One of my favorite movies is "Back to School," starring Rodney Dangerfield: Successful businessman goes back to school and in the process teaches academia a few lessons.
During the movie, Dangerfield’s character has an argument with his business professor on how to set up a company. When the professor gives a hypothetical example and Dangerfield asks him what product is being made, the professor answers that it doesn’t matter. Dangerfield mumbles to his son: "Doesn’t matter? Tell that to the bank." When the professor discusses building a factory, Dangerfield asks why build when it’s cheaper to lease? Finally, when the professor outlines additional costs, Dangerfield inserts that he left out a lot, like "greasing" the local politicians, building inspectors and Teamsters. Meanwhile, the students start taking notes on Dangerfield’s comments, forgetting the professor. Comical and perhaps exaggerated, this scene points out a separation — probably not so fictional — between what is taught and what happens in the real world.
Reversing the movie roles is our interview this month, trader Joe LeBlanc, who for 25 years was immersed in the wild world of energy trading, both OTC and futures, both speculative and hedging, both on the desk and in the board room; he lived the business (see "Joe LeBlanc: Taking a rare energy position," by Managing Editor Daniel P. Collins). A few years ago a colleague pushed him to teach how to trade. Tulane University had just opened a state-of-the-art trading room and needed someone to teach the class beyond the theoretical. LeBlanc stepped in and has been training energy traders since, not from an Ivory Tower point of view, but from the rough and tumble world of trading.
The saying "it’s better to be lucky than smart" may work in many instances, but not in trading, where it’s better, and more profitable, to be smart in the long run. The late night sloganeers who push their wares guaranteeing riches to those who buy their programs and services are, for the most part, empty promises and money drains. I don’t know how many times I’ve been asked for the best way to make money in the markets, but one thing I’ve learned while covering traders for almost three decades is it takes more than buying a computer, book or program.
The students who take LeBlanc’s class are getting a good start: Learning from someone who has been in all areas of a particular part of the business and can help them sort out what’s important and what’s not. For most people wanting to trade, it’s a lonely odyssey, filled with many dark days and long nights. But the truth is an educated trader has a better chance of being successful than one just going with the gut. In the end, that gut option will give you an ulcer.
Trading also takes money you can afford to lose; i.e., not Johnny’s college fund and not the mortgage payment. You need to accept that you’ll lose money starting out (and probably beyond). Paper trading or what LeBlanc is setting up with the CME Group, an electronic paper trading training program, is a good start. And of course, reading strategies by experts in the business (hopefully in Futures or at FuturesMag.com) is part of the education.
Luck can happen, but most people have to make things happen themselves. Don’t buy the hype. Take your time learning about the markets, plan how you can afford to trade, what and how you want to trade and, at least in the beginning, don’t quit your day job! That said, many do pick it up as a second career. Al Brooks (who will be speaking at the Trader’s Expo in Las Vegas on Nov. 18 as Futures’ guest) was a successful ophthalmologist when he decided to pursue a trading career. It took a lot of research, incredible focus and more hours than I’m sure he can remember, but today he lives the dream. In trading, it’s always better to be smart; luck comes after.