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For Currency Traders, Speed Is of the Essence


Today's employment report was welcome news for most of Wall Street, but for some traders, it's not the strength of the economy or the job market that matters; it's whether there was a big discrepancy between what was forecast and what was announced. NPR's Adam Davidson was up early this morning at a currency trading firm in New York.

Mr. ANDREW SPANTON (Global FX): Very good!

Unidentified Man: US (unintelligible)...

Mr. SPANTON: Sell!

Unidentified Man: ...rise 274,000.

Mr. SPANTON: You guys get it?

Unidentified Man: Unemployment at 5.2 percent.

Mr. SPANTON: Oh, look at these prices. Euro--they're way off. Both at 1.70, melting down.

ADAM DAVIDSON reporting:

Andrew Spanton spent the morning pacing, then sitting at his computer, then standing up and screaming at the two dozen traders at his firm, Global FX. It was easy to make some money in the minutes after the employment numbers came out at 8:30. Just buy the dollar and sell it as it keeps rising. But no one should be too satisfied, he says, since they missed an equally easy chance last night.

Mr. SPANTON: Any of you see the move on the pound after the election results came out? It got smoked. Missed opportunities, guys. This is a 24-hour-a-day market. And you know the market's going to be focused on the election results. You got to position your schedule.

DAVIDSON: Spanton says he sleeps about two or three hours a night. He can't leave the markets alone for too long; they move too quickly. News drives the currency markets. Good economic data from the US government strengthens the dollar. Bad news out of Japan hurts the yen. Spanton and his traders sit in front of three computer screens each, constantly monitoring a blinking mass of charts and news stories, and the complicated software they use to trade most of the world's major currencies. Jimmy Freiz(ph) is a new trader here.

Mr. JIMMY FREIZ (Trader): Gold is down $1.30. That's on that screen. News, the headlines over there--boom! A headline can come out, you know, and can throw you off. So you want to--this is my zone, you know, it's my trading zone. And these charts just give you a good picture...

DAVIDSON: The well-known currency traders like George Soros take a position in a given currency and typically hold on for months. That's not what Spanton and his traders do. They buy and sell within minutes. They're not making money on long-term bets, but on the volatility in the market. It doesn't matter to traders like Freiz if the dollar is gaining strength or plunging. If he's good, he can make money either way.

Mr. FREIZ: See how the yen's getting kind of low right now? We're going to get in.

DAVIDSON: So what'd you just do?

Mr. FREIZ: OK, basically, what happened is, I'm looking at the chart. This dropped down here to 13, right? So $1 buys 105.13 yen, OK? Most people in the world, they don't care about the 0.13 part. But that final decimal place is what we call a pip.

DAVIDSON: A pip is roughly 1/100th of a penny. But traders are buying tens or hundreds of thousands of yen or dollars or euros. So each time a currency moves up or down a pip, they can make or lose hundreds of dollars. Sometimes it's dull, but it can be thrilling, even terrifying. All in all, Victor Smith says it's a lot more pleasant than when he was a trader on the floor of the Philadelphia Stock Exchange.

Mr. VICTOR SMITH (Trader): I'm 42 now, and I'm happy, I'm not screaming. I'm happy. I'm off of my creaky knees, I'm an old basketball player--I'm happy I don't have to bump and fight and claw for trades. I like the idea that now it's just me against the actual market. Sitting at the computer and watching the markets trade is really interesting.

DAVIDSON: Spanton's traders are not exactly employees. They start as trainees, paying for Spanton's coaching. If they prove that they can make money by trading currencies in a demo account, Spanton will then let them trade with his money. It's tough.

Victor Smith started just this week. He's been unemployed for a year and a half. He has two kids in private school.

Mr. SMITH: I'm rolling the dice. If this doesn't work out, like I said, I'm up the creek. (Laughs) But I'm only doing it because I believe that I'm going to get a return.

DAVIDSON: Everyone I spoke with said the same thing: Spanton is brilliant, and he really understands the market. But they're all a bit scared of him.

Mr. SPANTON: Rule number eight: You do not panic into a (censored) trade. Dominick(ph), you want to fight me? You making money? Are you making money?


Mr. SPANTON: You're losing money. OK? Almost every day, you're losing money. OK? You should be disgusted with yourself. Absolutely disgusted.

DAVIDSON: Spanton said that he likes Friday evening. All the world's markets are closed on Saturdays, so he goes home, watches a video, eats some takeout, and then sleeps as much as he can until it all starts over again on Sunday. Adam Davidson, NPR News, New York. Transcript provided by NPR, Copyright NPR.

Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.
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