Page 26 - Trading #101 Course – Part THREE: SETTING UP YOUR BUSINESS – www.traderscoach.com

TRADING #101 COURSE – PART THREE: SETTING UP YOUR BUSINESS – WWW.TRADERSCOACH.COM

Leeson, a young trader for the bank, allowed small losses to spiral into $1.3 billion
(£600 million) in losses in just three years. His own fear, greed, denial, and nonexistent
risk control drove him to cover up his losses (in the now-famous 88888 account) while
he desperately attempted to trade his way back into profitable territory.

He stopped at nothing to fund his department’s trading activity.

In his own words Leeson says, “I saw the cuttings shreds of paper and glue which I’d
used to forge Ron Baker’s and Richard Hogan’s signatures. I couldn’t believe what I’d
done. … With my scissors, stick of glue and paper and fax machine, I had created £50
million.” This quote is taken from the autobiography by Nick Leeson, entitled Rogue
Trader: How I Brought Down Barings Bank and Shook the Financial World (Little,
Brown, 1996), page189.

What’s even more astounding than Leeson’s lies and deceit is that Barings’ upper
management was oblivious to his deception and did not implement simple checks and
balances to prevent just such a disaster. Their own greed and incompetence blinded
them to glaring discrepancies that could have easily been detected and addressed.

If we are to learn anything from the original rogue trader, Nick Leeson, it is that
accountability along with checks and balances go a long way to ensure our survival as
traders. If we are to be independent entrepreneurs, we then need to institute some type
of overseeing authority.

This might be in the form of a trading buddy, a spouse, a trading partner, an accountant,
or a trading coach. Basically, we need someone to whom we can be accountable so
that we stay on track and follow the rules we have established for ourselves. You will
read about more ideas on this topic in Chapter 16.

Ultimately, it is crucial to identify an individual to be your sounding board and eliminate
the isolation that can lead to rogue behavior. When healthy accountability and
benchmarks are not present in your day-to-day operations, you will be subject to the
temptation to ignore important signs that you as a business owner need to face head-
on. Working in an isolated vacuum over the long term will hinder your performance.

Watch the Rogue Trader Movie

If you haven’t already done so, you really owe it to yourself to watch the movie about
the true story of Nick Leeson. Rogue Trader was released by Miramax in 2000; Ewan
McGregor starred and James Deaden directed. The book that Leeson wrote in 1996 is
also enlightening.

The movie and book are much like a late-night thriller to any trader who has felt the
emotions of a trade gone bad, very bad. One reviewer on Amazon.com stated that he

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