Making Money Is Not The Goal

Grab 10 people off the street and ask them what a trader’s number one goal is, and I would bet that nine out of ten would say something along the lines of “making as much money as possible”.

Those people would be wrong.
Don’t get me wrong, making money is a wonderful thing—but it’s not the goal. Goals need to be things that you have direct control over. We have no control over the market. We can attempt to understand it, influence it, and work within its framework, but we have no control over it. At the end of the day, we are dependent on dozens of different factors all coming together at the same time for us to be profitable. Making money is the desired outcome, but it’s not the goal.

What is the goal then? On my desk, our broad goal is to be tightly run. We know that if we are a tightly run desk, focusing on the things that we can control and being the best we can at those things, we will have the maximum amount of opportunity in the market.

How do we become a tightly-run desk? Here are some of the goals that we have in our group in order to consider ourselves tightly run:

We Will Eliminate All Process Mistakes

I abhor process mistakes. Making a mistake in the market is one thing—we make those all the time and, with smart risk management, still survive. But process mistakes are different. When we screw up a dispatch and product doesn’t move on time, we could have controlled that better. When we don’t get contracts confirmed and a supplier walks on us, we could have done a better job. When we don’t properly accrue costs and have P&L surprises, we could have taken the time to do it right. The list goes on and on. Too many process mistakes will sink a desk and a career. Paperwork not going out on time, invoices not being paid, trucks being forgotten about, rail cars not being billed…all of those things cost money, time, and reputation. Even within your own company, you can develop a reputation as the trader who continually screws up the system, who costs their trading assistants too much time, and who eventually costs the company too much headache. Your greatest asset in cash trading is a reputation for EXECUTING large numbers of profitable trades, and the biggest part of execution is making sure your process mistakes are eliminated.

We Will Always Do What We Say We’re Going To Do With Our Counterparties
Our ability to succeed in the market depends on having our counterparties think of us when they need something When a customer needs something, I want to be the first person they call. When a supplier is in a bind and needs to sell something, I want to be the first person they call. When a trucker is stuck somewhere and needs to get moved, I want to be the first person they call. Our business is built on long-term relationships with counterparties who know that we understand what they are trying to accomplish and know what we can do to help them accomplish their business objectives. We might not always have the best bid or offer, but we want the relationship that allows us to have the first shot. And sometimes, that relationship will overcome things like price and timing and allow us to capture business that we otherwise wouldn’t get. We build these relationships over time, by being transparent with expectations and always doing what we say we’re going to do.

We Will Maximize Our Information Flow
When you have strong relationships, you tend to have a large amount of information that flows across the desk. Our goal is to make sure this information is organized and shared among the desk to allow us to capture as many opportunities as possible. We have to have regular communication among our traders to develop a strong picture of the overall market and to be able to target specific opportunities within that larger framework. We need to make sure that we’re updating our databases constantly with customer/supplier requirements, keeping good notes on conversations with counterparties, and having ongoing formal and informal conversations about the market. We strive to make sure that all of our traders are informed and are passing along information and processing it to make the right decisions.

This is a small sample, and obviously we have other things we work on too with things like risk control, cost minimization, asset optimization, etc., but this is a list that I think even non-traders can relate to. I think this mindset takes some time to develop, both personally and professionally. When I was first starting my career, I focused only on chasing the money, instead of looking at the things that I had control over. This caused an endless amount of frustration for me and nearly drove me out of the business. Learning to focus on the things that I can control has helped me immensely from a personal and professional standpoint. I encourage all of you to think about what the real goals are in your life to attain the outcome you desire.