I want to become a floor trader! How do I become one? (CBOT, NYSE, CME, NYMEX)
I’ve always been passionate about stocks, commodities, currencies, and trading the financial markets as a whole. One of my aspirations is to become a floor trader.
What’s a floor trader you ask? Well, have a look at this video first:
(Soybean trading at the Chicago Board of Trade)
These folks trade on the floor of the exchange for their own accounts (contrast with trading through the internet or the phone). Trading on the floor of the exchange = FLOOR TRADERS.
If you look at the video above, trades are carried out based on the outcry system (i.e. traders shouting at each other) as opposed to the electronic system.
I don’t actually intend to become a floor trader indefinitely. I’d just like to experience the outcry system for once, and also, to be able to own a seat on the exchange. Then perhaps, lease the seat out to somebody else.
Anyway, as I’ve hinted above, to be able to trade personally on the exchange, you need to own a seat on the exchange or at least lease a seat from somebody else.
How much do these seats cost? Here are some indicators:
1. At the New York Stock Exchange (NYSE), a seat was sold for USD4 million in 2005.
2. At the Chicago Mercantile Exchange (CME), a seat can be bought for approximately USD1.5 million.
Yup, they are indeed expensive.
Below is a scene from the movie Trading Places, where the outcry system is shown. Watching the scene for the first time made my palms sweat like crazy. Haha :D
Here are a few more interesting videos:
1. A movie entitled FLOORED to be released in 2009
2. Cotton Trading
3. NYMEX Open Outcry Trading Challenge for Students
4. Robert Downey Jr. commenting on NYMEX Floor Trading
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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.
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Other related posts:
- CFD Trading : An Introduction
- CFD Trading/Share Trading : Setting Stop Loss
- CFD Trading/Share Trading : Stop Loss in Perspective
- CFD Trading/Share Trading : Being Long and Short (Concept of Short Selling)
- CFD Trading/Share Trading : Short Selling in Perspective
- CFD Trading/Share Trading : The 2% Rule
5 Responses to “I want to become a floor trader! How do I become one? (CBOT, NYSE, CME, NYMEX)”
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You are ambitious. Watching these clips are stressful enough for me…
GOOD LUCK TO YOU! :D
I just love the energy that these guys emit. Not to mention, the fast pace environment.
I especially love the second video clip, the one from the movie Trading Places. Amazing! Hehe.
Also, if you watch the third video (The movie FLOORED), the trader had stated that there are people who got punched on the pits (the exchange floor). Haha. These money hungry bastards :)
Nadlique, you seem like an intelligent person, so take some friendly advice: do not attempt to become a floor trader. I traded coffee at the old CSCE and NYBOT for 21 years. Of the traders who were in the coffee ring when I started, only about 5% were still there 5 years later. Floor trading is no game, and it’s not a movie. It’s a daily street fight. Guys like me survived as long as we did by beating the living shit out of 20-something-year-old guys who made it into the ring, thinking that it would be cool and sexy and a rocket ride to wealth, only to find themselves, within 6 months, literally penniless. And we paid a heavy price ourselves — ulcers, heart attacks, depression, addiction. I walked away from that hell 8 years ago and have never looked back. I took what I learned with me, and I’ve been trading electronically, living well and enjoying life. Take it from me: leave floor trading to those with a death wish.
Hi Jerry,
I have heard numerous stories as well about how ruthless and how aggressive people can be in the pits.
Of course, in my case, I think, being a pit trader will only remain a fantasy. I do want to, but practicality wise, I’ll stick to electronic trading.
Anyway, in your case, did you manage to make any considerable amount of wealth in the pits? ;)
Nadlique:
Well, after 21 years, yes, I ended up with a lot of money — enough to retire on, at age 45. But I can’t even begin to tell you how many losses — huge losses — I suffered along the way. That’s par for the course, on the floor. After my first 6 months, I’d lost about 70% of my trading capital. I was able to pay my rent only by working as a dishwasher, at night.
But I learned a lot from the veteran traders, and the most important thing I learned is how to lose, moreover, how to LOVE losing. I know it sounds weird and goes against the “winner” mentality we worship, but it worked for me. You learn very little from winning. Indeed, a streak of lucky wins will do nothing but reinforce bad habits that will eventually break you.
Floor trading, as you probably realize, is a dying enterprise. For good and ill, the pits and the rings are going electronic and will never go back to open outcry.
If you’re bound and determined to experience the floor, I’d look into maybe leasing a seat on the Kansas City Board of Trade or the Minneapolis Grain Exchange — the two exchanges with “affordable” seat prices. You might be able to arrange a short-term lease with a member, so you can get a taste of what the floor is like. Also, these exchanges are small and not nearly as lethal as the Chicago and New York exchanges.
If I were you, though, I’d stick to perfecting an electronic system. Making money is what counts, and you can make much more of it, a lot easier, that way than on the floor.
Good luck to you!