Trading is an appealing activity for a variety of reasons but I’m on the most common I’ve heard and felt are:
It provides a possibility to escape from the mundane existence, financial constraints and restriction on time that the majority of salaried employment entails
You don’t have to work for a boss or take orders from anyone or with colleagues you hate
It has a bit of a mysterious air about it
It implies a level of intelligence or perception beyond the ordinary
Offers and almost unlimited variety of workplace locations provided you have decent internet.
Can be fully automated, fully manual or anything in between.
With a plethora of derivative providers out there you can gain access to almost any market with only a very small amount of capital
Doesn’t seem to have an age restriction so you can become successful if you’re 18 or 80
There are stories of people becoming successful regardless of their background race, education or any other discriminatory factor.
You don’t have to ‘screw anyone’ to get to the top.
These are all partially or completely true. What is important though, is to qualify how likely these outcomes are for you. Do you have a record of being successful? In academics? In sport? In business? There are reasons why Proprietary trading firms and other high performance environments ask this question and it is not necessarily because they’re being arrogant or trying to make you feel like rubbish.
The reason is, winning is a process and their assumption is if you have experience winning at one activity, then you can translate the generic skills of winning and apply them to this new activity.
Their assumption might be incorrect, However it increases their chances that you will have the right reactions once you have been given the right tools and the framework that they have been successful with.
Superstar traders are comparable to players winning the World Cup, Superbowl, NBA Championship, the PGA Tour or Wimbledon, to Fortune 500 CEO’s, to billionaire start up founders. There are less than 50 or 100 of each in the world.
A typical response might be “I don’t need that much, a couple of million dollars would be fine”. So again, applying the same analysis, how many professional sports people, business people or start up founders do you know directly who earn more than $1m per year? I don’t know many and occasionally I’ve met people who know someone directly that is on a professional contract – but again the number is pretty small.
The point I am driving at, is that most people pay to do things they enjoy. If you think about the examples of sports or gambling or travel or running a business most of us probably know no one that is making excellent money out of doing these activities.
That implies two things, that we don’t have many examples around us to find out how to make money out of those activities ourselves and secondly we will need to do things differently to help most other people do those activities in order to get a different result.
Applying this to trading, most of us very rarely will know a very successful trader. I know many professional traders who work or have worked for banks that do not trade their own account, invest in property or have blown up when they went solo. Asking them why, they typically respond:
at the bank you have order flow
very tight spreads
surrounded by other traders to discuss strategy and get ideas
you have a forced risk management process
you have to explain/discuss each trade to someone
there’s a restricted product set
How does each one of these contribute to a bank trader’s success? Click on each one to read more.
So where does that leave me? A long way behind. But there are also some upsides to being a retail trader, click here for more detail.