There is a huge difference between talking and acting in the foreign exchange world. Actually, it takes some naturally built-in guts to pick up the telephone and conclude a transaction. And it is true that «either you 've got it or you ain't got it». Traders agree that «once a trader always a trader». Even the best market analyst is not necessarily a born trader. And on the other hand a trader can never really give up the trading instinct. However, whereas these people are the big stars when booking profits, they become the loneliest people in the whole wide world when writing a loss. As one of this species, I am presenting a houmoristic article, which was written a long time ago, at a time that market information was not available through on-line pages on a screen but rather through slow telex machines. Technology has changed dramatically since then but I can assure you that trading psychology remains the same. **Written by Gerry Gohler, V.P. Wells Fargo Bank, L.A. in the late'70s General guidelines for junior dealers after taking their first major foreign exchange position or the dealing with the agony and ecstasy of being right or wrong. At close of trading session: Settle nervousness of abdominal area with several cocktails of your choice. Settle following aggravated nervousness with Alka Seltzer. Watch traffic carefully on way home. Other drivers are unaware of your pre-occupation with Japanese Yen and could not care less. Pay no attention to wife and children, you are alone in the world. Hurry with your supper because of necessity to watch the 5 o'clock, 6 o'clock and 7 o'clock news. At each of these newscasts feel either elated or depressed at the news. Maybe phone Singapore and see how the currencies open. If unchanged or slightly down from your price settle down for an evening of tube watching. You might not comprehend the stories but you may watch for news flashes during the actual shows. Stay up until about midnight, so you can watch the 11 o'clock news. Take additional Alka Seltzer and before going to bed (you don't sleep anyway) maybe call Zurich or London and see how things go. Toss around and talk in your sleep. Your wife will love you for it, especially when you mumble: «I should not have gone in -or I should have pulled out and why did I do that.» This will leave room for speculation on her part about your sanity. Get up around 5:30 am and maybe make a call to Frankfurt. Start a hurried breakfast (coffee and Marlboro with an Alka Seltzer will do). Avoid rush hour by driving to the office at 6 am. (You can do this without putting your tie on, lots of time for that after you unwind your position). Run from parking lot to office and curse slowness of elevators. When arriving in trading room run in direct line to the Reuters machine. Tear off 80 feet of accumulated news and with your left hand pick up telephone to broker. Don't bother with «Good morning» (brokers don't take positions and don't understand your problems). Scream into phone «Hows the Yen», hold your breath. Take bid and offer and write figures on piece of paper. If you unwind position at huge profit do the following: Write the ticket and calculate net profit. Your mysterious stomach disorder clears up immediately being replaced by sense of triumph, elation. Hot flushes of success. The real greatness of your own genius will dawn upon you immediately. Laugh hysterically at your own good fortune, slap top of desk and find the world a truly beautiful place to be in. Pick up telephone to brokers, clients, friends and with due modesty let them know how you interpreted the difficult market correctly and had enough guts to take a stand and make an educated guess and take a calculated risk which paid off... Tell some mild jokes to show your human side even if you know that you are really the greatest. From the reaction to your jokes you can easily tell how your friends in the other bank made out last night. If they laugh with you, they had the same position. If they just say «hmm, oh yeah» they lost money and don't feel so good. Don't press them at this point, hang up and let them call you back later. Show them you have compassion and say something like «It happens to the best of us». If you find that the market (and the whole world!) has turned against you, do the following: Exhale deeply. Sit down, calculate your losses. Cast furtive glances about you and determine who is in the immediate area. Turn introverted. Answer other peoples questions politely but firmly: «Sorry I can't talk now, but I am working out a complicated deal.» Repress hot flushes of past failures and fears of your entire future and stop your mind from racing in circles. Clear your mind and start thinking of how to explain this loss to your boss. During the period don't accept phone calls, the inflection in your voice might tip off other bankers to your true position. Telex calls are OK because of impersonal nature of machine. Take two Alka Seltzers and more coffee and Marlboros. and wait for bosses arrival. Since bosses arrive usually two hours after the common people you have ample time for strategy. List past losses (if possible from predecessors or ideally fro boss himself!) Blame loss on outdated revaluation system. Recite past profits and your own merits in bringing in several large accounts two years ago. Make the following statements with authority: 1. We are a big bank and have to trade to maintain visibility in the market. 2. You can't be right all the time. 3. We have 14 more working days to break even. 4. Are we a big bank or some provisional schlock outfit? 5. Put boss on the defensive by saying «I thought you knew about this and I had your full support». 6. Blame President Carter, Blumenthal, Kahn for being incompetent. 7. Tell him that Chase, Citi and Morgan have the same position only 20 times larger and they must be really hurting by now (this will make boss feel happy that he is not Chase etc.) 8. Don't talk to anybody if you can avoid it, especially auditors (they are against you anyway) or Operations people (they don't understand). 9. Take floating holiday at secluded beach, preferably alone, and don't forget your Alka Seltzer.
With ES/NQ one can go through all these emotions within 15 minutes which took about 15 hours in the article!