What Makes a Great Trader?
People often ask me what makes a great trader. I can really only answer this from my own perspective, because I believe trading is a very personal thing and different strategies and characteristics apply to different traders. First of all, I don't consider myself a great trader; I had some above-average success in the late 90's that led to my early retirement around age 30. However, the market conditions in which I traded no longer exist (and probably never will again) and the strategy I employed would be a sure loser in current market conditions.
So answering what makes a great trader becomes less about specific strategies and more about characteristics. I came across this article yesterday and thought it summed it up nicely. It presents the 9 characteristics of great traders.
The first characteristic is an absolute must for any long-term success. 10,000 hours. That's what it takes. The article says that's ten years experience at 4 hours per day. I took a different tack. I worked 18-hour days for about 5 years. I could not have enjoyed the success I did if it weren't for a total commitment to trading. This mean that if I wasn't at work trading, I was at home analyzing trades or studying new trading methods. The last two years I was trading, I took one week-long vacation to Tahiti and one 4-day weekend in Whistler, Canada. The whole rest of the time I ate, breathed, and slept trading. It was a horrible way to live, but it paid off in the end.
The other bit of great advice is to be like a machine. The better you are at divorcing your emotions from trading, the better your results will be. I can't tell you how many times I watched otherwise decent traders lose control and blow themselves up. It's like watching someone go on tilt when you're playing poker. When this happens to you, you need to take some time away from trading (2 or 3 sessions, or until you feel sure you've regained your composure). Emotions will kill you in this game.
Obviously, for those more inclined toward quant trading, tools are of the utmost importance. Make sure you're using the best available and that you're not ignoring obvious signals because you have a hunch they might be wrong. The tools are there for a reason and, trust me, they're right a hell of a lot more often than you are.
Any active traders have anything they'd add to this list?
Comments
I think being smart enough to
I think being smart enough to know you dont know shit and dumb enough to run into a wall hard enough everyday not to kill yourself.
WSO Conf - June 29, 2013
others?
What about being able to learn from traders around you (ie strategies, morale support, P/L monitoring, etc.).
How much of trading at that level benefits from the value added from other people on the floor?
I understand that trading can be an a very individual game, but am just curious about all the other functions that might facilitate or even accelerate P/L.
^^^ I worked with a lot of goofs
So morale was awesome because everyone knew how to have a good time, but from a trading standpoint, most of my colleagues were pretty clueless and just followed the company line. There was great energy, but no one ever came to me with a truly fresh idea.
Plus the guys I worked with were really risk-averse, which is great if you plan on being a trader for the rest of your life, but if you're trying to make a big score and get the fuck out, risk aversion is poison.
One thing I have learned from
One thing I have learned from FXTrading is to not try and hit a home run with my trades. If the market gives me 100 pips in a couple hours, I'll take it. I lost a lot of money going for the big one.
Risk Aversion?
So morale was awesome because everyone knew how to have a good time, but from a trading standpoint, most of my colleagues were pretty clueless and just followed the company line. There was great energy, but no one ever came to me with a truly fresh idea.
Plus the guys I worked with were really risk-averse, which is great if you plan on being a trader for the rest of your life, but if you're trying to make a big score and get the fuck out, risk aversion is poison.
You say risk aversion is poison? Isn't this whole financial debacle centered around people throwing risk out the window and dumping the consequences on the firm? Obviously in some cases in works out for the better (yours) but what about when it doesn't.... But like you said, it was a different time back then as well.
Focus, Humility, Balls
You have to be able to focus. If you can't stare at a computer screen for quite a few hours in-a-row, how are you going to trade? Or remember your positions? Or know what's happening in the market?
Aside from that, you can't be too proud. You're going to be wrong sometimes, and you're going to need the discipline to cut your positions.
Sometimes, though, you need the balls to make a call that other people dislike. In the end, you're the decision-maker, and saying 'everyone else thought it was a good idea' is not a good reason for making a call. You can't always be a follower to generate real alpha. Otherwise, you're just tracking beta. And if you're outperforming the market by doing so, you're just leveraging up your risk (which will cause you to 'blow up' in the long-run).
On a side note, someone needs to kick Alistair Darling in the nuts. Hard.
Can someone help clarify
Can someone help clarify something for me: if you are a trader working on an interest rate swaps desk would you be considered a "quant"? What is the line between quant and non-quant? I interviewed for a trading assistant rotational position and one of the groups asked me some questions like what is itos lemma and why do people study black-scholes. They also said they needed help building out their prop trading using Matlab. They then went on to say that if I worked on other desks I would just be doing things like end of the day P&L. Does this mean it is for a quant desk?
Is
Is an MBA the way to break in to Trading ? I think the skills / qualities outlined above can be developed at B School
bcbunker1 / quant
generally, a quant role involves programming (NOT VBA, we're talking matlab, C++, java). on the derivatives and fixed income side, it will also include knowledge of various theories like the ones you mentioned, along with simulation methods like monte carlo.
you don't have to be a quant to trade IRS, but many people that trade IRS are quants or have quant-like skills. there are probably also lots of people out there that have no formal training and don't know anything about programming and make a killing trading swaps based on fundamental research and gut feeling etc.
heavyweight / MBA into trading
the answer to the question of 'Is an MBA the way to break in to Trading?" is yes and no.
yes: a GOOD MBA from a top-tier institution will get your foot in the door with regards to recruiting at big banks and some trading firms. a couple schools (wharton, columbia, chicago, nyu stern, mit?) place emphasis on this aspect of finance and firms will hire from these schools for trading roles. another set of schools (harvard, stanford) are extremely prestigious, and having an MBA from these schools will basically allow you to pick your job.
there are also lots of successful traders that have an MBA and having an alumni contact can always help you get your foot in the door.
no: much of trading these days is highly quantitative and requires advanced computer skills that are not taught in MBA programs. most of an MBA program has absolutely no relevance to trading. big banks and other trading firms will not care about an MBA from any but a select few institutions.
bottom line: from the right school, it helps and almost certainly cannot hurt. the real key to breaking into trading (at least at big banks) is to go to a target for your undergraduate degree and major in a quantitative / hard science program (math, engineering, comp sci, etc). if you went to a shit school and majored in film studies for undergrad, good luck!
How can I move from Technology to Trading?
I have an MSc in Financial Computing from a top ten school, have ended up in a technology grad scheme but really want to be in sales and trading. How can I move from Technology to Trading?
I hate it when old timers
I hate it when old timers talk about how crazy things/ people used to be. My fucking high school chemistry teacher and her getting high behind the school trash cans or w/e stories...
How is it that the same people who supposedly had all this fun when they were young have created a system where the only way to be on "top" is by being an ultra-nerd over-achiever.
I bet 80% of the GS banker wannabes on WSO have never even seriously considered getting high.
Not complaining, just saying...