Chip Kenyon

I am very fortunate to be in a unique position to sit down with one of the greatest people ever to don a trading jacket: Chip Kenyon.  When I sat down with Kenyon, I intended to learn about a trader; but, by the end of the interview, I realized that I had learned about a man.  I have read interviews with other trading greats and, since I don’t know them personally, it is hard to picture them as people.  They are so skilled at what they do it is almost easier to think of them as superhuman or some type of emotionless robot.  Chip, however, is clearly no robot.  He is a man who integrated his life principles into his trading.

Kenyon got started in the trading business right out of college, kicking off his career on the floor at the Chicago Board of Trade.  He traded through what is widely thought of as the heyday of this business.  Fortunes were made and lost every day in the pits.  While there is still a tremendous amount of money to be made or lost today, at the time Chip began trading, the fact that so much trading talent was concentrated in one place is truly remarkable. The floors of the Chicago exchanges must have been THE most exciting place one could have worked. 

The following is some of the discussion I had with Chip.  The insight that I gained from speaking with him is clear, and I am gracious he allotted some of his time to sit down with a trader who is following in his footsteps, albeit in a different era. 


Can you tell me how you first got into the trading business?

Yes.  I got out of college at 23 and I was aware of the business but I wasn’t sure how to find an opening to pursue it.  I talked to my parents and they introduced me to my neighbor who was a floor trader at the CBOT.  I sat down with him and he took a liking to me, took me down to the floor and had me sit on the sidelines and eventually gave me one of his extra seats free of charge. 


What years were you on the floor?

I started in bond options in ’86 and then moved into the futures in ’88.  I eventually bought my own seat.  I left the floor in 2004 once the market was mostly electronic.  Once it got to about 80-85% on the screen on the computer, I said “That’s enough.”


After you saw the floor with your neighbor, were you attracted to trading right away?

Yeah, I did like the competitive environment.  Much like an athlete, I think you can do well by having a strong mindset and having a little hunger.  But I told my neighbor, “I’m not sure I’m ready,” and he said “You gotta go in and figure it out.  Learn by the seat of your pants.”  So, I remember the first trade I made, my hand was shaking and I couldn’t even write down the numbers.  But once you see a little success, whether it is making $30 or $50 a day, you want more.  Not out of greed, but you want to keep improving.
My neighbor always said we have to get the right breed in the business.  I tried to help out 13 guys but only 1 of them made it.  We want to pass it down to the next generation and have stable guys in the business.


That sounds like a pretty standard number, 1 out of 13 or even 1 out or 20 making it. 

Yeah, these were all good quality guys.  It’s not an easy business.


The guy that did make it, was there anything about him that you would attribute to his success?

Very level-headed, composed, no ego.  Never would try to trade outside of his parameters.  He was steady, never emotional.  He was also a big time hockey player so he also had that advantage.


Ego – how would you say your lack of ego is a benefit?

Once you start thinking you’re too big or the market can’t beat you, or you start making too much money and get full of yourself, you’re  gonna be humbled.  I always left everyday, whether I made or lost money, as the same person.  I always thought I could do better.  There were times when I thought someone stole my market,  but I wouldn’t scream and point and yell.  That takes you out of your gameplan.

I saw a lot of guys who were too cocky and they got put into their place.


This mind-set you’re talking about – remaining level, egoless and unemotional – is this something that you learned?

I had that discipline, but you train yourself.  It becomes a habit.  My wife would say that she never knew if I had a good day or a bad day.  I wouldn’t sulk or feel sorry for myself or start drinking.  I would have the same routine.  The best thing about trading is that you get back on the horse the next day.  I looked forward to the days where I got put in my place because then the next day I’d correct everything and I’d be a little more polished.


How long would you say that it took you to become confident in your abilities on the floor?

A couple of years.  It’s a gradual process, a slow process.  Every month I’d get better.  It wasn’t like one day I was trading 100 lots and the day before I was trading 1 lots. Always get better, every month, every year. 


Did you ever get impatient with yourself?

No, no, no. I was making enough money for a 24 or 25 year old kid which was probably more than I could have been making at a bank in New York.  I always thought I had a lot more upside.


How did you handle having a losing day?

I’d think about it; get angry at myself.  I’d look at my mistakes and tell myself it would never happen again.  Of course it would another month down the road, but I would just rehearse in my head why I did something.  A lot of my mistakes were from me being emotional or stubborn.  The worst day for anyone is when you’re adding to losers. 


How about a big winning day? 

Well I would go buy a new car and go on a bender (laughs).  No, I would go think about the opportunities that I missed.  I was never patting myself on the back.  The challenge is can you do it again?  Can you keep it up?


Was that one of the things you liked about trading?  That you always tried to improve?

Yeah, yeah.  It was never the money.  I would always think that I have more to offer so you constantly pushed yourself.  You learn a lot about yourself.


Tell me about some trading-related mistakes that you saw guys make.

Well I gotta tell you, the main one is how many people I heard on elevators or hallways saying “I should have bought it,” or “I knew it was going up.”  People lacking conviction and guts.  If you see something you react and take a stand.  There are a lot of people who have regrets and there are a lot of “hindsight traders” as I call them.  Well, they should have done something about it.  A lot of guys are afraid.  If your gut tells you to do something, then do it.


Do you think these guys would be upset with themselves about missing a trade and kick of a negative cycle of thinking?

Yeah.  Those are the types of guys that always make excuses.  Instead of saying I screwed up, it’s this excuse or that excuse.  The beauty of trading in the old days is that it’s never anyone else’s fault. 


I would say that the same is true today unless you are part of a team or have a partner.  It can be tempting to blame the market, but for example, I keep a journal where can see what I am doing wrong.  There is never any excuse.

There was this clearing house that had this card of “Dos and Don’ts.”  I kept that card in my pocket for 18 years.  It was the most obvious stuff.  You have to remind yourself over and over again. 
Cutting losers is number one.  But letting profits run, or adding to profits, is probably the hardest thing.  Everyone has bad days but when you have a profit, it takes a certain kind of person to ride it because you are thinking “Wow, this is a lot of money.  I should just take this and call it a day.”  But it takes a brave person to add on and let it go.  That’s how you really succeed in this business.


Would you say a good analogy to that is a baseball player knowing when to hit a single, double, or a home run?

Yep.  Or a hockey player that has 3 goals in the first period.  Does he say “OK, I’m satisfied, time to go home?”


Talking about sports, how do you feel your experience in college Lacrosse helped you as a trader?

The discipline, which some of it is inherent.  Competitiveness, drive, fire.  Playing college sports helped me train those skills that are important in trading. 


How about major lifestyle mistakes that you saw guys making?

There are a lot of guys who would make a certain amount and then call it a day.  I mean they would trade until 8:30 AM and then go to the bar, go play golf.  You shouldn’t have a limit on where you stop.  If you make money from 7:30 to 8:30, why not 8:30 until 2:30?  That always bugged me.  Guys would just skip out of the pit.  And these are the guys that are struggling now.  They live on their parents’ couch.  It’s a somber story but you see a lot of it. 
There is one trader who I was talking to recently and he said “You were right Chip.  I remember one day I made some dough and I was leaving and you said ‘Where the hell are you going?’”  He didn’t take advantage of the situation.  You don’t say “I deserve a break.”  You have to stay hungry.


Do you think some of these guys behaved this way because they were scared to give money back?

I understand that concept, but it’s just work ethic.  The thing that angered me the most is that if I left the pit and then I would hear about a trade I missed, it would burn me up.   So I would rather sit there for 5 hours and not make a dime than miss a potential opportunity. 


The barrier to entry for this business is so low.  To perform surgery on someone’s brain, you have to go to medical school for a long time.  But to start trading, all you need is some money.

Right.  I hate to say it but a lot of these guys were clerks when they were 18 and then making six figures when they were 22 and they can’t handle it.  You can’t get caught up in the money.


What did money mean to you?

It was just a way to see that I am still improving.  In early 2000s, I didn’t see progress with myself because the game was changing.  That frustrated me.  I decided to move on.


What did you like most about trading?

I think it’s important to like your job.  I looked forward to the competitive environment.  I could have been a teacher or a banker, but I would have missed the thrill factor of trading.  It’s the next best thing to being a professional athlete…or rock star.


What about things you disliked?

Um…it was very impersonal.  You might spend a week not talking to anyone.  Everyone had their own angle.  It’s not a nice business and why should it be?
I kept to myself.  I don’t think anyone was looking out for my well-being. 


Did you ever have feelings of guilt after making a lot of money?  How did you reconcile that?

Yeah, yeah.  One trader said that people can’t stand the guilt so they are dying to give money back.  They think it is stupid money. 


That is sort of ironic because making money consistently as a trader is extremely difficult, but having one good trade is not. 

Yep.


As Ed Seykota said, everyone gets what they want from the markets.

Exactly.  You can’t think about the money.  You focus on doing the best you can.


Did you do anything each day before the open?

Not really, I was really a reactionary trader.  I would get to the office 20 minutes before the open and that was it.  On the ride downtown I might talk to myself a little, but that’s it.


Would you want your kids to get into trading nowadays?

No.


What about back in the day?

Yep, I would, but not anymore.  I think it’s really difficult.


What do you think is more difficult about it? That the edge from the pit is not there?

Yep, yep.


For myself, the remedy is to not scalp, but just make a couple of good trades today.

That was hard for me, because I had a pit mentality.


How many trades would you make a day?

Hmm…maybe a 1000 round turns.  I think one day I did about 45,000 round turns, which was a big percentage.  I was always in the market.  I could trade with an opinion and be in the market the whole time. 


So your style was strictly scalping?

Yeah, scalping with an opinion. 


When you were having a losing streak, how did you deal with that?

I would just try to have one winning day and then all of the negative thoughts are gone. 


From what I have felt and read, it seems like a common experience during a losing streak is to think that you never actually knew what you were doing as a trader.   It has all been luck up to here.  Paul Tudor Jones said something along those lines.

Yep, but one good trade or one good day and you feel good again.


What about winning streaks?

That was the time to push it, not take a break. 


What about life outside of trading?  I think it is important to have balance.  You can’t drink a lot or do drugs, you should have good relationships with people; you need to be stable.

It’s important to have a routine.   I would either go work out or coach youth sports.  I would then have dinner with my family.  There was no wiggle room…it was stable. 


People have the false impression that traders are just guys that happen to be very smart or gutsy.  But I think maturity and stability are the more important attributes. 

Definitely.  I don’t think I went to bed past 10:00 PM for 15 years.




One of the key themes that we touched on during our discussion was the need for a professionally dispassionate attitude.  It may be somewhat ironic, then, that it takes a very real human to maintain that level of professionalism.  The person that Chip is outside of the pit largely affected who he was inside the pit.  That much seems clear.  His confidence in himself and his abilities were perfectly balanced by his humility and respect for the market.  He led a life in which family, coaching sports, and other extracurricular activities helped to provide him a much needed break from the demanding life of a pit trader. 

Despite not having initial success, Chip maintained confidence in himself and his ability to learn.  Trading is a business that will quickly humble the best and the brightest, so staying modest and persistent are necessary ingredients for success.  The flip side of that is that when things start going well, you need to stay level-headed and disciplined.  Making money as a trader is tough; keeping it is even tougher.

After this interview I was admittedly excited to see that a legend like Chip had indeed experienced many of the problems and feelings that I deal with.  It goes to show that while the business of trading may be one of the most dynamic businesses in the world, what it takes to find success may forever be static. 


Special thanks to Chip Kenyon for taking the time to let me pick his brain a bit.