So You Want to Be a Full-Time Trader
I recently gave a talk to Reading University Finance students. Some of them wanted to become traders. Each week I speak to hundreds of would-be traders and have a number of apprentices too.
So what does it take?
First step, and let’s just take this as the main step, I got performance which mimicked that of a pro. For me the pro I mimicked was one I met for my book The Mind of a Trader: Lessons In Trading Strategy from the World’s Leading Traders (Financial Times). He was Bill Lipschutz, Global Head of Forex at Salomon Brothers.
I knew if at the time of our launch in 2006 we could not match his performance then we could not raise capital. And if you can’t raise capital, then you are history.
Below is his and our performance intertwined. See if you can spot whose is whose!
Bill was probably the world’s largest trader — being global head of FX at Salomons. His Chairman was Warren Buffet for a time. Fast forward and in 2017 he was Hedge Fund Manager of the Year.
The most eye opening lessons
- Just as in today’s Dragon’s Den, Shark Tank, X-Factor, Pro-Am Golf Opens; amateurs can mimic pros and do as well.
- The trick was never to add to losing positions
- Add to winners, do not have profit targets
- Start small, risk profit for more profit by adding to profitable positions
- 80% of profits come from 20% of trades
- The greatest traders were right 50% of the time.
- Volatility based stop losses and vol based position sizing are the key to wealth in trading and in life
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The author is founder of www.pipspredator.com