Traders get a bad rap. Many people, who know as much about trading as I know about pillow farming, blame crashes on traders, or hedge funds, or computerized trading. When the markets crumble, the media is quick to blame those greedy traders.
Trading is about being free. That is what most traders want. Isn’t that why you are attracted to trading?
But are traders really greedy people intent on making it tough for the rest of the world?
I would say no – in fact, we traders do an excellent job at making it easy for the rest of the world to buy and sell stuff. We traders take on risk by buying (or selling) in the markets. We expect to be paid for taking on this risk, for sure, but we provide a valuable service to those people who are also buying and selling in the same market. We traders provide liquidity and this is extremely valuable for many people around the world, despite what you may read about in your local newspaper or see on the local nightly news.
Here is one example – and it is a good example because I actually know someone in this business (hi Craig!) – coffee trading. Futures traders who trade in coffee futures make it easier for coffee farmers to ship their coffee around the world. How so? Well, because there are so many futures traders around the world, buying and selling coffee futures at any given time, trying to make a profit, it is possible for people who are interested in buying coffee today (for a delivery at a later date), at a known price. Because there are so many people buying these coffee contracts, the price is well known around the world, and today anyone can buy or sell coffee futures with a few clicks of the mouse.
Coffee is a very liquid market, and this is due in large part to the futures traders out there who are providing willing buyers and sellers for this market. If you don’t think this is a big deal, consider what it might be like for coffee farmers (and coffee resellers like Starbucks, Peet’s Coffee and Gloria Jeans) if buying coffee were like buying a house. Can you imagine if it took 6 months to buy a few bags of coffee? It would be a nightmare. But it is not a nightmare, and this is because traders like you and I happily step in to buy and sell coffee in exchange for a profit. But coffee is not the only market that is very liquid because of the number of traders participating in the market. The largest market in the world is the money market, the forex market.
If you are reading this, then you are probably much like me, you are a currency trader. I would also guess that you understand that money is probably the easiest thing on the planet to buy and sell. You can do it nearly anywhere. In fact, you could probably walk outside your home and find someone willing to exchange money in a few minutes. The currency market is very liquid, there is a huge market for money. And one of the reasons for this is because so many people, so many businesses and so many traders are interested in buying and selling money. You and I both add to the liquidity of this market, although admittedly what we add to the market is very small.
So if you hear someone lament that traders do not do anything, or worse, that traders are causing crashes, and traders are greedy people, make sure that you mention what traders are right now doing for others around the world. Traders are right now taking on risk so that other people can enter the market for a small cost. Traders are doing this, and it helps banks, farmers, retail businesses and many many others.
But you are probably not a trader because you want to make it easier on Starbucks and cattle ranchers. You are probably not even a trader because you want to make a boatload of money…. right? Sure, making money is nice, but you are probably a trader because you want one thing – FREEDOM.
Does this sound like you? You probably just want to be able to wake up and do what you want to do that day. You probably want the freedom to work from any location in the world. You probably just want to trade and be free, don’t you? In the next post I will examine what traders and freedom have in common. Until next time, Happy Trading!
