The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

7.5. CASE STUDY ON A FAILURE TO LEAD

Another example I encountered was in a macro hedge fund where the PM, Robin, a long-term bond trader, was paired up with Chad, a shorter-term currency trader; they were running into problems because they couldn't decide on the appropriate division of labor. The PM wanted to trade a lot and realized that he needed his partner to watch him and keep him honest and keep him from pursuing what he viewed as addictive behavior in his urgent need to get into daily trades where he invariably lost money.

The currency trader for his part was eager to bet on broader macro themes, which basically took him away from the sweet spot he had developed for printing money daily by getting in and out in the course of the same day. What was the solution? They each needed to play to their strengths rather than intrude on the domain of their partner, but this was not something that would happen by itself, and neither partner was inclined to want to have this discussion.

Basically, Robin thought that if they just remained flat they would do fine and that if Chad would just wait until he figured out which way the market was going and then play it on a daily basis they both could mint money, but Chad insisted on playing broader macro themes. The problem for Chad was that the daily trading was not prestigious enough and that he preferred to do the macro theme trading where he was inclined to lose money trading fixed income, which was outside his area of expertise.

Robin ...