Friday, December 26, 2008

Million Dollar Traders

These are the cream of the Elite Traders whose trading profit exceeded more than a Million Bucks a year, consistently. Most of these traders I know are young, only in their 30s and 40s.

What make them stand out from the rest?

They have extra-ordinary courage to take risk in their trading. Most are scalpers and day traders who will square off their position by the end of the day so as to avoid carrying the risk overnight. They are extremely sharp in spotting trades with high probability of making a profit and executing them fearlessly. It is this trait that I really admire them.

What's their edge?

SPEED This is one of the most important factor contributing to the success of most of these traders. Having a fast Internet lease line connection, powerful computers, fast and stable trading platform make a lot of difference to these traders. That milli second advantage is what all these traders need to beat others to a trade. Having this speed superiority will enhance the confidence of a trader which is an important emotional and psychological aspect of a trader's mindset.

The real estate close to the Chicago Mercantile Exchange (CME) is very expensive because most broking houses and traders entrench themselves near to the exchange so that the Internet lease line connection is shorter and thus faster for the execution of trades.

COST Most of these Million Dollar traders are high volume traders with an average volume of at least 1,000 to 5,000 trades a day. They are very nibble and versatile, scratching or cutting their losses very fast once they feel that a trade will not work out. Thus the transaction cost would be a very important component to their profitability. Average commission amount to a few thousand dollars a day.

All professional traders join the various exchanges such as SGX or CME as members to get preferential commission, with scratch trade rebates and volume rebates an additional bonuses. It is with the lower commission that they are able to trade without hesitation and worry about the cost of transaction.

GUTS This is what separate the Big Boys from the Small Men. This exceptional quality is what the Million Dollar Traders process. The willingness to take risk with that slight edge in their favour together with the speedy and efficient execution make trading really competitive for the rest the traders, sigh!

No comments: