follows time. 

Whether you are a savvy, seasoned sailor or just getting ready for your maiden voyage on the high seas of trading hopefully you’ll find some type of trading that is thought provoking and insightful. I’ll leave with a quote from Pixar’s “Ratatouille” that I believe fits the trading industry perfectly.

 “Not everyone can become a great artist, but a great artist can come from anywhere.”

 ~LH