Rogue Trader (Nick Leeson)

Trader's Library #6 · Speculation classics and biographies. A handbook of how refusing to accept one loss can destroy a bank.

Author: Nick Leeson · Original: Rogue Trader · Year: 1996 · Usefulness for traders: ★★★★☆

What it's about

The memoir of the trader who, in Singapore, hid losses on Nikkei index futures in the secret account 88888 and brought down Barings, Britain's oldest merchant bank, in 1995. The book was made into a film with Ewan McGregor (described in the Film Library).

What it gives a trader

Required reading for anyone who trades futures. It shows step by step a mechanism every trader knows: a small loss you don't want to accept, doubling the stake to “win it back”, and a spiral with no way out. The Kobe earthquake in January 1995 finished the positions off, but the disaster started much earlier.

Lessons for traders

• a loss you don't accept grows (loss aversion, Atlas of biases #34)
• adding to a losing position to get back to break-even (the break-even effect, Atlas of biases #38)
• a lack of controls and segregation of duties encourages hiding mistakes
• futures leverage turns a mistake into a disaster within days

What to watch out for

It's Leeson's own account, so there's a good deal of self-justification in it. Worth reading critically.

On screen

This topic also has a film version: 🎬 Film Library #37 · Rogue Trader (1999).

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #005 The Vandals' Crown (Gregory J. Millman) · Library index · #007 Jesse Livermore – Boy Plunger (Tom Rubython) →

Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.