Billion Dollar Day video analysis

Billion Dollar Day part A



Since I first saw this video a while ago I'm thinking about opening a thread to analyse and learn from it.

Better than listening to people around the internet that "claim" to be professional forex traders, why not study this video and learn something from people that you know for sure do it for a living?

I plan to dissect and scrutinize this video little by little, learning as much as I can from each second of it.

If you feel like helping you are very welcome. Just jump in but try to be objective.

This first thread is for PART A of the video only. When part A is exhausted I will open another thread for part B etc.

First I will try to see where these traders are today.

Basically in part A of this video we have :

Richard Hill trading in London for Barclay's bank

Rony Schlapfer New York, Trades for his own hedge fund CMI

William Wong Hong Kong, works for Chemical Bank.

Below you can see William Wong in 1986 at the age of 24.
The other picture is more recent. He should be in his early 50s.

I will try to find the others later for the next post. If somebody knows of their whereabouts just go ahead and post it

Thats what I could find about Rony Schlapfer.

I remember a while ago I searched and found a recent picture of him at "Tradex" website but I was unable to find it again.

Thats all I have for him.

Found this article about him so I'm adding. It is from the NY times, old article, about the time the video was made.

http://www.nytimes.com/1985/03/01/bu...ss-nights.html

I was unable to find much about Richard Hill.

There is another Richard Hill related to forex around the net but it is not him.

The following links seems to be talking about the guy.

http://www.independent.co.uk/news/bu...e-1418022.html

http://www.fxweek.com/fx-week/news/1543131/people

There is this guy on youtube that seems to know him. I guess he traded with him or something. I'm gonna send the guy a message and lets see if I can get something.

Its the same here every day, when things go bad if you can't keep it cool thats when you have no chance to be perfectly honest

Thats the phrase from Richard Hill at the very beginning of the documentary. So from the horse's mouth we can get to the conclusion that when your trades go bad if you lose control you are screwed.

But keeping it cool is not that easy. Personally what helps me in stressful situations is that I know why I got in to a trade so when the reasons are no longer there the best thing to do is to get out. Specific rules for entries and exits will help you keep your cool.

I have watched this video many times. It is fascinating to watch trading back in the day. I was fifteen when this was filmed. Wish I knew then what I know now.

One thing of note, when you watch the video. Each time you get a look at the trader's computer screens there are no charts. Guess that dispells the idea that you have to have confirmation from several indicators to take a trade.

The guys in the video are institutional traders, trading for their Bank employer's account i.e. they trade to make money for their Bank using their Bank's capital.

They're not independent private traders risking their own money.

Their approach to trading are, more often than not, COMPLETELY different than private traders, in that they have more access to interbank market chatter to trade with (or fade against). Other times, they'll use charts.

They had OK (albeit primitive) charting software back then.. I remember using something called Teletrac and the earlier iterations of Tradestation. Reuters charting software was crap then, and still crap now.

And those days we still had to use telex machines on occasion with some counterparties aside from using Reuters Dealing to close deals.

Nowadays almost every Bank in the world has a Reuters Dealing terminal on their FX traders' desk, which still looks and feels almost exactly the same as it did all those years ago.

I could never see any one trade creating too much stress. I'm out well before it reaches that point. However, no matter how small the position size is relative to the account balance, it's never easy watching a trade go against you. I find the best solution is walk away and forget it. Come back at the end of the day (or next day).

The next important part is when Richard Hill talks to Barclay's America.

I'm gonna pretty much disregard what BBC's speaker is saying because they were very biased towards the nature of currency trading business. During the whole documentary they are comparing trading to gambling which shows how ignorant they are on the subject.

you got to remember the whole world is long sterling

the far east is down so.

Humm, ok you hang on through the far east, but i will get rid of it as soon as the far east gets going.

But don't think you gonna make a fortune out of it

I will give ---- over dinner------


Thats my transcription from the dialog.

It is really hard to hear what the guy on the phone is saying but it seems that Barclay US is short in a counter trend trade.

Richard Hill warns him that the trend is up.

Than the guy says: The far east ( asia ) is down so.

Richard Hill does not seem completely convinced of the deal. He hesitantly says ok but he plans to get rid of it as soon as he gets in the office in 7 hours or so. I guess it is what he means by " the far east gets going "

Than the guy on the phone says something I could not hear or understand properly, but by the conversation flow I believe he plans to let Barclays Asia ( dinner time in NY) take care of the trade or something along these lines.

Well, I think we can learn from this conversation that institutional traders do trade against the trend, but I guess their usual way is to go with the trend.

Richard Hill is definitely concerned about fighting the trend ( just remember the whole world is long sterling, don't think you will gonna make a fortune out of it) so it is something to keep in mind.

I would really appreciate if somebody with better ears could listen to the dialog and try to get more out of it.

At 1:54 minutes into the video we are now in New York, it is still June the third 6 PM and according to BBC Rony Schlapfer already made 200 K. The video says he trades for himself and 13 millionaires.

From his cell phone ( gosh! cell phone in the 80s) he dials a number the 5 last digits are 87141.


Ah, listen, can you please tell me what the cotes are for sterling and deutsche mark in Australia?

Yeah, in Australia now is 3 0 -------



Notice how Rony does not seem to stop at 5 PM. His schedule appears to go beyond fixed hours.

The same applies to Richard Hill.We saw in the beginning of the video that after hours (close to midnight London) he was still in his working clothes talking to Brarclay US basically WORKING.

Later in the video we will see Richard Hill early in the morning he was already awake checking the markets.

There is a link above from the NY times about Rony Schlafter and His partner Brad Westerfield having to trade almost 24/7 in a period of high volatility.

So we have to keep in mind that Forex is a 24 hour market and sometimes you have to be flexible with your schedule in order to profit from a special occasion.

Another important point is that you can't just "sit on your laurels" after a good trade and do nothing.

You are only as good as your last trade.

BBC calls Rony an "addicted" because he is still after more money but thats due to the fact that who wrote the script has no clue about what trading in the currency market is.

2:19 minutes into the video we are now in HongKong.

We can hear BBC asia saying that "trading in the European foreign exchange was erratic and thin"

It is around 6 AM of June the 4th and William Wong is already up. He lives in a "suburban apartment block" of HongKong.

BBC says he is one of the far east "leading" currency traders. What ever "leading" means for them!

According to the documentary, Wong belongs to a family of currency traders and his expertise comes more from his family millennial tradition than formal education.

3:19 minutes into the documentary and it is now 7:45 local time. No big news to move the markets on 06-04-1985 so William Wong will rely in his instincts to trade according to BBC.

We can see him buying the paper, and the camera cuts to a clock showing 2 minutes to 8 AM. The video says that he is late.

I always thought that bank traders had a 10 hour shift, from 7AM till 5PM. Maybe the bank he works for is different, or maybe he was supposed to be there by 7 and in this case he is really late, 1 hour late.

Ok from now on, in the next posts we will start to get to the meaty part of the documentary, where we will see how they trade and how the market back than reacts to their multi million dollar positions

3:27 into the video and William Wong is opening the door. We can see the currency trading room of the bank where he works .

BBC says that the pound is already raising and and William has minutes to decide if he will jump into a long trade and "hope" the move will continue up.

This first part of the video finishes at 3:47 minutes so there is no more information.

Now going back to 3:27 minutes visually we have a plethora of info that I would like to discuss.

First what amazes me the most inthis documentary is to see how advanced Forex traders were even back in the 80s.

Even back than, they traded pretty much as we trade today. They had computers, news feed, touch screens, real time price feeds etc. And the most important they traded remotely just like we retail traders do today. There was no direct interaction with the other players in the market. Just like us. Just like we do today.

If you were a regular trader of other markets in the past you would have to go the the pit, the open outcry to trade. There you had a lot of censorial information like, the noise, the fear in peoples face etc.

Now back than in 1985, when the open outcry was up and running, institutional Forex traders were so far ahead trading pretty much as they do in 2013 twenty eight years later.

Of course it looks pretty "retro" now. The squawk box, the CRT monitors etc but the concept is as fresh as today, Can you imagine they had touch screens in 1985?

Unreal!

Continuing on the visual information we can see that William works with 5 other guys for a total of 6 traders.

Now notice that his work station has 8 terminals so it will allow 8 traders to work simultaneously

Later in the part B of the video his co workers are identified as the dealers of other currencies.

We know William trades GBP/USD sou I would speculate they have the majors covered in this work station.

But the problem is that back than they had all the European currencies separated so, lets not forget that they had to deal with a lo more pairs.

French Frank
Deutsche Mark
Italian Lira
Spanish Peseta
Portuguese Escudo
Austria Schilling

and a lot more.

I would guess that they are dealing with JPY, AUD, NZD, DM and CHF. Back than I don't know how expressive New Zealand was so we may had the French Frank replacing the NZD.

Something really interesting is the traders age.

Did you noticed how young they are?

I would say the oldest one there is not older than 26.

I wonder why there is no older people working there. It may be because after a certain level they just go on their own ( like Rony Schlapfer) or it could be the crazy working hours ( 10 hours with virtually no break) and pressure.

They may get rich quick and retire young!

I can only speculate about the real reason, but the fact is that their bank does not have interest in older people in the dealing desk otherwise they would be there.

Why is that? It may signals that youth is better than experience in Forex? Meaning that fast reactions and willingness to take risks is essential to succeed?

From memory, as I watched this a few days back, does Richard's section boss come in at one point and tell him to bank a 20pip profit as its a good gain? He unloads closer to 30. Now its interesting that the team has a boss who guides them in trading decisions. That's either because they aren't trusted or more likely that a calm outside non-attached (to the trade) voice can be very useful when a trader is wrapped up in the position. Richard is thinking all sorts and under pressure. Should I hold, will it turn here I need more pips than this it will reach a new high momentum is with me it will play like yesterday our Asia guy said its good for 20more pips I could double up on this trade I could take half off the table. it goes on. But the boss comes over and simply says that's good take the profit. Do we need to regulate ourselves in the absence of this type of cool reasoning boss?

Not really a "shift" as technically a prop trader starts working the moment he wakes up. Some banks operate a Night Desk where the traders arrive at the office after 3pm to work until dawn the next day, either to continue trading or to manage the Bank's order books, or both.

Not entirely true, to be honest. There's plenty of "direct" interaction with the other traders even on the same trading floor at the very basic. You can see this even in the documentary.

It's not uncommon to have two traders working for the same Bank but having entirely opposite trades and opinions to each other. Plus traders get a lot of rumors and inside info from "friendly" counterparties in other Banks and from inter-dealer brokers, either thru conversations over the phone or on Reuters Dealing.

Retail traders are the ultimate at being "remote".

I think you might be trying to draw too much out of this video. What I took from this is that trading is a lot like poker, where stacks are played by humans and transferred because of humans, not because someone got dealt triple 7s on a slot machine. These people are familiar with each other, and understand what their own and their counterparts actions do to the markets they participate in.

Good post Skenoby, Thanks!

I guess we have to define what "direct interaction" is. I discarded this kind of interaction you are referring to, because I was using pit traders as a point of reference

Compared to the physical contact of the open outcry in the 80s the forex traders were very secluded.

I don't want to go to other parts of the video yet but we see later Richard Hill texting the Russians, William Wong calling Barclays etc, but I don't consider it direct interaction

The ironic side of their interaction is that it was used to lure the counterparty, not to help.

Gosh these words, so like today! Texting, Reuters terminals,electronic news feed etc.


As a retail forex trader I put myself in the same level as these guys in terms of "remoteness". Granted I can't get on the phone and call somebody, but what I'm doing here right now is interaction. If I go to the EUR/USD thread I'm interacting with other traders. But still not directly.

Thats why I believe they were ahead of their time. Their interaction was just like today not like their contemporary equity traders.

Ok I think the first part of the documentary is well covered.

I watched this video countless times but I still was able to draw more conclusions after watching again.

We learned from the professionals to try to keep it cool when things go wrong

To keep trading even after a big score.

Don't fight the market etc

We also learned that they are young, work long hours and were ahead of their time trading in the 80s pretty much as we trade today.

I'm gonna finish this thread with some vintage videos of some banks trading rooms.

If somebody would like to add any posts do it over the weekend, monday I plan to start to study part B of the documentary

Close FO but the accent may have thrown you a bit:

'Sitting here everyday, when things go badly if you can't ah, keep your cool at that time you've got no chance, to be perfectly honest'.

If you watch this on full screen you can see emotions inside him when he says these lines. Or atleast I think you can. I would break it down like this:

Question - is it likely to be something like 'What's the worst part of the job?'

RH I think looks a bit stressed at this point (by his work) and also taken aback by the question and quickly scans for the answer. He looks at his screen as if for a prompt. I think he mouths something before he says 'Sitting', something like 'Oh' or a very quick 'I would' as if he intended to say 'I would say'

RH - 'Sitting here everyday'.
He looks half at the interviewer, half raises an eyebrow (which is a personable response but also him showing that he really does find sitting there everyday a bit crap) and then down and around his desk as if taking in the environment to remind himself how boring and repetitive it can be at the same desk under a lot of pressure day in day out. I think we can assume he IS feeling the pressure with the way he seems to chain smoke. At this pause he half goes to flick his cigarette in the ashtray but nervously remembers he needs to give brief concise answers for the camera and is not in a normal conversation. He's a relaxed dude so in a normal conversation he would take a longer pause, lean over to flick his cigarette then continue or casually continue while flicking his cigarette. All these half gestures I would think are just due to him not being on camera before as in the second half of the statement he becomes far more relaxed.

RH - 'When things go badly'
He looks back at his screen when he says 'badly'. But crucially I think he comes out of his 'It's crap having to sit here all day feeling' and general nervousness to a more rounded humorous realization that yes things go badly and you can't cry about it so see the funny side.

RH - 'If you can't ah' It's when he says 'can't ah' that a little smile comes over his face. He looks down at his desk to briefly think about the rest of his sentence.

RH - 'Keep your cool at that time' here he looks into the middle distance which is I think shows that he does keep his cool and recognizes that to himself but he doesn't look to the interviewer for recogniti0on of his abilities there which to me shows he doesn't have a big ego about his abilities or success. There is I think also a bit of self reinforcement in the look which means he is reminding himself to keep cool while talking about it.

RH - 'you've got no chance' Here he looks directly at the questioner and holds their gaze. This is partly to show he's getting to the end of his answer but he's also looking for some recognition as to the humour in the situation of not keeping your cool. He's also thinking here I would say about other traders he may have seen around him start and fail, because he's talking about the 'no chance of becoming a successful trader' (rather than of himself having no chance.)

RH - 'to be perfectly honest' here he reduces the humour in his look and his language and his tone of voice, gives a little nod and becomes quite sincere. So he is saying you really do have to keep cool and it's crucial.

This is what I see and I think some if not a lot of that observation may be culturally based. I'm also from the UK. It would be very interesting to know if anyone else sees it that way.

A few general observations:

Richard is stressed by the job definitely. But despite that I think his trading decisions are removed from that stress in a way. The fact he can see the humour in the notion of things going badly says to me he has a balanced perspective on the trade and for that reason he stays calm under pressure and would make considered decisions rather than rash, reactionary ones. I think the fact the losses aren't his (Barclays) could be the reason for that OR more likely that he understands and fully accepts that if you don't keep cool that's of no help and you WILL make bad decisions.

I think his desk is a bit of a haven for him in that a look away from the screen to survey his desk and his ashtray seems to take him completely away from the market if only for a brief few seconds. I think that is important to temporarily relieve some stress and get a sense of balance. When looking at his desk I would say he feels safe and reassured. The market can't really hurt him, he is actually safe. That's an important defence mechanism because a lot of stress can make you very nervous and irrational.

Anybody thinks this is rubbish please say!