Whether you liked me or not, my clients, colleagues and competitors would listen. Sort of like General George Patton, Tiger Woods or Mel Gibson. You can question their process, approach, attitude or character — but not their track record. It's the same for a profitable trader.
I was a very successful options trader for many years. There are some things I would never admit to when I was in the business … until now.
1. The key was finding my Hyde. Not every great trader is a sometimes maniacal, stimulant dependent, functioning alcoholic with symptoms of ADHD. That might describe me — but not every successful trader. And that's a good thing! Here's why: If I had a thought about a trade idea, my go-to was a colleague who was the total opposite of me — he rarely drank and hated the social aspect of Wall Street. He was a family man and our weekends couldn't have been much different. However, that is exactly why I would go to him with my thoughts. If Dr. Jekyll and Mr. Hyde could agree on an idea, then we both knew we had a winner.
Take the Apple Watch. If you think everyone you know is going to trade in their Rolex for the Apple Watch, don't ask your friends that look like extras on "The Big Bang Theory." Go down to Seaside Heights — the Jersey Shore. Ask the first 20 people you see wearing tracksuits and zipper shirts what they think about the watch. If they agree that the Apple Watch is a must-have accessory like a fake gold chain or wearing sunglasses at night, then you have a winner.
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2. Traders don't always have a strong opinion but will never admit it. If you're a trader and you don't have a strong opinion on something, you are a Polaroid Camera, Blockbuster Video and Encyclopedia Britannica all rolled into one big bundle of obsolete. If you have nothing to add, nobody is going to listen.
When a client would ask why is the market down today and I had no idea, I would go to my Rolodex of prepared statements and defend them rigorously. Beware of excuses you hear from traders like "More aggressive sellers than buyers." "This Fed governor made a speech that has spooked the market but I can't find it right now." "Asset allocation out of stocks into bonds." Or my all-time favorite, "Someone is liquidating a big position — I have confirmation it's Goldman Sachs." (It's all in the conviction of how you say it!)
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3. When I really had no idea I would just talk in circles. Nobody really knows if the stock market is going to be up or down tomorrow let alone six months from now — unless they really are breaking the law. I don't recommend that — or else you may end up like Matthew Martoma. We do our homework, give our best educated guess and the good traders are right 69 percent of the time. If I really had no conviction, I would just throw in words like Fed buying, geopolitical risk and Ray Rice TMZ video and I could argue either case convincingly. Also, I would highlight reasons why my thesis could be wrong so I would be covered either way.
4. You trade better when you have lots of action. I don't know if this applies to everyone but it certainly did to me. The more action I had on a trade, football game and in my personal account, the better I would trade. Maybe it was the ADD, lack of sleep or 12 cups of Dunkin Donuts coffee but I was on the ball. It's when markets and are slow and boring that we make mistakes. Slow and boring probably led to famous mistakes like New Coke, Decca Records passing on the Beatles or the last three seasons of the TV show "Lost."
5. We have trouble separating trading from real life. Even when you aren't at work, you are thinking about work. When trading gets in your blood and you think about it 24/7, it becomes like heroin. You need it. That's why the trader comes out in non-trading scenarios. That's why you will hear phrases like "Buy 'em," "Sold!," and "What's your market?" when surrounded by traders in real-life situations. Real-life situations like negotiating with the guy selling fruit outside your office, discussing that potential blockbuster fantasy football trade involving Peyton Manning and the teams cheerleaders, or discussing how attractive that woman at the bar is. We know it makes us sound like douchebags, but please forgive us — we can't help it.
6. We like winning trades in real life as much as at work. Taking your trading skills to the non-markets and winning is just as good as in the markets. I know a trader who didn't like that his one-way Manhattan Street moved west. I am not sure how he did it, but somehow he got the city to change it so now his street moves eastbound. Amazing! That probably saved him 10 minutes of traffic on his commute to the Hamptons.
We don't care where we are or what we're doing — we want value, be it in real estate, buying a car or ordering food.
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For example, my friend is a big wine enthusiast and we were having dinner at a restaurant with 500+ bottles on the menu. He noticed a Lebanese wine seemed to be mispriced. (I didn't even know Lebanon made wines.) He asked the waiter how many bottles did they had left, the waiter said five.
My friend said, "Buy 'em. Buy 'em all!"
The sommelier came over and tried to lie and said it was the last one. We can tell when a guy is lying and my friend was having no part of it. We had to call two other friends to help us finish the wine but we won! But, so did the restaurant because we went back there many times to find mispriced wines — but never did.
Commentary by Raj Malhotra (Raj Mahal is his stage name), a former Wall Street trader-turned-stand-up-comedian. He has worked at Wall Street firms covering three continents, including at Bank of America, BNP Paribas and Nomura. He draws from his unique ethnic background and Wall Street career to entertain audiences nightly, highlighting the struggles of the 1 percent. He can be seen at Gotham Comedy Club, Broadway Comedy Club, NY Comedy Club, Greenwich Village Comedy Club, and the Tribeca Comedy Lounge. Follow him on Twitter @RajMahalTweets.
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