'Cooperation and interaction have always been and will always be
more productive steps on the path to the financial top
than individual effort!'
John D. Rockefeller
Any financier, be it the investor or trader, wants to succeed in the financial arena. Everyone chooses their own path. Some work on their own, others prefer teamwork in a belief it is more productive. What is more effective? Let's get to the bottom of it.
Asset management is one of cooperation and interaction forms. Does AM assist on the path to the financial top? No doubt. The investor can both analyze the market and trade, making money in the process, on their own. But asset management allows attracting an unlimited number of different professional managers with varying trading styles. To start with, it means diversification of your investment portfolio. In this event, cooperation has a significant advantage because if one trader's trading system generates a drawdown, another's will save the situation.
What advantages do large companies and hedge funds offer as compared to individual traders? Large companies allocate all processes among different specialists. Professional analysts are in charge of market analysis, traders trade, specially trained managers monitor risk levels. In such a situation the approach is of better quality a priori, while performance is higher by one order of magnitude. This is unavailable to an individual trader who has to do all this alone.
American scientists did research intended to prove that the collective intelligence has an advantage over the individual one. Researchers observed sixty six traders for 18 months and concluded when this term was over: the traders that exchange crucial information with their colleagues when trading make more money than those that traded without consultation. Therefore, the opinion that nonstandard thinkers succeed more in the stock exchange was disproved. Experimenters claimed that one should and must have a bright personality to make a killing but it often pays more, as it appears, to flow with the crowd.
Aleksandr Gerchik, a successful Wall Street daytrader, is also of the opinion that team trading has a positive influence on the outcome. It is the team method that clients trade in his courses. During annual conferences held by Aleksandr Gerchik, he calls on all active traders, especially beginners, to team up with a few others and trade as a team. According to him, it is only trading in a team that can help beginners survive in the market for a few years to come and not go broke. He says that when a person stays at home and stews in their own juice, they can make a host of mistakes. But when there is a team the degree of risk control goes up several times. This is why a special program, 'iron discipline', was even instituted. It requires that the risk manager control risks of beginner traders, thus protecting them from the desire to get back their losses. Success of the system is acknowledged by the huge number of successful students who now bring in large amounts. The particularly successful of them manage Gerchik's own money.
Victor Niederhoffer is also famous for preferring team work and hires exceptionally talented traders to train them in the art of market trading. He encourages and stimulates them to develop their own trading strategies. What goes on in his office looks more like the activity of a research laboratory than a traditional trading firm. Steve Wisdom (45) nicknamed as Mr. Wiz (Niederhoffer's right hand) sits not far from Victor (called the Chair). Only they two trade with investor money. Other team members test ideas and strategies on Victor's $50 million account.
Over ten employees that Niederhoffer taught the art of trading managed to make a fortune worth hundreds of millions and some - billions of dollars. They include Monroe Trout, John Hummer, Stu Rose and Roy Niederhoffer. They all achieved great success both in asset management and M&A transactions.
