2058

Why do you have to work so late? I’m not working. Well, the screen is on and you’re reading a book that’s clearly not a novel. Er….

That’s not an unusual conversation chez Garran.

Here’s a new one; you just said that you didn’t trade last month, but you’ve been watching the screen the whole time. Er yes, er, sorry.

So a month ago I found that one of my trading sites offered online poker. I mentioned it to my wife. Her faced dropped. She had a bit of an inkling about my character.

The next three weeks I played a couple of hours a day. Outside trading hours. Mainly around when the pubs closed – I’d heard that was a good time to take advantage. In the first week, I found I was making about £15 an hour with one losing session to four wins on average. Second week I was making £30 an hour with four winning sessions in six. Third week I was making about £60 an hour, before I found out there’s a good reason other people lose money when they play after the pubs have closed. And I dumped two weeks of effort in a petulant frenzy.

Here’s how I did it. I moved two levels up from $100 to $500. I then quadrupled my buy-in playing the first hour. What I was looking for was weakness, and when I found it – I went all in. So, the third time I went in heavy I blew it. I went from $2000 to $1100. And from there, I was road kill. I busted. $500 more, busted, $500 more, I busted, & I cut. Discipline, schmiscipline. I was all over, Grover. So I thought about it. Like you do. And I realised this – I love poker – I’ve played since I was nine. But I love trading macro more.

And the problem with poker is – I reckon I could get pretty good at it, but I’d have to put my soul into it, and that would crowd out time at home and trading macro.

There’s one thing about poker; everyone’s trying to win. At the low tables, that’s great, because most folks don’t have the knowledge, or the temperament, to win. Trying screws them up. But at the higher tables, more have the temperament. And higher still, more again. There’s always Muppets with money. Some pros will fly around the world to play them. But mainly, there are pros.

In macro, there are many people in the professions, but fewer professionals. My own attitude is the same as the pro poker player – I’ll fly anywhere in macro to play against the weak.

Now, this wouldn’t be a blog by me if I didn’t mention a book. And the book I spent my remaining poker profits on was Brett Steenbarger’s ‘Enhancing trader performance’. My view on these sorts of books is that the odds of any one being any good is like drawing a card to an inside straight. It’s just less than a one in 13 call. But the difference is that the payoff when you draw a good book is worth 50 busted flushes. To mix a metaphor.

So already this is a quality book. Steenbarger realises that his previous idea – don’t get frustrated – ain’t quite right. Cool dudes and three-day weekers, well, they didn’t seem to last. The frustrated guys did. So why?

Well, if you trade when you’re frustrated, you trade badly. That’s what happened to me when I lost out playing poker. Dennis Gartman’s rule – if you lose, get smaller - is largely a psychological call. And it is a good call at that. But if frustration gets you thinking – it’s useful. If it gets you more stuck-in, and working out a better way to do things. So I’m no Zen trader.

Benjamin Bloom, a University of Chicago researcher, sought out successful people in a range of fields – and he tried to analyse systematically the source of their success. It seemed they had something in common. They started out doing it for fun. Then they were in a place where they got supported big time, and started turning fun into profit. Then they just kept working to get better. So they ended up working on it more, getting better, and having more fun. It was never really work in the first place.

Now I’ve tried out fifty ways to make money. From fieldwork to working a field. But out of all of them, the thing I’ve really enjoyed – that I really got stuck into, and just kept working on it to get better – is trading macro.

It started when I was broking commodities. I was a one man band, and I knew I’d not beat Macquarie – with three detail pros – if I concentrated on building the most comprehensive supply/demand balances. And I wouldn’t beat UBS, with their 24 strong resources team, with my breadth of coverage or my access to sources. And it would be hard to be faster to a story than the producers, who have 1000s on the ground, and who can trade their own book with impunity. I knew I’d only beat these guys with a macro call, so that’s what I set out to do.

And I enjoyed it from day one. From commodities and resource stocks, through European equity strategy, to broking and trading global macro. Now I said to someone not very long ago, that I wanted to run macro for another 50 years. And for one reason – it’s great fun making money that way. I don’t notice I’m working.

So rule one; never blow up. I always run preset risk, and I always cut. And rule two; always bet hard on a big call – when I see extreme positioning, sentiment, and a fundamental angle.
And one thing I’ll bet on; I’ll still be trading macro in 2058. But I’ve no idea if I’ll still be playing poker.