Million Dollar Traders - Episode 3

And so Mr Van Dam's experiment drew to a conclusion tonight. 

As a social experiment it was certainly interesting, as a piece of theatre it had its moments, but as a trading experiment did it offer much at all?

After procrastinating for the last two episodes, Lex and Anton (sounds like a couple of celebrity chefs) finally got rid of the blo*dy annoying Cleo.

"Do you think she'll cry when we fire her?" asked Lex

"For sure" replied Anton.

And she did not let us down! The floodgates opened and as she frantically wafted her hands around her face, it all became too much for her. 

The response from the trading room was pure theatre, with Emile deciding to show solidarity he proclaimed "you can't treat people like that!" he picked up his bag and headeded for the exit. Amit and 'Social trader Dude' took this a signal to head for the door too - no doubt relieved to have an excuse to leave.

As the proverbial dust settled, it was interesting that the 3 remaining traders Oki, Mike and Caroline would have placed in the top 4 traders of the group (Emile being the other). Lex's $1million was swiftly carved up amongst the remaining 3 and Anton issued his now customary order "Lets go make money". With two weeks to go in the experiment and only 5 minutes to run on the episode, it was clear that not much happened in these last two weeks. Sure enough we cut to the last day and as the traders closed out their positions and cashed up, I did not get the feeling that much money had been made.

Perhaps surprisingly, Oki was the star performer with a 1% return, with Caroline delivering a 0.5% return and Mike posting a small loss of 0.5%. Not at all bad considering the market turmoil. It made them all feel better when Lex revealed he had lost 0.7% during the same period.

So, here are a couple of takeaway items from Million Dollar Traders

1. Having a point of view backed up with a clear rationale is key to success (Plan your Trade, Trade your Plan)

2. Build your portfolio - invest all your cash (Please note: This doesn't mean risk all your cash). I'd add to this - It's ok to have a cash element in your portfolio (or put another way, a low risk investment vehicle, like a bond or gilt)

3. If you don't have a plan, don't trade

4. It's harder to make money in a falling market

5. It's even harder with increased volatility

6. Emotional intelligence aids success (Eliminate Fear and Greed and try not to cry too much:))

7. Their is no substitute for experience

8. Not all city traders are ar*seholes!! (Personally I thought Lex and Anton were reasonable, logical and fair)

9. Trading can be taught, but really successful traders have natural character traits that help them succeed.

Million Dollar Traders - Episode 2

Tonight's episode of Million Dollar Traders finally began to show some promise. We have now been introduced and begin to get to know the 8 'traders'. It's becoming clearer which of the bunch are showing natural flair and its becoming even clearer which of them we should fade at every opportunity.

Poor old Simon, probably selected to represent the older generation. Maybe described as the 'safe pair of hands' of the group. But alas, all he touched turned to shit - and because he had been one of few to get fully invested (to his credit), there was a fair bit of shit flying about. I think if he had fought his corner with Lex, then he would have been given another opportunity, but you could see that he was in essence a broken man. He had tried - I was impressed with the way he decided to take it upon himself to lead the early morning meetings, but it was clear his mind wasn't in the right place. Simon's downfall shows what can happens when confidence erodes.

Cleo, on the other hand was also given the opportunity to fight her corner with Lex. In the two weeks they have been trading Cleo had invested less than 20% of her allocation. She would sit at her desk reaching for, and then retracting, the phone and then looking at the screen and saying under her breath 'go on just trade', one a her desk a post-it note with the words 'Don't be a girl'.  When confronted with Van Dam (who lets face it, isn't the scariest bloke you'll ever meet) she defended her corner with so much passion and vigour that he decided to let her stay! Cleo, if you put as much passion into your trading as you did into defending yourself, you'd be top of the pile.

I certainly warmed to, Emile. The scouse fight promoter who has built a portfolio based on going Long the stocks 'he likes' and shorting the stocks 'he doesn't' like. I'm not sure how that can deliver a nicely hedged portfolio, but it certainly demonstrates the value in understanding what you are investing in. He also displays a lack of emotion when getting into positions (Is this because its not his money at risk?) and seemed calm and thoughtful whilst the group were analysing the Russian invasion of Georgia.

The dark horse of the race was the quiet female Entrepreneur, so quiet in fact, that I have forgotten her name! She was however clearly 'in the right place' to trade. Her approach was considered and calm. She clearly understands what a balanced portfolio should look like and she was prepared to accept that it can take time for positions to work out.

What this episode certainly demonstrated is that a traders real battle is in their mind and the fear is a much greater negative emotion than greed. Mind you none of them have made enough money to be concerned about greed yet.

Million Dollar Traders - Episode 1

Last night, a new BBC2 reality TV show aired its first episode. Million Dollar Traders, the brainchild of a former Goldman Sachs director - Lex Van Dam. I watched with interest, in fact, I remember a colleague forwarding me the application for the show. I didn't apply - mainly because I have some trading experience (I think even if I had, I would have struggled with the interview - whats 32x32 - my answer "About 1000" - probably wouldn't have cut the mustard!)

The concept - take 8 members of the public, give them 2 weeks intensive training, a $1 million account and a custom built trading room in the heart of London and see if they can make any money.
Van Dam claims this to be 'his own idea'. This surprised me, given that any trader worth his salt will have heard of the now legendary Turtles experiment (brainchild of Richard Dennis).

I guess there is a difference in the two experiments. Where Dennis described in detail to his 'apprentices' a detailed strategy (it was a simple breakout strategy - its complexity lay in its money and risk management rules), Van Dam appears to have provided nothing more than an overview of how the markets work. I was surprised at how little the program detailed the training that Van Dam gave his apprentices - especially given how disappointed he was that one of the traders lost £2,000. On the one hand it seems he has given them little real help and on the other he seems angry at such a small loss?

It's clear from the first show that Van Dam is looking for PR from the show, but will he make a return? Can 8 members of the public become proficient traders, especially in light of the additional pressure's of the TV camera?

I would have liked to have seen some more detail on money and risk management. Van Dam himself is clearly a successful trader, so why has he given his apprentices what appears to be such a small amount of information?

Each trader was initially given £25,000 and was allowed a maximum risk of 20%. This seems exceptionally high to me? Put simply 5 losses in a row and these traders accounts are blown away. Assuming a strategy that wins 50% of the time, there is a high probability of 5 consecutive losses.

The show will no doubt explore the human side of trading and this could be interesting. Admitting a loss and moving on is hard enough when cooped up in your own private trading room, but for that loss to be exposed on national TV is another thing entirely. It will certainly provide an insight into what makes a bad trader, but with Van Dam's million at stake, is that what he wants?

I look forward to episode two next Monday January 19th (BBC 9pm)