Tom Dante

Tom Dante

16-11-2022

11:39

Lessons from the biggest traders I've known A thread

Almost every day in prop there was a lesson to be learnt. I was the recipient of much advice from one particular legend in the pits, who used to walk around, pointing a stubby finger at traders and spouting pearls of wisdom laced with profanities.

Two of his best were: "Why do you insist on fucking selling when the market is red? You buy on red. You sell on green." And: "If you take profit for no reason other than you have a profit and can't stomach losing it, you're a cunt"

I lapped all this up greedily. We all did. After all, on our first day we were told: "You go big, or you go home. If you're not here to make a footballer's wages, you might as well not bother".

This kind of talk however, whilst motivating, probably did more harm than good as traders did quick mental arithmetic, worked out how many ticks they needed to capture to make a footballer's wages and then promptly proceeded to over trade or over bet.

When you start out, you're always looking for the one thing. The one thing you need to do to make money. "Get involved", one of the most experienced traders told us. "You need to live and breathe your market to make money consistently".

It was great advice that fell flat. We wanted the holy grail and only heard platitudes. But eventually you came to realise that what was important was not so much the intricacies of how a winner traded but their general ethos.

I remember the biggest trader on the floor being short the ES at his full clip - an already mind-boggling number of contracts - and then him ranting and raving, calling the risk manager a "fat cunt" because they wouldn't let him sell even more.

It didn't matter so much why he was short. Traders were often in the same trades for completely different reasons. The real lesson I took was this: When you've got the market by the balls, squeeze them tighter.

Another take away was in thinking outside the box. When the flipper came in on Eurex, he'd post large buy orders, watch them get front run into his higher offers, withdraw his bid and then reverse his position. An underhanded ingenuity that made him rich and bled locals dry.

There were those who moaned about it. And those who made their career off recognising it and following him.

I had already seen the same thing in the mispricing errors I had capitalised on. I frequently saw people on forums complain about spikes stopping them out. My gift was another trader's nightmare.

Slowly our skills progressed. There are levels to this game.

A beginner trader would have no bias, chase every move and fire from the hip.

A proficient trader would have a bias and patiently wait for the highest probability trade to take in line with it.

An expert trader would have a bias, would make it their business to trade in line with it but would go one step further and be willing to take little bites long at high probability points during a short bias. Or vice versa.

But the true master of his craft would do these things and more. The true master would recognise the point at which the entire bias has a high chance of failure and at that point would trade aggressively counter to it without fear or hesitation.

To this day, one of the best trades you can take is when everything points to the market making a move in a particular direction, but it begins to move counter to that. My aim is always to get in before everyone realises they are wrong en masse.

The big money is made in the extraordinary situations, I once heard. This advice has stood the test of time. But you have to know the market well enough to know what is ordinary before you know what is extraordinary.


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