How Did You Start Trading?

Posted by Jeff Carter
on July 9th, 2012

Sean McLaughlin at The Minimalist Trader has an interesting post up on how he started trading. It jogged my memory, and I thought I would share mine.

In my career, I have never managed money or traded for clients. No fund, hedge fund or outside capital. Never filled orders. I am what’s known in the biz as a “local”. Formally we are called “independent traders”. The independent traders I know are some of the best in the business and it makes me laugh when I see “traders” on television when really, they are just brokers. Or they are trading someone else’s money. The pressure is far different.

That’s why this story of a big cotton trader suing over a 57k loss made me chuckle. If ever independent trader sued every time they had a big loss, attorneys would be busy for years!

I came by trading honestly. When I was a little kid, I used to watch Orion Samuelson’s Farm report before Ray Rayner in Chicago. He had a great voice and I loved to see the pictures of the traders fighting it out in the pits. Before electronic trading, we used to grow locals in Chicago just like farmers grew corn. There was a new crop every year. He still comments on agriculture, and you can find him on You Tube.

My freshman high school football coach left teaching to become a trader. He did well, and I can ply you with stories about him for hours. He is one of the funniest people I ever met. He passed away in 2001.

All through college, he would try to get me to drop out and come to the floor. I would visit, and be enthralled. I could never get a job on the floor because in 1982, there was a hiring freeze. Too many people. After that, I worked two jobs in the summers so I had enough spending money. Runners didn’t make much on the floor.

Post college, I was sick of being poor. I was responsible and got a job at 3M. After working there for two years, I was in a Villa Park bar and in walked Orv. He said, “What are you doing now?” I told him. He said, “Quit, I will have you making 100g in three months.”. So I walked into my bosses office and quit.

It was May of 1986. For three months, I made $150 bucks a week gross running for Stotler. No insurance. Nothing. Had to move back in with my parents. By the way, I was engaged and my wife’s family was a little skeptical.

Orv found me a job with a guy named Norm Seltzer clerking. I worked for NS for almost a half a year, and then he introduced me to Roger Carlsson, a big Eurodollar options local that hired me. I clerked for Roger until May of 1988 and then he backed me and put me in the pit.

I learned the ropes, and in May of 1992 I left Roger, bought my seat and started trading my own money. Roger and I are friends to this day. Without him, I wouldn’t have ever had the chance to trade.

Trading is full of ups and downs. I have had more than a few. The last three years have been the most challenging trade I have ever seen. It’s frightening and gut wrenching. One long time trader remarked to me, “How could it be that before electronic trade I would buy the high and sell the low every day, be right around 70% of the time on trades-yet today I am wrong 100% of the time?”.

That’s why a lot of us are scratching our heads. Markets don’t begin to resemble what they did in the past. On the SEC side, Sal Arnuk and Joe Saluzzi have chronicled how messed up they are. HFT is responsible for some of it. But the structure of the marketplace as codified by SEC regulation and some poor practices that are industry ingrained also contribute mightily to the messed up situation. On the futures side, co-location, HFT and transparency on the cash side are contributing to messed up futures markets that bear no resemblance to what’s going on.

It looks like to me, people are starting to wake up. World wide we see scandal after scandal, broken market after broken market, flash crashes and flash rallies. We know that regulators and many people that are leaders in the marketplace aren’t telling the truth.

In this latest LIBOR scam, maybe the solution ought to be to have a weighted formula and report every transaction to a central data base. Then we would know the on the run cash price of LIBOR. Participants could then hedge their bets in the Eurodollar ($GE_F) contract. It seems to me that if we want transparency, and honesty, we could use the tools we have to make everything on the level.

Markets are always right if they are structured correctly. Eventually, the truth will all come out and the market will reflect it. It always does.

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.