Million Dollar Traders Part Three

Million Dollar Traders - The Final Showdown

To paraphrase that icon of British cinema Vinnie Jones - "It was emotional".

In the words of my mate Oscar "Emotions are out! Stops are in!"

To paraphrase overpaid media celebrity Russell Brand when challenged about how much media personalities get paid for doing stupid stuff on TV "People in the City get paid millions for playing guessing games!"

In the third and final episode of Million Dollar Traders things certainly come to a head. I was surprised at the amount of emotion on display, although I suspect that is because the BBC edited it that way to bring out the emotional. Personally I would have preferred more of an insight into how the stockmarket actually functions and the criteria that people use when making their decisions.

Million Dollar Traders Episode 3

Oki made an interesting point, and I paraphase again, when saying that a stock price looks like it's just a number but it is in fact the result of a whole load of emotions. A lot of fear and greed is crystallized into what looks like just a number on a screen.

As recent events have shown, people are capable of committing suicide as a result of trading stocks, so despite the desire to keep emotions out of trading it makes you wonder if it is really possible.

Fortunately none of the million dollar traders committed suicide, but there was certainly a lot of emotion on display.

As we saw last week, some of the traders are doing better than others. Caroline is the best so far and Emile, Mike and Oki are also doing well.

Amit, Cleo and Sam are not doing so well. Cleo still has trouble making decisions, Sam is troubled by the ethical aspect of trading and finds the need to be ruthless at odds with his morals and Amit just seems confused.

But their successs as traders or lack thereof is overshadowed by the emotional involvement between the members of the team. After 6 weeks inside a pressure cooker during very turbulent times on the stockmarket something has to blow!

"I canna hold it any longer captain!" springs to mind.

The team is down £10,000 and despite the BBC's insistence that this is a lot of money it is only 2% and a tiny drop in a vast ocean of incompetence in stockmarket terms. So basically they weren't doing so bad at online stock trading.

Lex decides that someone has to go and so has a chat with Amit and Cleo. He could have kept them till the bitter end (there were only two more weeks to go) but hey this is showbusiness ! Sorry, the stockmarket. So did he need to boot someone out because in the stockmarket that's what happens and underperformers are removed ? Or was it all for the benefit of the cameras ?

As it turns out, after talking to Amit and Cleo and Emile, Lex decides to keep Amit, to give Emile some more money to invest and to get rid of Cleo. The reasoning being that Cleo is not investing enough and is not making her own decisions (Emile has been helping her out - but you would have thought that that could have been construed as teamwork).

So when Cleo is given her marching orders, she gets rather emotional (although to her credit she does try to control her emotions) but Emile takes offence and decides if Cleo is going then he will go too (which is odd as he was doing rather well and it was after all just a TV show - it's not as if Cleo was being ill-treated, she was just back off home to the family business). It seems, however, that there was other stuff going on and that getting rid of Cleo seems to have been the straw that broke the camel's back.

As Emile had decided to leave, then Sam and Amit decided to join in and make it a gang of four. So the team was at a stroke reduced from 7 to 4 and the 3 that were left behind were the 3 top performers. Could it be that they had all been manipulated by Lex? He certainly ended up with a much more manageable and productive team, but I didn't get the impression that he had planned it that way all along, but who knows?

The result of all this was that the last episode had a lot of emotion and interpersonal interactions but not much in the way of insight into the way the stockmarket works or how people reach their investment decisions (or "guesses" as Russel Brand would have it).

When Amit, Cleo, Emile and Sam had left there were still two weeks to go but the last two weeks trading were dealt with in about two minutes.

During the walk-out, by and large Caroline, Mike and Oki got on with what they had come there for, although Mike did say he was not happy with all the emotional reaction - and Caroline said it was very very strange.

Lex was happy enough that the best 3 had stayed and concluded that the people who were losing money were keen to find any excuse to leave. But in fairness to Emile that was not true in his case, as his trades were generaly doing quite well.

Oki was upset people had walked out - but he was there to trade the stockmarket not for other reasons.

Caroline's budget was increased to 200k - with Mike and Oki on 145k each.

In conclusion the "team" actually made a loss of 2.4% over the 2 months, but that is pretty good going given the markets last year and given that professional hedge funds had made an even bigger loss of 5%.

The top trader turned out to be Oki who in fact made a 1% profit which is in itself quite remarkable. Lex said he was very talented but a bit unpredictable. Oki says its like playing chess against the rest of world - an interesting point of view except that chess is logical, I would say it is more like a game of poker in which the big guys cheat by sending coded messages to each other and swapping cards when nobody's looking.

Caroline made a profit of 0.5% which again is remarkable given the markets. Lex considered her the best trader as she was totally focussed and not as unpredictable as Oki.

And Mike lost just 1% - Lex says he was focussed and unemotional and a good trader.

Lex himself had lost 0.7% over the same two months, so not quite as much as Mike, which does tend to validate Lex's theory that anybody can do it.

Sam, Cleo and Emile have returned to their day jobs. Amit still has his shop and now trades from home (good luck Amit and if you've got any tips please leave them below!).

Simon has made new plans for his retirement (a wise decision!). Oki is continuing with his economics degree and Caroline has started a new business. Mike, if I heard right, is running a vet practice, which is a bit of a surprise I didn't realize he was a vet, but hopes to become a professional trader one day.

Lex Van Damm's aim in doing Million Dollar Traders was to see if beginners could trade as well as the professionals. Personally I think he has proved they can. Four out of the eight did just as well as the "professionals" and let's not forget it is the "professional bankers" that have created the economic mess that we are all now having to live with (thanks for nothing).

Personally I found the whole programme interesting, but would have liked to have seen a bit more about the stockmarket and a bit less about how people react to each other in tense group situations.

So how about a programme about life on a real life live trading floor as it actually happens, warts and all? It would be nice to know what really goes on when nobody is looking and how the professionals justify the vast amounts of money they are paid for being so incompetent.

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Million Dollar Trader Part Two

Million Dollar Traders - Episode 2 Profit or Loss

I have been wondering again what Lex Van Dam's motives were for coming up with the Million Dollar Traders. He believes beginners can do as well on the stockmarket as professionals and he wants to prove it. One of the implications if he is correct is that success or failure is random. Put a group of 8 people in a room together and left to their own devices you would expect 4 of them to do well and 4 of them to do badly. If it turns out that success in trading is random then you could effectively do away with traders and have all your trading done by computers. And also anybody with a decent computer program could do well on the stockmarket. Or if it is all random then a set of darts would do just as well.

Be that as it may, in the second episode of Million Dollar Traders we see however that one trader, Simon, seems to consistently make wrong decisions, buying when he should be selling and selling when he should be buying. It is strange that this should be so, as it is clearly not a problem of intelligence. There are some people who seem to have the knack of doing the opposite of what is required. So much so in fact that one 'investor' in the USA was so bad that he was hired by a firm and paid to make decisions, the firm then did the exact opposite of what he said! Getting it wrong every time is also a gift.

Simon seems to be applying logic to his trades, but it is not clear that the stockmarket is logical. As he and Emile say the stockmarket is full of irrational humans who react in ways that seem strange and at times illogical.

The way to get around this problem appears to be to do two things at once - you buy one lot of stuff and sell another lot of stuff, then no matter what happens you are covered (in theory). The flaw seems to me to be that your trades may also cancel each other out.

Caroline seems to have got the hang of things more than the others and is singled out by Lex for a pat on the back ! She is in fact the only one of the 8 in profit, which is no mean feat in the stockmarket at the moment (or even back in the summer).

She appears to have achieved this by staying calm and also staying out of the financial sector.

For Simon, Cleo and Amit, however, the experience is akin to chinese water torture.

But as Lex explains, a lot of trading has to do with being able to tolerate pain.

Lex also asks Caroline if she feels any 'Schadenfreude' - the feeling of being pleased when people you know are suffering - a terrible feeling that we all get, but are loathe to own up to - Caroline says she doesn't (she's obviously far too nice).

Mike likes the intellectual thrill of the game, you are either winning or losing, so are rarely indifferent to what is happening, which most people who trade stocks will confirm, unless they get it right all the time and get blase, which never hapens. As Amit said, when you lose £25,000 in one day (which he did during the boom times) - you feel it!

Mike is one of those doing well as he has decided to concentrate on arms manufacturers, as a soldier he presumably has a certain amount of specialist knowledge, which may be a help in his decisions. There is certainly an argument for investing in what you know.

In a discussion with Sam, Mike says it's a bad world and if he doesn't make money from arms stocks then someone else will.

Sam on the other hand goes for ethical stocks - a difficult task, but not impossible, as ethical funds do exist. But making money on the stockmarket whilst maintaining an ethical stance is difficult, as Anton points out when he asks Sam (who has shorted a number of stocks) if he wants the US employment figures to be bad i.e. if he wants a lot more people to lose their jobs so he can make money - Sam says he only wants specific stock to go down, not the whole market, but if the market goes down it's a lot easier for his stocks to go down too.

Personally, for what it's worth I think shorting is immoral and should also be illegal. The best result possible for someone shorting a stock is when that stock goes bankrupt. The arguments I've heard defending shorting have not convinced me of its worth.

Oki, the economics student, says to succeed you need to do your research, work hard and hedge against any possible mishaps. But the stockmarket is a cruel place and you sometimes feel it has an evil plan to make you suffer. He bought Standard Chartered, reasoning that the Far East is immune from the turmoil, but he left his desk for 15 minutes and while he was away two banks were downgraded (that has happened to me before now too) and his stocks slumped. But instead of selling at a loss he took the decision to buy Shell instead, thus hedging his losses. Sounds like a wise move.

Emile has gone for stocks he likes, sports goods, Nike, Adidas, Blackberry and shorts stuff he doesn't like. An unusual approach but it seems to be working for him, once again probably because he has a c ertain amount of professional knowledge that the others don't have to the same degree.

Amit's motivation is to make money trading as he has had enough of shopkeeping and wants to make money for his parents who have worked hard all their lives. But he too is finding it difficult and also has the knack of doing the wrong thing.

He shorted Wolseley group when they announced profits were down - but as Mike pointed out to him - he may be shorting at the bottom. Amit was confident he wasn't but it turned out he got it wrong and had to buy back his short for a hefty loss. Anton points out that his problems are due largely to the fact that he only has one stock, whereas you need a portfolio. Amit could in fact have taken the path that Oki took, instead of closing his short, he could have hedged it by trading in something else and waiting for Wolsely to come back down.

At the end of week 3 Caroline, Oki and Mike are doing well and Emile is showing real promise.

Simon is fully invested and feels confident at last, unfortunately for him the stockmarket does not agree with his decisions.

( .......................................... Indecision !)

Cleo is being way too cautious for Lex Van Dam's liking,but she does have a point (that Mr Van Dam seems unwilling to acknowledge) i.e. what's the point of investing if you are not sure what to do? If you just buy something for the sake of being busy, then that is not investing it is just gambling. But on the other hand you should know what to do, or at least make an intelligent guess, at the moment Cleo seems to be paralyzed by the fear of making the wrong decision. But, as Lex tells her, you gotta pull your finger out Cleo. She does try a hedge, but only for 10 minutes, and Anton lets her know that that is not the way to hedge!

Caroline has the right idea. But as they are in it as a team why don't they get the good ones to help out the ones that are struggling?

Simon concludes that forecasting the future is impossible - Caroline on the other hand says you need to be resilient and just get on with it.

Jobs data comes out and is not as bad as expected so share prices go up and short positions start to lose money. Caroline, who is making money on her longs - which are hedging her shorts - says there is no point getting really excited as there will another event in a few days. As it turns out she was right, but it didn't take a few days, only a few minutes.

News from Israel about Iran reverses the markets and so the ups go down and the downs go down as well. But is it the news that drives the markets, or is it that the market really wanted to go down anyway (a lot of professionals were probably already short) so the marlet went down on the first piece of 'bad'news, on another day the markets would have ignored the bad news and gone up. (An interesting theory for when data is better than expected, the market will go up briefly, but then on the first bit of 'bad' news will slump again, as that is what people wanted it to do anyway).

Emile's shorts are now in profit and he points out that the stockmarket brings out the bastard in you, which is an interesting observation given that the UK economy depends on such a large extent to the City and the City is full of bastards. His particular example was the oil price going up which was good for his portfolio, but bad for petrol prices and probably bad for the economy too.

There are people in fact who say that the whole of this current economic crisis was started when oil prices shot up to from $60 to $145 a barrel.

Simon feels like many who trade do, that 'THEY' are out to get you, no matter what you do, the market has just been waiting for you to make a decision and then do the exact opposite. Unlikely but it certainly feels like that at times.

In week 5 Cleo, Amit and Simon are struggling. Caroline is the only one in profit, although Mike's arms companies and Emile's branded name are also showing a profit.

The team overall is making a loss, mainly due to Simon and Cleo, although if Cleo is not invested in much I don't see how she can be making much of a loss.

Simon seems confused and says he doesnt really know what he's doing, but Anton doesn't seem to be much help.

At this point Vladimir Putin very inconsiderately decides to invade Georgia.

The team sets about looking for who will profit and who will lose from a war in Georgia. There's no place for sentiment (which let's face it wouldn't do much good anyway).

Simon wants a rule book, Emile points out that he should rip the rule book up, you live and die by your decisions. Simon would like to know why all his decisions prove so disastrous.

Lex finally takes action - he tells Cleo she needs to get invested. Cleo thinks she really is making progress and sees no point investing if you are going to lose money, but Lex seems to think it's better to take a punt rather than sit around biting your finger nails all day. Cleo really does look like she is going through the emotional wringer, but maybe that's just the BBC showing the edited highlights. It seems to me that there is not much help and advice offered to the team, who are after all beginners, but I guess that's Lex's plan, to find out if beginners can do the job as well as professionals.

Lex has a word with Simon and they agree it is time for Simon to walk the plank. So Simon packs his bag and Anton aks him to leave quick, not hang around, as he could have a negative influence on the group. Simon leaves with a round of applause from the others at Anton's instigation. That is the way it is in the city, clear your desk and out you go.

So with two weeks left, the team is still making a loss. The BBC seems to be playing up the ethical dilemma side of the city, but I can't believe that many city traders worry about such niceties, if they did then they wouldn't be working there.

From a trading point of view I am curious to see if beginners can do as well as professionals or as well as a guy with a set of darts and a copy of the Financial Times.

A recent study has shown that male traders do significantly better than their colleagues if they have a long ring finger (something to do with being exposed to male hormones in the womb) - see - Size Matters . Such people take more risks and make better decisions, and the difference is statistically significant. So I've been trying to see who has the longest fingers, but haven't managed yet.

Third and final episode next week.

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Million Dollar Traders the Beginning

Million Dollar Traders - Episode 1 The Beginning

Watching the Online Video from the BBC is no longer possible - but check out the video clip below. It appears that Million Dollar Traders has been shown in many countries around the world and I suspect the BBC will be running it again - it was an interesting reality TV show for people interested in stock trading, although how close to actual reality remains debatable.

In the words of the BBC eight "ordinary people" - the afore-mentioned million dollar traders - are provided with a million dollars and two weeks training to see if they can trade on the stockmarket and do as well as the professionals.

The project is the brainchild of Mr Lex Van Dam , a "hedge fund guru". I originally imagined him to be just another smug city type but it turns out he is a bit more of a cynic than I thought.

“What has become clear over the past year is that the experts don’t know,” he says. “If you just do what the experts tell you it’s probably the quickest way of losing your money.

“And if something looks too good to be true it probably isn’t true – like the Madoff fraud. You can’t trust the Government, and you can’t trust companies.” Amen to that !(UPDATE : August 2012 - In particular you can't trust banks - which I knew anyway given my own personal experience with a big High Street bank that shall remain nameless for the time being - but in the years since this programme was aired on the BBC many more banking CEOs have hit the dust - and we have had the Libor fixing, scandal, the drug money laundering scandal, and now the Iran money laundering scandal, the insurance scandal etc... the dirty long list goes on - we also had the London riots where people were getting jailed for following the crowds and stealing a bottle of water!)

The eight Million Dollar Traders novices were :-

• 36 yr old retired soldier Mike Tobell
• environmentalist Dr Sam Duvy
• 42 yr old entrepreneur Caroline Taseham
• 30 yr old cage fighting promoter Emile Coleman
• 26 yr old ex-vet Cleo Foulkes
• 63 yr old retired IT engineer Simon Brew
• 34 yr old shopkeeper Amin Chopin Putra
• 20 yr old economics and maths student Oki Imekwaday

They were chosen in spring 2008 and the series was filmed in July and August during the stockmarket crisis.

By the end of Episode 1 the million dollar traders had lost over £2,000, hardly a king's ransom and on the stockmarket a mere nano-drop in an ocean of tears.

The first of the traders to actually trade was 63-year old retired IT Consultant Simon Brew, who ventured £5,000 on 'safe bet' British Gas, which promptly lost the team £250. After which he plumped for Bradford and Bingley and a bowl of cornflakes (or was it the other way round?) another safe bet (which no longer exists I think - but he wasn't to know - even Superman Gordon Brown didn't see that one coming).

And for an encore Simon told his broker to 'buy' 800 shares when what he meant to say was 'sell' thus doubling his losses in one foul stroke. But professional traders do that all the time - it's known as 'fat finger syndrome' - not 'long finger syndrome' which is another matter altogether and which is good - see Size Matters to Financial Traders

After a cheery and confident start the vet spent much of the episode fretting and on the verge of tears.

Former soldier Mike waited a week before making his first trade, a complicated affair, which ended up being a large loser, but he nevertheless seems quite competent IMHO.

Hats off to all the million dollar traders I say, trading isn't easy and two weeks is nowhere near enough training, but that was Mr Van Dam's idea so I guess we can't criticize him for it.



Let us hope the second episode is as amusing as the first!

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Million Dollar Traders BBC Mayhem

Million Dollar Traders - TV Show on BBC Fiddles While the Stockmarket Burns

I have decided to create this blog to follow the new BBC 'reality TV' show Million Dollar Traders. I'm not quite sure how this will all work out, but I found the first episode fascinating and the whole show may turn out to be something of a cult experience.

Obviously the show has been set up to provide maxmimum entertainment to the viewing public and you wonder just how it has been edited. At the moment it looks a bit like Big Brother in a trading room.

I shall try and resist the temptation to be rude as what the novice traders are doing verges on the impossible!

They have taken people who apparently know nothing about trading, given them a two week crash course then let them loose with a "million dollars" - around £500,000 I guess, but a million dollars sounds more impressive, of somebody else's money on a trading floor in the midst of the worst economic crisis in living memory.

The person responsible for this mayhem is Mr Lex Van Dam - variously describd as "hedge fund guru" "city whizz kid" "top city trader" - and yes we are led to believe that that is indeed is real name.

He gives the impression that he is very worried about the fate of his million dollars. But let's face it, a) if he was that worried he would have left it with the Northern Rock and b) it is not beyond the realms of plausibility to imagine that in the background he is doing the opposite trade to every trade that his novice apprentice sorcerers are doing, so that he will break even. Or am I being too cynical ?

Be that as it may it's all jolly good fun and we have already had some amateur dramatics and tears as the sacrificial novices get emotionally involved (or not as the case may be - a la Simon munching his cornflakes while piddling hedge fund guru Lex Van Dam's money down the pan).

Stay tuned for more shenanigans and further write-ups from yours truly. Comments are more than welcome !

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