Wednesday, March 21, 2007

How I learned to stop worrying and love the hybrid market

Zeke's face was bright red. He seemed to be holding his breath. Beads of sweat covered his brow and collected on his eyebrows, which were soaking wet and dripping onto his keyboard. A large purple vein, not a normal feature of his appearance, was prominent on his neck and looked like a well-fed earthworm. His hair was pulled back, very tightly, into a ponytail. From his lips sprang the same word, over and over again. "Fuck, fuck fuck fuck fuck fuck... then it morphed into, "They're fucking me." He was staring straight at his computer screen and his hand was glued to the receiver of his phone even though the phone was currently hung up... it was like he was bracing himself.

They sat me next to Zeke so I could learn from him. Zeke didn't talk much, but I did learn from him. I casually looked over at his monitor. He was holding a couple thousand shares of VOD which in 1999 (before it split 5 for 1) was very volatile and trading well over 200 dollars a share. He was down over 6 thousand dollars in the stock. Just then, his phone rang. He tried to sound calm as he spat into the receiver "It's just this guy, he's fucking fucking me." He hung up and practically doubled his position. In a few minutes he was down over 10 grand in the stock and the risk manager of the firm, a large man who looked more like a bouncer than a man who was crunching numbers in a back office, paid him a personal visit. Zeke knew his time was up. A short conversation between Zeke and the risk manager, a man who everyone simply called "Mr. Bill", ensued and then Mr. Bill watched as Zeke closed out his position. Moments later Zeke put his very expensive headphones over his ears, gathered up his very expensive coat and his desk belongings and silently left the room. It was the first blow-up I had witnessed at close quarters. I had been trading for only 3 weeks. I looked at my position monitor. I was down $6.25 in my one position, 100 shares long of AVY. At that moment, I felt incredibly "light".

The next day, Zeke's desk was filled by some hotshot trader "from upstairs" who didn't say much and watched porn in a small video player that he strategically positioned in a corner of one of his screens. This is a small example of what the environment was like at my first firm, a place that I traded for my first few years. I paid exorbitantly high commission rates and was routinely yelled at should I be ballsy enough to try and get those rates cut.

But to get to the central question, the "why trade?" question that plagues me recently as I struggle it's important to remember these times. I trade because to me it's a certain kind of freedom. People wore what they wanted to at work. The only thing that mattered was "How much you up"? Office politics didn't exist... the rules were simple, the more you made, the more you mattered. It was easy to understand and competitive and eventually I thrived even if it was in my "under the radar" type of way. Let's put it in these terms, I never had more than 3 screens. The "hotshots" often had 5 or 6. Thing is, a lot of these "hotshots" eventually blew up just like Zeke.

Trading isn't about ego, it's about being right. And dollars and cents are the perfect metric for measuring how right you are.

The "righter" you are, the richer you are.

And this has been a good lesson for me. You are either right or you are wrong. You really need to not make excuses about why you are wrong. If you're wrong, you need to figure out why and "get right" as soon as possible. Zeke couldn't get out of that VOD trade because he couldn't admit that he was wrong. And he blew up. I think for me, I need to figure out how to trade this new hybrid market and stop complaining about it.

I won't stop with the "freaky hybrid trade of the day" post because I have fun with that, but I need to "get right" again and get on the green side of trades.


FX said...

Reading your blog post is like reading a book totally enjoyable. You should write a book about your trading days, memoirs kind of stuff, or just write a lot in your blog. You are going straight to my blogroll, just keep on writing this kind of stuff ;))

Dinosaur Trader said...


Thanks for the kind words! I'll try and work on another "history" post this weekend.

Thanks for reading!