Turmoil pushes traders to edge

BSD

Veteren member
Messages
3,819
Likes
988
"Turmoil pushes traders to edge
Lack of confidence, surplus of stress dominate floor

By Joshua Boak | Tribune reporter
October 23, 2008

By 5:30 a.m.—a good three hours before the stock market opened—Jeff Friedman was anticipating another rough day.

"It's like a pounding surf in the ocean or whitewater rapids: You swallow some water, you're coughing it out, you're gasping for air, and when you're about to catch your breath, here comes another big wave," said Friedman, who started his career as a runner on the Chicago Board of Trade floor 30 years ago.

Wednesday morning, he scanned the Asian markets (all down), checked the international interest rates (doing much better), brewed a cup of coffee, and pounded out his daily letter to customers of Lind-Waldock, a futures and commodities brokerage in Chicago.

The Standard & Poor's 500 closed down 6.1 percent Wednesday, at 896.78, off 29 percent during a month marked by dangerous volatility and urgent liquidations from banks and hedge funds.
The experience has been grueling for many in the trenches of the financial crisis. There are canceled vacations and evenings without a full night's sleep, traders say. Some cope with the stress by spending 30 more minutes in the gym; others indulge in an extra beer after hours.

The work of investment managers, brokers and traders is suddenly at the forefront of America's thoughts, as much of the country tries to understand exactly how its retirement savings began to disappear and what could possibly be next.

Because of the market tumult, many traders are responding by trading in smaller amounts, trading less often and waiting for what they hope is the right opportunity to emerge.

It's an era "that history didn't teach us for," said Keith Fracassi of TMA Trading.

Don't mistake talk of patience for lethargy. On the frenzied Board of Trade floor this week, tensions are higher than usual.

Rather than risk getting sabotaged by a market upheaval, those manning computer terminals were seen violating a basic exchange rule: They were sneaking lunch at their desks, hiding a sandwich whenever a security guard walked by, because food is forbidden on the floor.

Keeping traders on the sidelines can end up adding to the tense atmosphere by increasing volatility. Fewer trades makes it easier for a purchase to move the entire market.

Dan Riley of DT Trading said that volumes are low enough that buying 10,000 electronic futures contracts in the S&P could drive the index up by 10 points, whereas the same purchase would have bumped the index up only 3 points to 5 points three weeks ago.

Many traders learned how to handle the stress early in their careers. Before understanding how to navigate the pits, Larry Levin, an S&P trader, went bust four times, in one instance losing the down payment for a new house.

"The No. 1 thing is: How do I not lose on this trade, how do I protect myself," said Levin, who also coaches traders.

While traders may be accustomed to stomaching the pressure, it may be tougher for investment managers who are removed from the hurly-burly universe of trading, said Howard Simons, a strategist for Bianco Research and former commodity trading adviser.

"There are a lot of professional managers who have told me they can't even bear to come to the office," Simons said. "They've lost their nerve, lost their confidence."

A key coping mechanism is to avoid worrying about what is beyond your direct control, said Brett Steenbarger, a psychologist who has written extensively about financial markets: "You can't control the market or its volatility, but you can control how you trade."

You can also control what you do after the closing bell. Russell Wasendorf Jr., president and chief operating officer of the brokerage PFGBest.com, trained for the Chicago Marathon.

As the race approached, the market meltdown began to climax. He kept running more than 12 miles a day, completing the marathon in 4 hours and 37 minutes, his second-fastest time in 11 straight races.

"The key to these types of market environments is to survive, to be here for the long haul, not these little sprints," Wasendorf said."


LINK:
Turmoil pushes traders to edge -- chicagotribune.com
 
Top