Learning from Traders that Made It (Part 4)

03/20/2008 12:00 am EST

Focus:

Timothy Morge

President, MarketGeometry.com

Mark began trading the currencies given him-the 'Skandies' as we called them-and his first six or eight months as an actual trader were difficult. He had to split his attention between following what he was trading and maintaining my records while I made hundreds of trades in a day. And his currencies were much less liquid and moved much less than the major currencies the senior traders on the desk took positions in. But after a period of settling in, he began to put together a set of winning months and at the end of that year, he earned a nice bonus-some for being my assistant and some because he had exceeded his profit budget for the year in his currencies.

Mark continued to develop as a trader that was known for his hard work and his attention to detail. He was not the most talented young trader on the trading desk, but he was a very promising one. By the middle of the next year, I replaced him as my assistant with a new intern and gave him his first major cash currency, the Swiss franc. Trading a major currency was a two edged sword: the major currencies had many more trading opportunities but the bank expected you to make much more money per year. To the bank, each seat at the trading desk had a price on it, and as you moved up the food chain, the rate of return on the seat you sat in went up. While a minor currency might have a net expectation of one million dollars profit per year, the trader trading the smallest major currency, the Swiss franc, was expected to make three million dollars net per year for the bank to earn a bonus.

Mark approached his new assignment the same way he had approached his first day as a trading intern: he was the first trader at the trading desk in the morning, he asked questions constantly of all the senior traders, he kept detailed notes of his trades and ideas and he never left until his accounts were checked out and balanced perfectly. After a few rocky months of settling in, Mark began to consistently make money in the Swiss francs. And he earned a very nice bonus at the end of that year.

The following February, I called Mark into my office. The current senior trader that traded the Japanese yen had decided to take the bank's offer to move to our Hong Kong branch. That left a hole in my trading line up. I could go to a 'head hunter' and recruit a senior trader from another bank, or I could promote someone from within our own ranks. I told Mark that the yen would be a difficult currency for him: the bank expected the yen trader to make at least five million dollars net per year and there were many very good yen traders in the US cash FX market at that time. If he wanted this seat, he'd be competing with the first string players-and the price of failure might be high. If he failed to meet or exceed the bank's expectations, he might get the chance to trade a lesser currency-or he might get the chance to resign, depending on how his year went. We didn't discuss the upside possibilities, because both of us knew that if he made it as a yen trader, he'd have shown he had become a senior trader at a major US bank and besides earning a substantial bonus at the end of the year, he could walk away and work for any bank as a currency trader.

After laying out the possible pitfalls of the opportunity, I told Mark I had a decision to make: should I hire an outsider or did he want me to give him the chance? Mark didn't even hesitate. He just smiled and said, 'I'm ready, Tim. Give me the ball. I'm not gonna fail you.' I shook my head and then smiled back at him and told him to take a nice two-week vacation on me, out East to see his fiance' before making the decision. He told me he'd be glad to take the two-week vacation if I was paying but he wanted the chance and he'd made up his mind.

Mark came back from that vacation and slid right into the yen trader's position. This time, there was no settling in period. He made money from the first day and he made money every month that year. He wasn't the top moneymaker on my cash FX desk, but he was the third highest moneymaker and now that the year was over, he was going to get a very nice bonus.

More tomorrow in part 5 Part 1  |  Part 2  |  Part 3  |  Part 5  |  Part 6

Best,

Timothy Morge

www.medianline.com
www.marketgeometry.com

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