If anyone knows about trading, it's Steven Goldstein. Goldstein has been in and around markets since before most of today's were able to tie their shoelaces. He got his first trading job in London in 1986 and went on to become a senior rates and FX trader at Credit Suisse, an associate director at Commerzbank and a senior prop trader in the rates group at American Express. Twenty nine years later, Goldstein is a trader and fund manager performance coach at Chrysalis Performance Coaching.
In light of Andrea Orcel's angst over the 30 year-old traders at UBS who've never experienced a rate rise, we asked Goldstein how 'young' traders today should be preparing for the Fed's first move, and about trading careers in general. This is what he said...
Q: Why did you quit trading to become a coach?
"It was 2009 and I lost my job. It wasn't as a result of the crisis, but because the bank I was working for was acquired by another bank and they didn't need people like me any more. I was at one of those career crossroads - trading isn't really a good career for someone coming towards their 50s. I had a conversation with someone who'd been my own coach and he suggested I consider coaching. It went from there."
Q: You had a long trading career - 1986 to 2009. That's pretty impressive. How did you do it?
"I guess I was partly a survivor and partly good at what I did!
The longer you stay in trading, the more you realize that it's a very Darwinian career. People keep disappearing all the way through.
In the first few years you get people who realize trading isn't what they'd signed up for and who fall by the wayside. The issue is often control. When you work in trading, there's so much that's outside your control and that can be hard to deal with. You're sitting there every day and sometimes the markets are in your favour and sometimes they aren't. People start to question whether they really want that.
As time goes on, surviving in trading is partly down to luck. Trading is like sport - you get a lot of very highly qualified people with the right capabilities, but sometimes they just don't make it into the top team. It's also a question of adaptability, both to market conditions and regulation. Trading is always changing and the people who don't adapt fall by the wayside as the market environment changes. In the late 1980s and early 1990s we had the arrival of the PC and a lot of the older traders disappeared. We also had changes to bookkeeping processes, and a lot of people disappeared after that too.
Nowadays it's about adapting to algorithms and the high frequency market. The traders who survive today will be those who can code. They will also be the ones who want to stay under the new regulations. You hear a lot of older traders complaining that it's no fun any more.
Q: What advice would you give to young traders today who've never experienced a rate rise?
Be ready to learn fast and adapt. In 1994 we had a major bond bear market. There were plenty of young traders who'd joined in the late 1980s and early 1990s who'd never experienced a bear market for bonds. They really struggled, but those who came through were the most adaptable and the most ready to learn from the guys around them. You need to remember with the market that no one knows what's going to happen and no one knows what shape it will take. Markets can move faster than you can believe and they can stay irrational for longer than you can stay solvent. Every single new bull or bear market will be different to those that came before and some people will always be caught out.
The best thing you can do to prepare is to be aware of your own trading behaviour. Try to become more self-aware: understand yourself and the behaviours that drive your successes and limitations. What is it that undermines your success?
Q: Are older traders necessarily better than younger ones?
No. You'd be surprised - a lot of older traders make the same mistakes throughout their lives and they're often the same ones that they made when they were younger. If anything, older traders can be less willing to learn from their mistakes. Generally, however, older traders are better at dealing with risk and more emotionally balanced. Younger traders can be too over-confident.
Q: Paul Tudor Jones famously said that traders who are going through a divorce see their P&L drop by 10-20%. Is this true in your experience?
Well, one hedge fund we used to work with refused to employ an outstanding trader when it found he was going through an ugly divorce.
Divorce isn't the only issue though. Other adverse influences on traders' success include financial commitments, the size of their mortgage or their debts (a high mortgage can make you more risk averse), gambling debts, private trading losses, insufficient income from trading to cover expenses, pressure to pay school fees, and of course keeping up with the Joneses, or the other guys in the desk.
Internal relationships with other traders are also a big deal. You'd be stunned how much damage the quality of working relationships with colleagues impacts people's performance, from denting their confidence, to forcing them to take trades they shouldn't, and trying to exert their ego.
Q: Markets could be pretty volatile next year. Should traders be out there meditating and practicing 'mindfulness'?
I am a big fan of getting the 'head right.' Mindfulness and meditation are practices increasingly being used by traders. - I know some top traders at hedge funds who use it to help keep themselves sharp. For many traders, however, it is a step too close to hippydom. If it makes you uncomfortable, then try running, taking a long walk, or going to the gym. They all fulfil a similar need!