Tuesday, 15 February 2011

The Young And The Reckless

Mike commented:

On the theme of growing up, do you think there is a prime age, within which traders blossom ? Or, is ageing actually a benefit, as what we lose in reaction time, we gain in maturity and balance ?

I am now 50, and still trade in-runing, where the ability to press a key quickly, is still needed. I can still compete though, sure, kids with Play-station honed reflexes, should be faster.

I think oldies are less likely to go on tilt - though, obviously, we all still do.

I have seen a lot of kids, do their bankroll - but by the same criteria, have also won, more than their share, due to a less caring attitude to risk.

Do you have any thoughts re the best age, for a trader ?
It's an interesting subject, and one that was touched on in this excellent piecewhich touched a nerve with me a while back, and may do the same for you!

I know that when I worked in the City, (70s/80s), traders on the FOREX markets and options traders were almost without exception in their twenties. Hit thirty, and they were moved to the back rooms, but these were traders who needed to focus on screens all the time, and react quickly. The infamous Nick Leeson was still in his mid to late twenties when he brought Barings Bank down, so youth is clearly not everything!

Here's a typical response to a question on what is the right age to start (financial) trading:
I believe that the earlier the better. The younger you are, the more able you will be to change your personality and traits to be the ones of a great trader. (ever hear the expression you can't teach and old dog new tricks?) Same goes for here I think. I'm not saying that adult can't start trading, I'm just saying if you are the spontaneous, indecisive, risky and wreckless type of person, I don't think you can change yourself to better your trading if you are older.
My personal view is biased, because I'm an old bastard myself, and so tend to exaggerate the benefits of experience, but there are some. It also depends on your trading style. Personally, I am not involved in trading where I need rapid physical reflexes. Certainly I can't afford to sit around and twiddle my thumbs, and on occasion a great deal pops up that I move fast for, but any decline from your 20s to 50s is less than from your 50s to 80s and probably negligible. It's the brain that needs to react fast, rather than the fingers. Making the decision is the time consuming part, and in my opinion, an activity like trading is perfect for keeping the brain sharp.

Money will mean less to someone in their 50s than to someone in their 20s. Although I funded this whole enterprise with less than £100, I could have, if needed, raised more. £200 wouldn't have been out of the question. Seriously though, £1,000 to a fifty-something is a lot less than it is to a twenty-something so if things go tits-up, as happens to the best of us, I would favour experience over youth when faced with a loss in that range.

Bottom line - I think Mike puts too much emphasis on the importance of a fast reaction time. Trading isn't an athletic event, it's about identifying value. Older people, a lot older than me I might add, seem to have trouble understanding the concept of value, but if you understand that, have a few quid in the bank so that the odd loss doesn't impact your life in any way, I would favour age and experience over youth. At least to a point, and that point is still a few years away. We're good for a while Mike.

Oh, and to be a successful trader, you need to be male. Seriously - why?

1 comment:

Joe said...

Interesting thghts.

I suppose a lot depends on what type of trading you partake in. For the last 5 yrs, mine has been speed based, so, I think you are a little premature to say, the emphasis on reaction time, isnt so important.

Many traders would pay many £000's, for a 1.10 sec edge.

Model based trading, obviously doesnt need speed - you just need the model to be right.

The male/female divide, is another really fascinating subject. I probably know - 300 traders, and only 2 are female. I am not sure I understand why, they cant or wont, make a living in these mkts.

I would really apprecaite your thgts as to why females, dont make it. (No sexism, just apparent fact).