Anecdotes and Observations from the Front Line

Thanks to my bud @allanschoenberg, I attended a book release event for Robert Koppel and his new book Investing and the Irrational Mindat the old CME Group building last night. This is not a book review, I haven’t cracked the book yet. But during the introduction and Q&A session, Robert relayed an interesting observation that got me thinking about some things I’ve heard recently and sparked some good “Limoncello”¬†and wine-fueled¬†conversations with Jeff Carter (@pointsnfigures).

Robert spent time on the floor at the former Chicago Mercantile Exchange building some years ago. And then he moved on to New York to be involved in a fund where he managed a bunch of traders. He noted he has observed a very significant difference in the mindset of the typical “Chicago” trader versus a typical “New York” trader. He said in Chicago, traders tend to take losses hard and take them personally – mostly because the typical Chicago trader is trading his own money. Whereas in New York, when traders experience a bad day, they typically shrug it off as a “paper loss” because the typical New York trader is trading on behalf of a fund or a backer – otherwise known as other people’s money (OPM).

Having traded both on my own hook (as I do now) and also having managed OPM, my experience was when I had a good day, it always felt best when I’ve been on my own. And whenever I had a bad day or a bad run, I’ve always felt much much worse when it was OPM. I’d be interested to hear other’s thoughts on this…

Meanwhile, earlier this week I caught up with a friend on the phone to talk shop about trading and the trading business. He’s basically of the opinion that it’s just become too damn hard to make money as an intraday trader. I tend to agree with him, and his opinion certainly carries weight with me – he’s a partner in a trading firm and has first-hand knowledge of the profitability (or lack thereof) of a large number of traders. And to him, the numbers don’t lie: Nobody is making any money.

Of course, this can’t be entirely true. Somebody is making money. But who?

All of the above are just further items that bolster my opinion that less is most definitely more, especially in today’s marketplace and until further notice.

I’ve spent this month transitioning the majority of my positions into options spreads. This allows me to define my risk, avoid getting burned by stop-losses, and generally have a hands-off approach. This has never been more important for me – both strategically, and for peace of mind. Never underestimate the value of being able to take your focus away from your positions, but still have the ability to sleep well at night.

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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