6 Ways to Emulate Talented Traders · Aaron Fifield

our next presenter is Aaron Fifield we've invited Aaron to condense his interviews into a presentation for you today and to reveal six ways that you can emulate talented traders welcome Aaron excellent I'm absolutely stoked to be here so first of all thank you very much to Trish and Nik Raj for inviting me out here it's a real honor as Chris mentioned my name is Aaron Fifield I host the chat with traders podcast and I mention this because it's a sense you want here so I interview traders from all across the globe who trade all different markets all different timeframes all different methods and styles and that type of thing so when Nick and Trish initially reached out and asked if I could come along and speak with you guys asked if I could perhaps pull upon some of the best insight which I've been able to gather from which is now over 130 different episodes yes so I do want to preface this by saying that some of the things I'm going to be talking about here we are speaking in general terms to a certain extent you know there there will be traders who do almost the exact opposite of everything I'm about to say and still have some success but for the most part I think are these things are fairly affected so I think I've appropriately titled this talk six ways to emulate talented traders so the way I'm going to go through this is or how I'm going to structure the talk is I will pull upon a quote which has come up from one of the conversations I've had which I feel like actually in some ways frames that particular point and then we'll go through and we'll flesh things out so the very first thing I want to address I guess is point number one have an unstoppable demeanor so the quote I'm going to pull up on here is from a trader Darrin Reid who is user prop trader and for most of his career he's been a prop trader in Sydney most of his trading career I should say he's been a prop trader in Sydney as you just moved back to Perth to start up a firm of the zone the down says the number one thing is grit you need to be like a bulldog that gets his teeth around a bone and will not let go now this of course refers to thee and I don't use this word lightly insane work ethic that so many of the traders have spoken with have okay it's not uncommon for some of my guests to put in up to 80 hours a week into their trading now I'm certainly not saying that something you guys will need to do and I'd be a hypocrite if I'd did say that because I certainly don't spend that much time on my trading directly but I think it's worthwhile mentioning because you need to have an appreciation that there are people who are putting in that many hours and taking this that seriously as Tom dan T if any guys are on Twitter you probably will aware of who that is a trader who I've interviewed from the UK has this brilliant line which he mentioned while you're not working on your edge someone else says okay so no one got to where they are now by putting in mediocre effort and no one got to wear that now by half-assing it right so when we're talking about have an unstoppable demeanor this of course refers to having a really strong work ethic putting in the time it also refers to things such as overcoming challenges overcoming adversity and overcoming various failures so I'm going to share a couple examples of some of the guests which I think kind of capture how some traders who are very successful when their own right today have overcome those types of challenges and these are certainly not the most extreme cases but I think the somewhat relatable and you know we're not really talking about anomalies here so the first trader that comes to mind is a trader named Jonathan I'll keep his last name private at his request but Jonathan's a trader I interviewed he's from of appreciates from Texas so he actually was in a fortunate position when he got into trading that he was mentored for about a year fairly intensively by a former trader from s AC Steve Collins hedge fund and after a year of trading after a year of trading so I've been mentored by this particular trader he went out on his own he was like I'm going to fund an account and have a crack at this he took out a $35,000 student loan to fund an account to begin day trading futures so I certainly don't recommend anyone does that but he certainly did needless to say he lost every dollar of that in a fairly short period of time the next rational thing that someone in that situation might do is approach a family member and ask them for a similar amount of money another 30 $35,000 same thing happened he lost every dollar of that at this point in $70,000 in the red so hard a position that any of us would be envious of anyway he didn't stop at that point he realized that maybe he would try and get into a hedge fund you know get into a hedge funds a pretty tough thing for many people it causes the you know what what they're looking for he went to university got a degree or two I don't remember one or two degrees anyway that would potentially give him a really good shot at getting a job at a hedge fund so he went got his education got his degree then so he was all qualified still really struggled to get his foot in the door at a hedge fund he emailed something like ninety two different hedge funds over the space of a few months trying to get an interview finally got into a hedge fund within six months he was promoted to head trader at a billion dollar hedge fund he was there for a few years he left I think it was about five years later where he was head trader he left to go out on his own so he cashed out I think he'd become a partner at that point funded a trade an account of about two hundred two hundred fifty thousand dollars in the past two or three years he's run that account up to over two million dollars so you know that's a really great example someone who had a very tough in the beginning but has managed to pull through someone else who comes to mind Sean handle men now I'll mention who Sean is in just a moment but Sean started out as more of an investor he he had summer jobs this is when he was a bit younger and slaved up a bit of money got into investing actually did quite well decided he was going to have a shot at active trading so that I guess it started out okay but soon turned pear-shaped lost all the money he had okay factors there Oh picked himself up dusted off his shoulders I guess changed his approach to trading a little bit and actually started to have some really good success and was making some real progress with his trading him and a couple others at that point decided that they were going to start a hedge fund so they went about that I started a hedge fund but it's set up but to whatever reason and it's not really important but the hedge fund failed to gain traction they end up having to wind it down and through that process Sean actually lost all his money again so twice over now he's lost almost every dollar he heard if we look at where Sean is today he's the CEO of one of the largest proprietary trading firms in the u.s. in terms of number of traders which is t3 but when we're talking about having an unstoppable demeanor and overcoming sacrifice sorry adversity and challenges in that type of thing we're not just talking about losing money through trading areas trading areas and portrayed and etc we can also talk about sacrifices that people have made to pursue their trade and career so you know for example we can take down Reed's I've quoted up on the board here at the time Dunn was working at a brokerage in Perth he was it was kind of an old-school shop and he really wanted to pursue his trade his career as a trader he feels like the best bet to do that was to join a proprietary trading firm and as I'm sure you guys are well aware most of them are located in Sydney so he moved away from his partner and moved away from his family over to Sydney you know he wasn't getting paid a salary at this firm and really had to try and make it on his own so it's a huge risk to take a really big sacrifice and you know it's obviously paid off for him another really great example which I'd like to share is my buddy Bryce Edwards who's a brilliant day trader he's also in Sydney so Bryce a few years back actually had a few hundred thousand dollars with a particular broker for whatever reason and I don't know the details the story but that broker went bust and he pretty much lost all the money he had with that broker so pretty much one day woke up a few hundred thousand dollars are disappeared through no fault of his own we look at where Bryce's today here's a seven-figure trader many times over now I share these few examples because I think they're really great in the sense that I think probably most sane people most sane people would probably walk away if these types of things happen to them but as these four examples show you know when when things get tough they tend to double down and having spoken with the founders of some of the really prominent prop trading firms and I even spoke with our one gentleman who was a he's a recruiter he's a headhunter for some of the very large prop firms and in Europe and that type of thing also some of the the bigger hedge funds and even banks and every single one of these guys have said to me that when they're hiring they really like to see that you've experienced some form of hardship and been able to push through it you know they really respect those with a competitive Drive which is important because if you're going to fold at the first few setbacks which are inevitable you're not going to get far as a trader I can promise you that and just to take that one step further I interviewed a trader pro trader in the UK some of you also actually fine I've moved from South Africa to the UK to pursue his trading career putting himself in a really great environment he said let me spoke earlier in the year this is in a quote one of the key characteristics of a successful trader is dog-bite meaning you keep going and going and going this job would turn you over and spit you out so many times if you can't keep coming back and rolling with the punches you'll never survive now do realize we're talking about this type of thing there is a certain amount of survivorship bias but anyway you want to look at it there is no replacement for grit okay it's such a big part of the makeup of any successful trader however it's not the only part so the next piece of the puzzle playing the long game have a willingness to play the long game so I'm going to refer to a quote here from Peter brand and I'll tell you Peters in just a moment that Peter says it's been quite a ride for me it's been one I've enjoyed I like trading I like watching markets I love being a student of markets I guess more than I actually like to trade I'm a real student of the markets so Peter Brant is someone who's been trading for forty five years has a very respectable track record and to hear someone in his situation refer to himself as a student of my which i think is very powerful you know that speaks volumes what it says to me is that you need to be humble enough to know that you'll never reach a point we know everything and just to really emphasize that so this comes from a conversation I had the Peter must benefit earlier part of 2016 now Peter had not long actually just recovered from the largest drawdown of his trading career okay so the man he's been training 45 years yet only recently has experienced the largest drawdown of his career you know so just goes to show you'll never reach a point where you know everything and because of that you really do need to enjoy the challenge of trading every one of my guests although they'll express it in different ways if you get to the root of it there's no denying that they have a curiosity for learning new things okay now many people are attracted to trading because of the great earning potential and I'd be lying if I said that wasn't partially the reason why I got into trading and I know for many of my guess was certainly one of the stronger motives for getting into trading as well but as Kevin Davey one of my guests who is a championship-winning our rhythmic trader says trading is the hardest way to make easy money so I bring this up because the money alone is not going to be enough because it doesn't come right away okay most people I've interviewed so as I mentioned I've interviewed over 130 different traders and market participants now and it's something I quite frequently ask and if I had to think in general terms how long it actually took them to gain some consistency and gain some real traction with their trading I think probably around about 5 years is an average type of answer to some people I think that might be shocking but really if you think about it I don't think it should come as a surprise normally I hate analogies right but I feel like it's probably appropriate in this case so if we look at someone who's perhaps an Olympic swimmer okay you really need to think about all the work I've put in to get to the point of where our now you know how long have they been participating in that sport they're probably been swimming since our five six seven eight years old you know how many hours a day they put in how long I've been participating in that sport to get to the point of where they are now and really in many ways I don't see trading as being that different from any other discipline where high performance is a requirement so yeah anyone who comes into training certainly has to have the willingness to play the long game I interviewed a trader Nico again I won't mention his last name but he's from the US and just an average sort of guy he was running IT business at the time I think one of his clients was one of his clients was more of an investor but that kind of piqued his interest in trading anyway so he got into training started dabbling in it one thing led to another and he really started like putting some money behind it it makes some money lose some money could never really hit his stride anyway this went on for eight years he didn't give up he kept pushing on and these days he's very consistent consistently making five figures a month but you know had he not had a willingness to play the long game he would never got to that point where he was now making five figures and months and I think really he's just getting started so the ones who are doing this for real do not have a get-rich-quick mentality they have a mentality of longevity and building real wealth in the long run and I'm going to share a story with you so I mentioned Tom Antion the last point I made when I interviewed Tom he shared this story so this is not word for word but you'll get the general gist so Tom used to work at a prop firm in the UK he says there was a huge traitor there and this guy wouldn't be uncommon for him to make a couple hundred thousand dollars in a week right there was one particular day when this guy had an absolutely solid a made a huge gain tom says there's a real buzz around the office but this guy you know he was emotional he call we had a smile on his face but he wasn't running around doing backflips off the desk or anything like that 5:00 p.m. comes around Tom gets on the train heading out of the city going home gets home thanks oh forgot my keys doesn't want to pay for a locksmith gets back onto the train into the city back to the office gets to the office by this time it's around about 9:30 p.m. at night all the lights are out except for one light underneath that light is the same trader who just had the absolutely salad a-ok and tom says this particular moment for him was a real eye-opener because a lot of people get into trading for an easy life but if you look at the ones who are really making a whole lot of money they work very very hard at this so anyway just to finish up this point getting good at anything takes time and in trading you soon have to be amongst the best to make money this is not something where you can afford to be mediocre point number three know your strategy intimately keyword been intimately so I'm going to point to a quote here from Jeff Davis who's a he trades the S&P 500 futures day trader anyway it's not important but Jeff Davis has these few words which are absolutely fantastic nice and simple but very effective there's we says do less do it better do it bigger okay now just a few things on this I want to make it very clear there is no best way to trade alright you can be a day trader you can be a long term investor you can trade take for patterns you can trade a hypothesis you can data mine for strategies anak [Laughter] almost everyone I've interviewed trades in their own unique way so there is no best way to trade but regardless however you do decide to trade there is no replacement for knowing your strategy intimately because every single person I've interviewed can tell you with absolute certainty what they do trade and what they do not trade and just to give you an example on this someone who might trade let's say small cap stocks here in Australia they don't wake up one morning and see that crude oil is up 5% and for the rest of that week they just start trading energy futures right it just doesn't work like that the only way to know your strategy intimately is to specialize now for everyone now everyone specializes in some form shape or another how you choose to specialize is certainly going to vary from person to person I think it's quite a personal thing in many ways you know some people are going to specialize just running with that theme energy futures maybe some people are going to specialize in certain types of strategies you know they might just trade news events or earnings they might trade breakouts there might be a trend follower they might trade just small caps on the Australian market whatever it is find what your thing is and then specialize in that and I guess in some ways I'm just going to echo what Nick said earlier on but and actually got a note here to pull upon a conversation I had with Nick for the podcast so Nick's been on the podcast twice now and I'm sure he's probably said the same thing both times he was on in maybe slightly different ways that I'm going to quote Nick here so next says you must know why your strategy makes money because if you don't understand why you're going to find it very difficult to stay with your strategy when it goes a little bit pear-shaped every strategy will at times now I just want to take this one step further because I think that's a huge benefit of knowing strategy infinitely but when you really focus and you begin to build confidence from knowing the strategy and getting comfortable with it that's when you can really begin to scale as Jeff says up here do let's do it better do it bigger okay when you give them when you can begin to scale with strategies that's really when it all becomes worthwhile and as I mentioned focus just before I'd like to add this thing because I think it's really cool in it it might help in some ways so just recently actually I interviewed someone who up until recently was the performance director at a oil trading firm in United Kingdom in London and this guy was the performance director so he wasn't a trader but his sole job was to help accelerate excellence at this trading firm okay and they had this question that they would well this sort of saying that they would use around the office and they said will it make the boat go faster and I think they actually pinched it from the Great Britain rowing team I think that's something they used when the Olympics were on their will it make the boat go faster you know if we want to tie that back into trading maybe we would ask something like is this increasing profitability or mitigating risk you know it's very easy for us to go down rabbit holes and get sidetracked so I think if you use a question like will it make the boat go faster that's something that should really help to guide every decision you make as a trader now point number four trade with an edge this is perhaps my favorite point and who better to quote than Blair hole if you're missing an edge there is no reason to play absolutely love that line and I really think it's this one line alone save traders untold amounts of money if understood okay so when I first got into trade no certainly I would hear traders talking about having an edge and that type of thing I guess I'd never really fully understood it took me a while to fully understand it I guess by the time I actually got to a point where I could interview Blair how I had kind of worked out what it meant to have an edge but I wanted to hear how Blair would put it in his own words because the way my opinion where is like the master of edge so I asked where what does it mean to have an edge and I quote if you do this same kind of trade hundreds of times in the long run you'll have more money than when you started and he goes on to say without an edge it's gambling it might be fun but it's going to hurt you financially now I spoke with Blair for about 60 minutes or more and from that conversation it was just so obvious that here's a man who's not going to bet or wager on anything unless he feels as though he has an advantage you know with the probabilities of him winning are winning a bet or whatever it might be in his favor he even actually said and this is a direct quote whether I'm on the golf course or anything I must have an edge in my favor okay and that's the man well worth listening to now someone who influenced we're now referred to Blair is the master of edge so this gentleman is on another level again and someone who have had the great opportunity of interviewing is Edward Thorp now if anyone plays blackjack or maybe has any interest in gambling Edward Thorp actually invented card counting and he wrote the book beat the dealer so when he actually started out in Las Vegas and where he played blackjack he beat roulette and a couple other games as well but you know when things got a bit hot and heavy in Las Vegas he moved to financial markets and ultimately became a legend in the hedge fund world anyway so I interviewed Edward Thorpe and I wanted to hear in his words how he would describe having an edge specifically around financial markets so ever thought said I try to think through how good or how bad something might be compared with my most probable estimate and even if the bad situation looks good then I know I've got something worth playing on and like I mentioned edy comes from more of a gambling background and has sort of applied some of that theory to financial markets and IDI actually said understanding gambling games like blackjack and some of the others is one of the best possible training grounds for getting into the investment world because you learn how to manage money how to compute odds and how to reason what to do when you have an advantage or when you have an edge now I'm not going to go over that last point because I think that's absolutely key reasoning what to do when you have an advantage so we've talked about trading with an edge this is take this - step further when you've got an edge how you actually make the most of that you know so I interviewed a gentleman Victor Hagane now Victor was one of the founding partners of long-term capital management now long-term capital management for anyone who doesn't know was a hedge fund that came about in the 90s did extremely well had an amazing track record until 1998 and they failed in a spectacular fashion they failed so badly that the the Federal Reserve I think it was actually had to step in and organize a bailout in order to prevent the possibility of a collapse in the global financial system so then they start pretty bad anyway and I'd opportunity of speaking with Victor and he's still around today and Victor actually run ran this experiment funny enough with the help of Edie Thorp and this wasn't experimented recently they gathered 61 participants in a room and each one of these participants came from a background in either in math science investing finance from some form or another so these are smart people a as you'll find out this should know better the experiment was they were given $25 of real money and they were told to flip a coin for 30 minutes straight just flip flip flip as much as they could if they bet ten dollars on heads they made ten dollars if they bet ten dollars and it came up heads then I'd win ten dollars if they bit bet ten dollars on heads and it came up tails but lose ten dollars okay the catch was this was a biased coin so 60% of the time it would land on heads 40 percent of the time it would land on tails okay so there's a very clear edge to be had by betting on heads however at the end of 30 minutes and even before 1/3 of all participants had managed to go bust so even with a very clear edge they still found a way to mess it up so I think as this experiment proves if you can build your knowledge on you know probability and maybe some basic statistics can really help you make the most of how to reason what to do when you have an advantage as ed thought says now any of their scooter aiders in the audience here I'm sure would we're waiting for me to bring up something like this manage your lifeblood manage your risk essentially okay this quote here comes from sauna he says it's not all about getting one trade right it's about staying in the game by having the right risk management now Saul is someone who was the risk manager at a prop firm for a hundred and twenty traders so he would manage risk controls for all of these guys now some people might say on the subject of risk management that this is the most crucial part you know I guess would be difficult for me to disagree because as a trader your capital is your lifeblood you know if you lose your money you're out of the game it's plain and simple as a trader your job is to position yourself so that no one trade or series of trades should take you out of the game and from doing these interviews and speaking with so many really great talented traders it's been so obvious to me that they really do have a deep respect for just how quickly the market can take away their money and believe me they ever forget that very quickly reminded I've interviewed numerous people who have lost hundreds of thousands of dollars in the space of just a couple short days I even interviewed one trader who lost a million dollars in space of four hours and of course when these type of events occur it takes in months and months to recoup from those losses not to mention opportunity cost okay so on a balance sheet there's no column for opportunity cost now something I want to bring up on risk management now I mentioned Peter brand on the second point I made earlier on Peter Brent when I spoke with him he said something along the lines of this he said he makes about 80% of his games from 20% of his trades okay I've interviewed Tom Basso who some might consider to be a legendary trend follower was profiled in the Newmarket Wizards book Tom said something along the similar lines he said that some years two or three trades were so profitable that if he had not have had them in his portfolio he would have broken even for the year Jarry Parker who Nick brought up earlier on one of the turtle traders when I spoke with Gerry Parker he said also something the same sort of lines five to ten percent of his trades will often make the majority of his money so I think it's important to mention these three examples because I think that's in many ways kind of captures or is the crux of why risk management is so important often we have a lot of small trades that don't really add much to our bottom line so that's why you need to effectively manage risk making sure you don't go bust in the meantime waiting for those really decent good trades to roll around which make it all worthwhile so I guess you know someone might ask the question well how do these traders manage risk and to be fair I think that probably deserves its own 45-minute talk but I can certainly say one thing that's being echoed throughout many conversations I've had is having a plan now none it sounds very simple and basic but you know who says it needs to be complex everyone's plan is obviously going to vary and Jack Swagger I think is well known for saying know where you're going to get out before you get in okay so that's all part of having a plan so important because as soon as you've got real money on the line emotion obviously comes in and can cloud or get in the way of good decision-making mark Gardner a prominent figure in Australian prop trading who I've interviewed he actually has power generators running at his house in case he loses power he needs to be able to manage any positions that are open I mean that's probably not something that most of us need to worry about at this stage point number six stick to the game plan all right Jerry Parker when I interviewed him he said there's been many times in my earlier years when I didn't follow my sisters I would be much wealthier now if I had okay someone has been trained a very very long time one of the most successful turtle traders manages billions of dollars you know for sure that is already very wealthy so to hear him say something like that I think is worthwhile paying attention to Jerry also went on to say we're not concerned with performance we're concerned with buying the system now obviously that comes from someone who has huge amounts of confidence in their system okay and I think that's something that each one of us should really strive for is obviously having the discipline to follow a strategy during periods of bad performance which we know are going to happen occasionally but this point is twofold okay so there we've obviously talked a little bit about strategy sticking to the game plan internal sticking to the systems in terms of a trading system okay I also want to hit upon the point of process so processes for your workflow processes or routines and the discipline to follow those as well okay as my buddy from New York Dan Shapiro says your god-given talent is not going to make you money and one of the things I've come to notice from doing these interviews and speaking with so many traders and that in many cases certainly not all but in many cases traders don't use highly complex methodologies instead they consistently apply a will thought-out process and I think one of the flaws of new traders in you know through no fault of their own but when they come into trade and I think what might be helpful is instead of thinking about I want to become a trader thinking about I'm starting a trading business okay like an actual business how do you run a business right well from my experience most businesses operate on will thought-out processes okay so when we're talking about trading these processes might be you know how do you scan for potential trades how do you evaluate how do you manage positions how do you adjust your strategy if necessary those types of things and to continue on process I interviewed Michael mobizen who some of you may know or may not know he's a best-selling author he's also very high up at Credit Suisse so I'm not sure his exact title software top of my head but um he's also someone who's highly regarded as an expert on decision making and he's very well known also for three very simple words process over outcome meaning you need to judge outcomes based on how you made the decision okay meaning did you file your processes it's very difficult and I really think you should judge yourself based on the outcome of whether a single trade made or lost money instead you should really be judging yourself based upon how well we followed your processes with the information you had at the time Adrian a futures fry a futures trader from UK and that sounds like an if you have lot of traders from UK but I didn't realize I was a Coast Adrian when I interviewed him he said the common link between profitable traders is not so much their edge of course because everyone trades differently as we've already established but how they approach the business of trading so everyone who I know of has a very big focus on process very process orientated now just to close things out here I often get asked and I guess that leads on from the top the topic of this particular talk you know what are the characteristics of great traders what are the personality traits of great traders and I really think it's very hard to try and [Music] the word come up with a perfect answer there's no one-size-fits-all okay I guess that's what I'm trying to say there is no one personality type which is best betrayed in now this quote comes from a gentleman who was the very first person I actually interviewed name's Tim Walker and he said something to me said amateurs never win in the game of life okay so like I just said it's very difficult to say there's one personality type or one characteristic which makes the ultimate trader but whoever they are the one thing I can tell you is that they hold themselves as professionals in every way trading is not something we can afford to be mediocre because amateurs never win in the game of life the end thank you

Channel: Chat With Traders

Views: 77,280

Keywords: day trading success, successful day trading, profitable day trading, day trader, day trading strategies, learn to day trade, day trader documentary, successful day trader, day trading, the day trader, day trading stocks, how to day trade, live day trading, day trading for beginners, trader interview, successful trading, day trader interview, trading interview, trading stocks, trading psychology, trading strategies, trading education, trading success, stock trader

Id: eestOVjy41w

Length: 40min 56sec (2456 seconds)

Published: Sun Aug 20 2017