Markets are tough, extremely tough. They have been like that from day one for me. We, on this website, have never claimed this business is remotely easy. Most websites make fraudulent claims about all of the fabulous wealth being just around the corner. Just buy their system or await their stock trade alerts. And then you can have the cars, houses, blah-blah. Total scams. We have always laid it out for people how much struggle goes into this – always. But it’s the struggle which gives us the mental toughness and the fortitude to allow for the success later on. It’s no different than any other competitive endeavor – athletics, music, small business, etc.
My journey in markets began on a trading floor, at first on the Midwest Stock Exchange, and then onto the CBOE, trading the OEX options (S&P 100 options). And I came into the business in the 1990s knowing virtually nothing about markets, but had the same (totally wrong) view of markets that everyone does. Meaning, the “professionals” were all loaded and lived expensive lifestyles. This was reinforced somewhat with my first “taste” of real live trading when I went to visit a buddy of mine who traded T-bond futures options. Unlike myself, Eddie is a brilliant guy, a perfect person to be involved with options strategies. His father had been a floor trader for many years, first in the grain pits, and then in T-bonds in the early 1980s – and he was loaded (and lived lavishly). But what I learned (eventually) is that most successful traders are not driven by money. It’s a relatively small percentage who live the lavish lifestyle. The markets eventually humble us all.
The early 1980s was an amazing time to be in a whole new world of new instruments, mainly the financial futures. The big change first came with T-bonds in 1977 and then the S&Ps (Spuz or Spoos) in 1982. Hardly anyone knew how to trade these things. The CME Spuz contract became a wildly successful product. It was a very physical trading pit, with quite a few actual fights. But the T-bond futures eventually became the most widely traded contract in the world. The incredible bond volatility in the late 1970s resulted in the massive selling climax in 30 year bond prices (high in yields) on October 26, 1981, when the yield hit 15.21%. And the volatility continued for years. There were some fortunes made back then, like with the great Tom Baldwin.
All of these exciting stories and times are chronicled in the wonderful book, “Market Wizards” by Jack Schwager. I highly, highly, highly recommend reading it, along with the “New Market Wizards“. I do not recommend books often, but there are a few standouts. Back in the 1990s, when I started trading, “Market Wizards” was recommended by all the floor traders. Most of the traders in the book were known by the “old guys” down there. I reread “Market Wizards” several times. The only book that had more influence on me was “Reminiscences of a Stock Operator”, by Edwin LeFevre. There is nothing comparable to this book. Every single successful trader down there read it, numerous times.
Back in my beginnings in the 1990s, my mentor SW told me, early on, that the “easy money” of the 1970s and 1980s was gone. So the plethora of trading stars managing outside money would also disappear. As usual he was right. Those markets in the 70s-80s were wildly inefficient. When I started trading, the old guys were always complaining about how “hard it was to make money anymore” and “program trading and computers had ruined markets”. Sound familiar? And now the whining is about how “central bankers have ruined ‘price discovery“. Price discovery? Who cares about “price discovery”. What a crock of…. It’s just a total excuse by people who have no work ethic. So even in the 1990s, my brilliant mentor understood why he made so much money in the early days – they had a HUGE edge over the public. That is gone.
The markets have been brutal since my first day, and they haven’t changed one bit. Not one. But there is still plenty of money which can be made in markets, if for a few years you’re willing to do what most people will never do, so that for the rest of your life you can live like most people never can. And understand that fighting, clawing, scratching every day gets you closer and closer to where you want to be.
Great article, thank you Scott.
I agree. Excellent!