Thursday, March 29, 2012

Mantra Trader 8

A question I see a lot on this forum is why don't the bank traders trade on their own account?

Well its very simple, its all about risk. If you trade for the bank they pay your salary and if you make money you get a bonus as well. So financially you have ZERO risk. If you make a mess and lose money for a year you will probably get 1 more year to recoup - the banks know traders dont perform well consistently so they allow a bit of a drawdown. Now if you still don't make it they will let you go and you simply move on to another bank or do something else - money lost -zero. If you traded your own account all the money you lost was your own. Its much easier to take risk with somebody else's money.

The second reason is simple. The motivation to "trade your own account" is many a time to have more free time and to not work for a boss...Well the truth is whether you trade for a bank or for yourself you are still your own boss. Nobody will force you to come in at 8 and leave at 4 - you are a proffesional trader you trade when the markets are ready to trade that might be for a full week and then nothing happens for 2 weeks. The fact is whether you trade for yourself or for a bank you will still have to spend the same amount of time infront of the markets if you want to be successfull. I have never had a deskhead give me trouble if I phoned in, in the morning and told him I had a long night I'm taking the day off. He knows and I know that it is MY budget and my head...the same goes if you trade your own account.

This "more free time" if you trade for yourself is actually funny. Many traders go golfing on Wednesdays and Fridays for "client" purposes and those are the days that they do much better in the markets as they simply phone in get a quote leave an order and they don't fiddle with the market any further. They are open minded when leaving the orders and do not stare blankly into a screen all day long. In their subconcious mind they have an overall view of the market a kind of gut-feel of where the market should go and as they are not looking at short term charts they basically back their long term view unknowingly. However then I must add these traders are bond and swap (interest rate) traders and therefore there is not really any short term trading going on in that market. So they have "more free time" while working for the bank and to top it off the bank pays for the golfing excersions!

So there really is no incentive to trade for yourself. It just doesn't make sense to leave the security of someone elses money, the constant flow of readily available market info and a group of traders to bounce ideas off. Why give that up just so that you have more free time or for you to be your own boss.

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