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Traders: (Losing) Millions by the Minute

Yesterday I watched “Traders: Millions by the Minute” which is currently available on BBC iPlayer. This is a two part series that explores the world of financial trading. If you’re at all interested in investing this really is well worth a watch.

Don’t expect too much insight in to how to make your millions. It’s more like an A-Z of what not to do.

Episode One

The first episode explores the professional world of trading, some of which is mildy entertaining and even in parts accurate. It also introduces us to a handful of wannabe traders that have enrolled in a 4 month trading course provide by a slick looking city firm.

It’s very interesting to see how these newbies react to the stresses and strains of day trading, particularly when offered the chance to trade with someone else’s money.

Episode Two

However things get a lot more interesting in episode two where the focus turns to punters who are, or are about to start, trading at home, on their own accounts. We talking day traders. People that have seen the flash cars and watches and decided they want a piece of the action.

First we meet Jane, a mother of three who has turned a fictional £300,000 into £1.8m in just under a year by trading FX. Move over Mr Sorros, there’s a new bank breaker in town!

However despite this initial promise she goes on to sum up her strategy pretty succinctly when she declares:

“I’m not very good with numbers. But what I’ve learned to do is literally just look at the chart and guess, and think which way it’s going to go.”

Staggering, she’s been at it a year and appears to have learnt nothing. Here is a grown woman, seemingly educated, a nurse, someone who you’d entrust their health with, about to ‘invest’ £6,000 of her hard earned cash on pure unadulterated guess work.

The odds are of course stacked against her as each guess trade that she makes she crosses the bid/offer spread and further enriches her broker. As TEA would put it, she’s Frankie and she’s in the casino, not running it.

Day Trading

The most important line in the whole program came in episode two (17 minutes in) when a city broker @ Saxo (complete with slicked back hair & Rolex) gives the game away:

“The perfect client for us is an active, profitable client. So they are trading actively and every time they trade they pay us commission.”

Good luck Jane!

Next up there was Rene. An amicable sort of bloke that seems to be caught up in trying to attain the glamorous image of trading. He openly admits he’s made just £10 in the last couple of months. He says he’s got a good trading plan, seeking volatility and uses it as an opportunity to exploit, however he later declares he’s been at it for 7 years and is yet to make any money!

In the program there are a couple of successes and glimmers of hope. The fitness freak Charlie seems to be doing alright (well he has got a Porka on the drive) and at least seems to understand the concept of risk management.

Next we get to meet Justin and Acquile who claim to have over £1 million ‘under management’. The boys seem to talk some sense (and drive a Merc) and are at least attempting to run the casino by seeking investors (mainly professional footballers) and charging management fees to boost profits.

Justin ignores the news and trades purely on his technical analysis. They seem to be doing well however I can’t help feeling they’re storing up a nasty dose of realisation when Justin declares “because history repeats itself….”.

Then there’s the investment club of geriatrics that decided defensive investing just wasn’t exciting enough and decided to day trade Asos. Whoops…

Asos Price Chart

I hope these boys didn’t sell their investment trusts to fund their new found trading hobby!

There’s no doubt about it that whatever the program makers intentions this program will inspire many punters to lose vast amounts of money ‘trading’. There’s a heavy theme of glamorisation of trading running through the program so be warned!

As entertaining as it was I  think I’ll be sticking to my dividend investing strategy.

In other news…..Sports Direct

If I was a Sports Direct (SPD.L) shareholder I’d be more than a little concerned that the company (under the guidance of Mike Ashley) has entered into a put option agreement with Goldman Sachs on 23 million shares in Tesco PLC. This is nothing more than a big bet that Tesco’s share price will rise.

According to a Sports Direct press release “This investment reflects Sports Direct’s growing relationship with Tesco and belief in Tesco’s long-term future”. Let’s not beat about the bones, this is Mike Ashley punting that Tesco’s share price will rise. At stake is £43m which is not insignificant when you consider the companies 2013 Operating Profit (EBIT) was £213m.

Despite my pretty down beat assessment of the situation at Tesco now might well be a great time for Mr Ashley to buy shares in Tesco. What I don’t understand is why he’s being allowed to gamble with the money that belongs to Sports Direct’s shareholders. If I was a shareholder I wouldn’t be happy that the boss was gambling with my money, especially not if he’s using the same strategy as Jane!

{ 14 comments… add one }
  • Cerridwen September 27, 2014, 11:01 am

    Hi. I’ve just watched the first episode and what strikes me most is the way that although the overriding influence in the day trading business is still that of emotion (as Ben the trainee says “it’s a game of emotion”) the future looks to be heading in a very different direction – as seen with the Dutch company and the mathematicians tending their algorithms.

    The more traditional traders refer to “reading” the other guys in the trading pit, likening their skills to those of a poker player and online trading hasn’t yet fundamentally changed this as it seems to be a test of nerves more than anything else. However skill and “mindset” just won’t come into it when pure number crunching does the “decision” making.

    I wonder whether day trading will be something that quite so many thrill seeking and adrenaline addicted (young?) people will be so drawn to when it becomes a science rather than a sport.
    I’m looking forward to watching the next episode.

    Thanks for the link.

    • Under The Money Tree September 27, 2014, 12:49 pm

      The future (mathematicians/algos) is already here. You won’t find many people trading purely on emotion (apart from Episode 2!) and having any sort of longevity. Pit trading was an art form akin to poker and that art remains to some extent in that people try to predict movements of the market off the back of macro news/announcements.

      Through work I know quite a few young academics with pHd’s that have started trading with their own developed algos. They invariably all blow up eventually as there’s always a long tail risk that catches them out. The most successful was an ex colleague who was very intelligent and verging on autistic. His algo blew up after a year or so and he’s now decided to resist another city job and plays online poker full time, doing very well at it by all accounts! He’s successful because risk management in poker is much easier than online fx trading!

      Enjoy episode 2!

  • Westerly Falcon September 28, 2014, 5:46 pm

    Even the fx developer said something along the lines of “I feel like this news is going to make the price drop” so made his trade and made £4k or whatever it was.

    Also the porsche chap said that if he makes a good trade in the morning he can take the rest of the day off. This seems unprofessional and poor thinking because his career is one long trading session. If he is has a positive expectation he should be in the markets all day, rather than let his hours be influenced by his early results during the day.

    • Under The Money Tree September 29, 2014, 9:11 am

      Westerly Falcon,
      I started taking some notes while watching with a view to sharing them in this post, however there was just too much good material!

  • DividendDeveloper September 29, 2014, 5:06 pm

    Yeah, I think that day trading like these guys do is inherently a losing proposition (and their returns confirm it). Even if you have a background in finance, chances are you can’t compete with the big boys, who have legions of traders working for them and exponentially more resources than you will ever have. Better just take it slow and steady with index funds or dividend growth stocks.

  • No More Waffles October 1, 2014, 1:00 pm

    Oh man, now I’m sad I can’t watch BBC iPlayer in Belgium… The examples you mentioned above sound too crazy to be true!

    Day trading is almost always a loser’s game, especially if you’re a small fish. Transaction costs and brokerage fees will eat you alive!

  • guest October 1, 2014, 6:39 pm

    Both episodes are on YouTube Waffles.

  • JLTrader October 8, 2014, 3:28 pm

    I was looking to see if there are any reviews of this show because I was thinking of writing one on my site and I stumbled upon your blog. Just to keep this as short as possible, I’m going to refer just to those 2 clowns Justin and Acquile. Would YOU entrust them with more than £10 of your money after being pitched with a demo account like that footballer was ? :)) All flash and bragging aside, there’s nothing to substantiate that they’re profitable at all. I looked them up on twitter, they were boasting of an FCA authorization, but when asked for details, they didn’t reply back. They remind me of Alex Hope :))

  • Martin October 23, 2014, 5:49 am

    I watched those series and found it quite entertaining. However, there is one point I must disagree with you and that is on your comment about Rene that he has traded for 7 years and yet made no money.
    Trading and investing are different babies. If you want to be a trader, you have to learn a lot and be ready to lose money. If you read about famous traders such as Livermore, Darvas, and others, many of them wrote that it took them about 10 – 13 years to learn how to be consistently profitable and make money trading.

    I invest money into dividend stocks, but I also decided to be a trader trading options, so I put aside some money to my trading account and started thinking that trading will be easy as a piece of cake. After about ten years I finally started being profitable, although I still make costly mistakes.

    So yes, trading is a very tough business and not everybody can do it (statistics say that only 10% of people who ever try it becomes profitable consistently, but if you decide to go for it, learn a lot, be ready for the stress and risk and learn how to handle it, you can break thru.

    If you want to become a professional good surgeon, you also won’t be one overnight. You spend 10 years in college (6 years + 4 for doctorate) and yet you need a lot of practice to be a good one. Why people think trading is a different and they can handle it in a year (well, unless you are a genius)?

    • Under The Money Tree October 23, 2014, 10:30 am


      Welcome, it’s nice to get the opinions of a day trader on this subject to counter balance all of us boring income investors!

      The point I was trying to make about Rene was that here is a man that has given up his job to trade from home, an activity that was making him no money. 7 years is a hell of a long time to have zero income. Sure it might be interesting/fun/enlightening on occasions but surely taking 7 years unpaid ‘work’ is a very bad trade. With a reasonable income and the right attitude most people could get a seriously long way down the road to financial independence in 7 years. Of course I no nothing about Rene so maybe he has a million dollar portfolio of blue chips pumping out income that enables him to pursue his trading.

      If you’re going to do it it sounds like you have the right approach – backing up your trading with an ‘investment’ portfolio. Are you using the trading to generate more capital to put in to the dividend portfolio until such a time you can live of the dividend income?

  • theFIREstarter December 4, 2014, 3:58 pm

    Hey UTMT!

    Thanks for the recommendation, sounds like a “must watch”.
    It’s like a reality TV show for FI/Investing geeks… TOWIE watch your back! 🙂

  • Stephen January 23, 2015, 1:46 pm

    The Porsche guy maybe makes all his money selling expensive educational material : http://www.ezeetrader.co.uk

    • Under The Money Tree January 23, 2015, 2:44 pm

      I’m not surprised by this!

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