Hedge Fund Manager Lex van Dam Reveals His Trading Process

and welcome everybody to the to the trading psychology webinar tonight I'm sitting in London with my head of markets James Heller all next to me so whenever I get you know little distracted a little boring then James will jump in please ask as many questions as you want that's the whole idea it's gonna this webinars gonna last about an hour and if all I do is have to listen to myself I'm going to get extremely bored so please any question you have send it to me there's a lot a lot lot of people on here tonight so unlikely that all the questions will be answered I think they stick to about an hour and total that'd be good so I will do my best to to to make it entertaining and it'd be good to get the feedback so whenever you have questions you send it to me and if I can than that I'll answer it immediately and if not idolater today or you know just email me and I'll do my best so first of all I have to do a disclaimer so we're going to talk about a lot of stuff tonight don't immediately go out there and start trading everything I say or do the opposite of everything I say neither of those this is educational an educational session this is not meant to be although we will be using actual markets like markets don't go out there and trade based on what you hear today okay this is who I am a lot of you might know me for those who don't I've been trading for last 20 plus years I started at Goldman Sachs as a as a market maker I was flow trading so I had clients on the other side and I had to make markets and even if I didn't want to make markets I still had to make markets if the client was a seller I had to be a buyer even if I didn't want to then after that I moved on to a big hedge fund called GOG but I was a hedge fund manager been a lot of client money said Goldman's I've had money for the bank which is a lot easier than working for a hedge fund yeah the hedge fund you get so judged internally and externally every day based on your own skills and you don't have a big organization around you making your life a lot easier so a lot of people might know me from the BBC I came up with this idea to make a program showing the psychology and the ability of ordinary people people who didn't have the privileged backgrounds of many people in the city and I try to show that actually know what there's there's a lot of smart people out there and you know it's it's it's important to take care of your own financial future and hopefully this program show that you know people can do a lot more than often is portrayed so currently I'm still at hedge funds and I also started a training academy and this webinar is based is meant to talk a little bit about the Trading Academy about what we do and it's especially gonna look at trading psychology it's obviously is a suit super interesting and for all the sleepless nights I've had through my 20 years trading all the pain I've suffered hopefully if I share some of this with with you guys and and it becomes clear that everybody is going through the same bill humans will go through the same processes through the same developments so so this will become a talk about today as well so within the Academy there is I look at stocks I look at currencies I look at commodities so there's courses about that there's also course about technical trading strategies so I look at this for many different perspectives and it's all together in what is called the million dollar traders course it's very similar to the program that people in on the TV went through and they outperformed the experts so hopefully people who go through this program are very much prepared for the foot foot for their future in trading form with a lot of courses out there is that they are not being taught by the right people the right material it's all old stuff it's just like trying to push it down people throw roads and it's not about the end consumer the end trader but it's about making money for the educator for me it's different I'm just interested in sharing what I know we also have a trading club this talks about what's going on in the market right now and there's weekly memberships and quarterly mausi whatever we'll talk about it later and it might it might be suitable for you might not it's whatever works for you so we gonna everything I do is backed by what is called a five-step trading process I'm gonna talk about that in a second but first we're gonna do two polls James is gonna put them on the screen the first one just to have an idea about the audience so let's begin guys with the number of you who have traded previously with real money and whether it's currently or may have may now have ceased so when you'd like to vote we can see the results coming through so it's great to see so many people who are applying their experience to the markets it's a very good way to learn to have the active participation but also good see so many people who are new and taking the the right approach so will that get things that was that was great guys - thanks and one other quick one if we can so what was was a result so it was overwhelming in favor of yes and currently trading and that's part 70% with around 15% beginners okay okay okay and there was another pool I think on D yeah so this time the million dollar traders at seriously how many of you saw the TV series okay so again overwhelming majority have seen it she's really good to to know over two-thirds of you in the room so what again guys thanks for participating I can see all but four people have actually voted there so where to thank you for engaging with it it's great to see okay I so the way I look at trading is that you need the way I look at trading is it you need to have a process if you just come in every day and you just look at the market and yourself okay you know a bullish and bearish you know what's an interesting stock to look at today it's not going to really work over time and definitely nobody else would give you the money to manage so the right way of doing it and this comes back in everything I look at comes back in commodities comes back in currencies in stocks you need to have a what I call five-step trading process and none of this is is unique in itself but the combination and and the ability to go through each step whenever you trade is really really difficult and I'll tell you that there's very few professionals who are able to do this and I myself also struggle to always go for each of these steps because sometimes you really keen on doing a trade and you feel like okay it's now or never I want to pull that trade that trigger but if you haven't gone through this chances are that for example in a trade that a lot of people already have or that has already run it it's its way so let's go into each of these into each of these steps and again I've developed this way of training over the last twenty years and I think if if people use is it used it will really help them so when I talk the first step is idea generation you need to make sure that you have an idea that not everybody else has at the same time because you're going to have a consensus position you're going to all be in the same idea and you know if you're a long you know if you bought a stock you need someone else to buy it after you obviously otherwise it doesn't go up so if already if everybody already has bought it it's not going to work so there's two ways of doing this basically it's either top-down thematic orange bottom-up I'm going to talk about thematic I'm thinking of stuff like at the moment the Greece theme that can be a theme it can be China slowing down it can be the end of the raid cuts in globally and you know the start of a rate hike cycle it can be the oil price chill chill gas coming online it can be disruptive technologies it can be shortage of water around the world can be can be million different themes so that's the top down of looking at stuff can also look at it from a bottom up trying to find a good stock for example so let's look at one idea for example if you look at China slowing you can look at the price of iron or you can you can look at the Aussie dollar you can look at the electricity demand in China you could look at the GDP and Singapore so there's lots of different things you can look at to see what's going on to confirm a theme and to have a think about what trade might be interesting so for example if you think China is slowing and you believe that rates are going down then maybe that's going to be such an enormous amount of consultative easing in China they could just buy the stock market and that's exactly what is happening now and we look at that in a little bit more detail later so let's top down another way of look at this bottom up look at Amazon today they had the Amazon Prime day but they apparently sell more than on Black Friday so every evil of every 10 minutes they had not a deal and a lot of people have talked about Amazon being never been profitable but you know what I use it almost every day package delivered to the office but again something else that's you know what is so easy to buy don't have to go to the shop and if you if you invest on that basis you can do really well and it's actually the same as as emile dit and million dollar traders he bought what he was wearing so he liked wearing nike so he bought nike and then it was stuff that he didn't like and he shorted it and he was saying that i actually know what was really amazing how that works and that's the way warren buffett does it and you know if you are like that you are an expert in something that could be a way for you to do it as well so then fundamental analysis so again we look at currencies or commodities or stocks or whatever whatever your trade you need to have an idea of fundamental value it's not I mean we'll talk a little bit later about technicals but if you don't have an idea of an opinion on the value of something then how can you know if it's cheap or if it's expensive so in in when we look at stocks we have in our in a course we talk about stocks from five to five different angles we look at the derocker geography we look at management we look at products we look at finances look at the stock market valuation so if you go through the process every time you look at a stock you're gonna know a lot so you won't have a good idea idea generation you want to make sure that it's backed up also in memory look at currencies we look at this fundamental matrix where we look at certain factors that we think impact a currency and visually published within our club as well and yeah you how can you trade the currency if you have no idea about what the fair value is and again you can you can we'll teach you how to do that so if we so that's the fundamental analysis so you have generated good idea you understand a little bit about the fundamentals so what do you do next all right so let's look at the chart this is quite a good chart to have a look at this one compares the Aussie dollar versus Chinese inflation so I look myself that's a probably have about a thousand different charts very similar to this to give me an idea if there's a divergence and to give me trading ideas so here you see the you see the Aussie dollar in white and you see the the CPI in China in yellow you see the actually Chinese inflation has come down a lot year-on-year so there's a yearly change and you see the Aussie dollar it's you know it's making new lows could actually go down a little further so looking at a chart like this might even need to give you the idea of yeah let's sell some Aussie dollar obviously there's lots of other long checklist before you do that but this might give you and I trading idea and here we talked about GDP and Singapore before and you see here that Singapore GDP is actually negative and that tells you a lot about China as well Singapore is like obviously the almost like the Switzerland off of Asia and if it's if that economy starts to deteriorate the negative GDP growth then you know that's not good for China or it means that china is not exporting as much as they used to and it might be negative for the Aussie dollar so again that would be supportive of being short Aussie dollars so then the next thing is technicals so you might ever have a great idea fundamentally it looks good you need to make sure that you time your entry properly and thank you you set your targets and your stop always control your risk so one way of doing it is I would like to show this chart it's just it's called the Ichimoku cloud which one which we teach in our technical of course it's a invented in Japan and let's not go into it right now but basically you know it looks like actually the yen could start climbing further towards the whatever volatility level or dropping whatever you wanna call is based on based on this chart and then we look at obviously our trading psychology and maybe maybe maybe James wants to do young talk a little bit now you fancy it fancy having it have it having a go ahead we're having plenty seeing plenty of questions coming through guys and thank you for for sending them our way we will be running through them but towards the end just for the purposes of time so do keep them coming but we will get to them a little bit later so anything interesting and it's really this is a thorough fancy there are some good ones and there's one here actually from Louis for you who asks when he when it comes to trading FX and your experience um do you tend to just focus on the technicals or do you look at it's quite a popular she do you use volume at all in that bags which is quite hard to work there i verbally yeah I mean you what you want to know is is how people are positioned and what you will know is obviously volume that that's taking place but the end of the day it is about the price and that's the ultimate determinants and you know that's how you how you you know blow up so you you ideally look at as many indicate well you look at the number of indicators and volume is important obviously in FX it's quite difficult to get what we look at a lot in FX's cftc positioning so if people are becoming very very short and the price is not making a new low then that's a sign of divergence and it might be time to become a contrarian and start buying it but you especially want to do that if you actually fundamentally believe that it's it's totally overdone and that was the case with the euro a couple of months ago was totally overdone didn't really make a lot of sense and it was time to bounce a people way too short now tomorrow people I'm not a short anymore actually no it's the keep on throwing money at degrees so that's that's maybe not that great either so Greece staying in might actually be negative for the Euro people are not assured yours breaking down at the moment so you could easily say okay it's time to show Europe was look at the options markets while that winter yeah there's the option markets and there's a question about do I still talk to Anton from the BBC show I had lunch with him a couple of weeks ago he was looking good is the good life was definitely showing he's traveling a lot around the world so yeah I'm still speaking to enter this also has much respect sir thanks very much for that there's someone else's can we have a copy of the slides yes you can how do we find out fair value of a currency different ways of doing it you can do purchasing power parity you can use the price of hamburgers of McDonald's in Switzerland and Japan to give you an idea you can use whatever goldman sachs things or JPMorgan but it normally is you know we showed the show in the trading club where the fair value is based on the different ways of doing it but you know what fair values is a long term game you know the rule number one in trading is to make sure that you're still around tomorrow so if I trade it based on the fair value of a currency I would have a serious serious problem okay so you have a continue with the trading psychology so obviously trading is a fight against yourself you everything from from your birth is coming up if your mom was nasty against you and you had fits and you couldn't control yourself then anything that reminds you of your of someone yet telling you off or the market saying like yeah you're wrong you might not be able to accept it and you know it might kill you in trading so first of all you really really need to understand yourself and probably takes a lifetime to do it to really understand yourself but in the meantime you have to live it yourself so you need to control yourself and again if you go through a five-step trading process and you just take the boxes try to be as objective as possible it will be much how much easier to deal with the psychology but those in psychology is not just about yourself it's also about the market and the market sometimes go absolutely nuts look at China again we suddenly exploded little bit older Chinese going out and buying it you saw like farmers who who left their farms left their animals their crop and thought actually know where they can make a lot more money very quickly and some of those obviously made money but most of them have always had been carried out in in the last last couple of weeks and here you see that you see the this young highs yeah I mean food for years it did absolutely nothing as the rest of the world was purpose was rallying people in in China were focusing on property and not actually think about you know what the government has said that we will support the market everybody knows that they will not you know sell lots of state companies so let's just buy it and I had analysts in the office saying about a year ago I said like you have to buy it you know the government's going to support it you need to own it and yeah that looks like obviously like an absolutely amazing trade but then at some point it becomes parabolic so when it broke through the 3,500 level you know it wasn't stoppable it values another 50 percent in three months and then you know if you bothered about 5000 suddenly you're down 30% and if you use leverage and obviously that's why be always very very careful using leverage and I don't yeah if I use leverage of 200% you know that that's already a lot because on a move of down 30% and you use twice leverage you down six subsets and that's not what you want to do based on trading and an index which many would say is manipulated by the government so then obviously like brings us to to risk management if it's the fifth step of the process you can have an amazing original idea you've done all the fundamental work so you know you're right you're gonna be right in the long term you've got an amazing entry point psychologically you're very stable everything goes well your kids are not screaming at you your girlfriend wife partner is very supportive of you sitting behind the trading screen at 7:00 a.m. even even when you're losing money and and she has to cancel her holiday so you need to add a no matter how how well everything is going you need to control your risk which means deciding beforehand what a maximum is of the loss that you will accept you need to make sure you have a diversified portfolio and that as I said before you always need to be around to trade another day so those are the five steps and it's the same in currencies and commodities and if you have the patience to go through these five steps again and again and again then I guarantee you and you write this all down in a trading journal then again can guarantee you that nothing anyone can teach you is going to be better long for you if we trading results this is going to be the best much better than just looking at graphs and following someone else you know this copy trading stuff of you know it's crazy you know I've over my 20 years I've discovered many people who were amazing at some point in time and you really want to know what they're thinking but give it a month or six months or a year or two years and they suddenly disappear you left the position the end up losing a lot of money and you're not quite sure why so don't don't do it to yourself make your own trading decisions do your own analysis don't copy other people don't watch CNBC to find out what what's stock someone is pushing just just make sure you get the information the proper information in front of you and make your decision based on that information and that's what we're trying to do in a trading club make that whole process really really easy give people with boards so we have this weekly report twelve pages long lots and lots of numbers but if you read that and you don't come up with four or five trading ideas that are relevant at that time then you know I'd be very surprised so if you look at another chart so so so we do back tests this is a strategy called the turtle soup you might have heard of the turtle traders so we James Knight did a seminar webinar in Spain of it a few months ago and the because a lot of people say ok you you taught your eight people how to trade and Richard Dennis taught his people how to trade and his people made a lot of money purely based on technicals so we had to look at it we had to look at you know how we can combine our methods with the turtle trading and also what is shown here which is turtle soup and the turtle soup is as total trading as you is momentum trading you buy whatever 20 day high and you just go with it turtle soup takes advantage of people being turtle traders and this is taking advantage of you know you're in the range there's fools break out and you go against it so you're making new high but it's the next day it's closing below that that new high it's back in the range that you settled in the open of the next day and that's what's happening here the the knock the Norwegian kroner if you had done that over the last that's a year you would have made nine percent return based on the stood sorry back test it's worked for some currencies some periods some sometimes it doesn't and that's that's yeah that's one of the ways we like to look at stuff as well and we have the abilities within the academy to do any of that I'm so I'm very lucky because I've Bloomberg I can pull up any chart I can pull up any tool and and and the news that that's going to come out from our side over the next couple of weeks is that through a new platform called tradable this is going to be taking over from Metatrader no doubt it's an app based trading tool and what you will be able to do there is look at my own trading screen all you would need to trade is on that platform I've designed lots of apps myself you're very busy with that and it's it's going to be very very powerful it's going to be very powerful tool and everybody can see what I look at it will include the fundamental matrix so you don't need to look at any other website you don't need to look for the information it will all be there and it's going to be an incredibly powerful platform I have apps on there that I've built other people have done the same so that will really help you and it will for a lot of people you know who subjects or people have in Bloomberg you know dead they'll pretty much do to say okay now we go into training psychology you're probably bored of listening to me for a little bit James you will never go sure I'll I'll step into the breach is it what so one again we've seen some some great questions coming through who will gets through them at some point so moving on to were to psychology in the core of this presentation first of all what we're looking at here is the five factor model that was used on the program and we employ still at the academy to essentially assess the mental toughness or strength from a psychological standpoint of developing traders and established traders alike so we're going to run through each of them here on the next slide and so what we're looking at is first of all motivation so the reasons why you are trading and what inspired you to come it to start trading and ultimately what helps you to get out of bed every morning and want to you know keep going and hit the markets particularly when you're tested so that's an important thing and something that you should all think about and I'm sure you're you're well aware of and self-confidence is the second factor so what belief do you have in your ability and it's completely normal to injure periods during your training where you perhaps question that whether openly or you keep it to yourself but ultimately you do need to have that self belief in order to succeed that's part of the mental toughness of the psychological makeup I've been a successful trader the third area we look at is focus so if you have other things on your mind maybe in your personal life or you're simply not paying attention for any reason then that's going to impede you and impact your results when you are trading and trying to focus on the importance information so that's a very important element and again that will wane from time to time with everybody as human beings it's one thing that the computers do very well and versus us the fourth is composure and it's something that I think people earlier in the careers especially when they're perhaps towards our adolescence coming into the markets I was not too long ago do find challenging but over time with experience does calm is one of the things that haven't worked with legs for a number of time I know for a great deal of time I know it's a very calm and composed and the pressure I've never seen in that ever seen kind of loser lose his cool and resilience is the final fifth and final one so you will get a number of setbacks and knock backs when you're trading whether it's a single loss or a succession of losses a bad period that you're enduring maybe your setups just aren't working or your process is really being tested that happens in time to time but it's how you get up and keep going after a series of things going against you that ultimately CC persevere and the results come good again yeah so for example on the self confidence is it bordered to be self-confident but you need to back it up by analysis this pointless being self-confident and be dumb and running into a wall and losing you know like trying to you know follow conviction that's not backed up so that's one of the things their composure James says I have a lot of composure well I do hope so when I was a Goldman's in my first year I was taken into a little room by my manager because he said I had done something wrong and I knew I had not but he thought I had and he had this pencil and he was pointing it like close to my eyes and I thought this guy's gonna you know he's about to kill me and I didn't cry then I didn't cry when you know I lost a lot of money at different times so I know I'm okay I'm okay on the pressure and not everybody is obviously like that I've seen lots of people cry you know people ask come into a meeting and they refused to go because they could they couldn't deal with it so it's it's it's important to have composure but again if you know what you're doing and you back up your your your trades the proper research you know you have more reason to be composed and also like if you Nielsen always need to think about okay what if I am wrong what am I going to do and if you have a stoploss in place and there is no reason to not have composure it is a question of statistics you can do all the work you'll still be wrong certain my sense of the time and that's just part of the job if you can't accept statistics then you really shouldn't you really shouldn't trade and and again like if you have a trading plan then all this stuff will be will be so much easier so here's foreign-born Buffett and he says all you need is like all had to have ordinary intelligence but as long as you have a temperament to control you know the urges let's get other people into trouble I think he's talking about fear and greed so don't don't let yourself be controlled by fear don't be scared don't be a crybaby and don't be a greedy bastard then you know you have a good chance that you know you don't need to make all the money tomorrow you don't need to have that winning trade that that's you know will make you rich it's a long-term game you have to be careful you have to play according to the rules don't ever do anything illegal just just just just play safe and here we look at the eight key skills of successful traders so it's obviously like a subjective list for me it's really important the ability to listen a lot of people just absolutely love talking and talking and talking and just can't stop talking telling everybody how about their life and and if you do as them it's all amazing and talk about you know all the way even to lifestyle whatever I never do that I hate talking about myself I hate telling everybody okay this is my latest trading idea you know I want to hear what other people are thinking and then I can make my you know I can make my trading call and I think that's very important you already know what you are thinking yourself obviously is very important to discuss ideas with people who know more people have more experience you know ask them what they think about certain situation absolutely go for that but don't tell other people all the time what you think and what you're gonna do because you already know that this is the waste of their time waste of your time obviously you need to recognize your mistakes you need to be hungry to learn resilient as we talked before and analytical ability and numerical skills are totally you know important but I really not as important as a psychological perspective so analytical ability in numerical skills everybody has a computer everybody can have an excel sheet you don't need to go so deep that you need to know absolutely everything about the accounts of the company again the certain things you need to know and I will teach you what you need to know what you don't need to have a sorry James yes I was just going to say we had a quick question here and where did you get 75 percent from now for the the key mathematicians amongst you in this trading room yes that's the six out of eight it's not an exact science it's just because six out of the eight are directly related to psychology of the eight factors we have on the on the screen yeah yeah that's all there was to it and nothing more scientific than that we struggle beyond is there have been nine it could have been 78 percent but that's it's it's just yeat okay so why do why do many beginners fail and funnily enough it's not just beginners will fail or obviously it's not just beginning to feel a lot of experience people fail as well and you have every couple of months you reading in the paper that's another big hedge fund has failed so everybody fails and why is it the electrical system trading process to take too much risk they can't take it anymore and for beginners you know 20% survives after four years don't ask me where you get variegated number from that's you can't see it on this chart but it's a number we yeah it's an industry number that we hear and obviously one of the reasons is that people just will not do it too quickly they've only here the golden rule of trading you know what it takes a very very long time to be able to understand trading properly but a great thing is that you know if you have talents you don't have to have gone to university you know you can you can work in a shop or you can be a car mechanic you can be a chef any anyone has possible the potential ability to be a great trader and that's what I love doing about it it's not about I want to teach people students of the economic graduates or whatever not at all we like to be able to teach everybody so there's a few see how we doing on time so I think they're still okay so we have intercourse if you talk a lot about common trading mistakes and what you can do about that one of the big ones is obviously over trading and we're going to go through this quite quickly so don't worry come and look at some some interesting charts in a minute over trading is a huge huge problem probably the biggest mistake from everybody it ends up being gambling there is no strategy some people do it out of boredom some other people do because they need to make money and if you trade because you need to make money is probably the hardest the hardest way to do it you know it's how much do you really how much capital do you really need to be able to live from your proceeds and if you look at the professionals and they make 10 or 15% a year that's a lot so if you need 10,000 to live on you know you would need a hundred thousand in capital to trade with or you use ten thousand and you leverage it ten times but if you make a loss of 10% or more you're wiped out so they can't be the idea either so other reasons I like you might you might be beginner you might be very enthusiastic so that might say okay I'll do another one and do another one do another one probably not great either sometimes it's revenge you lost a lot of money just now you want to make it all back so those are common reasons for over trading you have other symptoms trading losses large Commission bill probably you go end up being very frustrated and it's probably a vicious circle into disaster so what can do about it follow a plan if you board walk away call a friend read research learn more and accept that's you know sometimes the market just doesn't give you the opportunity that you would like to see so if you do more than one trade a day yeah that's that's a lot you know I think that a especially if you're beginner you know just take it easy take it slowly so you see what happens you have to you have the rest of your life to try I think that's a good point actually seen some questions coming through and it's a recurring theme we're seeing when you mentioned the car mechanic and chef analogy early and not having to give up your day job the work of the questions which said we'll look presumably wants of started trading and become a bit more successful not saying that we become rich and we can can afford to quit jobs necessarily but would we not have to do it full-time and I think that demonstrates that the reality of trading isn't necessarily a full-time or an all-day occupation but for many people if you just try to merge a portfolio yeah I mean the way we look at the way I look at it trade look at trading is that okay you have day traders who sit down there by in the sale intraday and they look at the news and it quickly they quickly enter trade there's lots of computers these days that look at the information coming out the news coming out and they do it a lot quicker than any human can do so it is really that's a really really difficult way to to trade but if you have again if you have the right process you have the right way of looking at things and the right way of analyzing stuff and folks WC I'll get Tesco it's not going as well anymore everybody's shopping at Aldi if you start seeing that you start analyzing the underlying business then shorting Tesco is not a decision that you need to make intraday you need to do proper work before that and then you look at our cables a good level to short it and you say okay below that I'm going to short it and if it goes above a certain level that's very much tapas you know you can do whatever you want and it's going to be good to walk away from the screen so you can then build a portfolio portfolio of ideas and then sometimes what makes money and the other one loses money okay that's fine but you at least have something to make up for it so if you if every trade has to be your winner you know you're going to be your clears trader it's going to be very short but there are plenty of ways for P people not to to have a job and to combine it they thought video that's exactly what we set up to do that's how we want people to try it almost like a kademan I don't want you to be a full-time trader then you start maybe you turn out to be extremely talented they have amazing ability and you are special but then maybe you should give up your job but don't do it till you actually go through this go through the education and again like the way the educate is is meant to is very specific to each individual so it is not oh this is how you have to do everything it's making sure that people strengths come out that people's ability comes out and that people's aren't psyche comes out so you have you develop your own style I want people to develop their own style I don't want people to copy me I don't want people to learn little tricks saying okay you know the I am is at this level so now you need to do that you know that's that's the crazy way of trading that's just not how money is being made tons and tons of money is being lost following those little rules because sometimes they work and sometimes they do not work so we teach a framework and it is like many many different ways of analyzing situations and be sure what works when and how to adapt so we're not trying to create one-trick ponies we're trying to create I mean I don't say even a racehorse we just try to make sure that you know people have a chance of actually making money and then they lose money they've actually learned something about themselves and about the process they're going through as opposed to oh whatever I was listening to was rule and I shouldn't have done that you can guess which guys are making the money taking advantage of not trading in segways the guys who have got the perspective we've got the experience and a different approach not the guys following signals or following the rules yeah I mean for me like the turtle soup what I said is like fading fading the move because everybody jumps on it and all the copy traders are suddenly so like shorting here oh you know it's wrong and it doesn't make sense anymore and it's like the seam has has gone and we start to see on our side that ya positioning is too extreme the you know the economic data coming out actually is not much worse we understand the Greece situation etc you know that makes it that makes it just so much more fun so far it's also like an intellectual game it's about you want to be the market and the mark is going to be around forever and it's not easy to beat the market so it is the hardest game in the world it's playing chairs against whatever millions of very very smart people and they change all the time so that's that's the fun of it that's why I'm doing it and the same it educating it's very challenging you know because a lot of people don't understand why they should be educated because I think it's okay well you know look at a chart and they're being educated walk so that's that's how we look at it so let's look at some charge because we're starting to run out of time I'm clearly talking too much so this is what we do a also like a quarterly Club report where we look at some very interesting charts and we look at some some some some strategies sharing some strategies this this this one is this is because we're talking about psychology for every fun every one of the five step there we probably don't like share about in this report we do in a fire-- Platinum Club members over a hundred charts that they share every quarter and let me explain what's going on in the market so here you see in the top top box you see the S&P taking up and up and up obviously in 2009 no 666 and now we'll be above you know above 2100 close to making new highs and below you see sentiments from from retail traders you can see whenever sentiment is is low it's it's it's time to buy so that's what we get from this one and if you've done that every time the sentiment number came out below 24 you see in this S&P gained per annum box that you would have made 26 percent per year it's only 15 percent of the time but it shows that whenever retail traders have been negative based on this report it's time to buy so that's really really you full report to have so that's what we make accessible to to whoever joins our club so then another one a lot of people look at this is the VIX and you see here again if the VIX is high so the volatility of stocks and SP is high you know it's it's time to buy and that's strategy again 15% of the time would make you forty percent so it doesn't necessarily need to be there difficult you know so psychology if other people are fearful you really should consider buying not always can still go down a lot but if you had done it over this period over the last 18 years this is what you would have made this is it's partly strategy if you've done your research you've done your preparation you have a view fundamentally on the market or on the particular asset you're looking at you've worked out whether or not it would be a fit within your portfolio you've gone through all the steps and sentiments or positioning is one element when you see that opportunity that's when you take it versus perhaps when you let it walk you know it's about that preparation so here you want to explain discharge yes so this is an example of extremes in positioning selects mentioned earlier that one of the things that we look at in the currency markets and also the commodities markets and feature within the reports that we produce are the futures positioning from the CFTC so to the Futures Commission in the state now what you can see here we've manually overlaid the upper red and lower green lines just to indicate an arbitrary extreme level when essentially people in the futures market and specifically referring to what they call a define as large speculators in other words hedge funds and very very large traders when they were net long above zero on that short and expecting prices to decline below zero so what you can see is often when positioning reaches an extreme then you could consider the trade to be what we call crowded so in other words has been something of a herding effect to you see at the psychology term so in other words if everybody's already long how many buyers remain how many new buyers remain to step in and take prices higher and what you can see same as countries true for for for shorting as well and you can see that essentially the exhausting points on this chart which was a good example albeit taken last year of the Aussie dollar which is now lower you can see that as it approached extremes it ran out of steam temporarily so participants wants to take a pause and this is what we'll focus on with some trends examples over the next couple of slides yeah so this'll be gonna look at I don't just any questions in between that's that's worth having a quick other all worth going through like so I think we sorry dead bit I should say every question is worth um being there but not every question might be worth answering in front of like there's many people we we've got probably 50 or 60 questions to get a faster will okay so we're going to speed up a little bit so another one we look at this is what's called a risk reversal and what that means is you know the price in the option market this is in this case the Aussie dollar the prize of course call options but you say it's going up for surprise good options they say is going down so if it's below zero means that people you know buying boots are worried about the downside and again this is one of those ways where you can say okay everybody's getting you know everybody's berries at a certain position at a certain time everybody short everybody is buying boots you know is its head it's full and here what's going to be interesting also interesting is actually know what this does not as many boot buyers as you would expect so the Aussie dollar could could continue to drop what one comment LX just receiving coming to the questions was that I'm pointing out the fundamentals play a lot or were relevant in some of these currencies explaining some of the moves and that's absolutely true and it's not to say it's certainly not saying disregard fundamentals and all the rest and only look at this this is just one part and one thing that we focus in on to help us gauge a sentiment of the market the time of our train no but I'm so sorry you're looking for definite positioning of them yeah so we definitely want it's like have a view on the currency and then you're waiting for everybody to be going the other way we massively positioned wrong and then waited for the tech because you know obviously like the marketing move a long way away from that fundamentally should be so you're waiting for everybody to go the wrong way and then you know you go against that ideally then a technical point has happened and the position is extreme and then you go into it so you already know your fundamentals so you're not going to go with the what other people are doing based on their positioning you just use it for yourself so here's like James James has a you know generated an example based on on this weekly report that we show and we show this for currencies we showed for commodities we showed for equities so it's a very very interesting report maybe you only quickly explained we will make this one brief just so we can we can continue through answer some questions at the end but what we identified here last week in last Wednesday's positioning report when it was produced was that we're looking at for example dollar Swiss franc which we have highlighted in red and towards the extreme of the range when it comes to positioning so in other words as towards extremely long dollars versus Swiss francs in other words there was a lot of negativity around the Swiss franc which given the right cut today has actually proved to to be right so in this case it's it's warranted however going but last week retrospectively you wouldn't necessarily have known at the time also another highlight as you can see was the positioning in the New Zealand dollar this time traded against the US dollar was extremely short and in terms of price at the price range at the bottom you could see that it was also at the lowest level it's been in the last year and again this is one which hasn't necessarily is held up over the last few days but today has actually played I correctly with seen fresh lows in the New Zealand dollar we've seen the Canadian dollar also get crushed relative to to the US dollar if you're in the u.s. from the long side so in this case its idea generation but something that hasn't necessarily worked out so it's something to keep on the watch list as you can see here from the chart which was taken admittedly earlier in the week so keeping on the theme of extreme positioning this is another idea which is generated from the same report you can see last Wednesday at the top right hand corner and this time focusing on commodities which are well continue to endure a very very difficult and testing period there in absolute bear market there's no doubt in that approaching the 2009 lows and within certain categories there the performing even worse largely driven by energy but one of the the pockets of positivity if you'd like to use that expression is is in the agricultural sub index and we're seeing movements actually today in the latest report dated version of this we've seen even greater a performance and also long positioning in the futures reports for the agricultural commodities wheats has also stepped up and but the idea here is that rather than and again coming back to context and how we interpret this information which is what we teach rather than trading this from a contrarian perspective or contrarian angle we actually saw that soybeans were within quite a tight trading range but towards the lows at the 52-week trading range however the market large speculators the professionals had suddenly got extremely long and long as they've been in a year so for this reason and given the price action we actually looked at soybeans as a potential long so a potential turning point in that in the trend in the longer-term trend as opposed to a really short term move so there are times to fade it and be contrarian based on the same information there are also times to follow the smart money as it were but with the this sort of perspective you gain through the courses and through ultimately learning and you can pay per trade you can test your ideas with a smaller size to begin with and get some of that feedback from the markets and from you trading whistles as you go along so where it's for you with that as you can see here we've we have the chart over the last couple of years for soybeans you can see the consolidation has been making for last year and we've now broken up out of that range and we're testing at new highs so something to keep an R that we're watching but as you see a lot that does a lot more going into this than just looking at the chart and saying alright you know what I should ask you buy that so that that to me has always been the most bizarre thing that people only the people are able to make decisions purely based on on charts because it's kind of boring you don't know what you're really looking at and it's looking at the clouds and so saying I was going to float that direction might you know if you make lots of money doing it good luck to you but I wouldn't put my money on purely based on that there's a lot more to it so how's your trading be relaxed in control calm energized positive focused confident effortless that's how it should be you know that's the million dollar mindset how often am I in that space well I can tell you one thing that I'm not in that space and I know I'm not in that space I really really shouldn't trade I should trade when I feel like this so it's not a question of you obviously you want to be in this space as as much as possible so obviously a positive thing but if you don't feel like any of those they have they have an issue and again within the the tradable environment as I explained we developing all these apps for we have a trading journal and part of the trading journal talks about your psychological state of mind you will write down as you trade or when you trade how you feel yourself if you're positive or dangerous positive so if you make it if you track emotional state again you will learn about yourself and if you if you don't want to do this if you don't want to be honest with yourself if you don't want to learn but then obviously education is not really for you but here this is like how we teach best methods and and this is part of that it's like if you want to be an athlete right but you don't put the work in or you cook corners in the gym or your diet you're not going to get the same results yeah yeah so basically to conclude what the talk about here and and then we'll go into Q&A we have you can look on our website we have 50-plus videos talk about stocks occurrences and commodities and some people like tried to offer it separately or not at all but to me I can't trade one without the other you know what happens in the FX market helps me with looking at stocks you know I can trade the net guy without going knowing what's going on and yet you know I need to know everything I need to know I can trade the Aussie dollar without knowing what's going on in ninr etc etc so we provide 50 plus videos that I've written over the last five years take me normals amount of effort normal amount of time there's an enormous amount of knowledge in there we build spreadsheet models to make your life easier you continuously come back with world case studies and if you want you can have you know doing exam and have a certificate and then we have the trading club so what we what we have today as a special offer is if you take out the the lifetime XS you're gonna get the free gold trading Club the gold trading Club for free which is worth a thousand dollars why pause right yeah so if you did a lifetime course this is because we haven't done before normally we don't and I don't like trying to persuade people by special offers but because it is our first the first big webinar that we're doing I thought makes sense to incentivize people a little bit or to just say thank you for for for listening for still being here and funnily enough only we've only lost two percent of the people who who signed up initially so to think terribly for listening to this for an hour and so that's any any more questions that you that you have here that's that we have a look at so we now have 40 seconds for questions I'm kidding we can we can have a run past eight o'clock in line with that with many many requests to do so so why don't we why don't we allow 5-10 minutes so at least you were to run through some of these it's quite nice someone says keep going so okay we're gonna keep going so says thank you for your time yeah so then then someone else says sorry for asking dibs but why is legs from them selling its trading secret that's actually really good question because everybody says okay well there's there's the secret to trading and you know you know that you know buy sell to anyone but there's obviously a lot of people who say they have a secret and then they they sell it and obviously it's not worth anything but here it is the key is and it was the same that the turtle traders the key is to follow the process so the key is that's the secret just follow know yourself do the work and you will probably if you have talent be successful so that's that's the secret so if I'm very happy to share that a lot of people and I want them everybody to be a scooter trader as they can be but there is no secret if you believe there's a secret to trading then you are mistaken so I don't have the secret to trading I have a methodology itself business works for me to last 22 years so I'm happy to share that what do you enjoy trading but for me I just love trade like and I love different experiences in life so I love trading different instruments so I want to be able to say okay you know I've traded whatever like afraid of oil on the floor so you know I did that for a little bit and in the in the 90s and you know for my desk cooling the floor broke and it was like a really smart guy and it's like he said okay maybe this is a good idea I said yeah that's probably good idea and then there was an OPEC headline and then you know obviously totally don't totally didn't work out etc but I felt okay I've traded oiler you know so I think the fun is to actually trade different things so again when you trade currencies you suddenly have to look at lots of different countries and you can analyze these countries and it's not they're difficult but you know you can you can trade the rupee super interesting what's going on in India so I just love trading different instruments and I find it the more different in trade it's you know credit default swaps whatever I've done I've done it all and and it's just super exciting because you learn something new and you put your money where your mouth is you know and you and you're always fighting against really really clever people who probably know more than you and you still go into that arena and every time yeah you risk your money and you hope that the work you've done and risk management that you have in place will still allow you to be there the next day but that doesn't other thing I was saying here like you mentioned put some money where your mouth is backing your ideas because you get that with the program but something we are being asked it amongst people here today is how much money do you need to really start trading a I guess it's quite difficult for a figure on it but some maybe no you can have a obviously can have a dummy trading account if you have no money you can see it as a you know as a fun thing an intellectual thing to do and get better and then maybe one day you will have the money to trade it so you don't even yeah you don't need money and if you want to make money and then obviously you know it's going to be totally you know correlated to the amount of money you put in but whatever money you put in even if you put in a hundred pounds or a few hundred quid you should not increase your size to make up for your lack of money because you will not learn you will end up just gambling it you might as well go to casino so whatever doesn't matter how much money you have play carefully I get emails all the time from people saying I made 300 percent and them ideas and I made that and they go straight into the into the bin because you know it is not impressive if you make 200 percent it's impressive if you can make 10 percent consistently that is impressive and if you're able to write down why you do those trades and then those Trading Act then the trades are based on your own ideas and not copying someone else we have we have a question here from from Farouk forum a man one of our students high freq thank you for for attending whilst learning with us I'm quick quick question here um how do you identify a good short in a strong economy now it's been a long time I think since we've been signed a strong economy but we can but dream how have you identify good shorts in a strong economy well for example at a moment other words interesting is obviously disruptive technology so there's of old fashions strong business models are being you know being destroyed so if I am you know if you look at uber new technology everybody using using the app then there will be companies that are gonna get destroyed by these guys so if you're whatever listed listed taxi company you know you're going to get you know you're gonna you're gonna suffer and it's the same for I mean every mention it in the we met again we talked about this in the in the club all the time so damn dead there are certain situations another way to look at this is okay we'll just performing badly you know where they are the losses taking place at the moment and these stocks are doing well every stocks are not doing well so obviously Amazon is doing really well in this in this strong economy in well in this economy but General Motors is not so you could look at okay I'm going long Amazon I'm going short I'm going short General Motors all the interesting that foods obviously as the Dow and S&P are making closer making new highs what the transports are not so to to start looking into those areas so if you can do based on price action so you can do what is not doing well so that those are short candidates it can be based on the Aldi Tesco example where you know someone is not doing their business correctly some on and it's based on disruptive technologies and then there's another ten different ways of doing it so I hope that kind of helps we've got another good one here it's a maybe something we could frame around the process this is quite a an expansive question and but what do you see is the biggest risk that's not currently priced in to the market I guess there are so many different markets you can take thick well as a big question I mean there's obviously like there's liquidity risk because you know banks are not providing the same liquidity everybody goes into the same ETF so there's a risk that if things go wrong then everybody's position the same way right at zero everybody's in stocks everybody's a leverage long stocks so this was a huge risk in this market if the government's are no longer able to support it but you know what I mean my view is that that's you know those risks are definitely there but they're almost inedible so you need to make sure that you have stops in place and say okay actually know what if the S&P starts trading below 2000 you know I don't want to be long the stock market anymore I don't want to be long US stocks anymore that's that's a good point link to that we're being asked again on both of you and how within the course how do we determine ultimately how much you you put on a particular trade or a particular position well I think that's for people you know professionals you know if you do bear trading and you lose 1% of your money you know that's already a lot so I think that's you know you wouldn't in general you don't want to rule it risk or lose more than 1 or 2 percent of your money and that's obviously like if you have a small account that's that's really really hard to do so you could say okay I'm gonna do a little bit higher than that so maybe like 3% or 4% but if you start risking 10% per trade I mean chances are that you're going to have 10 wrong trades in a row and you lose all your money and that you definitely don't want to do so the less you risk the better so and especially when you're starting or maybe especially when you've done it for a long time but you've done it for a long time you don't want to lose it all by going through a bad period and then you start you don't want to give up like a possible really good trading career by risking too much for each trade sure and we are having a couple of questions related to the course in the club and I show you this isn't a a false plug and just to very quickly answer Lukas specifically who asked this he asked whether I believe the gold trading club access was does it mean large time axis the the course is about all on a 1 month or a lifetime basis in terms of how long you have access but the trading club is a subscription so it's a 12 month access for the prices see so just to clarify that and as 10 webinars so every month except the summer months that there is a discussion about about current markets and you get the weekly trading report as well and we'll dig much deeper into into x equals going on so it's not going to be every time a conversation about psychology of trading could be actually about you know what's going on in the markets right now what's being discussed in the in the weekly report you know what's going on so check can if you want to have a look at the upcoming webinars which I'd encourage you to do and other events on our website let's find an calm in the events section you'll see a schedule of what's coming up on next will be a week on Wednesday where we'll be looking at I believe going to be looking at either uranium or possibly lithium plays using fundamental using the idea generation step for for generating some good stuff ideas in those areas it'll be David who's that running through that okay so I mean it's really great to see all these questions as like it's going to be impossible to go through it and and yeah please I mean lot of people are being really nice bothers would like to be a millionaire there's a good love you now tell us it's also much as Russia was is used by the casinos Shanghai markets very difficult to play in auto trade in the market that's manipulated by the government but you know what if they've really committed to buying this then maybe it's not that different from the Greenspan put so maybe if Shanghai goes down a little bit more than probably it is actually an amazing Buy so then someone says multiplies its cause different from Anton's cause obviously X colleague of mine who were asked to help me with the million dollar traders program vice different you know I'm still trading I'm a hedge fund manager it's very different being a hedge fund manager than then trading for at a bank for bank you know I put everyday my my own money at risk in high sighs and I did the same for clients so there's a very different background so I have time for Stu look at what's going on in the market right now so that's that's what I do and you know I don't think there's many other educators who do the same we've got time for a couple more questions but there's a bomb war is a very good one that's consider release do you like to kill do you like tequila well I I don't I don't mind a drink I guess but I'm straight I'm pretty boring you know I wouldn't I don't like running around being drunk so one or two is probably okay and when everybody is short should I be buying well if you actually bullish if you actually bullish on whatever it is that you're trading and everybody else is short yes you should be buying then lets you see what else do we have okay I think that I mean there's so many other questions from all over the world from from India Japan etc so I just want to say thank you all for for for listening in for staying visit food for so long please email me crash it directly and I will I will try to answer that so I hope to hope for some of you to join me at Academy and for other people I hope see you again at one of my events or as nor the webinar so thanks very much thank you very much everybody you you

Channel: Lex van Dam Trading Academy

Views: 251,553

Keywords: Financial Services (Industry), Finance (Industry), Education In The United States (Literature Subject), Educational Psychology (Field Of Study), Hedge Fund (Industry), Hedge, Lex Van Dam (TV Writer), His, Market, Trading, Trade (Quotation Subject), Stock, Forex, Stocks, Analysis, Economy, News, Business, Technical, Investment, Futures, Options, Bloomberg, Currency, Gold, Markets, Euro, Dow, Dollar, System, Stock Market, Charts

Id: YlGlTbr5DcQ

Length: 70min 29sec (4229 seconds)

Published: Tue Jul 21 2015