How I Started

Why I Chose Trading Full Time As A Career

“Wall Street seemed very much like the place to be at the time.  The world didn’t need another lawyer.  I hadn’t the ability to become a doctor, and my idea for starting a business making little satchels to hang off the rear ends of dogs to prevent them from crapping on the streets of Manhattan never found funding.  Probably, the real truth of the matter was that I was frightened to miss the express bus on which everyone I knew seemed to have a reserved seat, for fear that there would be no other.

I certainly had no fixed idea of what to do when I graduated from college, and Wall Street paid the most for what I could do, which was nothing.” – Michael Lewis, Liar’s Poker

Why I Chose Trading Full Time As A Career

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I’m not sure if I represent most people or only a minority of fresh graduates.  Here’s the truth, despite countless years of formal education, I never really had that epiphany moment when I made a concrete decision as to what I wanted to do in my life. Most of my choices were made primarily by following the conventional wisdom.  I just followed the “herd”, the “experts”, my predecessors and friends.  In short, I was just a trend follower.
For example, the decision to take M or even entering in A was made without even blinking my eyes (Thanks Malcolm Gladwell for pointing this out ).  I simply knew I could never draw or sing for a living.  I couldn’t see myself programming computer softwares because I didn’t want to be an owl nor did I want to learn another language.  I was not beautiful enough for people to just watch me on screen, nor did I have any skill when it comes to dramatic arts.  I just probably know how to rant, cry and memorize lines like a robot.  Who’d pay to watch me do dumb things?  Maybe I could muster a handful of 10 to view me on Youtube?  Still won’t be enough even for my food.  I couldn’t play a sport so well for people to watch me.  I’m no Kobe.  I’m no coach like Phil.  My friends told me I could calculate numbers pretty fast, like some machine so they suggested I take something with lots of Math.  Really weird, if you can multiply 189 and 19 and come up with an answer in less than 1 minute, you can do math?  In hindsight, I guess most people just didn’t know what the hell to do , so any advice was still advice, whether stupid or not.

So here goes, “Indecisive Me“ simply checked where my friends were going, what they ticked as their course option and I took the same path.  I was not thinking whether I would like the curriculum or the professors.  I was in the illusion or presumption that since everyone I deemed “wise” chose this course to be their first choice, and then maybe that’s one of the best places to be.  I was just like a child entering a restaurant not really knowing what to order, so I just chose what everyone ordered.  What’s your best seller? Mildly spicy is fine.  Something sweet and bitter can be added into the mix.

My pattern of making decisions was mostly simple.  I don’t really analyze my choices (Even if my friends would say that I’m one of the most serious analytical people they’ve ever met).    Am I left-brain or right brain?  Words or Numbers?  Black or White?  Coffee or Tea?  English or Math?  Jock or Nerd?

Even if my college boasted of philosophy and theology to help directionless students like me to be more aware of ourselves to aid us in finding our careers, I just remember myself blurting out common passages professors wanted to hear.  I want to be the best I can be.  I want to find my limitless possibilities.  I want to be a “man for others”.  I want to be a social entrepreneur.  Yada yada yada.  Lots of big words, but ambiguous and never really anything much except an idea from the clouds.  Of course I’d insert some concrete lies, but I never really followed through with pretty much most of them.  If you ask me what I said I’d do after college then, and what I really did, they’d probably be like the North and South Poles.  A good friend of mine simply summarized me as someone unpredictable.  He couldn’t tell if I would eventually be an actuarial scientist, a doctor, an entrepreneur or a trader.  My strength and probably my weakness as well was that I was fine with everything.  I was like a “jack of all trades”.  I would never excel at something, but I would be above average with most things.    I guess being unpredictable is really a euphemism to say that I am going nowhere.  I have no plans where exactly I want to be or who I wanted to become. I just knew I didn’t want to be stuck with my family’s business.  I wanted to make it on my own.  I also wanted to be rich.  Who wouldn’t?  I told you I am just your normal kid.

Internships and Job Fairs

You can just imagine me during internships and job fairs.   I was just aloof with the whole world.  The whole world was changing right in front of me and you could see all my peers frantically preparing, submitting all their neat application forms in scented envelopes as if they had conceived this ever since they set foot in college.  If for one second, you could treat the job market as much as the financial markets, I simply found myself chasing after the same jobs most people wanted.  Since I knew pretty next to nothing about which jobs to take, I just followed everyone.  Just as stocks (read as job) could be worth nothing much than people perceive, probably overvalued the job’s good qualities, none of us really knew what we were doing (unless we did NPV analyses, but would you believe in fundamental valuation?  How do you value intangibles like personal growth development?).  Everyone was listening to the same salesperson (read as sell-side analyst) campaign why working for Company X has helped his growth advancement as a person etc.  The more of my classmates passing forms to this company, the more the worth of that job seemed to be.  Price action is far more important than whatever those speeches had to tell us.  Tell me how many from your batch worked for NGOs or social civic work?    I’m not really sure why most of my batchmates (MEAns) wanted a career in finance or marketing.  Prestige? Compensation?  Growth? 

With all my indecisiveness, you guessed it.  I simply passed all my forms to these sectors.  It was simply like a lottery as to which company will have the decency/unluckiness to call me to work for them.

Lottery

I took an internship doing supply chain marketing with a cosmetics company (even if I knew next to nothing about make up) because they were the first one to call me and hire me.   Just as I told you, I don’t think much about jobs.  People treat their internships as something super important for their eventual jobs and resumes, while I just batted my eyelashes and crammed it like most of my projects in the process. 

In any case, I found myself in a place where I didn’t want.  It’s a good thing internships only lasted for 2-3 months.  It was simply not a fit for me.  I have no problems at all with the people, or the management.  I just found myself wanting to do something else.

So how did I end up being a trader today?  What a long introduction right? 

My First Encounters with the Stock Market

I’m not like most of the people who went to work in and for Wall Street.  Most people in this industry have watched Oliver Stone’s “Wall Street”, “Boiler Room” and other popular movies in relation to finance several times.  Others have been trading early on in their lives or have heard about stocks while they were still 12 or 13.  They probably have a father or an uncle who would talk about the markets during lunches.    How I wish I knew earlier that there was such a thing as the stock market, then I would have at least rode some part of the bull market with all the irrational masses from 2003-2007.   I probably would have ended up studying economics and psychology if I had to re-visit college.  That’s the closest thing to behavioral finance, at least here in the Philippines. 

In any case, whether you believe it or not, I only knew much about the existence of the markets and the accomplishments of the market wizards pretty much during the latter half of 2006?  This was my 3^rd year already in college.  I’ve always heard about Mr. Warren Buffett, the great sage of Omaha, being the 2^nd richest guy before Bill Gates but my knowledge of the stock market was zero. To be fair, I was studying accounting and finance classes, and we’ll talk about the markets lengthily, but I never had any experience of trading it at all.  My definition of the stock market would be what my textbooks would say.  That pretty much sums it all.  Rote memory + numbers + concepts.  Formulas, NPVS, WACC, ROIC, income statements, earnings growth etc.    If I don’t apply it, I’ll quickly forget it after a while.  That’s what happened to my Calculus, Physics and Chemistry classes.  Sorry to those teachers of mine.  I had fun studying them then.  I just didn’t know how I’d use them afterwards.  If I offended anyone, I’m sorry for not being as gifted as you are to understand their importance in my daily life.

I guess a lot of it changed when I got hold of Jack Schwager’s Market Wizards Series, Phil Town’s “Rule # 1”, Benjamin Graham’s “Intelligent Investor” and Edwin Lefevre’s “Reminiscences of a Stock Operator”.  Those books as well as Ayn Rand’s “Atlas Shrugged” have somehow opened up to me the possibility that even without much capital, I could earn my own millions.  Self-made.  Perhaps that’s the best sales pitch anyone’s ever made to me.  Of course Robert Kiyosaki’s popularity with his Rich Dad Poor Dad series somehow made an impact for me to be more non-conformist and try new things.  Be contrarian, as he would say.  Although in a way, he betrayed me by becoming mainstream with all these cashflow games and redundant books spreading all over the world, I heard him once and that is enough.  Writing 6 or 9 books more on the same topic was just milking money from all his followers.

In any case, I wasn’t ever going to be a good real estate agent so I told myself I’d get my hands dirty with a career in finance.  Whether it’s investment banking, quantitative modeling, proprietary trading, research writing, I wasn’t sure.  I just wanted to be in finance, even if I had to start making someone else’s coffee just to be there.

Decisions with no known outcomes

I worked in this private bank for six months before I started proprietary trading.  The firm was touted as one of the best “go-to” places by my batch, so I joined them.  I wasn’t really thinking about the salary even if I heard their bonuses were good.  In fact, I even told them during the interview, I’d work for them even if they don’t pay me a single cent, because I wanted to learn everything I could from them.  I was honest.  I wasn’t making some bullsh*t press that I’d work without pay.  It was real.  Most of the traders I read in Market Wizards talked about working in finance as one of the most fulfilling jobs, they’d work even if they were only paid a dollar a year.  I believed them.  I simply wanted a mentor.  They were the most profitable department in Asia for what they were doing.  I felt as if I was doing the right thing, being in the right hands, so I joined them immediately.  That May of 2007, I was working as a marketing assistant for this private bank.

During those first months, I saw myself watching the movements of Philippine stocks rather than attending to my work.  I was more intrigued with the reports sent by my peers re equities and derivatives than anything else sent in my email.  It was during this time, when I was exposed to interest rate swaps, bonds, forwards and foreign currencies that I reaffirmed with myself that I did want to be in finance, but not in private banking.  No disrespect to my peers and mentors, I simply found myself looking for the kind of “excitement” and thrill felt by fund managers and proprietary traders who would risk their money (or their company’s) with their conviction ideas.  Before I could help and advise clients in private banking, I would first have to equip myself.  I found myself reading about blogs on macro topics, and reading research reports.  I envied the analysts who would have coverage of certain companies, look for value plays and write about them.  I told myself, I wanted to do something like that.

After 6 months prior to the regularization interview, I gave my resignation letter.  I told them that I wanted to work in the equities department, learning fundamental analysis.  My hero at that time was still Warren Buffett’s teacher Mr. Benjamin Graham.  I knew about technical analysis, but my heart was more bent on learning how to value stocks.

The Right Job

I knew exactly where I wanted to work in right after my stint in the private bank.  I wanted to work in brokerage firms.  I want every morning to wake up to Bloomberg and breathe stocks in my life.  It’s easy to understand why I’m currently working for my company because it is where I opened my first trading account in the Philippines.  It’s the largest online trading firm and I heard that the bosses there were really good traders. I wanted to be as great as Jesse Livermore and Warren Buffett so I applied for any job that they would offer me.  Company is vastly different from where I used to work.  I could talk immediately to my research head and my bosses.  The organizational structure was very flat and the atmosphere was very casual.  They still meant business, but it was just more laid-back than where I was used to.  The feeling is much like being back in the neighborhood, after spending some time abroad.  Company felt more homey.   January of 2008 was my first day researching for stocks.  If you still don’t know where I’m working, I don’t know how many clues I have to put in order for you to get it.

Pretty soon, another 6 months would pass by and I would be asked if I wanted to transfer and work instead with the proprietary traders full time.  Instead of researching and writing reports for companies, I found myself watching a quote screen, and working like all the guys out there.  We were all eager to make money and our first million for that year.  There were rumors that there was a trader making a million every month, so if he could do it, why couldn’t we?  It’s just a matter of experience and skill right?  It can be learned right?  I transferred just 3 floors above where I used to work that June of 2008.  Finally in the right job, I say to myself.

I remember waking up every single day thanking God because I’m on my quest to be a super trader.  To make things worse, my overconfidence was fed with a nice compensation check because I’ve made quite a sum for my first two months.  I thought at that time 15% for the month was just ordinary.  I’m really stupid and a new trader, wasn’t I?

2 and a Half Years Later

I guess I should be thankful because my career started in the most historic of times.  I lived a once-in-a lifetime event: The Crash of 2008 and the Violent Rally of 2009.  If I had not made any money on the way down and on the way up, I could still say I had market experience.

If you asked me why I wanted to become a trader then, I would have given you the classic off-the-mill answers of most wannabe traders out there.  I came here to make money.  I was passionate and willing to commit the time and effort to learn whatever I needed to do in order to gain market experience, light years ahead of my age.    The dreams and the fantasies of a self-made millionaire, then possibly work as a hedge fund manager or pay for my college (ala- 21-esque) using my winnings from trading seemed like a nice thing to put on my future resume.  Things seemed easy.  I guess I was really stupid to think of things that way but the fact that most successful traders came from meager backgrounds provided me enough evidence and take that long Hail Mary shot to believe that I’ll be one of those top 8% of traders who become super traders handling millions of dollars for their clients’ accounts.

You only know what you’ve got until it’s gone.

Realization that Trading was never a themepark

I only knew I wanted to become a good trader when I already lost most of my dreams and fantasies that initially tempted me to become a trader.  Ironic or cliché as it may seem, you only know the things that you want to do, or love to do when someone takes out all the perks from you and yet you still continue to do it anyway.  If you’re constantly losing in your trading, and yet you still find yourself charting stocks, reading news reports and watching Bloomberg during your free hours, you are one of two types.  You are either a passionate trader who wants to improve his/her game by being up to date, or a chronic gambler who’s on the verge of lunacy partly due to the staggering amounts of money lost and the inability to get out from one’s hole.

I’m not sure what type I am.  I probably am both.  Still though, despite all the challenges I encounter from trading, I really can’t see myself veering away from it.  I believe trading has that certain hold on people.  Once you pop, you can’t stop.  This blog is certainly one part of me, trying to put a structure to my passion/addiction with the markets.  I want to chronicle my education of becoming a super trader.  Welcome to my world.  It’s hell and heaven at the same time.

Trading for a living is different from trading.  Anyone can trade.  You just simply open an account, buy and sell a stock or any financial instrument, and you can call yourself a trader.  Becoming a trader for a living is an entirely different field.  Becoming a trader for a living means that you are looking for consistency in your life.  Just as most businesses have a stable cashflow, that is the goal of the trader.  You want to trade well and have stability in your account.  You want growth minus the wild volatility.    For a newbie to realize the difference between a senior trader and an amateur, one only needs to see how they both look at the market.  One sees it as a business, while the other sees it as a gold mine or a theme park.

I’m not a hypocrite.  I came to the trading floor because I wanted to handle huge amounts of money, getting myself and my clients as rich as possible, as consistently as possible, and as early as possible.  Timothy Sykes, George Soros, Nicholas Darvas, Jim Simmons, John Paulson, David Einhorn – they were all poster boys of non conformists and I wanted to be included in their pack.  The ability to help people is within their reach because they have the guns, the girls and the gold.  You need to have the gold.  I wanted the gold.

But of course, a few beatings from the market taught me that only those with the proper psychology, mindset and willingness to work hard could have the gold.  Trading, like every other business in the world, is a place to develop your self.  Trading is a means of self development.  You will begin to know your deep seated egos, and know who you really are, your strengths and your weaknesses, by the way you manage your trades.

“If I were a beginning trader and knew what I know now, I’d realize that trading is no less of a business than opening a store or a doctor’s office. It requires talents, developed skills, and a clear plan for success. It requires adequate capitalization, and it requires a firm ability to limit overhead during the early, lean years. Fantasies are exciting, but there is so much more to performance success in any discipline.”  -Brett Steenbarger

If you are past your fantasy stage and seriously looking to be a full-time trader or learn trading the right way (even as a passive trader), follow me in my own journey and let’s share our own stories.

Your fellow market addict,

– DimsumTrader-