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  • Writer's pictureAlpha Trader

Who are we?

The other day someone very dear asked this question during a candid conversation I was having with her.


"If I am to introduce you to my friends then how should I do it?"


I promptly replied, "Well, I am a professional trader-investor".


To that, came a swift counter question- "What's a professional trader-investor? How do I explain it?"


So previously whenever I was asked this question I gave that reply, and the response was mostly one of these- "Wow!", "Interesting!", "Can you teach me?", "Can you suggest me some good stocks to invest, please?"... So typically most people with whom I mingled or conversed, somewhat knew what investing or trading is, or at least they thought they knew it! But, for the first time I was having this conversation with someone completely uninitiated. For a few moments I was flummoxed! I had never actually thought about it.


Let's admit! We, professional traders, are not easy to introduce. We are not the regular job goers, we are not the typical business men, I mean in some way trading should be treated as a business but in reality it's not the typical business type profession. We are not the typical self employed professional who render a service like lawyers, doctors, architects, accountants, message therapists, so on... although we are self employed is all true sense!


So who are we exactly?


After deeply pondering for a while, I could define us by this one line: We are 'Financial market risk managers'.


Does that ring a bell?

No?


Let me explain. 'Financial market' because not all of us are really stock market guys, some of us work with the commodity markets which in no way is related to the stock market, some with the forex markets which is the biggest financial market in the world, the bond markets, etc. However, in essence all of these come under one umbrella, that is, 'Financial markets', but of course, only the ones that are typically traded!


And why 'Risk Managers'? Because, that is precisely what we do in the markets when we trade or invest! Every investment position or trading position that we essentially take up has inherent or literal risk in it. Remember there is no Reward without Risk! That is the nature of the beast, which is the market! We traders/investors live off this Risk-Reward nature of the markets.


Like any other profession, there are successes and failures in this profession as well, more failures than successes to be honest! So who succeeds and who fails in this profession? To this, I have a very blunt straight forward answer- The one who manages Risk properly eventually succeeds and the one who fails to manage risk eventually fails! This is the bitter truth!


To elaborate a tad bit more, I will say that broadly there are three key factors for becoming successful in this profession:

1. Maintaining a favourable Reward:Risk ratio factor in every trade or position that is taken

2. Effectively managing the risk on the trade or position

3. An effective practical trading/investing strategy


Some of you might be wondering at this point, what has all these to do with answering the original question?! It's not like the layman would understand terms like "Reward:Risk ratio", etc..


Frankly, I digressed!

So, after much pondering over all these for hours and for days, I am still wondering how to answer the question "What's a professional trader-investor? How do I explain it?" to the uninitiated! It's easier for me to explain QM, Diamonds, FTR, ERC, UFL, LFL, Hedging, Calls, Puts, Delta, Theta, Vega, and what not! But to answer this layman question succinctly, I think I need more time! [Face-palm]


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