Paul Rotter - aka "the
Paul is arguably
the single largest and most successful individual futures trader on
planet Earth, executing trades on the Eurex exchange primarily in the
Bund, but also in the Bobl and Schatz interest rate futures. He trades
between 200-300,000 round turns daily using the X_Trader platform, and
clearing through GNI Touch.
Every trader can aspire to imitate
success as he is proof that it IS possible for a small trader to build
on his success and grow into the biggest most active speculator around.
introduction (translated from German language interview with Traders Magazine):
Paul Rotter has made it - he belongs to the best traders in the world
and counts as a real big player. he usually does 150,000 rt/d, sometimes
up to 250,000 mostly in BUND/BOBL/SCHATZ futures. in the hall of fame of
celeb EUREX players he's top notch end even leaves Tom Baldwin (bonds)
or Lewis Borsellino (S&P) behind. he had to work hard to make it. he
blew up in the beginning of his career, which was painful but also
educational - he learned his lesson and with lots of research, seeking
improvement all the time, he became the man.
q: was there any key event that brought you into the game?
a: no, no key event like 'buying my first stock'. took part in some
trading contest while at school.
q: how did you get to professional trading?
a: when I was apprentice in a German bank I had to work on the DTB (now
EUREX) execution desk for several weeks. this attracted me a lot. during
that time I was doing gamble trades on my private account, losing pretty
much all of it. when it was deeply in the red, I had to leave the bank
but shortly after, I was allowed to start trading in a Japanese bank. I
was very lucky here, since I was allowed to gain knowledge through
learning by doing.
q: did the bank give you any mentor?
a: not, I didn't have one. in the beginning I was exchanging ideas with
the chief trader Ajiasaka, who was constantly profitable. he sometimes
even hedged the positions of his boss, when he thought that his boss was
wrong. I had many conversations about market psychology, which proved to
be very helpful, especially after bad losing days.
q: how was your trading back then? have you been constantly
profitable from the very beginning?
a: I was doing 100 - 150 round turns a day after a short time... I had no losing
month with the first 3 years of my trading. later on with bigger
position sizes i took occasional hits, especially after EUREX allowed
terminals in the US and big players like Harris Brumfield / Chicago were
entering the field.
q: there is a saying that every trader has to completely blow up
his account at least once before he can become successful. what did you
learn out of it?
a: like I earlier said, my private account saw some bad times during my
apprentice in the bank, although I must admit, that back then I had
absolutely no idea that there was something like 'risk-management'.
later on I found 7-digit losses to be cumbering. on day I had a blackout
and after losing 2,5 million € I was seriously thinking about stopping.
still had enough capital left to live without having to worry about
financial issues and i just wouldn't want to take those psychological
hits anymore. after taking 4 weeks off, I regained my motivation and
returned in the ring. I was able to make up the loss in a relatively
short period of time, so that I came out stronger than before.
q: has this changed the views of the market in a way?
a: with the experience of bigger losing days coupled with good phases
right afterwards, I'm not so sensible for losing days anymore. I know
that I can make it back. this has lead to being able to switch off the
screens on a day with medium/small losses more easily, instead of
forcing the way back into positive territory.
q: what are your strengths as a world-class trader and where are
the differences between you and other traders?
a: it's the ability to get more aggressive in winning phases, taking
bigger risks, and scaling back in losing times. this is against human
nature. the best thing is to have somebody around who is neutral to
trading, that switches the terminals off, when a certain loss level has
been reached for the day.
q: you are known as a order book-scalper, could you please
explaining to our readers what you are doing and what your strategies
look like? what is your tactic?
a: it's some kind of market making where you place buy and sell orders
simultaneously, making very short-term trading decisions b/c of certain
events in the order book (level2). for example, I usually have lots of
orders in different markets at the same time, pretty close to the last
traded price. the resulting trades are usually a zero sum game, but I
get a pretty good feeling for what is going on and then ultimately can
make a decision for a larger trade.
q: how long are you usually in a position?
a: since I do trend plays very seldom and actually scalp the market, i
constantly get fills in different markets on both sides which can cause
constantly changing positions for hours. sometimes i change my opinion
several times within a couple of minutes, which is not pretty hard for
me, since I'm only looking for the next 3-5 ticks.
during your professional career, have you always been a scalper or did
you try other strategies (momentum/swing) as well?
a: yes, I have always been a scalper, but I am adjusting my strategies
to different market situations all the time. on volatile days I of
course have less orders in the market and do more 'single trades',
although I usually hold them only for a couple of seconds.
q: your strategies only work on electronic exchanges?
a: yes, b/c you cannot handle that much orders in a pit, looking for
counterparties and so on. computer exchanges grant fast order flow and
are not as easy to manipulate.
q: as a scalper, are you trying to run stops?
a: well, yes, but because of the increase of liquidity in the last
couple of years, the fast spikes caused by stops are not happening that
often anymore. apart from that, that stops often are not where you would
suppose them to be, because the other market participants are not silly
either or learned their lesson in the past.
q: what role plays risk-management in your trading?
a: i set daily goals for my p&l, whereas the most important thing is
the stopping limit, the maximum loss I take, before I switch off the
screens. my biggest positions are 5 digit number of contracts. I don't
use any specific money-management rules.
q: what are you doing when a position goes against you? are you using
a: I strictly close my position when they start going against me. with
bigger positions this is not that easy, because I move the market
against me, which could cause other traders to get in the same situation
like me, which could accelerate the move. however, most of the time I am
able to make some of the losses up, b/c I know what caused that move and
therefore take the opposite position.
q: why don't you have any problems with closing out the position and even
taking the opposite direction? shouldn't a trader stick to his opinion?
a: no, definitely not. an analyst or some kind of guru has to stick to
it, but as a trader you should have no opinion. the more opinion you
have, the harder gets it to get out of a losing position.
q: what role plays market psychology?
a: I constantly try to read the psychology of the market and base my
decisions on it.
q: how do you handle distracting thoughts and emotions?
a: when it gets really bad - taking a cold shower or jumping in a cold
q: how do you prepare for the trading day? do you follow any
routines or do you take it as it comes?
a: before the open I check all the economic reports that are about to be
released, speeches of central bankers - simply anything that could move
the market. then I try to define important levels in the markets I
trade. I do this through my own analysis and through reading analyst
commentaries. that's how I get a picture of the market and its
important levels. I am not interested in opinions of other market
participants as this would influence my own opinion.
q: any kind of mental preparation?
a: nothing specific. actually I am motivated all the time...I see
trading more as a sporting challenge and try to erase the thought of
q: how many hours do you spend in front of your screens?
a: usually 5 hours, that's when i trade actively...in case of special
events i can be up to 11 hours
q: isn't it hard to spend that much time in front of your pc's?
how do you stay concentrated for such a long time?
a: that is what my Japanese colleagues asked themselves as well...well I
take it as some kind of game where i forget the time. therefore the real
troubles are more physical (eyes) than psychological.
q: what do you do to calm down / relax?
a: i do lots of sports and take lots of vacations.
q: what equipment do you use?
a: MD-trader from TT, Reuters, Bloomberg, CQG and a USD-squawkbox.
q: why a USD-squawk box?
a: i use it because €/$ had some effects on the interest rates over the
last couple of months. those effects change, right now it influences oil
prices and the DAX.
q: what timeframes are you using on your charts?
a: usually 5- - 30-min charts for trendlines and indicators. I prefer
p&f charts because they give me a clearer view on patterns (triple
tops). for indicators I like the CCI because it also shows the
volatility of the markets.
q: do you think is it possible for a single player to manipulate
a: no, in my opinion a single player cannot influence the market around
the clock. there are always several big players in the market. take the
BUND for example - there are one million contracts traded a day. when a
trend starts out of the blue with only slight pullbacks, I could trade
against it, but with no effect. I couldn't stop the market from going up,
because there would be more money needed that I could bring in. apart
from that, so-called 'Analytics' computerized scalpers have made it
tougher for me lately. as far as I know they are analyzing the
behavior in the order book and create a fully automated system. since
they act in several markets at the same time, I think these computer
freak come from the fully automated arbitrage- and spread-trading.
q: what has one to do if he wants to become a scalper?
a: he has to watch the order book for a very long time.
when asked for advice for the readers, Rotter says that everything can
happen all the time, so you better have your toilet close to your