Bank Traders on the Outs

I was having an off-the-cuff conversation not too long ago with a very knowledgeable trader who came up through the programming side of the business, having done time on the graveyard shift for some of the big banks. We were chuckling at the notion that so many customers on the retail side of the business actually think that the dealers they do business with know how to trade. In our humble opinion they do not.  They consistently give back a portion of the money they make on transactions costs because they don’t know enough to just take the pip or two profit, or even a scratch, that they make on every transaction and just move on. In fact most dealers now are employing computers to automatically lay off  — off set –on the bank feed every trade their customers make with them, rather than have a warm body screw it up. This came as no surprise. 

What was really an eye opening was that from his perspective the bank traders who provide the liquidity and price feeds to the dealers are consistent losers also. For every dollar they make on transaction costs the guesstimate is they give back upwards of 35 cents on trading losses.      

And then there was the story about one successful young currency trader in New York City for one of the bigger banks in the world. When asked why he didn’t just set himself up on his own and trade from wherever he wanted to in the world? His answer: “Cuz when I blow out, I want to know that I can walk across the street and get another job”.

The best traders in the world are not working for banks and certainly not for brokerage firms or dealers. They are generally private citizens who have a wealth of real life experiences. They have more losing trades logged  than  most bank traders will ever make in their careers, and they have a whole lot more winners. They subconsciously know what they’re winning percentage, and risk/reward ratio is. They never hesitate to pull the trigger and they are grateful every time they are on the screen and they get a set-up that fit’s their criteria. They tend to be humble, polite individuals who smile easily, dress casually and never boast.

We were at breakfast a couple of Saturday’s ago with a very successful trader and his wife. He and I started talking shop, and his wife of many years looked at my fiancé and said, “I don’t know what they’re talking about. I don’t even know what he does for a living”.

She said that kiddingly but the truth behind it is he doesn’t talk about trading in most circles, which is how it should be.

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DISCLAIMER: Futures, options and Forex (off-exchange foreign currency futures and options, or “FX”) trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, options and Forex may fluctuate, and, as a result, clients may lose more than their original investment.

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About Jay Norris

Jay Norris is Director of Education at Trading University, has over 30 years of trading experience, and is the best selling author of "Mastering The Currency Market", McGraw-Hill, 2009, and "Mastering Trade Selection and Management", McGraw-Hill, 2011. He has also been published multiple times in Technical Analysis of Stocks & Commodities magazine.

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