Excel errors in commodity trading
Imagine, you have two-floor apartment, Lamborghini and high-speed internet, but, instead, of phone you a still using telegraph or Morse language to call people. Such images come to my mind every time I see commodity traders, use Excel to manage operations.Yes, you got it right, these are people, with more than 1 million tones annual turnover still use Excel to manage data that costs millions. But the most interesting thing they don’t think there is something wrong about it, and excel errors can cost them thousands.
It’s easy and fast, they say. Okay, here we go.
I will write a couple of articles describing about Excel errors, why #excelshouldbeeliminated and what is wrong with it.
Any Excel mistake may cost you thousands
How? Let me show you. Usually, in real practice, there is even bigger data set (so even harder to find out), but let’s try it simple. This is the Trade position, you received as a Report.
Are there anything suspicious in the results? You are not trying to answer this question each time, don’t you? You just believe and make your trading decisions.
But then….. Something revealed. There is a problem with every month. In each case differently.
Excel error #1. Commodity 7 – Jun.
The row is simply not included into the formula for the total. Common case. Happen in real life?. Often. It was an easy guess.
Excel error #2. Commodity 4 – Jul.
Did you notice that tiny dot? This dot is the reason why 4,000 is not included into the total.
Excel error #3. Commodity 5 – Aug.
My favourite.
912,00 is not a number. It is a date which was transposed and is reflected like this. The problem here is even more damaging, since behind this 912,00 is number of 17 510,00 which is your real position, and which affects the total. It was just simple transposed to date, however still counted in total, but the date looks like a number, so is not recognisable it, unless to directly look to the formula.
Excel error #4
Copy-pasted value instead of formula into cell. You see a number, but it is just a number with no formula behind it, so if something essential change – it will not be reflected on a paper. It requires more complicated example, but I like Excel not as much to spend some more time in it. These examples are BASIC things I just have done them using only left hand. What to say about more complicated formulas with IF/ELSE cases, with TRUE/FALSE scenarios, with macroses, whatsoever.
How much you could lost due to Excel errors?
Simply calculate what will happen when you suddenly find out you have unclosed position and the price gone up 5$. You would never find out if you receive a report like this in PDF, made by someone in Excel. People can make mistakes. People WILL make mistakes, so eventually it will happen with your company.
What is the solution?
- Find a CTRM/ERP vendor (you can ask me for advise)
- Start integration
- Eliminate Excel completely
- Feel relief
To read Chapter #2 of why Excel should be eliminated, click here
