How to Succeed as a Sell Side Trader
June 27, 2022·2 comments·In Brief
The foundation for junior trader success contradicts what they're told about copying their seniors and chasing P&L. Most traders learn the same hard lessons in the same wrong ways because institutional knowledge doesn't transfer cleanly and personality matters more than IQ. What separates enduring success from burnout is understanding which principles work backwards from conventional wisdom.
• The most reliable market signal isn't from algorithms or flow data. It's the moment someone cheers for a winning position. Donnelly's 18-year observation shows that trader euphoria coincides almost perfectly with local price tops. When someone is screaming about their brilliant trade, they're at maximum exposure and maximum vulnerability.
• Your peers are all equally intelligent because the industry now filters exclusively for elite schools and high grades. The competitive moat shifted. Raw smarts alone rank you middle of the pack. What separates you is how you communicate, think creatively, build relationships, and understand your own psychology rather than just market mechanics.
• The bank seat itself has embedded value that dwarfs the trading profit you generate early in your career. Young traders assume P&L is the only metric that matters. The advantage of working in a bank versus a prop shop is the "franchise annuity" that lets you take intelligent risks without needing to be right immediately. That protective structure is something you need to master first, not bypass.
• Trading someone else's view guarantees you'll exit at the wrong time and hold the wrong bias. Your conviction shapes when you stop out. Your conviction shapes whether you even know the original trader changed their mind. Success requires doing your own work and developing your own thesis, even when your boss is broadcasting the opposite direction at full volume.
• The metagame of what your specific bank and boss actually reward differs wildly from what the job description says. One manager wants you building client franchise and writing good commentary. Another wants you to 4X the risk profile. If you're optimizing for the wrong metric, your bonus and career trajectory hit reality and shatter. Understanding this gap early determines whether you build runway or burn out.
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This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.
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Comments
Nice interview with Brent Donnelly on Bloomberg just after 12:30 Texas time! One of his salient observations was that the “buy the dip” instinct among investors, particularly retail, has not been purged yet. That part of the cycle still to come.
‘I am not being funny or exaggerating when I say that I truly believe that a trader cheering for a position that’s moved aggressively their way is the most reliable trading indicator I have ever seen. And this has been true for almost 20 years. The hit rate is close to 100%.’
Brilliant! And in my long-only, long-term experience, the hit rate is close to 100%, too. Shopify 1700 (170) yeah! Shopify 300 (30) boo! Ouch!
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