How To Swim With Sharks & Stay Sane

In this article there is an interesting perspective on how commodity traders think before they make deals. Those who want to learn the ropes of the gem trade may want to read this article to understand market uncertainities so that they are able to survive in the dog-eat-dog world of gem business.


(via Times News Network) Nidhi Nath Srinivas writes:

Do you need to be a hard-boiled, tough, Svengali-like,Type II alpha male to make money in commodity trading? A quick poll of some top traders says not at all. Which to my mind is good news (unless you are one of those chicks looking for a Nick Leeson kind of man) because it means ordinary persons who don’t have to live on a permanent diet of adrenalin, aspirin and alcohol, stand a fairly good chance.

Yet the ring is not a bed of roses for sissies. The ups and downs can be swift, fear contagious, losses serious and prospects foggy. So how do traders make sense of the market maelstroms and keep sane? As no psychological profile of the average Indian commodity trader exists, we asked three traders, with diverse ages and backgrounds: what were their top two survival tips.

Arun Mahabir (name changed on request), 30, is a successful soft commodity trader with a MNC here. Calm and soft-spoken, he has been in the ring for more than six years now, straight after an MBA from Punjab University. After trading from nine-to-five, he doesn’t hit the nearest pub. His first principle: don’t be greedy. “I believe in a cut-loss theory. Everything doesn’t work according to fundamentals every time. When things go wrong, just cut and get out. There will be plenty more opportunities later, so don’t sulk on a lost one now,’’ he says.

His second principle: junk your gut feel, see the facts. Despite being a New Age professional taught to think out of the box, Mahabir believes data and tables are a young trader’s best friends. “I hate speculating myself. And I don’t believe in luck. The only thing that stands with you in the ring is in-depth analysis of demand and supply,’’ he adds.

Mahabir trades on his company’s account. This means all the money he earns only fetches him a bit extra in bonus. The flip side is that he has plenty of advice and most importantly, a target to meet. “The target is most helpful because then I can pace myself. I don’t chase every trade. If the returns have been good, often I can even relax,’’ he says. His heros: Mark Faber and Jim Rogers.

B Thomas is a seasoned 48-year-old spices trader in Cochin, who has been passionate about the business since 1988. His first rule: get your ego out of the way. “Don’t love any position. If you don’t stick to your cut-off point and over trade, you are doomed,’’ he says.

His second principle: keep numbers in your head to think on your feet. “In Malayalam we call it ‘manakanakku’ or mental maths. You always should have the latest figure of positions and profits in your mind to know what best to do next. Without this, you are handicapped even in the age of online exchanges,’’ Thomas said.

Jojan Malayil, former president of Indian Pepper and Spice Trade Association, comes from a family that has been trading pepper for five generations. His first principle: be strong minded. “The market is volatile.

You need to be able to cope with the ups and downs without letting it affect you. Most of the trading is now speculative and sentiment-driven. One needs to get the fundamentals straight and be tough,’’ he says.

His second principle: case out the exits. “You should know exactly when to enter and exit the market. And don’t trade with shallow pockets. You should have enough funds to take physical delivery. That increases your staying power,’’ Malayil adds. His guru: his father.

Ultimately, the rules boil down to this: you need to be mentally strong and passionate about the business without losing sight of your target, trading strategy or bottomline. One more thing: fundamentals are your only life jacket. Cling to them if you want to get out alive. Even the SAS can’t do better than that.

More info @ http://economictimes.indiatimes.com/How_to_swim_with_sharks__stay_sane/articleshow/1559294.cms