Archives of “scene of the crime” tag

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When Things Go Wrong

  
  Education
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The trade falls apart. The stop loss gets hit, but your dealer doesn’t get you out of the trade. Or the spreads widen. Or you forget you have an order in the system and it triggers, and you’re on vacation, and you’re just having a great time until you are on the White Knuckler roller coaster ride and you think to yourself:

Trading is much like holding a fire in your hand.

At the same time, it’s beautiful and mesmerizing (for some of you at least). It hurts, too. When you have a bad trade, you are holding fire in your hands, so to speak. What are you going to do with it? Take a picture of it? Hide from it? Close your hand on it? Blow on it? Pour gasoline on top of it?

We don’t always react in the best of ways to the unexpected trade. Especially if the trade is a loser, or a mistake, we are likely to try to hide from it first. We flee from the scene of the crime.

If things don’t go your way in trading, tackle the situation. Get on top of it. Figure something out, and do it with friends, and do it sooner rather than later. You’ll be happy you put out the fire in your hand.

The golden rules of banking

  
Analysis, Education
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THE crisis has taught people a lot about the banking industry and the thought processes of its leaders. These lessons can be distilled into four golden rules.

1. The laws of supply and demand do not apply. When food producers compete to supply a supermarket, the retailer has the luxury of selecting the lowest bidder. But when it comes to investment banking, wages are very high even though the number of applicants is vastly greater than the number of posts. If the same was true of, say, hospital cleaning, wages would be slashed.

An investment bank, like a supermarket, demands a certain quality standard: it will not hire just anybody. But whereas it may be easy to identify a rotten banana, it is harder to be sure which trainee will be the next Nick Leeson and which the potential George Soros. That gives executives an excuse when things go wrong.

2. Success is down to my genius; failure is caused by someone else. When banks do well, and profits soar, the bosses are responsible for it all with their strategic cunning and inspiring leadership. Huge bonuses are therefore due. (more…)

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