Trading, data strategy and statistics: five stories of those who have succeeded

You don’t necessarily have to have a degree in economics to trade. To tell it, through five success stories united by a rational approach to trading, detailed analysis and the adoption of strategies based on data and statistics, is the four-time world champion of trading, Andrea Unger, luminary of the sector. The protagonist of the first story is Jesse Livermore whose strategies are still studied today. Livermore was a simple dishwasher, then, in the late 1920s, he was hired as a messenger in an investment firm. And it was there, observing investors, that he learned his trade. By securing a place in history as the Great Bear of Wall Street: «But Livermore – explains Unger – is in good company. Nicolas Darvas, born in 1920 in Hungary, was a dancer and choreographer. In short, a creative, nothing further from the rationality of numbers. Yet his book How I Made Two Million Dollars on the Stock Market says a lot about his performance, while creating an effective investment system based on patterns and volumes. An absolute genius.” Innovative strategies also for Bruce Kovner, the founder of Caxton Associates who was born to manage his business activities: «But before all this – Unger recalls – Bruce had dropped out of university and decided to be a taxi driver. A story similar to that of another industry giant, John W. Henry. He was a truck driver when he decided to enter the world of trading and in particular that of commodity futures. Same specialty as Larry Hite, the man who gave birth to the Mint Investment Management Company. But do you know what he did before? The Rock promoter was responsible for promoting musical events related to rock. The stories of Livermore, Darvas, Kovner, Henry and Hite clearly demonstrate that you don’t need to have an academic background in business or finance to become a successful trader. A training of that type, of course, can be of help but it is certainly not essential». What is needed then, what is necessary instead? «Experience, dedication and the ability to learn from one’s mistakes – reflects Unger – are, in my opinion, crucial factors. They turn out to be more important than previous experiences in the financial world. But there is a requirement that is perhaps even more decisive, the common thread that unites the stories told: the rational approach to trading, detailed analysis and the adoption of strategies based on data and statistics. This scientific mentality is the basis of the success of Livermore, Darvas, Kovner, Henry and Hite who then declined their work according to different styles but always having as a point of reference the analytical study of market trends. This is the real secret to keep in mind, there are no other possible ways nor shortcuts. It takes passion, perseverance and above all head to be able to tackle a complex activity such as trading». The scheme therefore seems well delineated and it is the same one that allowed Unger to become the world trading champion four times: «I – says Unger – graduated with honors in mechanical engineering at the Milan Polytechnic. I have never studied economics and I have never made operations in the sector based on fundamental notions of the market. And this is both because I don’t have the skills to understand them, and because in general the movements generated by fundamental data, such as financial statements, are broad-based, while my operations are more short-term and would be difficult to marry with that type of horizon storm. But not only. The part of the technical-analytical approach and data and information collection, aimed at understanding how a certain security behaves and studying the most suitable strategy, is linked to my scientific mentality which allowed me to graduate in Mechanical Engineering and makes me put, still today, everything in order in my head». Was the engineer born first or the trader first? «I don’t know – concludes Unger – Just by chance I first graduated in mechanical engineering and then later I dedicated myself to trading. Surely the degree allowed me to deal with problems in a very schematic way. An approach that has helped me in my analysis of the markets. But the opposite may also be true: maybe I was born square and maybe I was good at graduating in Engineering because I was already square and then I was good at dealing with the markets with the same method that still allows me today to understand how behave and adapt to this trend, to try to draw profits from what has been analysed».