My top 3 trading/market ‘related’ books read this year.

As 2012 comes to a close I thought I would look back over my reading, and highlight my 3 top trading ‘related’ books that I read this year. Just to elaborate; when I say ‘trading related’ not only does this include books obviously connected to trading, it also includes books that in my mind illuminate some aspect of human psychology, behaviour or the human condition, which can add insight to ourselves as traders, or to the behaviours of others and the market in general. As you will from my ‘top 3’ list, two of those included are in no way directly and perhaps in one case, even loosely, connected to trading.

During the past year I would say I have probably read around 10-12 books which I would say are in some way connected to trading in terms of markets, trading, risk or some aspect of human behaviour. In addition I have read many more books that I have never completed, but will endeavour to do so still, some of which are overhangs from last year or even a year or two previously. The books I have read are books that have piqued my interest at some point, and led to me picking up and thumbing through, or have come across on the internet, or have been reminded about or recommended to. There are many more books too which I have ordered, and which rather sadly gathering dust on a shelf, or sitting currently unloved on my kindle.

Top 3 (Not in any particular order)

Moneyball: The Art of Winning an Unfair Game by Michael Lewis.

The book tells the story of how the Oakland A’s and general manager Billy Beane used unconventional wisdom to win. Faced with a very low budget, the Beane and the A’s competed with the richest teams in baseball. The innovative approach was so successful that it changed how teams were put together.

I came to this book quite late (It was originally published in 2003). The film about the book really brought this to my attention. Without the movie I doubt I would ever have come to read a book about baseball, which here in the UK garners about as much interest as cricket does in the US.

The fascinating thing about this book, and it was occasionally a struggle due to my unfamiliarity with the language of baseball (thank god for Wikipedia), was that much as it was about baseball, it also about so many other things ‘trading related’ including performance, the human condition, human behaviour, risk and statistics. Written by Michael Lewis, of Liar's Poker fame, it is his excellent writing and ability to tell a story and tie its various themes into coherent and gripping whole, which make the book so accessible to someone who has never watched a baseball game. In fact so excellent and gripping was the story, and the writing, that the book became almost un-put-downable (My own small and rather pathetic contribution to the English language).

There are so many facets of the story and small elements within it that any trader can recognise and relate to from the small private trader to the large bank or hedge-fund trader through to the investment and asset manager. A couple of examples include the quotes by Pete Palmer, ‘The pain of looking bad is worse than the gain of the best move’. Does that not resonate with Daniel Kahneman work on Loss Aversion? The consequence of this for Palmer is that ‘Managers tend to choose a strategy that is least likely to fail. Rather than pick a strategy that is most efficient.’ And how about this line, when talking about Billy Beane, the highly talented rookie who was expected to the next big thing, but was failing with the bat: ‘He (Billy Beane) began in the Private Casino of the Mind, to hedge his bets.’ I am sure many a trader will be able to relate to that sentiment.

Also fascinating to the book was the post-script focusing on the reaction to the book and its theme, particularly within established baseball circles. This further illuminated aspects of the human condition and behaviour, and in particular the ability of entire groups of people to dismiss a view or proposition without so much as listening to or considering its arguments. If you have not read Moneyball yet, then I'd recommend putting it on your reading list for the coming year.

Hedge Fund Market Wizards: How Winning Traders Win by Jack D.Schwager.

The next book is one for the purists. Jack Schwager takes a behind-the-scenes look at the world of hedge funds, from fifteen traders who've consistently beaten the markets. Exploring what makes a great trader a great trader, Hedge Fund Market Wizards breaks new ground, giving readers rare insight into the trading philosophy and successful methods employed by some of the most profitable individuals in the hedge fund business.

Jack Schwager, who I had the pleasure to interview earlier this year, released 'Hedge Fund Market Wizards', the long overdue follow-up to his original Market Wizards books earlier this year. I always recommend any younger trader to read the original two Market Wizards books, and I advise many more established to traders who have read the books to re-read them. In terms of trading books, the Market Wizards books are timeless classics. I therefore was keenly looking forward to this latest version, but also wondering whether he was going to repeat the brilliance of the original books, whilst updating and probably most significantly being able to add something new. - I was delighted to say that I was not disappointed.

The interviews he conducted were a thoroughly illuminating look into the mindset of successful traders. Schwager also varied his subject matters, the list of interviewees included some who were extremely well known, and some lesser known. Interestingly Schwager focused on a wide and diverse spectrum of trading styles, methods and approaches, which highlights many different ways traders are able to achieve success in the markets, and everyone who trades or has traded will probably find someone in there they can relate to. I don't honestly think there is a sentence or word in the book wasted; my own particular favourite interview was the fascinating interview with trader Jimmy Balodimas. Balodimas’ style and approach seemed to baffle Schwager, it is a style and approach which seems to defy convention, though personally I have witnessed a number of traders of that type who probably could not explain what they do right, but have developed an instinct for trading, using innate skills and abilities which enable them to prosper and thrive. The interview itself was ‘Pure Gold’, with Schwager revealing as much about himself in this interview as he does about the interviewee, and in this case rather bizarrely offered advice to Balodimas on how he could improve his trading.

The Balodimas interview is a great example of the human element which Schwager so brilliantly manages to bring out in every interview, and which allows the reader to get inside the mind of the traders interviews and to perhaps gain a greater understanding of themselves. Amongst the many excellent interviews, the ones which stand out to me were the interview with Ray Dalio, a true legend of the markets, and Edward Thorp, the man who beat the casinos, even devising a machine and system to win at roulette.

I, Mammal: Why Your Brain Links Status and Happiness by Dr Loretta Graziano Breuning.

This is the book, which I am almost certain nobody who trades or has traded would have read, and which is absolutely nothing to do with trading and yet in my mind explains so much in the world of trading (and beyond). The central theme of this book is how Mammals seek dominance and status because that stimulates their brain to produce ‘Happy Chemicals’; serotonin, dopamine, oxytocin and endorphins. As humans our brains are based on the same model as our mammal ancestors; the ancient mammal brain does not communicate in words but uses neurochemical. Our neurochemical ups and downs make sense when looked at through the private lives of mammals.

This is a fascinating book that provides a new look at how to understand human behaviour. The book itself is part scientific treatise and part personal happiness manual. The science element is mainly evolutionary biology; the happiness manual adds relevance to the science. Loretta, writing in her own particular and at times quite jaunty and quirky style, explains the biology in simplified terms for the non-experts, and manages to keep the reader interested with stories, examples and real scientific research.

The book is self-written and self published, this means it does lack the benefit of being professionally written, edited and presented. In light of this some patience and understanding may be required occasionally, however the reward for this in my mind well worth it, the reward being the learning and provocation of thought that this book inspires.

The book explores a wide range of interesting questions which focus on human behaviour and can easily be applied to trading and markets. Questions such as; why we behave the way we do? Why are all we prone to patterns of repetitive behaviour? Why do people often act in ways that undermine their own happiness, success and well-being? Why are the emotional rewards of success often short-lived? And, above all, how can people start to come to terms with their emotional selves that are often self-judgmental and self-critical?

More than anything I came to appreciate that we rely on an ancient operating system, which has developed and evolved over millions of years, this operating system acts as our default system; it manifests itself and reveals itself in the form of emotions and feelings, and is driven by automotive responses to stimulus which creates powerful chemical responses in our body and mind. This unstoppable emotional system is far more controlling and influential than our more recent add-on, ‘the logical human brain’, which allows us to think rationally and enables us to abstract and plan the future. I see this book tying in, from a biological perspective, many of the theories we see in ‘Behavioural Economics’. Daniel Kahneman, in ‘Thinking Fast and Slow', talks about humans as almost two separate entities, instinctive and impulsive on the one hand, and deliberate and calculating on the other. The theories put forward in 'I mammal', start to add some biological flesh to these theories.

If I was to recommend one book out of all the books I have read, which deepen my understanding of the human condition, and then this is it.

As I stated at the very beginning, there are many other excellent books I have read that could so easily have made it into this list, however I wanted to keep the list to just three, other notable books I have read this year which I would highly recommend include; ‘The Hour Between Dog and Wolf: Risk-taking, Gut Feelings and the Biology of Boom and Bust’ by John Coates. ‘Risk: The Science and Politics of Fear‘ by Dan Gardner. ‘Market Mind Games: A Radical Psychology of Investing, Trading and Risk' by Denise Shull, and most recently ‘Lords of Finance: The Bankers Who Broke the World' by Liaquat Ahamed. There were also some real duds and disappointing reads too, I’ll do those books the courtesy of not naming them.

I hope you find my little recap useful and informing. If anyone has their own personal recommendations or some feedback or comments of their own, I would be happy to hear from you.

Anxiety and Stress in ‘Trading’: Consequences for one’s self, their trading and even their family. And a new coaching approach for dealing with anxiety that can benefit trading performance.

Anxiety is one of most common emotional issues facing traders. Anxiety, and the stress which results, affects most traders and individuals engaged in risk seeking activities at some point. The consequences of anxiety and stress can be extremely serious: With regard to one’s work, an individual’s trading performance and their longer-term confidence can suffer. With regard to their health and well-being, anxiety and stress can have serious consequences and damaging side effects. And the results of anxiety and stress do not end there: Anxiety is often taken home, and typically the individual is unaware of this; they themselves are caught in a delusion whereby they think they are doing everything to avoid bring the anxiety home. The results can be harmful to one’s relationship with loved ones and family, and can have a more damaging and long-lasting affect on the children of those affected by anxiety and stress: Forbes recently carried an excellent article earlier this year about this phenomenon, the article ‘How Parents' Stress Can Hurt A Child, From The Inside Out’  can be seen here.

I recently wrote an article about performance anxiety, using sport as the metaphor, and focusing on the troubles of the Spanish soccer player Fernando Torres. Performance anxiety affects many accomplished individuals in the fields of performance, such as sports, the performing arts, fields of endeavor, and games involving skill and judgment such as poker and chess. More specifically it occurs when the individual focuses too heavily on the outcome of their performance, which actually interferes with the act of performing.

Another form of anxiety is ‘Secondary anxiety’ this occurs when someone is actually being anxious about something which makes them anxious. An example is a trader who fears they will be stopped on a trade, so they actually trigger the stop themselves prior to the market hitting the pre-set stop level. This is to try and kill the anxiety they are suffering, however the market then recovers and the original stop would never have been triggered. Their anxiety actually created the very situation they were trying to avoid, thus ironically making it a reality.  Other examples of this type of anxiety can be seen when trader’s fear they’ll lose money, lose their job, or fear they cannot beat the market; they create the very situations that lead to the very thing they fear and are trying to avoid. Often this is can be the early stages of a vicious circle which may be very damaging to the individual and beyond.

In my coaching work with traders inside banks and hedge funds, I often come across traders suffering from anxiety. I try to work with the traders to help them focus on improving their confidence and self-belief, breaking negative habits, and cementing practices and behaviours which aim to take their trading forward thus creating a virtuous circle. I have also recently started collaboration with ‘Julie Courtney’ a coach who uses a relatively new approach called ‘HeartMath®’ coaching. This is a very specific method of coaching which targets the root of an individual’s anxieties and works with them to help reduce and negate the specific anxiety and thus improve their ‘Personal Resilience’, and lead to enhanced levels of performance.  HeartMath® utilises leading-edge science, practical techniques, biofeedback technology and the combined intelligence of the human heart and mind to achieve exceptional results.

Julie has been working in Financial Market businesses for many years, and hence has a good understanding of the environment and requirements specific to risk takers. I am delighted that Julie has written the following article about her work.

TRANSFORMING TRADING STRESS by JULIE COURTNEY

Stress and anxiety don’t have to be the affliction of high-flyers

Stress is nothing new. Everyone feels stressed from time to time, whether through pressures either at work or at home, and many people feel stressed a lot of the time, especially when their life is going through a period of change or when the going is particularly tough. So if you feel stressed you’re not alone, especially among the high-flyers of this world. It’s a sure fact that many top businesspeople feel stress or even anxiety at some point during their careers – and fear of failure is a big contributor to that. A recent study by Towers Watson found one in three workers in the UK are at danger of burnout!

The main problem is, in our fast-paced world, we have an awful lot of commitments, from the trading floor, to the boardroom, to the home environment. In some cases, too much pressure and stress can overwhelm and become a problem. If that happens, mental health suffers and so does physical health, with symptoms such as fatigue and irritability being common.

Any emergency, high-pressure, risk-taking scenario that takes you outside the comfort zone has an impact on what is going on inside you and, by its very nature, can damage your health. In trading environments, you often see people having a strong physical response – who has not seen a colleague or friend lose control on occasion?

Many stress management solutions can be merely coping strategies and they don’t necessarily help build long-term resilience to pressure. To overcome difficulties as they happen and to react to challenges with composure is the key to stopping the negative effect stress can have on physical and mental health. And mental health is just as important as physical health. Steve Redgrave, winner of four consecutive Olympic rowing gold medals, and an epitome of testosterone-driven success says, “Athletes train their body to incredible levels, everything is put into the physical training, yet very little is done mentally. Most of the time the limiting factor is the mind and not the body.”

Dealing with stress ‘in the moment’

Finding a way of dealing with stress as it’s actually happening can have many positive effects. It can improve your performance at work and in the other multifaceted areas of your life where you are expected to achieve. But how can this be done?

One solution is personal resilience coaching, which shows you how to reduce stress ‘in the moment’ simply and quickly and, in so doing, enhances your performance, productivity and quality of life and work. Coaching techniques vary but in one method, called HeartMath®, practitioners use innovative approaches based on learning how to use your emotions to change the variability in your heart rate in order to create ‘coherence’ – a scientifically measurable state. This is a technique relatively new to the UK, but which has already been proved in the US and is now achieving exciting results on this side of the pond. The results are that you feel more balanced, are able to judge situations clearly and react accordingly, and you don’t suffer from the negative effects of stress on the body.

Specifically, HeartMath® can enable more balanced risk-taking as well as improving the long-term health and vitality of those in the trading profession. Risk-taking by its very nature, whether the trader is the highest earner on the desk or not, triggers human software on a daily basis that has not had an upgrade since prehistoric times. So whether it’s the best or worst trade in the trader’s life, the pressure is still wearing down the body, because the body doesn’t distinguish between life & death situations and the risks involved in trading.

What shall I do today? Kill a mammoth or get a deal done?

So what are the benefits?

Heartmath® and personal resilience coaching genuinely raises people’s performance and health, equipping them with skills they can very easily apply to every aspect of their life, quickly, simply and continuously, without becoming reliant on external coping strategies. And it’s quick to learn – the techniques can be mastered typically in a few one-hour coaching sessions – and the skills last a lifetime and be applied at work, at home or in sport

Above all, stress responses are like habits. Learning how to practice the techniques allows you to retrain your body into establishing healthy habits and over-riding those that cause you problems.

In a recent survey 88% of people put off making a change to their lifestyle, despite believing that it would improve their lives. To sum that up, consider these words by Austrian neurologist Viktor E Frankl: “Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom." 

It’s a tough question, but what are you putting off that you know needs to change in 2013?

To find out more about Julie Courtney’s work with traders using  HeartMath® coaching please contact her at:

Julie Courtney

tel: +44 ( 0)1892 544 783

mobile: +44 (0) 7872 517 109

email: info@atriumsynergies.com

For more information visit: www.atriumsynergies.com

Or alternatively to find out more about my own work with traders and my ‘Trader Performance Coaching’ programme. Please contact me:

Steven Goldstein

tel: +44 ( 0)207 993 5362

mobile: +44 (0) 7753 446097

email: sgoldstein@bgtedge.com

For more information visit: www.bgtedge.com

"Worried Businessman With Pc"  image by 'David Castillo Dominici' courtesy of FreeDigitalPhotos.net

Fernando Torres: A sad example of 'Performance Anxiety'; a threat to all traders .

A major problem common for many, if not most traders, at some time or other, is that of ‘Performance Anxiety'.  This can afflict traders, from the most experienced of professionals traders working for large banks or hedge funds, to small private traders working to make a living trading from home or a local trading office. 

Performance anxiety afflicts accomplished individuals across a whole range of fields of performance and endeavour. It can be seen across sports, in theatre or music, military personnel, surgeons, and in gaming amongst poker and chess players.  A dramatic example has been unfolding as a sad spectacle before our very eyes here in the UK over the past couple of years. One of the world’s leading football (soccer) players, the Spanish international striker Fernando Torres, was purchased for a UK record of $80million almost 2 years ago by Chelsea FC from Liverpool FC. During his time at Liverpool, Torres made 102 premier league appearances scoring 65 goals, a strike rate of almost 64%, at Chelsea he has made 61 premier league appearances, scoring just 11 goals, a strike rate of just 18%. To add to his woes, exposure at the very highest levels of the game has exasperated the situation. Sadly, this highly talented and entertaining footballer, who was once the terror of many an opposition defence across Europe, is now a mere shadow of his former self. I have attached a link to an excellent article from last February’s FT, which talks about the Torres situation and other high profile examples from the world of sport. As well as some comparison you tube clips of Torres at the foot of this article.

http://www.ft.com/cms/s/2/e7c80640-5788-11e1-869b-00144feabdc0.html#axzz1nR9Sp229

A link to an update of the Torres situation can be seen in an article from last Friday.

http://www.express.co.uk/posts/view/361554/Time-s-up-for-Fernando-Torres

As stated at the very beginning, performance anxiety affects traders at all levels and can strike at any time. High level performance skills have usually been honed over many years; the individual’s performance has largely become automatic and habitual on many levels, relying on sub-conscious and non-conscious actions, reactions and decision-making. Performance anxiety typically occurs when the focus starts to shift to the outcome of performance, as opposed to the actual act of performing or doing. As a result automatic and habitual behaviours are replaced by efforts to gain conscious control of their activity; conscious actions are often far clumsier than sub-conscious and non-conscious driven actions, which result in a major disruption of one’s performance. 

Performance anxiety does not always occur in long-term dramatic examples, but can also be seen in short momentary situations in high pressure circumstances, commonly known as ‘choking’. Examples can sometimes be seen in the final round of a major golf tournament, when the leader inexplicably surrenders a large advantage going into the final stages. An memorable example was Jean Van De Velde's meltdown at the last hole of the 1999 British open: Standing on the 18^th tee, Van De Velde held a 3 stroke lead over Paul Lawrie, surely this was game-over!. Sadly and rather farcically Van Der Velde managed to achieve a triple-bogey, putting the ball into the rough, the sand, the water and even the grandstands. - Tennis is another fertile area where individuals choke, I recall Jana Novotna freezing in the final set of the 1993 Wimbledon’s Women final: Leading 4 games  to 1 in the final set and serving at 40-30 for a 5 -1 lead, she managed to choke, surrendering that game and the next four games to lose the set and the match. And as for us long-suffering England football (Soccer across the pond) fans, we have to put up with our national team choking whenever it comes to a penalty shoot-out at just about every major tournament (Not that we ever have a chance of winning anyway). 

Traders once again are familiar with this, rather comically amongst my trading colleagues we use to term it as ‘snatching defeat from the jaws of victory’, unfortunately it would sometimes be a joke used a little too often for some. Yet again this was often a case of watching the outcome, over managing the process, thinking consciously or ‘trying to hard’ and not sticking to plans and discipline. I think most traders will be able to identify with at least some examples of this, however if you can identify with too many examples, it may be time to start taking some sort of affirmative action, since this is often the beginning of what could become a downward spiral à la Fernando Torres.

Torres - from this:

 

To this:

" 'Sad' Image courtesy of zirconicusso / FreeDigitalPhotos.net"

Ray Dalio - Always worth listening to.

I don't often do economics on this blog, there are plenty of other people covering the 'dismal science'. However just occasionally I veer slightly over to the dark-side. Inparticular,there are certain people, who to me have a great grip on the subject, and understand it deep enough for their comments to be relevant. One of those people is Ray Dalio. - Dalio is the founder of Bridgewater Associates, the worlds largest Hedge Fund, and according to the FT earlier this year, he had overtaken George Soros as the world’s most successful hedge fund manager. 

I will actually defer at this stage to another blog, the excellent 'Daniel's Trading'  who has covered a discussion involving Dalio at 'The Council on Foreign Relations sponsored'. The hour long discussion, “A Conversation with Ray Dalio”, is a great explanation of what is going on in the global economy today. The blog provides a succinct summation of Dalio's perspective of the global economy right now, along with his insights into investing.The full discussion can be seen below.

CNBC: In Battle for Dominance, Traders turn to Coaches

Thank you to Nia Williams for penning the following article published today: 'In Battle for Dominance, Traders Turn to Life Coaches'. Of course I would have preferred the writer to have used the word 'Performance Coaches'; there is a big difference between a 'Life Coach' and a 'Trader Performance Coach'. - Life coaches work with individuals on aspects of their every day life, and are largely seen as, rather unfairly, a little new age and almost other-worldly. On the other hand Trader Performance Coaches have their roots in understanding what is occurring within the 'Minds and Behaviour of Traders' from having 'walked-in-their-shoes' and worked with them extensively.

My experience as a Trader Performance Coach, draws on over 25 years in the financial markets, principally as a trader in the Foreign Exchange, Rates and Fixed Income markets for some of the world's leading investment banks. This is buttressed by having studied and qualified at one of the world's top 'Executive Coaching Schools' and worked as an 'Executive Coach' with traders, brokers and managers at many leading investment banks and brokerage firms. I have also provided education and consultancy work on many aspects of trader performance and psychology, this includes creating a portfolio manager development programmes and supporting documentation for two of the world's leading global hedge funds.

Further to the article, I would like to explain the work I do as a Trader Performance Coach (And Executive Coach): I offer specialist performance coaching, mentoring and development services to businesses and participants in the financial markets. I have worked with and helped traders, portfolio managers, fund and investment managers, brokers, sales people, risk managers, teams, desk heads, managers and leaders.

My experience and knowledge of the landscape, environment, culture and demands of the financial markets, together with abilities and skills learned and developed as a coach, combine powerfuly to help and assist individuals and teams in the financial markets in making real and lasting change, to develop and enhance potential, and to face up to the extraordinary challenges and demands required by the job.

Currently the demand for coaching services in the financial markets has never been higher as businesses and their staff face-up to an extremely challenging trading environment and ever-changing demands and challenges from a torrent of legislation, regulation, technology, competitive and even political threats.

So what it is I exactly do with my clients: In truth the demands are many and varied, I have included a list of some examples of the outcomes I look to achieve in helping my clients:

• Working with traders on issues of confidence and self-belief; with those who never had it, and with those who have lost it. 
•  Helping traders come to term with their trading fears and redefining these.
• Addressing self-defeating behaviours and habits.
• Developing a repeatable and powerful approach in relation to placing successful trades.
• Coping with the 'ego battles' within the trading room.
• Coming to terms with and adapting to changes and challenges in the markets.
• Dealing with perfectionism and the need to be right.
• Helping traders to progress through self-imposed ceilings in performance.
• Facilitating better self-awareness and understanding to help traders hold on to positions rather than grab profits or limit profit by not taking large enough risks.
• Working with traders to improve discipline and patience.
• Helping traders to raise their risk profile and more optimally manage their portfolio.
• Helping traders to develop a style and approach more commensurate with their personalty and strengths.
• Managing change from market-maker/flow-trader to a proprietary approach.
• Helping traders cope with the change in competency required when shifting markets, products or even styles and approaches.
• Working with traders to develop better money/risk management practices.
• Encouraging traders to become more active in working to improve their approach.
• Helping teams work better together and with other teams and groups.
• Working with traders to understand why they are under-performing and helping them to regain prior levels of performance.
• Working with managers who have faced difficulty making the leap from trading specialist to a role which requires them to both trade and manage.
• Helping managers make the adjustment to becoming a strategist.
• Improving end enhancing how one engages with clients, colleagues, managers and reports.
• Developing a better understanding of the needs of clients and customers to improve sales and broking services.

In order to help businesses and companies assess the value of my 'Trader Performance Coaching', where practical I offer a complimentary trial coaching service prior to committing to an investment. 

Further information, check out my website at www.bgtedge.com, or contact me direct on (+44)207 993 5362/ (+44)7753 446097 or email - sgoldstein@bgtedge.com.

Paths to a Trading Career

Trading offers opportunities which few other jobs and careers can match. For those able to achieve success they can attain financial independence at a relatively early stage in their life, with the possibility to earn very large or even huge amounts of money and set oneself up for a very comfortable lifestyle. – As a job/career, it is an extremely interesting and exciting choice; no two days are ever the same, and the challenge of competing and winning against the markets and other traders is both highly rewarding and extremely stimulating. Unlike many other careers, trading does not follow a linear path based on intellectual and academic ability or privilege. Trading is a skill which can be learned and developed; in many respects trading is closer to an art than a science. 

As owner of the Linked-in group 'Trader, Trading and Risk Psychology' and a 'Trader Performance and Development Coach' I receive countless Linked-in messages from people asking how they can get into trading. – I use to reply personally to a few of these, with a summary of the various options open to them. However, the number of Linked In messages I now receive asking this question together with time limitations from my work responsibilities, make this no longer possible. I have therefore now decided to put together the following piece which is my thoughts on this issue, and then throw this question open to Linked-in group members who can then pool their knowledge and experience and perhaps come up with various thoughts on this matter to help young, and perhaps even the not so young, to get started in trading.

The main issues are:

1) Finding paid employment as a trader: - It is increasingly difficult to get work as a graduate trader inside an investment bank in the wake of the Global Financial Crisis and with the subsequent constraints on bank capital, increased regulation and within a contracting market place. The days of getting a job on the floor of an open-outcry exchange are largely gone, however there are an increasing number of private proprietary trading firms which have and continue to move into this space (More about that below).

2) Trading location: - In order to learn trading I feel it is important to be around a trading environment with like-minded people from whom you learn from and with. The noise and buzz of a good trading environment provides useful information in itself, and stimulates the senses in a way that just staring at screens cannot achieve. A good location will offer many resources in terms of access to markets, monitors, pc’s, trading management systems and availability of news and research. - Though many people can and do trade from home, I would recommend being in an office with other traders if possible: Trading from home is a very lonely existence, and that in itself can be demotivating and can undermine one’s ability to learn and develop.

3) Obtaining adequate trading capital: - This has always been the dilemma of the self-starter. Until one has proved themselves, using one’s own capital is pretty much the main avenue open to most people. For many self-starters, and particularly for those without access to capital, this is usually extremely difficult. – Even for those with access to capital, producing an income in the early stages, and until the capital has increased sufficiently, is extremely challenging.

4) Training and development: - Good training is essential, there are various avenues to this such as classroom based learning plus practice on a simulator or with a small trading account, plus on the job training and practice along with a good mentor and teacher. There are of course many people who teach themselves, reading from books and publications, though I believe some human guidance is essential.

5) Understanding the nature of the job and the risks involved: - Many people come into trading seeing it as a job they can merely learn and apply, or as an extension of some casual trading, hobby or interest they have. However trading is so much more than that, it is all consuming and encompassing and in every sense akin to starting ones own business: This includes the danger and very real risk of losing a major part of or even all of ones capital, also a very sharp learning curve, and the high possibility one will suffer serious setbacks as one learns and develops. Furthermore, in the same way a new business owner rarely earns a decent income in the early years, the new trader will probably not earn a living until they can stand firmly on their own two feet, which may take some time. Finally, like the failure rate for new businesses, the failure rate for traders is unfortunately very high.

So what other options are open to get into trading?

The opportunity to work in a bank trading room as a way into trading is as mentioned growing increasingly limited as banks retrench from trading following the difficult market environment of the past few years.  There is still some hiring occurring, however it is mostly from higher education establishments through graduate intake programmes, and the numbers being hired are I believe considerably down on a few years ago. - Hedge funds tend not to employ inexperienced traders, however one or two of the larger funds, do have graduate training programmes, but once again I believe these are mostly open to graduates from the select establishments. 

In the absence of obtaining an internship or graduate place at an established trading institution the next best option and the option open to virtually anyone, is to try and get into training programme at one of the many and growing number of proprietary trading firms.  This is becoming increasingly popular as a means of providing opportunities to potential traders. There are usually two types of approaches here:

• Non ‘Fee-paying’ programmes at proprietary firms: These either take graduates and pay a small salary, or they may take in a number of recruits on a short sharp ‘boot-camp’ type approach, which they quickly whittle down to a very small group who they train and then place within their company, though often without a salary or a very small token salary but with the opportunity to earn a trading income.  This option is only open to relatively small numbers and only a few traders get selected, however often the training is limited and traders have to learn the method particular to that firm.

• ‘Fee-paying’ programmes and courses at proprietary firms: The firms provide a fee based training course and programmes and then ‘cherry-pick’ those that show the most potential for hire. Upon being hired they then earn a small salary or/and the opportunity to earn a trading income : Some people may have an issue with paying to learn and then only ‘possibly’ getting hired, however this seems to be very much 'the way' in this day and age of ‘training courses’ and unpaid ‘internships’. - This approach usually involves firms charging a fee to participate in their training courses and programmes. In return they provide education, teaching, mentoring and facilities to trade on simulation software, or may even provide you with a small trading account in which to trade real money. Some firms run diploma courses and these may be attached to a recognised or accredited education establishment.  As would be expected the education and training is far more in-depth, broader based and of a higher quality, and for those who do not wish to or cannot continue in trading or would like to move into a related area within finance or the financial market industry, it could be a useful addition to their curriculum vitae or résumé.

Some considerations to pursuing these options.

This involves a level of commitment and sacrifice by the trader that in many respects is their first trade: For example:-

• The ‘fee-based’ training programmes and courses, though not cheap are probably on a par with training courses in most professions and industries. – In most cases, the trading education at the ‘fee-based’ training courses is far superior or more in-depth than the non-fee-based approach and should provide a far more solid grounding.  
• Many of the training programmes can lead to opportunities to be hired by the proprietary firm providing the training; however the actual number hired may be quite small. Nonetheless the training can be a springboard to a career in trading elsewhere or in one of the many associated businesses or careers.
• Earning potential is of course very high in trading, but in the early days, weeks and even first couple of years learning the job, income may be low compared to alternative career choices. This can become troubling when one sees friends earning considerably more in another role, or if one has big financial commitments or dependents to support. – The need to make a decent amount of money quickly, is unrealistic and can be the death-knell of many a promising trading career.
• Intellectual ability does not necessarily equate to trading success. This is one of the biggest stumbling blocks for many people who expect, having achieved straight A’s and first class degrees throughout their education, to be able to achieve success in trading. One has to go in with an open mind, and be willing to learn from scratch if they want the big rewards.
• Persistence: If you really want to trade, and the first attempts do not work out, or your experiences at a proprietary firm or on a particular course are not positive, do not be too downhearted. Many a successful trader experienced similar starts to their careers, it is in many respects part of the learning curve. I know of one trader that had three attempts and many years trying before finally getting going.

Other options available:

• One can start and learn at home on one’s own or in a small proprietary trading office or arcade where you hire space and equipment. 
• If you know someone in trading, perhaps a family friend or friend of a friend, try and spend some-time with them, watching and learning, and seek their opinions on a career in trading. They may be able to give you or know someone who can give you a head start.
• Major trading hubs, such as London, New York, Chicago, Dubai,  Hong Kong, Singapore, Frankfurt, etc,  tend to offer far more possibilities than provincial and towns and cities. 
• There are some trader training companies and businesses which provide online or classroom training and/or support systems. However do be aware that there are also many dubious but well-presented and marketed companies out there posing as professional training organisations, promising you the world and getting you to part with your money for very little return.  – Do your homework and investigate all options thoroughly.

'Learn' and 'Future' images courtesy of FreeDigitalPhotos.net.