Floored.com, The Movie

Tonight I saw a documentary called, “Floored”.  It is about life in the trading pits of Chicago.  But, actually, it’s about much more than that.  I am far too close to the topics discussed in the movie to act like Roger Ebert and give the movie a thumbs up or down.  If you get a chance to see it or buy the DVD, I certainly enjoyed it.   Seeing it though made me realize what a special place the trading floor was.  It is a myopic lens to view the world through, but wow, what a view.

When you talk to someone in the business, find out if they were a broker, a desk broker, or a local.  Each has a different function in the marketplace.  The local is the one that assumes most of the risk.  That’s the guy that knows what real heat feels like.  As the movie says, no steady paycheck, no 401(k), no health benefits, no net.  One day you are shopping for a Cartier watch, the next day you are buying your sheets and towels at Walmart.  If you really want to know the business, talk to a local.

If you talk to successful traders they will tell you that there is not a more fun way to make a living.  Trading your own money.  To put it into words that you might be able to understand, Joe Gibbons in Floored says, “I am trading my own hedge fund, with only my own money.  My customers are my kids, my wife.”  They have implicit trust that Dad isn’t going to screw up that day and lose everything.  It is life on a razor’s edge and few can understand it.  Fewer still have the nerve and stomach for it.

Another old trader adage in the film is that “making it is fun, keeping it is the game”.   Good traders know how to get out of their losers.  Traders that I know can tell you about their winners.  But, they will say that the best trades they made are the ones that lost them the least amount of money.  Kind of like when you see a train wreck coming and you narrowly avoid it.  Your sense of relief and blood pressure swing is about the same.

Traders are the smartest and shrewdest people I know.  They cut to the chase.  Not a lot of bullshit.  They are able to size up a situation pretty quickly and make a decision.  If I were in a life or death situation, I’d pick a floor trader as a partner.  They know how to survive.  Pressure is trading your rent check or mortgage payment.  They may not be able to articulate the niceties of Bayesian probability theory, but they can certainly give you a reason why when one thing happens how many you need to have on-and how much money you will make doing it.  Pit traders while in the pit were generally honest too. It wasn’t just the exchange rules that made it that way.  Peer pressure from others in the pit, and the fact that you weren’t going to see any order flow played the biggest role in it.  While you were in the pit, your word was your bond.  It was as good as gold.  Screw over your fellow trader and you were mud.

Floor trading is going the way of the dinosaur.  Computerized algorithmic trading has replaced the old floor trader.  Nothing will change that.  But, locals saw that coming, or should have.  Open Outcry survives in the options pits on the futures exchange floors, but that’s about it. I would encourage you to visit the visitors gallery at the Chicago Board of Trade, or any other US exchange while you can.  It won’t be there for very much longer and the only sound you will hear there someday will be the sound of your own breath.

Traders won’t be fossilized like dinosaurs.  Some will adapt and keep trading.  If there is anything that 2008 proved, is that computers are not infallible.  Traders that adapted were able to make money.  Once the transition is done, the adapted trader might even be able to make far more than they ever were able to make before.  There will be a lot more volume, and a lot more things to trade.

One thing is for sure.  If you thought a circus had a lot of characters, you never have been on a trading floor. Each exchange had its own colorful characters with incredibly funny stories and antics.  There is not enough room on the internet to catalogue them all.  If you press a floor trader, you can hear all kinds of stories about debauchery, drugs and alcohol.  But press them a little harder, and you will hear stories about some of the most generous people on earth too.  I have seen guys write checks to charity that would make you blink, and all you had to do was ask.  People without high school diplomas matching wits with MBA’s from the top schools in the country.  Each trader an island.  Competing with each other, but really competing with the market.  It was and still is a helluva way to try and make a living.

  • admin

    pittrader1988

    2010/01/19 at 12:27pm
    http://www.businessweek.com/news/2010-01-19/trading-pit-envy-strikes-chicago-s-new-electronic-generation.html

    Bill Provenzano

    2010/01/19 at 12:09pm
    I think the feelings we displaced floor traders have experienced resemble the feelings of a professional athlete whose career was cut short by injury.

    Like most professional athletes (baseball players for example), we floor traders believe that our best years were still ahead of us. Never completely satisfied with our performance, we chomped at the bit for the next trading day, the next at bat, vowing to do it better the next time. We were mad at a single for not being a double; mad at a double for not being a triple, and so on. But at the end of the week, despite how horribly we beat ourselves up for not performing up to what we felt was our best, we basked with gratitude in the spoils we accumulated.

    Like an injured athlete, we all believe that our careers were cut short through no fault of our own. It’s one thing to retire from the game of your own volition. But to be forced off of the most exciting playing field before our natural time was up produced a grief, a longing, a heartbreak that is not easily remedied.

    We all grieve for what was; the income, the laughs, the almost inexplicable sense of fulfillment from a winning trade. Some of the best laughs I ever had were on the trading floor. And I’d be lying if I didn’t tell you the some of the greatest moments of despair I’ve ever experienced were on the trading floor as well. But those really were the best of times.

    As with any loss, the grieving process has to run its course. Taking an extensive time away from trading as I did in 2007 helped me with this. I encourage anyone who is trading on the floor, getting sucked in and wrecked by huge orders, yet afraid to not be on the floor because of what you might miss, take some time away from it all. You are stuck in a cycle. Like Pavlov’s dog, random reinforcement pulls you onto the floor. It is the closest thing to an addiction. Until you separate yourself from it, you will be stuck in grieving mode.

    I’ve learned that, with some reinventing of self, a very respectable income can be earned trading on the screen. It may not be nearly as fun (when I “shark” the screen, it’s just not the same), but you can still experience the sense of excitement and fulfillment that winning trades produce.

    I’ve researched some very viable trading systems to trade the mini S&Ps and the mini Dow. If anyone wants to shoot me an email I’ll point you towards them: wprovenzano@yahoo.com (full disclosure: I don’t get any revenue from them.)

    Thank you, Jeff, for this venue to allow conversations like this to take place.

    UMR327

    2010/01/19 at 11:58am
    CR,

    You have echoed and put into words many of my own thoughts, thanks for a great essay!

    Even though I have thrived as an electronic trader, I would trade it all to go back to full-open outcry trading. The daily adrenaline rush of crowding into a confined space with hundreds of other over-caffienated (and over-drugged), sweaty, stinky, loud, stressed-out, flamboyant-yet-broke, agressive, self-absorbed, and self-made guys (and a few Tom-boyish gals) can never be replicated electronically. I started as a runner in 1989 and started trading as a local in 1999, just as electronic trading was taking hold. It has been painful to see this insane testosterone-intensive phenomenon of open-outcry trading be de-balled by the speed and efficiency of electronic trading. Yet, as you correctly stated, we all saw it coming. It was only a matter of time till the party was over, but what a great party it was!

    Umar

    BRC

    2010/01/19 at 10:44am
    I was a pit trader for 20 years and loved it all.For me it was fun and exciting most of the time. I have transitioned to the screen and it is just not the same fun. The excitement is still there but the fun is gone. As a second generation pit trader I have seen and heard a lot of things, but the best thing is to watch someone who has nothing become a multimillionaire, and sometimes this happened in very short periods of time, and sometimes the person just was plain lucky. As the saying goes I will take luck over skill any day of the week, especially in the trading pit.

    Gazza211
    2010/01/19 at 8:31am
    From the floor of the CME, CBOT and then LIFFE to the Computer, there was no better way to live. All traders
    will tell you trading resembles life.
    As to what has not been said though, is all traders look back and say they would’ve done this and that differently, but the reality is that there is not a one who didn’t love what they did.

    Lorie

    2010/01/19 at 7:26am | In reply to Tony LaPorta.
    It was a fun ride tlp.

    MCS

    2010/01/19 at 12:27am
    Ah, the memories! From opening day April 1978 in Amsterdam (EOE), to closing day 2002 in London(LIFFE), I traded open outcry markets with joy and anguish.
    I was a local for 20 of those years, and still am today, but unfortunately now staring at a screen. It’s pretty hard to see fear in the eye of a computer…
    Black Monday, 1987 in London became Armageddon for some, for others, the biggest day of their career.
    I loved pit trading, especially before an unemployment number, when you could cut a knife through the adrenalin in the pit.
    Pit trading: I thrived on it, I jumped for joy from it, I cried from it, I sometimes hated it, but I’d never change it, and I’ll never forget it.

    Zeml

    2010/01/18 at 11:10pm
    Try to explain the emotions of being in the S&P pit during the 1987 crash. I know what the end of the world will feel like. I felt it.

    mike spallone

    2010/01/18 at 9:40pm
    thanks jeff.
    good luck on this endeavor. should be fun
    and maybe from time to time you’ll allow us to bring up old memories…great memories!
    here’s one…the “rush” you get that last 30 seconds before an unemployment number!

    gLinx
    gLinxcard.com

    2010/01/18 at 9:27pm
    From the cloud…

    I’m definitely a “local boy” in this business. Crazy part is the president of one of the biggest media companies in the world told me to seriously consider becoming a trader or launching a business. It’s weird how that’s what I’ve done. That’s why I went into business (not medicine or some other profession that my mom wanted me to pursue). When it’s all said and done, hope to be trading bandwidth and f/x currencies to stimulate liquidity in this crazy mobile world.
    Think Mobile. Enjoy Life.

    Tony LaPorta
    powerpoints.net

    2010/01/18 at 9:20pm
    I started on the floor of the Chicago Mercantile Exchange in 1979. I worked for 12 years on the London International Financial Futures Exchange. I traded my own money as a local for 16 years on both. I was filthy rich twice and broke twice. I would not change a thing.

    The tax man can take our money. Our ex-wives can take our children. But no one can take the memories. After a night out with some old friends fron the LIFFE floor, one of them said, “There is no need to reminisce. They were the greatest years of our life. We all have a story. Your story is no different than mine.”

    Cheers,

    Tony LaPorta

    PS. “A trader cannot be made into a trader. A trader is born that way. A trader will pace the floor all night…and love it…and would not change a thing.”

    2010/01/18 at 9:14pm
    True story. I was at a University of Chicago Booth Graduate School forum. On the panel was the head of the Chicago Federal Reserve, Professor John Cochrane, Professor Lars Stole and Leo Melamed (Chairman Emeritus of the CME). Leo saw me and said he was nervous about being on a panel with academics.

    I told him not to worry, none of these guys ever had a 10 lot go against them. Leo did great.

    Chris Lang

    2010/01/18 at 9:04pm
    Well said brother

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