Where Do Trading Profits Come From?

1:07 pm - May 7, 2010

Some stream of consciousness thoughts from a first-class airline seat…

Q: Where do trading profits come from?

A: From deploying the optimal mix of caution and aggression better than the other guys.

From out-working, out-thinking, and plain old out-hustling the other guys.

From understanding government policy mistakes, the impact of those mistakes, and the proper means of exploiting them.

From knowing how to probe… how to deftly control and manipulate horizontal & vertical exposure, while always keeping a firm handle on risk.

From knowing when the market deck is rich in tens and aces, and when the converse applies.

From always playing from position.

From knowing who the fish is at the table.

From doing the math.

From combining intuition, knowledge and deep detail work to see around corners and get a proper handle on things.

From having an articulate, flexible, and useful vision of the world.

From recognizing those rare times when it’s “raining gold,” and having the sense to put a few buckets out and keeping them out until they’re filled.

From “being right and sitting tight.”

From staying three steps ahead of the crowd – well ahead strategically, but only a modest distance ahead tactically, leading the twists and turns with fluid anticipation.

From thinking like “Alexander” from Liar’s Poker.

From always learning.

From understanding semi-complex trade structures and their dual role in both enhancing return and reducing risk.

From simultaneously possessing the killer instinct of a Siberian tiger and the detached patience of a Tibetan buddhist monk.

From being a joyously fierce competitor.

From fighting like a samurai and expressing like a poet.

From knowing how to take a hit without going down. From knowing how to take a count and always bouncing back. From possessing an indomitable will and an indestructible spirit.

From absolutely loving the game.

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