I had no business being at a hedge fund. At that point in my life, my previous job was doing IT Consulting and the entirety of my financial education consisted of reading Market Wizards (and a few more trading books). Yes, I'm completely serious. But I did understand the concept of being able to go short and long…so maybe I had that going for me.
The reality of the situation was that the Headhunter for the position was a fellow Hawaii native and I guess he just wanted to give me a shot. Whatever the case, there I was…sitting at a tiny trading desk in Santa Monica, California. The desk took up the entirety of the tiny room it sat in, with barely enough room to walk around it. There were a total of six seats at the desk and the Bloomberg terminal was crammed in a corner.
I had the illustrious responsibility of reconciling Excel spreadsheets with the trades for the day, passing out P/L statements every morning, sending faxes, checking trades with counter parties and marking positions to market.
Pretty much everything short of getting coffee. But what do you expect with a Biology degree?
Working at this hedge fund is classified under the category of: coolest things that I have ever done, but would never do again. Right up there with ATV riding (because I flipped mine) and deep sea fishing on 15 foot seas (for obvious reasons). It was awesome because I got to sit at the same trading desk as one of the best Bond Arbitrage traders in the business.
I would never do it again because I am the absolute worst data entry clerk that has ever lived. In addition, as cool as most people were there, that work environment wasn't for me.
However, I did learn a few important lessons from that experience that shaped my view of people and money. Most of them surprised me, being a recent college graduate at the time and never having been in that type of environment before.
Be wary of anyone who cannot use some form of the word “fuck” as a noun, adjective and verb, in the same sentence
This is a rule of thumb that I still follow to this day. Not that I necessarily appreciate gratuitous cussing, but if I sit down with someone for a coffee or a beer and I don't get so much as a “shit” out of them, then they could be prone to hiding stuff. Not in a kleptomaniac kind of way, but in terms of holding back information and what they are really thinking.
My boss would use “fuck” like it went out of style 10 years ago and she wanted to bring it back retro. I was slightly taken aback in the beginning. But she is one of the most genuine, competent and caring people I have ever met.
Find your trading advantage and stick to it
One of the traders would sometimes only do a couple of trades in a week. On a quiet week he would bullshit on the phone in hushed tones for 30 minutes, then walk over with his trade ticket. Then he would sit around for the rest of the week, watching the markets, surfing a little porn and causing trouble.
He knew what his advantage was and the exploited the hell out of it when it was there and sat on his hands when it wasn't. I saw his P/Ls every day and he was very consistent. While everyone else was doing dozens of trades a week, he had the discipline to wait for the right conditions.
Badass traders aren't necessarily Zen
One of the best traders was normally a pretty quiet guy in most social situations. But get him into a bad trade and copious desk pounding and aforementioned f-bombs started to drop like dollar bills at a strip bar.
But it seemed like it was all part of the fun and was a release for him when he was in a bad trade. The bottom line is to figure out your emotional makeup and do what will get you centered as soon as possible. Don't try to be like Buddha, when you really are like Chuck Norris.
Having a lot of money doesn't turn you into Gordon Gekko
With all of the good traders at that hedge fund, they started making a lot of money and were soon able to move out of that cramped office into some really awesome digs. Maybe not Steve Cohen nice, but still pretty damn classy. They started flying on private jets more often and their capital under management grew quickly.
During this whole time, everyone remained exactly the same. They still held lunch parties for everyone at the company when it was someone's birthday (even little ol' me) and I didn't feel like anything changed. Being responsible for that much money requires having much more integrity. Regardless of what your parents told you.
Money is just an idea
This is probably the biggest thing that I learned there. On a busy week, there would literally be BILLIONS of dollars in trade tickets coming across my desk. But how was this possible?
They learned how to trade, found opportunities in the market, clicked the mouse a couple of times and established a track record (yeah, it's slightly more complicated than that). They showed their record to investors and got more money to trade. The whole thing was just based on ideas. The best part is that ideas are free.
Along the same lines, I also learned that some people there, in spite of their high salaries were just as broke as I was. That was a revelation to me. They had really nice homes, beautiful cars and their kids went to expensive private schools. But they were only a couple of paychecks away from the poorhouse. Being in that kind of financial situation is also based on how you think of money.
I hope that you found some of my insights helpful. What are some of the unexpected lessons that trading has taught you. I would love to hear your opinion…feel free to leave a comment below.