Paul Rotter is a trader famous for making $65 – 78 million yearly for a period of ten years by scalping liquid contracts at the biggest futures exchange in the world. He is nicknamed “The Flipper” after his unique trading style that involves placing big orders and quickly canceling them out once people jump in.
Paul Rotter – Overview
- Birth name: Paul Rotter
- Gender: Male
- Birthplace: Czech Republic
- Nationality: Czech
- Profession: Trader
- Famous as: One of the most successful retail futures traders on earth
Paul Rotter’s Personal Life
Born in the Czech Republic, Paul Rotter moved to Germany when he was nine years old.
His first encounter with trading was very early in life. He bought his first stock while in school as part of an assignment. He also participated in various school trading contests.
Paul Rotter’s Career
Paul Rotter’s professional journey to becoming one of the most successful traders began with an internship role at HypoVereinsbank, a German bank in Munich, where he spent a year in the trading room.
His primary duty was entering trades into the computer systems for the bank’s clients. The trades had been made over the Deutsche TerminBorse (DTB), the German futures exchange that preceded the EUREX.
Paul Rotter admits that his time on the DTB execution desk attracted him to trading. Besides entering trades, Paul also started trading in a private account. However, it wasn’t a good start, as he lost virtually everything.
Paul’s upward trajectory started when he left HypoVereinsbank for the Frankfurt-based Japanese bank Daiwa Securities.
He joined Daiwa as a junior trader and learned by doing. He started trading small contracts on the main German stock market index (DAX). After six months, he switched to the bond markets.
He didn’t have a mentor, so in his early days, he exchanged ideas with the chief trader. Paul swiftly climbed the ladder and soon traded Deutsche Bund (the German 10-year notes) in large lots.
He had no losing month in his first three years of trading. Rotter left the bank in 1996 as one of the leading traders in German debt futures on the DTB.
Paul Rotter’s Net Worth
Paul Rotter’s net worth is as elusive as his identity was before being unmasked as The Flipper. However, he reportedly made $65 – 78 million per year for ten years while scalping liquid contracts at the biggest futures exchange in the world (Eurex).
It is also known that in January 1998, Rotter and some other traders started a proprietary trading firm Greenhouse Capital Management, and within three months, the firm made $6.5 million.
In 2001, Rotters left to start his own fund management company (Rotter Invest) in Zug, Switzerland.
Paul Rotter’s Trading Strategy
Paul Rotter explains that his trading strategy is “some kind of market-making where you place and buy orders simultaneously, making very short-term trading decisions because of certain events in the order book.”
Paul Rotter became known as “The Flipper” because his unique strategy involved posting a huge order on one side of the market and reversing it when other traders jumped in to ride the big position.
Rotter’s bond trading strategy is a three-step process, described as follows:
- Posting large amounts of buy orders at a certain price level;
- Because of herd mentality, the big order attracts other buyers who will try to buy at the same price;
- Once the market gets close enough to his buy order, he cancels it and reverses his position to take advantage of the false move he just created.
Rotter was basically scalping the market using big orders. Scalp trading involves trading for small gains by exploiting (or even creating) short-term movements in prices.
A scalper prioritizes making small profits at a high frequency. You enter a trade when the market is the busiest, win a few pips, and quickly exit.
Scalping requires placing a high number of trades. The gain from a single one might be limited, but due to the high quantity of trades, the total profit can be substantial. Scalpers are very time-sensitive, and since they have to be able to quickly jump in and out of trades, they utilize ticks (one-minute charts).
Paul Rotter admits that he “was always the guy who traded a lot, sometimes up to one hundred trades a day.” He added that he was “only looking for the next 3 – 5 ticks.”
The Key to Paul Rotter’s Scalping Success
Rotter says his strength is the ability to get more aggressive when winning and scaling back when losing.
However, humans naturally act in the opposite way. We become more cautious when we are profitable and start taking more risks when losing money in a bid to compensate, only to end up losing even more.
To Paul Rotter, human nature (cautious when winning and taking more risks when losing) is the exact opposite of good trading.
He maintains that, with discipline and good money management skills, anybody can be a successful trader.
For example, when winning and you get more aggressive, proper money management requires having a stop limit (the maximum loss you can take), while discipline requires having the strength to pull the plugs if you reach your stop limit.
However, when in a losing position and going under a certain predefined threshold, Rotter advises starting to reduce your position size. If you end up losing even more, he advises you to call it quits and get back to trading another day.
Because it can be very hard to scale back and close trades when losing, Rotter advises having somebody around who is neutral to trading. Such a person can help enforce discipline by requesting that you stop trading when you reach a certain loss level.
Another piece of advice by Rotter is: “As a trader, you should have no opinion. The more opinion you have, the harder it gets to get out of a losing position.”
Takeaway – Study Paul Rotter’s Principles to Become a Better Trader
Paul Rotter is considered among the biggest bond traders of all time. His career is an interesting example of a small-time trader who rose to become one of the biggest players in a market. It proves that trading success comes from being aggressive when winning and having the discipline to scale back when losing.
Whether you trade bonds or forex, you can examine Paul Rotter’s principles to become a better trader.
