Can Minimalist-inspired trading survive on a Prop Trading desk?

• Posted by chicagosean
• on January 3rd, 2011

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The short answer: Yes (feel free to stop reading now) ;)

The blog-form answer:

There is a well-deserved perception in the trading world that retail trading and prop desk trading are two completely different animals. If you scan the surface, it is easy to agree with this assessment. If you are a work-from-home Trader who trades his own money like me, then the picture above looks like outer space to you. Take it from a guy who has spent several years in a room similar to above – there are definitely inhabitants in these environs that more closely resemble space aliens, in body and in mind.

But when you cut through the rows of monitors, dim the florescent lights, and push aside the personal stashes of pepto-bismol, ultimately trading comes down to one thing: buy low, sell high, repeat.

I had a conversation on StockTwits with a trader today who shared with me that his prop desk (located in Europe) had a group discussion this morning to kick off the new year, and one of the topics was minimalism and applying it to their trading. I’d like to think I had a hand in inspiring that talk, but I’m sure its just coincidence. Either way, it lends further confirmation to me that Traders of all stripes are looking for ways to simplify and streamline in an effort to sharpen their focus and achieve a more zen-like stance to their market operations.

How can Minimalism Thrive on Prop Desk?

It’s so easy to be drawn into all the tools available to you when working for a well capitalized firm. Your workstation likely has 4 monitors, maybe even more, and you can load them up with graphs and spreadsheets and scanners and chatrooms and any indicator under the sun. And you don’t want to be the guy accused of not trying or giving it his all, so you’re likely to sit at your desk all day (even eat your lunch there) and bang out trades all day long. Again, I’ve been there.

There isn’t anything inherently wrong with actively trading throughout the day – if you have an edge. While it certainly isn’t the way I like to spend my trading day, if you have an exploitable edge or a recurring pattern that yields you good risk/reward odds on a consistent basis, then by all means trade it and trade it often! SMB Capital offers a solid training program for their prop traders and one of the items they stress to newbies is to find ONE pattern/trade/stock/strategy that you can learn in and out and apply it consistently. It may be a strategy that requires multiple entries and exits each hour. But if you break it down to its basics and keep it simple, you’ll have stacked the odds in your favor. Where I often got myself in trouble back in the day was when I would jump from stock to stock, trading different patterns and different timeframes, with no thought or reason. Often just out of boredom, or the opposite – fear of missing out on the next big move.

Now I realize this might be heresy in some prop trading board rooms who’s business model relies on commission income, but the best situation a prop trader can find yourself in is one in which you are more heavily measured by bottom-line performance, and less by how you got there. What I mean is, if on the 30th of the month you set two traders side by side and see that they both earned $20,000 for the month – does it matter that Trader A executed 1.5 million shares, and Trader B only traded once per day and her volume was only 10,000 shares?

Don’t get sucked into the vortex. This is now a world where information attacks you from every direction. Put up walls. Limit your intake. Seek curated data specific to what you need to know. Discover bloggers that educate and inspire. Find the people on StockTwits who trade like you do or share the type of macro info or color that aids your efforts. Let the chaos on your prop desk swirl around you, but keep it outside that imaginary wall that separates you from the madness.

It can be done. Do it.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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