These days I'm working out of a fund manager friend’s office here in London. As quiet and nice as my home office is and as “entertaining” as my children are I do need to get into town and feel the “buzz” of finance in action. Mayfair is hedge fund central and I’m back amongst the traders and dealmakers and sharp suits. I love it - it suits me to come in once a week and then have the rest of the week to think about investing in my own time and my own way.
This is the third time in my career I’m working with traders and I have a good idea about how much information they have and how they go about their business. Although I’ve never been a day trader and lack the killer instinct to be one, I have a pretty good idea of what you need to know….
For folks who don’t work for a hedge fund or investment bank and have not run their own trading desks for years there is ONLY ONE WAY for you to consistently make money by trading daily and here is a step by step breakdown:
Register with your national financial regulator
Get lots of funding from your rich uncle or friendly neighborhood venture capitalist
Hire a few marketing people.
Create lots of TV adverts showing images of instant money making and clever people…. repeat similar for facebook advertising and other online places.
Hire a few software programmers
Get your programmers to create software that is easy to use on the web and allows people to trade with the major stock exchanges almost instantly.
Get people excited to start “trading” with a free $100 or $500 teaser in their account
Make it really easy for them creating apps to buy and sell the market on the go
Send them “strategies” and trading talks so they feel empowered to go up against the big guys
- Never bill them directly for fees charged, just take it off the total. Because the market is jumping up and down they are never quite sure how much they’re paying you.
Sit back and collect the commission fees because that is the ONLY WAY an outsider can consistently make money in day trading -- get other people to trade buying selling, panicking whatever… actually panic is really good for the bottom line since people are more active in the markets when they are anxious.
Ameritrade and Etrade are perfectly legitimate businesses but like all businesses they need you to trade often as they generate a commission on each sale. These firms have really helped regular investors as they have made it easy and online to buy and sell your own shares. Are you old enough to remember travel agents? I am - every trip to India my mother would call our travel agent who would then be given a 2-3 day window to find a good ticket. On the phone we would go back and forth with Mr Singh calling out prices and dates. We trusted him to give us the best deal -- because he was a nice guy AND we gave him our business year after year and recommended him to friends. How inefficient… now I go to expedia/ opodo or whatever and within 2 minutes have an airline ticket confirmed and I even pick my own seats. Transparent fast and beautiful. Just like the travel arrangements are now super easy…. finding and acting on financial information is more efficient than anytime in human history. The trick is not to buy yourself a trip to Timbuktu when you meant to fly to Paris.
Don’t waste your time day trading or trying to find a perfect trading formula unless you plan to make it a full time profession.
Scarily enough I have my first workshop teaching investing coming in London on March 12th. What was I thinking -- I’m more than certainly out of my depth. Details next week.