What Works on Wall Street

It’s the name of a book but also inspiration for this post. I have an enviable position as I work with CEO of our firm and can monitor P&L and positions for about 30 “prop” traders at one of the more reputable firms in New York City. Although fairly new and not the largest, it is developing a reputation and attracting talent from other top firms (SAC, bank prop desks, hedge funds) Despite it’s placement, the honest truth is only a small amount of the traders I would consider to be in the ‘consistently profitable’ category. Meaning while I don’t expect them to make money every month, these traders should have net positive P&L by the end of the year. Considering the turn over involved in some cases, it is a fairly low winning percentage rate. And from conversations with guys from the other reputable prop shops, not too uncommon.
So here you have a number of firms in the sector but very few profitable traders. What I’ve noticed of the guys who are in that ‘consistently profitable’ basket is that they have a certain niche or strategy and they adhere to it consistently. Whether it’s merger arbitrage, technical analysis, information, event-driven, or biotech, these traders master a specific strategy and stay with it. The other group of traders tend to chase hot ideas, utilize sell-side research and trading calls, over trade in general. This is important observation for those new or struggling with consistency. Learn an edge, master it, and have the discipline to stay with your strategy.

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~ by largecaptrader on July 18, 2010.

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