On the other side of the room were the discretionary traders.
They were more laid back. Chatting with each other. A guitar
leaning against one of the trading desks.
Then see what happens. Watch how your body and emotions react.
I set up a trading account and transferred an amount of money that if I lost it all, it would sting but it wouldn't financially devastate me. Then I started trading. Gold, silver, interest rates, volatility, futures, options, future options, etc.
Yet, like a forbidden fruit trading has always enticed me.
My Life as a Trader
That's a serious handicap for trading because even though my intermediate term macro view was correct, I couldn't stomach the losses that it required for that view to be rewarded.
I really, really hate losing money. Even on paper.
J. David Stein is the Founder of Darby Creek Advisors LLC which oversees the online investment advisory platform at jdavidstein.com.
Read the original article on jdavidstein.com. Copyright 2013.
The account should be small enough that if you lose it all, it will not devastate you.
A couple of years ago I visited the offices of a $7 billion macro-oriented hedge fund for some due diligence.
Here's the problem:
I suck at trading.
Everything I have learned about managing my own and other's money over the past decade and a half has taught me to avoid short-term trading (i.e. day trading) like a plague.
So when I quit my job, I determined I would try my hand at trading.
It looked more like a hangout than a trading floor. Their job was to trade based on their individual macro philosophies. They were trading rock stars, pulling down millions a year in compensation.
The future never looks more unpredictable than when you are staring into that unknown abyss with skin in the game.
I met with the firm's founder and chairperson. His skill set appeared to be selecting talent, because I found his macro views to be overly simple and politicized as if he got them from the Wall Street Journal.
I left that hedge fund thinking why I couldn't I be a discretionary macro trader. I've managed money long enough, spent years meeting with top hedge funds to learn how they invest, understood macro. How hard could it be?
You see, in the very short-term there is absolutely no rhyme or reason to why securities move as they do. They bounce all over the place. It is completely random. And when they bounce the wrong way, then that is money lost.
So I quit trading. I was down 20%. A fair price to get trading out of my system.
I kept at it for six months. Not every day, but I put in enough time to come to a straightforward conclusion.
And consider yourself lucky that you got trading out of your system before you did something stupid like wager all of your retirement savings on Apple at 700, gold at 1700 or Bitcoin at 240.
I think there is no better way for individuals to learn how difficult investing and trading can be then by setting up a small account and buying some individual securities.
Losses lead to rash decisions aimed at stopping that pain.
Trading Rock Stars
Losses cause one to see patterns where none exist and to double down to try to make back what has been lost.
The quants sat on one side of the room and looked appropriately geeky and mathematical as they stared at their trading screens. Their job was to make sure the computerized trading programs they developed were working properly.
Then after you have had enough of a short-term trading fix, go back to the boring, long-term, low fee, diversified stuff.
Why You Should Try Trading
They were quantitative and discretionary macro traders. Their trading floor was divided in half.
Losses cause pain. Emotionally, sometimes physically.
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