Welcome back. Enjoy this latest article and then scroll down and please leave your comments/reactions at the bottom of this post. Thanks for visiting again!

All good things must come to an end, and this is the last in our series of 5 articles on Floor Traders and what they have to teach us about emini day trading, buying stocks or Forex and trading in general.

The original reason for creating this series was that I received a lot of emails from readers asking me to teach more about how the floor traders are screwing them over, and how they could ever compete with that elite group.

My hope is that while I personally hold pit traders in high esteem (it’s a tough job as I think you can see now), they are not necessarily smarter or better than you, and many of the advantages they used to enjoy are fading away … like the pits themselves.

So respect them, but don’t be intimidated by them … and certainly don’t blame your lack of trading success on them.

Rather than posting another video, I’m going to use this final post in the series to refer you back to a blog article I made back on April 15 of 2007 about my first visit to the CME (Chicago Mercantile Exchange).

I received a lot of great feedback on that post and it’s still one of my old articles that remains firmly in my memory even 2 years later.

The title of this post was simply “ME” and you can read it here:
http://www.topdogtrading.com/?p=18

… and if you are disappointed I didn’t post a video this time, here’s a video of actor Robert Downey Jr. visiting the floor of the NYMEX. At the end of the visit he gives his candid impressions of the experience. I’m just putting a link here rather than embedding the video because (be warned) there is some very, VERY colorful language!

If interested, you can check it out the video here:
http://www.youtube.com/watch?v=Dtc58sTsTpE

Please leave your comments below.

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Today’s lesson: What we can learn from Floor Traders about psychology when emini day trading, as well as the Dow futures and commodities trading. Who makes better traders on the floor  – people with brains or brawn? Is it better to be a scholar or an athlete?

Also addressed: What is the future of pit trading. Are all the seat owners going to get killed or make a killing?

In this video 3 NYMEX pit traders are interviewed to help answer these questions:

1. Fredo is a seat owner who has been trading for 20 years.
2. John is a floor trader who executes trades for his employer as well as his own account.
3. Paul is a clerk who has only been at the exchange for 9 months.

This is part 3 of our 5-part series.

Enjoy the video, then please click on the “Comments” link at the very bottom of this section to leave your comments.

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Many of my readers have shown special interest in the behavior of floor traders. To people doing stock, Forex, dow futures or emini day trading, floor traders have a mystique and they want a peak behind the curtain.

I’ve never been a floor trader, but I’ve been trained by floor traders that took me right down into the pits of the CME so I could experience it up close and personal during market hours. I’ve visited the New York Stock Exchange, the Chicago futures exchanges  several times, but to me there was something special about the Chicago markets. The energy is very different than New York and I loved it.

I’ve also been to the Tokyo Stock Exchange, but that is now completely electronic and is as silent as the Chicago pits are loud. The energy of the TSE is just like walking into a library! Click here to read more about my trip to the Tokyo Stock Exchange.

Most screen traders (those who trade from computers) assume that floor traders have some special edge that screen traders don’t. There is, or was, some truth to that. But actually most floor traders are not successful. In addition, the open outcry system of the floor is giving way to electronic trading and the “floors” around the country, and the world, are shrinking and even disappearing.

While that transition represents progress, the nostolgic part of me mourns that loss. The floor has a unique and exciting quality that I hate to see disappear.

So if the pits are on the way out, what’s the point of learning about them?

It’s important because screen trading gives you the impression that the markets move based on the lines and squiggles of indicators. But when you stand on the floor of an exchange you see, hear, smell and feel that what really moves the market is people. You can hear their energy, you can see the greed on their faces and you can almost smell their fear.

That’s the REAL market, and that’s what makes the market really move.

Today I share with you the first video of this series on floor trading. It is actually a preview to a new movie that is coming out which looks very interesting.

Please post your comments and questions below about the video and about floor trading.

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The first time I visited the CME (Chicago Mercantile Exchange) was very intimidating. I was reminded of the Guns N Roses song, “Welcome to the Jungle.”

Here were masses of people and everyone was moving at blitz speed like they had just downed a gallon of Starbucks’ finest.

Traders would crowd into the elevators like cattle. When the elevator was full, a few more people would push their way in until I experienced a feeling beyond claustrophobia.

When we stopped at a floor, someone (usually from the very back) would yell out “Me!”

Then they’d aggressively wiggle their way through their competitors and exit the elevator.

My first day there, after my first morning of trading, a bunch of us decided to break for lunch. So we, along with half of the planet, headed for the elevators. Again, our elevator was full, people pushing their way in miraculously finding space where no space existed.

At each floor, someone yelled, “Me!” And made their way out, aggressively pushing others aside in the process.

Next floor: “Me!”

Next floor: “Me!”

After lunch we corralled back into the infamous elevators once more and I got squished into intimate contact with at least 4 strangers.

I was waiting for the first “Me!” to be sounded, when the elevator came to a HALT!

Oh no!

Stuck!

The ultimate “STOP!”

It seemed strange to me that everyone remained calm and no one said a word.

I wanted to yell, “Hey, we’re stuck and I’m squished and claustrophobic and I’m going to panic big time if someone doesn’t get me out of here pronto!”

But instead I waited to see if anyone was going to say or do anything.

Silence.

I started to think about the whole experience of my first day. The trading floor was a jungle.

Dog eat dog.

Survival of the fittest.

Everyone was out for themselves, FIGHTING to make money for “Me.”

The floor was crowded and chaotic, people literally pushing others out of the way to make money.

Being there changed my trading forever. Being a screen trader, I had been focused on lines and colors and dots and curves and pretty stuff on a monitor. You almost start to think that’s the market.

But when you get on the trading floor, you “see” the market. It’s people. And those people are FIGHTING for their money. These people are serious. Dead Serious.

It’s you against me. And I’m only concerned about me.

Nice guys finish last.

Welcome to the jungle.

This is not “compassionate capitalism!”

It was a lot like the elevator.

I tried to distract myself with my thoughts as long as I could, but then my attention came back to where I was and the feeling of panic started to rise again.

Finally I blurted out, “Does anyone know how to get us out of here?”

Someone responded, “This happens all the time.”

I replied, “How long does it usually last?”

He said, “10 to 15 minutes.”

And sure enough, the elevator started again.

Yes, it changed my trading forever because though I remained a screen trader, I realized that trading is a “competitive sport,” and the competition is fierce. I knew I had to be as tough and as smart and as aggressive as these warriors, or I was doomed.

There was no room for the wall flower, and there was no allowance for laziness.

You had to always look out for the tigers because they are always there, hiding, waiting to pounce. And they feel no remorse in attacking you … in fact they enjoy it because you’re their dinner!

At the end of my first trading day, my sponsor asked me if I had any questions. I said, yeah, I have only one:

“Where’s the stairs?”

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