The Traders Rumored to Have Made a Fortune: What Are They Actually Like?

"There are very few paths by which an individual can start with relatively little capital and end up a multimillionaire — and trading is one of them."

Stockbroker Jordan Belfort rolls a hundred-dollar bill into a careful little tube, snorts the white powder off it, and a smile flickers across his face. He has finally grasped the secret to Wall Street success that his mentor, Mark Hanna, taught him: "In this business, sex and heroin are indispensable."

That scene from The Wolf of Wall Street carries a second meaning: money, like a drug, can make you lose yourself and leave you unable to stop. In the 1980s, Belfort raised equity financing for the shoe company Steve Madden and made $22 million overnight. He tried to park the money in a Swiss bank with the help of a crooked banker named Saurel, only to be betrayed by the banker and arrested.

The film probably fixed the impression many people carry of Wall Street: clever and sly, greedy and arrogant, playing with money and knowing no limit. Lanny, a trader in Atlanta, doesn't see it that way. "My colleagues all think the movie went crazy for the sake of being crazy — it's too exaggerated." Winston, a trader at Goldman Sachs, says the film only shows you what trading looked like 35 years ago, before it went electronic; those stories belong to the "old Wall Street."

So what does a trader look like in real life? Over the past month we interviewed 12 of them, Lanny among them. What the interviews proved, in the end, is that the misunderstanding survives because traders are "mysterious" and keep their heads down — most of them asked to stay anonymous, and asked that their firms not be named. Q is one such pseudonym. He admits without hesitation that he made several million yuan in three months in 2014, then adds at once, "Our boss told us not to talk to the media."

It is the same in the United States. Hedge fund expert Jack Schwager interviewed dozens of the world's top traders and collected the interviews in Market Wizards — every one of his subjects also asked to remain anonymous.

Beyond the secrecy, the group does share a few predictable traits. One is a fierce appetite for sudden change. "There are very few paths by which an individual can start with relatively little capital and end up a multimillionaire, and trading is one of them," Schwager writes.

Only a few succeed, of course, but trading at least offers the chance of change. That is why their stories hold more than rumor and the trades themselves.

We Hear They Always Make a Lot. How Much Is "A Lot"?

If you met Winston at Goldman Sachs' New York headquarters, you would probably come away more certain than ever that traders are all rich. Goldman's office tower in New York is worth $2.1 billion. Winston spent seven years at the firm — the first two in investment banking, then 2008 to 2013 in sales and trading.

In his first year as a trader he made the firm $2 million, in his second $3.54 million, in his third $6 million. Asked how much of that landed in his own pocket each year, he answered vaguely: "Let's just say six figures." Six figures means somewhere between $100,000 and $990,000. The average American earned about $40,000 a year in 2014.

Traders are usually moving large sums of money around, even when none of it is theirs, which means the chance of a big loss rides along with the chance of a big gain. It also means a large sum does not always stay in their hands long enough, or arrive with a chance to cash out.

For Zhang Boxin, profit and loss are blurry ideas. He can always "act like nothing happened a couple of days later." Because he trades highly leveraged products — leverage being the margin ratio used in foreign exchange — including currencies and precious metals, Zhang can sometimes multiply his capital tenfold in a month or two. He can also "lose a Jeep Wrangler" in one night, an SUV worth 300,000 to 500,000 yuan.

Still, plenty of the traders we spoke to said they really have built up some wealth this way, and with luck it takes nowhere near as long as it would for an ordinary person.

Q, born in the 1990s, is a stock day trader. April and May of 2015 were the easiest money of his life: in those two months, he says, he made one to two million yuan. His firm is 30 people, all born in the 1990s, moving billions of yuan a day; the best of them made 20 million yuan. Not all of Q's money was his own, but on the margin-trading leverage available at the time, after roughly a year of accumulating, he bought an apartment in Shanghai last September.

Fushan runs a five-person team in Beijing that caught the recent run in commodity futures; this quarter they "made eight figures" — tens of millions of yuan. Before that he spent three years trading U.S. stocks. His fixed salary in Beijing then was 5,000 yuan a month, and he managed a $300,000 account; his best month earned him 390,000 yuan personally, his worst 80,000. Fushan counted the days he spent in the U.S. market: 887 of them, each one running from 8:30 at night to 6 the next morning. "By the end my body just couldn't take it."

After those 887 days he went back to Tianjin, bought an apartment, and traded up his car.

Do These "Money-Making Machines" Run on Brains, Luck, or Inside Information?

Since the money comes faster, common sense says the group must have something unusual about it. Most people picture a trader as a science graduate with an off-the-charts IQ and a sharp instinct for numbers.

Fushan says no. "My IQ isn't especially high. This business doesn't care much how high your IQ is — I know people from Tsinghua and I know people who never got into college. What matters most is the ability to learn, and discipline." Teacher Zhu, who trades commodity futures at a private futures fund, says 70% of the people around him studied humanities.

The group doesn't mind the high-IQ, science-graduate label. What galls them is the assumption that their work is pure luck, that it amounts to gambling. Of all the traders we interviewed, not one would admit that luck has played, or ever will play, a part in their success.

"Trading is absolutely not about luck," Winston says, because he never expected to win every time and he follows a strict strategy and code of conduct. "You need to know how to maximize your gains when you're winning and cut your losses when you're losing. As a trader, if you're right 60% of the time and wrong 40%, that's already remarkable."

Building a strategy is not simple. Teacher Zhu, who manages more than 100 million yuan, says each of his strategies comes out of at least two or three months of analysis and research, and that he also draws on reports from professional research teams.

Gambling, by comparison, is a simple game: you put your money on one possibility. Fushan is eager to point out that they do not lean on a 50% chance of winning. "Trading isn't guessing, it's forecasting," he says. "A forecast always covers two directions — I have a strategy for a rise and one for a fall. If a stock price breaks below a strategy's warning line, you take profit or cut the loss and get out immediately; reducing the drawdown counts as making money too. In futures, if there's a trending rally, the main strategy is to go long, but you can also run a secondary strategy that adjusts to conditions and deliberately limits how much profit you give back."

The other accusation traders reject hardest: that they hold more inside information to build their strategies on, and so have an edge over the rest of us.

Insider trading does exist, and the people with the information really can profit in the short run, but traders insist that leaves ordinary people no worse off. "When the people with inside information are trading frantically, you can see it on the chart too, and you can choose to follow," Fushan says. "If you don't want to trade that short-term, you can make money other ways." The same holds in China's A-share market.

Are They Always Glued to Their Screens?

After two years as an investment banking analyst, Winston moved to Goldman's trading desk for a simple reason: banking was too slow, sometimes one deal every six months, while a trader has to make one fast decision after another under pressure, every day.

You can read it off the trading floor on Goldman's fifth floor. The desks sit side by side, each with four, six, or eight monitors in front of it. Digital clocks hang from the ceiling showing not just New York time but London, Hong Kong, Tokyo, and the other global financial centers — a standing reminder that every second counts.

Frank, who trades foreign exchange at Deutsche Bank in Singapore, lives much the same way. He reaches the office at 7 a.m., and the first thing he does is read global news on his Bloomberg terminal, because macroeconomic news is tied tightly to currencies: the moment it breaks, it shows up in prices. From 9 to 11:30 every morning is the tensest stretch of his day, when he has to follow market moves and news at once. "It's basically nonstop quoting to clients, traders shouting back and forth — really noisy," Frank says.

In the industry, Winston and Frank are both execution traders — as the name says, their job is mostly to carry out what a portfolio manager tells them. The manager hands them a strategy and a range for stop-loss and take-profit levels, and every trade they place has to stay inside that range. Q, the day trader, has to hold his concentration through the four hours he trades each day; he can barely get to the bathroom.

For most execution traders, becoming a portfolio manager is the goal — the difference between working for someone else at a big company and starting your own business as the boss. A portfolio manager may have traders, analysts, and economists all working for him at once. He makes the final call, and he takes the largest share of the profit when a trade works.

Execution traders have a saying: as long as the position is open, I'm at my desk. A portfolio manager's life is different. "I just spend a few months building the strategy, then hand it to the traders under me to execute unconditionally, with strict risk controls," Teacher Zhu says. The sums he manages are fairly large and he mostly trades swings or the long term, so he doesn't need to watch the screen and trade constantly.

Teacher Zhu compares it to rock climbing, one of his many extreme-sports habits. Climbing and futures trading are much alike, he says: to most people the sport looks dangerous, "but a climb is really made up of countless simple moves. Before you can enjoy it you need a lot of training on those moves at a climbing gym, you need to learn the gear, and you need to get your body into shape. Futures trading is the same."

Even With All That Order, the Financial Crisis Hit Hard

Teacher Zhu has watched The Big Short three or four times. The film, which puts its weight on analysis and nerve, struck a chord with him. It tells the story of several Wall Street investors who, just before the 2008 crisis — when everyone believed real estate was the safest investment there was — saw the bubble underneath. Some made a fortune shorting the market; others lost badly.

To a degree, the film won back the reputation traders lost in The Wolf of Wall Street. This time they came across as sharp and hardworking students of the market, and Michael, the one with the glass eye, is the clearest example. He went weeks without going home or showering, grinding through numbers in the office to prove that countless mortgage loans were "dog shit wrapped in cat shit."

Michael counts among the few lucky ones in the crisis. Mark Baum, a fund manager who also saw through the bubble, discovered that what he had been shorting all along was his own parent company, Morgan Stanley — leaving him no choice but to dump the firm's stock.

The crisis also changed working life for everyone who entered the industry after 2008; there is far less sweetness left to taste. Lanny heard from colleagues that before the crash his firm would rent a yacht, or an entire ski resort, to celebrate a big trade. Now a celebration means a meal out or a baseball game.

The U.S. government also stopped the once-flush investment banks from buying bonds for themselves; they can only act as middlemen now, buying and selling for others. So the banks hold no bond inventory, liquidity across the market has fallen, and trading volumes have shrunk sharply.

Crises, meanwhile, come far more often than we notice. Beyond the large financial storms, small ones are running all the time: European risk assets sliding steadily this February, crude oil prices swinging without warning, stock prices falling.

These traders insist that whatever happens, someone in the market comes out ahead. "If oil fell yesterday, then today the trader at our firm who watches airline stocks might have good news," Q says. While European risk assets were falling, the European Central Bank bought corporate bonds to stimulate the economy, which pushed European bond prices up; investors turned to cheaper U.S. bonds, and that demand pushed U.S. bond prices up in turn — which is how Lanny's firm came out ahead.

When the stock market slumps, volume drops, and that may be a trader's worst headache, because it stops them from capturing a spread quickly. A plain fall in prices, though, need not frighten a day trader, because "what we make money on is liquidity and volatility. The harder it falls, the happier we are, because what we earn is the spread," says Tyler, a day trader.

A Crisis Can Turn Into an Opportunity, but the Sense of Crisis Still Follows You Home

Zhang Boxin now believes life and trading have to be kept strictly apart, and he paid dearly for the lesson. One day he made a mistake at work, then quarreled with his girlfriend when he got home. That night he misjudged an order and opened a position of five lots — the unit used in futures trading — and his account shrank by $20,000 on the spot.

Han Yu, who trades at Broad Group, believes trading is a fight against yourself from beginning to end. That is why traders love books about psychology.

Waterbug's story is worth hearing. At first he believed that "the more I put in, the closer I get to success." He started trading futures in 2008. The first time he put in 60,000 yuan and lost it all; the second time 120,000 yuan, lost it all; the third time 240,000 yuan. By 2010 he had blown up his account and lost 2.7 million yuan.

"I thought it might be a problem with my state of mind. After I placed an order my hands would shake and shake — I was terrified. Once the order was in I'd stare at the screen without daring to look away, panicking. So I started reading a lot of books on anxiety, fear, and OCD, watched every documentary about those conditions, and found I wasn't one of those patients. Then I took up psychology — more than a year of it — but those books only told me the symptoms, not the cure. The only thing that worked was meditation and yoga. I also practiced calligraphy, learned thangka painting, and studied Buddhist scripture.

"But the problem wasn't solved. My hands stopped shaking when I placed orders and I was still losing money. Three weeks out of every month I'd be making money, and in the last week I'd lose all of it. That went on from 2008 to 2014. In the end I found the problem wasn't my state of mind, it was risk control. You just need to know how to cut a loss," he says.

Teacher Zhu thinks anyone considering the business should know this: "This industry asks you to be two animals — a fox and a lion. When you need to be cunning, be cunning: if you can't afford to keep losing money, run. But you also have to be a lion, confident, and take what's yours when it's time to earn." Fushan used to love an argument. Now he is plainly a mix of lion and fox: he will still discuss, but he never argues.

Lanny's lasting symptom is that he can no longer hold his attention on one thing, because trading demands that he run several tasks at once. He is easily distracted. That puts him at the opposite pole from his friends in investment banking, who fuss over details and can only do one thing at a time.

No One Can Coach Them or Hand Them the Right Answer

Many traders name Warren Buffett as their idol, but Buffett can only help so much. What he actually does is simple enough — go long, go short, or close out, no different from anyone else — while his philosophy and his way of thinking are very hard to learn. People can only guess at his judgment from the direction he takes, the size of his position, and how long he holds it.

On Wall Street, training outfits for futures traders can help them move up a little, and China has no shortage of trading seminars and lectures either. Professional traders don't buy it. "The people giving the lectures are failures. Only someone who can't turn a steady profit goes out and makes money by teaching," Waterbug says. He was once invited to lecture at a university for 10,000 yuan a day, but he did the arithmetic: staying home and cutting his losses on a single bad day could earn him 700,000 yuan.

Beginners also struggle to find a real mentor; they don't even know what to ask. On the professional networking platform Zaihang, Teacher Zhu has been booked about 40 times. A large share of the people who book him just want to know how the market looks right now, and whether there's a way to make money forever. Of the things that matter most — strategy, money management, risk control, state of mind — they usually have little idea.

Does Everyone Want to Squeeze Into This Industry?

Across his five-plus years at Goldman, Winston got up a little after 5 every morning. For three months straight he had to drink when he got home just to let the pressure out, and it didn't help: he still woke in the middle of the night, and his first act, eyes half open, was to turn on the computer and check the Asian markets. Only once everything looked fine could he go back to sleep.

He believes a trader can never really be happy. "Because when you're making money you regret not buying more, and when you're losing money you feel just as bad. You question yourself constantly: should I even be doing this?"

In 2013, feeling his health going, he quit. Over the next nine months he traveled to 18 countries, and the whole trip cost him $35,000. "If you think about what five months of living in New York costs, that's really not much," he says.

Goldman's trading division was shrinking at the same time, and more and more trading managers were let go. Trading desks at all the big banks are contracting: Deutsche Bank hired only 300 traders across Asia this year, and the nine major investment banks together took on fewer than 1,000. Frank, at Deutsche Bank, graduated from Fudan University's math department in 2013; of the 200 people in that graduating class, four became traders.

One reason is that trading volumes shrank after the crisis. Another is that as technology advances, computers have taken over part of the human workload, crunching huge volumes of data and pricing risk in a fraction of the time. Senior managers felt it first, because they cost the most — and the existence of those senior jobs was exactly what gave junior traders a reason to work themselves raw.

Next to the nine big investment banks, small firms and proprietary shops set a much lower bar. Xiaotian, a day trader, sent his resume through the job site Zhilian Zhaopin, sat through three "pretty lax" rounds of interviews, and was hired. Tyler applied on 51job, got through one round, spent his first day learning the basics, and was trading on his own the second day.

For them, a grassroots kid's dream of making it big may actually be within reach. Q is one of them. But Q, who bought an apartment in Shanghai last year, isn't happy now. The sense of superiority he felt among people his age right after making a pile of money "faded fast. My job is a standardized assembly line — sell high, buy low. Anyone could do it after a bit of practice," he says listlessly.

The assembly line is also exposed to policy. After the state shut off margin-trading leverage last year, he has been idle for a year, with little to do and little to earn. He says he wants a steady, down-to-earth job now.

Image credit: tradinghub, businessplusbaby