Market Watch Ep.11: What makes a good trader?

Welcome to the Market Watch podcast by Amplify Live, where you can access the latest market insights with me, Anthony Cheung, the Head of Market Analysis, and joined by our Head of Trading, Piers Curran, getting you up to speed on what mattered in markets this week. Good morning and welcome to episode 11 of the Market Watch. It is Friday, the 9th of April, and as per usual, I'm joined by our Head of Trading, Piers Curran. But markets have been incredibly quiet this week, and so rather than do our normal routine of talking about some of the market-led themes, we're going to completely pivot and talk about one single topic, and that is what makes a good trader. So, Piers, I think to start things off then, we need to qualify that statement. So how should we go about that?

Yeah, well, it's a big question. And it's a question I get asked all the time. For me, what makes a good trader is consistency. I think it's— anybody can make profit on any one day, let's say, or in any one week, or in any one trade. Anyone can make profit. And that's just simply by view of the fact in the end, price can only go one of two ways. And you get lucky. I mean, I've had plenty of trades where I've got lucky. And if you happen to be in a trade at the right time, I don't know, you might be long something, and there's news, and it happens to ping higher, and wow, you make a lot of money really quickly. But I don't think that makes you a good trader. So for me, it's consistency over time. That's what makes a good trader.

OK. So now that that's clear then, Let's go back. You've been trading for about 20 years. I think I've been around the block now about 15 years. So we've encountered some amazing traders and some not so good traders along the last few years. So tell me about some of the characters that really stick out in your mind of being what would be perceived as a good trader.

Yeah, I mean, well, I hit the trading floor— well, I say I didn't quite hit the trading floor straight away in 2002 when I joined the US trading firm in their London office. I said we hit the trading floor. We didn't. We actually got shoved into a side room. So these trading floors were quite aggressively hiring. And I was one of 15 people. And Will DeLucy, the other co-founder of Amplify, was also in that same group of 15. And anyway, we started. But we got shoved into this side room. Basically just got given a computer and access to the simulated version of the market and got told to basically figure it out. There was really virtually no training at all. And we got shoved in a room. And then like a month later, right, let's have a look at your simulated performance. OK, if you've done well, fine, right, you can come across to the trading floor. And so then you kind of walk into this massive room, these open office huge rooms with 100+ traders on there. And I have to say, it was very, very intimidating. And it's not the environment you would expect, or certainly not the environment you see these days. I mean, this is 2002, pre— well, pre-everything, pretty much. This is where we were right— when I joined, we were right in that transition between. Coming off the LIF floor. So that LIF being the futures exchange in London, that's an open outcry trading pit. That closed, and futures trading went screen-based. And you had all these kind of big characters, these big— I mean, a lot of them were like Essex boy, Barrow boy, as we call them, these really kind of extrovert, big, quite aggressive characters that were trying to figure out how to trade on a screen, having had a career on the floor. And with that came some just ridiculous behavior. You'd walk into the trading floor, and you've got people just in their Bermuda shorts and flip-flops with their feet on the desk, just reading stuff that, that really shouldn't be read in public.

Um, I've got a good story of how the traders, because they used to go out all night and then come in straight into work, they would, um, borrow the, uh, they would borrow a special bag because back then there obviously wasn't smartphones, and the bag had some, um, adult content magazines, and they would take the bag to the toilet and they'd also have a stack of toilet rolls and have a little kip in the toilet. It was that kind of behavior.

It's true. And it's kind of weird to think about that now. You go onto a trading floor now, and obviously it's super serious. I mean, part of that— I mean, we won't talk about it in this podcast, but perhaps the overregulated situation that we now find ourselves in means that behavior has swung from one end of the spectrum, which was ridiculous, absolutely ridiculous when I started. Now to the other extreme where it's just gone too far. And actually, a lot of traders working for some of the big banks, for example, are now actually super cautious about what they're doing because literally they could get fired for saying the wrong thing.

So one of the things here was that I spoke to my brother yesterday. My brother used to work for Refco. And Refco at the time was a New York-based— it's the biggest broker in the world in the late '90s, early '00s. And they had a big futures division where people were just speculating on the market. And I asked him, well, what were some of the nicknames? Because this is something that doesn't really exist so much nowadays. But back then, if you were good, you weren't known by your name. You had like a code name, a market name. And here's just a selection for you, Piers, that you might enjoy. So you could tell what people thought about how good a trader this guy was. This guy was called Yoda. So he obviously was the boss. I mean, to have a nickname like that, you really are top dog. Another one, this is slightly going a different direction. He was called Toxic. But you mentioned one of those characters, and I remember Toxic, and he actually, You know, it was really weird, uh, situation because when I first went on the trading floor at Refco, um, I was about 16 because my brother was trading for Refco at the time. I was, I was young, and I remember they took me out at lunchtime for one of their usual lunchtime forays, and oh my goodness me. But ever since then, me and my brother are quite different personality-wise. I mean, he definitely enjoyed that culture. I think for me it was very different from what I was used to, and I was quite introvert at the time. But they were always so pleasant and nice to me. It was almost like I was the little kid that they took around.

The little brother.

Yeah. And so Toxic actually was part of the— I can't remember what the firm is called at Chelsea Football Club, but he was part of the firm.

Oh, right.

Yeah. So he was a tasty fella, but really, really nice guy. Some of the other names— The Edge.

Nice. I'll take that.

Another one— Black Ray.

Black Ray.

You know, these are different times, I guess.

Chicken.

And then my brother was called the Chinaman, our surnames obviously, and us being half Chinese. And then, and therefore I just adopted the nickname Chungy Jr. Um, so, but, but the one that stuck out, talking of like of the biggest name at the time, was one that I think even you heard of at a different proprietary trading firm. The guy was called Braveheart.

Anthony Cheung.

And surely that has to be the best name.

He was a legend. I actually never met him, but you certainly knew about him. And almost like the folklore kind of stories that would kind of ripple through the prop trading desks about this guy and how much he's making. I mean, I'm sure— I know he made a lot, but I'm sure the numbers that— it's like Chinese whispers. By the time it got to us, a few trading firms across, then those numbers have been multiplied 10 or 20 times. But yeah, I had a nickname. My nickname was— and I didn't give this to myself. My nickname was Iceman.

OK, that's good.

We'll get into some traits, personality traits of good traders. We'll explore that in a minute. But yeah, that name came from the fact that apparently, you couldn't tell. So other people on the trading floor sat around me or whatever. They couldn't tell if I was having a good day or a bad day. They didn't know through the way I was, my external appearance, the way I was behaving, they didn't know if I was making a lot of money, if I was flat, or if I was losing a lot. And the point being that I think I was very good at dealing with the sort of roller coaster of, um, P&L swings, let's say.

So, so where— that I've heard this before. I, I know you're the Iceman, and I know for what reason that you, you were given that name. What I don't know is that what, what's— where's this ability that you have come from? Was it learned? Was it something that was born out of an experience, life experience? And if so, can we have some more color on that?

You want to explore that? Well, look, I think to be a good trader— I mean, let's start there. Then we'll kind of get to that point, why did I perform well? I think to be a good trader, firstly, it's very hard. And as we said before at the start, it's about consistency over time, day in, day out, week in, week out, month in, month out. Year in, year out, right? It's consistency of performance. And so a whole bunch of stuff— attributes, skill sets— needs to go into that, into you achieving that consistency. And of course, there's the obvious stuff, like you've got to be— your product knowledge needs to be excellent. So what financial products are you trading? And just understanding these products from the ground up. I think you've got to be a great analyst. And that comes in a few forms, actually. But the obvious one is price analyst, so charting and technical analysts, so really understanding price and price behavior. I think you've got to be a good sort of macro— or you've got to be a macro expert, so understanding the forces that drive prices. All of this stuff, those three things really, that just comes with time and learning and reading. Anybody can learn that stuff. It's not rocket science. It's very straightforward. It just takes some time. That's not the differentiating factor. How much of an expert are you on equity products? That's not your differentiating factor, because everyone can learn that. So actually, I think in the end, it comes down to your control of yourself is, in my view, the most important attribute of a trader. All the good traders I traded with, all the good traders I know, I would say that's their one common attribute. No other common attributes. None at all. Actually, just the control of yourself. And mostly, I would say that comes when you're losing money, the control of yourself. Can you deal with loss? I think ultimately, in the end, that that's the single most— actually, so whether can you learn that is the question. Can you teach yourself to deal with adversity? Can you teach yourself to deal with loss? Can you be in that moment where everything's crashing around you, your P&L is red and getting massive and red, and how do you act? How do you behave? I think to a certain extent, you can educate yourself around psychology. That's key for anybody who wants to be going down the pathway of trying to perform as a trader. Psychology is key. You can learn about that stuff, but unfortunately, that isn't enough because in the end, fine, you might— You understand psychology, but can you control it? And so I would say, for me, are you able to deal with those bad days? Are you able to come back tomorrow and behave, genuinely behave in a way where yesterday doesn't matter? And I say genuinely because the psychologists out there will say, well, you've got to get the right mindset. Come back tomorrow, new start, P&L is at zero now, forget yesterday. Those losses have gone, you can't make them back, always look forward. You can tell yourselves all of those things, but actually, actually, how are you feeling inside? And can you control that? And so, yeah, for me, I mean, I guess I was quite— I think I'm quite resilient as an individual. And I think that comes from my early years, my childhood. We lived in the back end of nowhere in the middle of Wales in a tiny little village. I went to school and the school I was at, this is when I was 6, and the school I was at had 21 people, not in my year, in the whole school. There were 2 people in my year. I was one of them. That was my environment as a school. But then my dad started doing quite well at work. The school wasn't very good. The best school nearby was actually like a 45-minute drive away, and it was a boarding school. They thought, now we've earned a bit of money, let's see if we can upgrade education here. I got sent to a boarding school, and I was 7. It was like a Victorian old school boarding school. It's since been shut down. Let's put it that way, got shut down about 15 years ago, or maybe 20 years ago now. And look, it was just a very— at the age of 7, it was just a very harsh environment. And I think that forced resilience into me. And that resilience, I believe, has stood me in very good stead, certainly when it comes to trading. Because look, all right, I've lost some money. Just getting it in perspective. And how easily can you get that loss into perspective, I think, is relative to the kinds of ups and downs you've had in your life prior to that moment. And that's why I think, kind of thinking about the way big institutions hire and how they've hired, they tend to hire the Oxbridge candidates. And there's a flaw in that. There's a flaw in that system. And that's because Oxbridge candidates, tend to have just excelled throughout their life. They've academically smashed it. They've achieved and achieved and achieved. And they've never failed. And I think having never failed at anything actually puts you in a really vulnerable place when you enter the trading floor and you start to try and manage money. Because money goes up and down. And when it goes down, right, let's see what you've got. That's really where you find out if someone can trade.

Yeah, it's just so interesting because I think having been involved in Amplify since our inception with kind of trader development, often new traders coming into this will be looking for like, what is the routine? What's the framework to success? But actually, you and I were talking a while ago about the idea that some of the best traders we know, some trade 12 hours a day. Some trade literally 1 hour a day and they have equally the same output, if you like, as results in how they trade. So funny as well, when I asked, because my brother worked with Braveheart and I was like, come on then, tell me, what was he like? I said, what was the one defining characteristic of Paul Bristow, which was the guy's name? And you know what he said? Is it a two-word response? Big balls. But I've heard you say this, there's something weird about the way, uh, this, this kind of manhood thing, because you've said about your boss told you— what was it your boss said to you about what he liked about your, your best quality?

So we used to get— we used to have a monthly review. So at the end of the month, marched down into the boss's office. My boss was a guy from Chicago billionaire, dollar billionaire, quite old guy. He was in his 70s. Ralph Goldberg, legend. Anyway, we get marched into his office. It was very intimidating because he's such a massive figure in the industry. And right, he'd sit you down. Right, have you got on this month? Let's have a look. What's been going on? Let's have a look at your P&L. And he'd go through it. And then, yeah, he used to tell me, what I like about you is you don't mind letting it hang out there. Is what he said. He wasn't talking about my genitalia. This is where he meant that— because look, when you're trading, you've got to be comfortable with risk. Obviously, a trade is taking risk. You got to be comfortable with risk. You got to put a trade on and let it hang out there, be comfortable in the environment where you might lose money. Obviously, you're going to be in the trade because you've done the analysis and you think the probabilities are in your favor and you're going to make money, but there's always a chance you might lose. And are you comfortable there? And a lot of people aren't. And if you're not comfortable there, don't trade.

So it must have felt uncomfortable for you at the beginning, though. So what was the transition phase of that for you?

Yeah, I think I was quite quick. I adapted to it quite quickly. And so I guess I took a bit of confidence from that. And that was quickly relative to the 15 other people that were all in our microcosm together. I think I took some confidence from that, I guess. That helped. Confidence is, like in many walks of life, confidence is such a valuable commodity. I got a bit of confidence because I was progressing quickly, relatively quickly. Then it just went from there. I think I was a natural at being comfortable with taking risk. I think that was a natural attribute rather than something that I learned. I think that really helped me along the way.

Okay. Well, to conclude this conversation then, what's our takeaway here then? The podcast title is What Makes a Good Trader. Having discussed what we've discussed then, what's the conclusion?

Well, big balls. Anthony Cheung: Well, all joking aside, that's pretty much it. I mean, yeah, as you said, it doesn't matter. On the trading floor, we had people walk in at 11:00 AM, walk out at 2:00 PM. They're the best trader on the floor. You had other people who got in at 6:30 AM and left at 6:00 PM and made a fraction of what the other person made. So it's so hard to pinpoint it. But yeah, I'd say you've got to be an expert on products, really good analyst, know your stuff. But in the end, it's about being OK with risk, and it's being OK with loss particularly. I think it's that old saying, you've got to learn how to lose before you can actually learn how to make. And it's so true. If you can't deal with loss, you're never going to make any money.

Great. Well, look, that's a good strapline to finish on. And so, yeah, I hope everyone enjoyed that slightly different sort of direction, if you like, for the podcast this week. If you did enjoy that, do let us know. And we're happy to go off and talk about other non-direct market stuff from time to time if that's what you you guys want to hear, absolutely happy to do so. But otherwise, hope everyone has a great weekend and we'll see you next week. Thanks, Piers.

See you guys.