How to Power Through Trading Losses w/ Nick Radge

chat with traders episode 4 the biggest secret of the best traders in the world is that they're just like everyone else however they've worked hard to learn the markets and discover what works and what doesn't but how can you hear about these journeys and get in on the strategies and tactics they use you can do it by listening to chat with traders here's your host Aaron Fife fields Hey what's going on traders thanks for listening to the fourth episode of chat with traders I really hope you've enjoyed the first three episodes and ideally learned a few things from the guests that have been on so far if you haven't then I think that's all about to change today's guest has written many waves of the financial markets since place in his first trade in 1985 the almost 30 years of skin in the game NIC Rogers here to share some of the crucial lessons that have allowed him to not only survive but consistently profit along the way in addition to 30 years of trading NIC also runs a highly successful stock market advisory service the Chartist he's also been featured on Michael Koval's trend-following podcast appears on Sky Business Channel once a month and is the author of not one not two but three books one of the things I really enjoyed about this interview was how Nick went into great detail about many aspects of trading that are not often discussed I feel as though there's something in this for traders of all levels now before we roll into the interview please remember to visit chat with traders on iTunes and leave a 5-star rating and review if you like what you hear but doing this it will help us to reach even more listeners and the support is really encouraging with that being said I'm your host Aaron Fifield this is chat with traders and Hera's today's guest from the Sunshine Coast Nick reg hey Nick awesome to have you here thanks for coming on the show thanks Aaron so take us back to where it all started in 1985 for you how did you first discover the markets and what was it that really appealed to you well I was an average student in school I didn't go to university really had no idea what I wanted to do when I left school and a friend of a friend worked at a big stock broking firm and offered me a job as a clerk there just pushing paper I had no interest in the stock market or anything like that at the time but it was a job in the city so I went along and quite enjoyed it as I said it was pushing paper it wasn't anything to do with the markets but I had a stroll through the private client desk or private client area of that stock broking firm and came across a gentleman who had some chart paper and was drawing some red and blue lines on that chart paper and it just kind of intrigued me and I asked him what he was doing and he showed me and basically it was a five and ten day moving average crossover strategy on the share price index futures and I could just see the trends right there he was saying when one crosses over you buy and leant across his back your cell and you know back in 1985 it was a pretty strong bull market so there was some nice trends showing there so by the end of the day I kind of had gone down to the stationery shop and bought my own chart paper and red pen blue pen black pen and from that point I just started plotting it and I don't know I don't know what it was but something just clicked and it made sense and then a few weeks later I went into the old wiley office manager and asked him if I could set up a trading account to trade futures which was quite stupid in hindsight because back then the spy was a hundred dollars a tick and I was only earning about twelve thousand dollars a year so he kind of frowned a little bit and said okay well so long as I sign off on each ticket and that's how I started trading okay excellent so you write into it what was some of the early setbacks you encountered so you were trading your personal account straight away you weren't you weren't at the firm as a trader at any point where you know absolutely not the they didn't have any trade well they did have some traders upstairs on the money market desk and that's the paperwork I was pushing there too kind of trading activity but on the floor that I was working on it was just all brokers so they had retail brokers and they had institutional brokers and I never really had any inspiration to go that way it was just all kind of happening around me and it was just interesting sure okay so when she did start trading with your own personal account how did you go with that we use sort of a bit of beginner's luck or was there you know some early setbacks and expensive learning lessons and there or how'd you go yeah well back in 1985 you know it was very different to what we have today I mean obviously we didn't have the internet back then we we didn't have the myriads of courses and seminars and books and trading magazines and data and software and all the stuff that you have today back then I remember vividly the only way you could get a real trading book was request a catalogue from the US which would take three weeks to get to you then you know it was a little black and white catalog for books and then you'd send one off and six weeks later or eight weeks later a book would turn up in the mail and that was predominately it back then so I had no idea what I was doing I had no money management no nothing all I had was a five and ten day moving average crossover and a bull market and that's that's where the luck came from I guess my early setback was just went a little bit of greed set in we back in those days you had a two-week settlement period if you bought a share you didn't have to give anybody any money for two weeks and of course the share market back then moved a long way in two weeks so we found a little bit of a loophole if you like and started trading in and around this loophole where you didn't have to pay for your shares for two weeks and you know after you make a little bit of money and you've seemed to be making this free money then you just get bigger and bigger and bigger and of course you know then the 1987 stock market hit so I learned a very very expensive lesson very very quickly but young and stupid and not knowing what I was doing that's what was to be expected at some stage so after that I didn't do any trading for quite a number of years okay sure so what sort of led you back into it you know after that those few years did you get an education with you know how did you sort of ease back into it well by that stage I was actually working in the business so I started off in the back office as I said but then went down to the trading floor of the Sydney futures exchange and down there there was different kinds of traders you obviously had the scalpers and the day traders and then you also had a lot of institutional traders Bank traders coming in mainly putting hedges on and that kind of stuff and then you also had the big funds and back then really it was early days for the hedge fund industry or the CTA industry as it was back then and we used to see their business come into the pit and I was quite intrigued because there are a hundred percent systematic and what they were doing and I'd never been exposed to that before and that really interested me because they were obviously running computer models and that's where I started doing a lot more work and a lot more research we had a gentleman Gordon Manning in our office who had a computer that you were able to back test on and I remember going in after work each day and sitting in this room and plugging stuff into this computer and back then you'd push the button and close the door and have to come back in the morning sort out all the paper because it would just spit out paper and then go through all the back test results so it was the combination of seeing these big systemic trend followers come into the market and what they were doing and also having access in the office to a computer that you could do some back testing with and that's how it really got started for me again okay so it sounds like a lot of it was sort of self-taught to a certain extent absolutely 100 percent self-taught yeah I have no formal qualifications in any way shape or form as I said I didn't go to university I've never done any kind of technical analysis courses or any trading courses or anything like that a hundred percent self-taught and that's all from being involved in the business both personally and professionally and and with a passion I think that's the key difference right there I think you've got to have the passion because if you have the passion for something you will find a way to make it work absolutely you know I agree with that one that's that's really good point you make so let's sort of talk a little bit about your trading style you define yourself as trend-following trader so how how do you describe that and what are some of the benefits of it versus sort of that other sort of trading styles out there sure the easiest analogy I can come up with for trend-following is like being a hitchhiker and we're not predicting the market we're not analyzing shares we're not using any fundamentals in any way shape or form at the end of the day any kind of trading whether you're a fundamental investor value investor or whatever the the profit is made from price movement price has to move from A to B in order to generate a profit that is the bottom line it doesn't matter how it gets there what drives it but in order to turn a profit price has to move from A to B so as a trend follower that's all we're actually interested in following the trend from prices moving from A to B or B to C wherever it may be and if we use the analogy I guess of a hitchhiker let's say you're in Brisbane and we need to hitchhike to Cannes which is in the north so the first thing we're going to do is stand on the northbound lanes of the Bruce Highway for the simple reason that a car that is going to Cannes is more likely to be traveling in the northbound lane than in the southbound lane so with the stock market what we do is we position ourselves in the right direction of the price movement right there the next thing with the hitchhiking analogy is that we don't know what car is going to stop but if we stand on the side of the road for long enough we do know a car will eventually stop and same with the stock market we don't know what stock is actually going to go up but we do know somewhere some time a stock will be going up and then once we jump bored that ride we don't know where it's going to stop so for example if we hop on a ride in Brisbane we don't know if it's going to stop here in noosa we don't know if it's going to keep going to rockhampton Townsville or maybe if we're lucky it'll go all the way to Cannes and same with the stock market we don't know how far the share price is going to go but we will stay on that ride so long as it keeps going in the right direction and as soon as it turns around we will hop off the basic the basic premise of how we make money therefore is that when we get on a ride that lasts a long time we make a lot of money and when we get on a ride that doesn't do well we only lose a small amount of money so look we may only get it right 50% of the time and to the average person that probably doesn't represent a great deal of success but mathematically we make a lot more money on those 50% that we're right we might make you know $3.00 on each one and when we're wrong we only lose one dollar so mathematically that's how we make money and in my view that's the easiest concept to understand it's the easiest way to actually generate money in the markets psychologically it's a little bit difficult because these rides don't come along every day the stock market especially offers you know quite high correlation so you will have periods of time where lots of stocks are moving very very well and you make a lot of money but then there will also be periods of times when the stock market's kind of moving sideways and some of those rides aren't available and that can be very very frustrating but you've got to take both sides of the equation you know that's just the way the world works absolutely yeah you describe that really well I might just backtrack a little bit there you mentioned when you trade you're only lose a small amount how do you ensure that is only a small amount have you got your stock losses in order before you even enter the market I mean how do you determine that you're only going to lose that small amount sure well everything we do is planned in advance and that planning comes in the format of some kind of a formula or mathematical equation so we might say something very simple that we're going to buy this stop let's call it stock XYZ and we will follow the rides so long as it moves up but if it moves down against us by let's call it 10% then we will exit that position so 10% loss sounds like a lot on an individual stock but that's why we buy a portfolio of stocks so in reality each time we have a loss it only represents half a percent or maybe even point 8 of 1% of loss of our trading capital so all our losses are very very small but if that stock keeps moving higher we might make 10 percent 20 30 40 50 60 s sometimes you know just recently we exited a trade in the Commonwealth Bank where we finished up with an 87 percent profit so from the amount we win can sometimes be four five ten times as much as the risk on the trade and so long as we keep doing that over the longer term we'll always be ahead of course yeah it's all about running more than you lose so that's right and the stop-loss doesn't have to be anything complex I think people like making things complex but it doesn't have to be that the key trait here is one to remain invested when the market is going up and revert to cash when it's going down that's a key component and second of all making sure your profits far outweigh your losses over the longer term and that's that's the bottom line it doesn't have to really be any more complex than that mmm yeah I've heard you say that trading is really simple a few times and sort of different talks you've had and that kind of thing why do you think people do you think that people sometimes over complicate it oh definitely I think people believe that well it's not necessarily that they over complicate it I think that people don't understand that it's not a linear journey it's not something that's going to make you money every day every week every month every year nothing is like that in the world you know it doesn't matter if you invest in property it doesn't matter if you're a fundamental or value investor I mean Warren Buffett does not make money every day every week every month in fact Warren Buffett does have losing years and sometimes he has significantly large losing years it's a fact of life but I think what happens with a lot of people is they they have some kind of vision of a professional trader makes money every day every week every month in every year look I'm sure there are people out there that do that but by the same token you can be very successful and you can make a lot of money and become very very wealthy without that it's just not necessary you know the eighth wonder of the world is compounding and that's how Warren Buffett has become so wealthy not because he makes a hundred percent returns every year you know he's annualized return well over the last 15 years has only been about eight or nine percent but over the last 40 50 years it's been about 19 percent now for the average man in the street I guess there's two kinds you've got the people that think to be successful you've got to be making a hundred percent of you and that's just not true but they tend to be a lot more impatient and want things quicker and they tend to be the ones that fail and then you've got the you know more mature been around the block middle-aged kind of people that realize that the secret to success is being there for the long-term not necessarily making a lot of money very very quickly so patience is very very difficult for for a lot of people to to come to right ya know that makes a lot of sense something else I've heard you talk about a few times also is your way of viewing trades as quantitative versus qualitative light on that because I thought it was really interesting and probably something that isn't talked about as much as maybe it probably should be sure absolutely look I I don't know too many people that talk about it at all I presented this back in 2009 at a conference in Melbourne and to me it's it's you know it's a significant part of the whole equation so we've got two sides to trading the first side we can call quantitative and these are hard and fast rules that you will read about in any book in any seminar that you attend or anything like that and it's it probably represents 95 percent of all material on trading out there so as an example let's use something like don't risk more than 2 percent of your account okay it's a common rule fixed fractional position sizing it's technically known as everybody talks about it it's in all the books it's something that you can actually replicate a moving average crossover for example would be another quantitative trait it's something that you can replicate you can physically see anybody can do it anybody has access to it so anything you come across in a trading book that you can do would be called a quantitative trait okay and most people believe that's all there is to trading so if we you know cut profits sorry cut losses let profits run by breakouts trade a trend we'll all be successful well that is the case from a quantitative perspective yes but then we have what's called the qualitative perspective and this I believe is the difference between professional traders and amateur traders qualitative is let's use the analogy of driving or teaching a teenager drive a car okay which is something that I've recently been through so the quantitative sides of teaching a teenager how to drive a car would be put your foot on the brake to stop put your foot on the accelerator to go forward turn the wheel to the left to go left turn the wheel to the right to go right things that your teenager can physically actually replicate and do so that's the quantitative with the qualitative it's things like how do you teach a teenager to understand a dangerous situation on the road okay as we have experience we can feel when a situation is dangerous we can feel that the traffic is getting faster and closer and whatever but how do you teach a teenager that when they don't have the experience they don't have the feel how do you teach our teenager that during wet conditions it's going to be very slippery you've got to slow down you can feel the car sliding if you like you can feel that situation getting out of control these are qualitative things and when we talk about trading we're talking about how do you teach someone that you've got to have ten losses in a row you can tell someone you will have ten losses in a row but the feeling of having ten losses a row then getting another signal and thinking gee do I take this signal or not because I'm not feeling very good about this strategy he's a very very different thing and you cannot teach that so the qualitative traits of things that you can't really teach and these represent the hurdles that most people get stuck on so for example most people think trading is linear ie they make money every week every month every year but that's not the case in reality so even if you have the most profitable trading system you may still have a losing year now it's very difficult to place trades every single day every single week every single month for a whole year and have a losing year because you haven't been paid for your effort and but this is what people need to understand will be the case so the way I get over these kinds of things is that I research how the journey is traveled by many traders before me so you can access the track records and performance reports of many great traders going back for 20 30 40 years and you can have a look at them there's a gentleman in the US David Roos he has been trading since 1981 he has an annualized return of in excessive I think 17 percent after performance fees have come out now that is an exceptional track record but you can go back and have a look at his monthly returns every single year through to 1981 and that gives you a good understanding of what he has had to go through in order to achieve that very good return and I don't think that's what people most people will not do they don't accept that you can be one of the world's best traders and have a losing year in fact someone like David Roos from memory I think he's had five or six losing years in his career but people don't view a losing year as a trait of a successful trader so as soon as you come to understand that that is actually the reality of it all then you're in a much better position to be able to deal with those hurdles when they come along and they will come along they come along for everybody so I think people have the wrong view of the world obviously many people have been fed incorrect information but you can go and access the track records of these great traders even warren buffett you can go back and take a look at his returns see what he's been through let's have a think back to warren buffett the great example in the late 90s when he rejected investing in tech stocks back then everybody said that you know he'd lost the plot you know he's he's had his day in the Sun it's all over but at the end of the day it didn't matter you know it didn't affect his long term return so I think the qualitative traits things that you can't teach having a losing streak is one thing having a losing period of time placing 200 orders and not making any money well that happens you know hmm we might try to find some of those track rock track records and put them in the show notes because I think they're quite interesting I've seen like when you actually sort of zoom into a certain section as you mentioned like one year you can sort of see in the shorter term how it was a losing year but in overall as the years go by it's you know a nice up curve I think we'll put those in the show notes because they're really interesting yeah I mean a good example recently I was looking at and certainly added in there Campbell & Co is a big fund in the US and they managed over 2 billion dollars so it's not small cheese I mean it's it's big money now you know they they have had a number of years of going sideways but they've been in business since 1971 they don't change what they do they just accept that that's part of the journey and I guess if we look at that in in in real life outside of trading let's think of something like Airlines let's think of something like Qantas I mean at the moment I'm pretty sure you can walk down the street and most people would tell you the last thing they want to know and want to own is an airline stock but we don't see Qantas getting into a and all mining or we don't see them getting into any kind of technology or inter banking or anything different they are an airline that's what they do but they understand that sometimes the airline business goes through good periods and bad periods but they don't change what they're doing let's you know Jerry Harvey with Harvey Norman retailing goes through good periods and bad periods but he doesn't change his business model just because of that we can look back to the GFC and the last thing you wanted to be was a bank but they endured they got through that but most of them did anyway and now they're all still very very successful companies they didn't change their business model so I think what happens when most people come to the trading arena with the qualitative traits when things get a little bit tough they change direction completely and they go for something else and that roundabout if you like just going around and around in circles looking for the Holy Grail is what actually undoes them in the long term yeah they get stuck on what you've called the beginner's cycle exactly right so there must be a point when you know you talk about writing out these losing streaks some people say you know you take three or four if you take three or four losing trades you need a stop step back reassess what you're doing and you know maybe back test for a while paper trade just whatever that might be you're sort of saying that you just sort of got to push on through it just keep pushing that button and executing as the opportunities come up is there a point when you sort of got to step back and say this isn't working yes you you've got o firstly and foremost before you even start trading is understand why your strategy will make money okay that's the key right there if you don't know why your strategy is making money then you're going to find it very difficult to keep pushing forward when the time comes so for example let's take a basic trend following strategy that trades long only in equities okay so we know that our mathematical expectancy is creating by writing trends and cutting them cutting a losses short so that's how we make money but we can also know intuitively know that sometimes the stock market will go through periods where it's either going down and we may stay in cash or it's trend less and go sideways and we have a little bit of a whipsaw now that's something that's happened in the small Ordinaries here in Australia over the last couple of years the small Ordinaries is basically at the same level or as it was four or five years ago so it has been trading sideways so there are small windows of time in there I remember the last quarter of 2010 as an example where in a three-month period of time the trend in following model made about 24% return and for the other eight nine months of the year it did absolutely nothing so most people I've come across would be pretty happy for a 24% return no doubt about that but most people also come across I'm not happy sitting there for eight months waiting for that great three-month period to come along so to get back to your question you have to know why your strategy makes money that's that's the key if you're doing ten different things and you have no idea why that is making money then you've got to change that you know you've got to understand why and once you understand why your system will make money then you can start to answer questions as to why it's not doing so well during those periods of time so again I know why a trend file model in the resource stocks is wouldn't be doing particularly well at the moment because the resource sector is is is underwater and going down it doesn't mean the model is broken it just means that it's out of sync with the market and one day it will come back in to sing so what a lot of amateurs try and do is avoid those periods of time where as a professional doesn't avoid them they accept that that's part of the journey and rather than avoid those periods of times what you should do is add a secondary or a third system or strategy to the mix so you have different strategies doing different things that make money in different environments I think a lot of people want to avoid the pain completely I mean I guess that's natural human tendency to avoid the pain but rather than avoid the pain what you should do is keep pushing through and add more strategies to the mix to diversify okay so when you say strategies what you meant by that like learning sort of extra blind signals or looking for different patterns and setups you want to just elaborate on that a little bit sure yep so personally for example my core strategy in the Australian share market is the trend following model okay that is my core exposure to the Australian market it's a break out model which means we buy strength sell weakness it has an average holding period of six to eight months and we tend to trade small cap stocks outside of the ASX 100 so that's that's the basic premise of that model then in the US market I also run a short term mean reversion strategy so very different in many aspects one its trading the US market specifically the S&P 500 stocks a completely different market second of all its trading a completely different style rather than buying breakouts it's actually buying dips so it's buying into weakness rather than breakouts it is doing a lot more frequent trading so we do 800 to a thousand trades a year in that strategy which gives us a little bit more consistency rather than the 25 lured trades in the trend and following model and lastly the average hold time is only three days so you're diversifying across different markets different timeframes different styles all sorts of different things and you're getting a completely different return profile than you would with a trend following model so rather than and last year is a very good example so last year I think the trend following model that I've that I use in Australia I think at a minus 12% year one of the first losing years we've had since the GFC now a lot of people would say well that's not good enough I'll go on to something else whereas that's part and parcel of the journey we're trading but the US model while US models made anywhere between 22 and 45 percent return last year so one model in one market didn't do particularly well but over the longer term what will be perfectly fine whereas the other model did exceptionally well and that's what I'm talking about I haven't avoided the drawdown I haven't said trend following doesn't work anymore and I'm not going to do that so it will always work it has to work Trent's stocks have to trend they can't not trend but they can go through these periods of time where we go sideways so rather than avoid that 12% negative view or take an opinion that the next year won't be any good I stick with it but I add other models to the mix that will help diversify okay cool I think we may have already covered this a little bit but just so we're really clear I mean you're in the business of dealing with quite a few novice traders where would be one of the key areas you see them slipping up and what would your advice be to overcome these setbacks yeah it's a great question there's probably a few areas where people slip up on let me talk about two in particular that don't get spoken about a great deal first of all Commission drag I think it's a very key reason why a lot of people fail a lot of people come into the stock market even when they're well capitalized they come into the stock market and saying well I've never done it before I'll just start with $3,000 or $4,000 and see how I go now when you're paying a broker $20 to buy and $20 to sell it doesn't actually take a huge amount of transactions to chew up your account or a significant amount of your account I had a gentleman in the office recently and he was the father of a friend of mine and he wanted to buy this whiz-bang trading system that was being that was being sold and I showed him that he needs to make 22 percent per annum just to break even and the simple reason for that was the quantity of trades that this strategy was doing the broker that he had to use and the Commission dragged that the strategy created he had to make 22 percent per annum just to cover those costs now I don't care how good you twenty two percent per annum is a big big ask and if you've never traded before it's an impossible task so he had to go away and have a good think about whether he changed broker which he really didn't have an option or he included more capital into there so that drag went down so I think a lot of people come into the business not understand that these peripheral costs can actually chew up the accounts significantly and make it almost impossible mathematically impossible to be successful I think the other core trait the people fail at is they simply don't understand what the journey entails and we've discussed this already to some degree you know the journey of trading does entail losing trades it doesn't ail periods of time of losing and it may entail having a losing year it's very very difficult for the average person to accept that they can place trades for a whole year and have a losing trade or have a losing year and until they accept that they're going to find it very very difficult to to be successful in it yeah sure I would like a strategy that makes money every day every week every month every year as anybody would but it doesn't exist I'm a realist I understand that and as I said earlier on there might be a few people out there that do have that but I don't and you don't need that to be successful I think if people take a longer-term view of applying the strategy rather than micromanaging the strategy and trying to avoid those bad periods of time when they come along they'll be a lot more successful mmm okay that's great this just made me think of something else you were talking about commissions there so some people might be paying $20 and $20 out that's a $40 round trip if you take a step back you were talking earlier also about maybe only risking 1% of your account on a smaller account say around $5,000 you can't really buy too big position with that the markets got to move quite a way just to cover your $40.00 Commission am I right in saying this that's correct absolutely correct yeah if you're going to use correct risk management tools such as fixed fractional position sizing or the one percent or two percent rule you know first of all you're not going to be able to actually do too many trades and second of all your position size is going to be so small that yes the market has to move a phenomenal distance in order to just cover your costs so I understand that there are certain people out there that say you can trade with $1,000 or you can be successful with $1,000 and look I'm sure there's people out there that have been but there's also people out there that win the lottery but for the very vast majority the chances of success are very very low two to nothing so I'm just talking about probability of success I'm not talking about impossibility I'm talking about probability so trading is difficult enough as it is and there are certain aspects of successful trading that you can control and one of those aspects is your Commission right you can go and move from a high priced broker to a discount broker you can do that yourself it's common sense to to make it as cheap as possible for your own bottom you know the second thing is you can control the amount of capital or you should take responsibility for the amount of capital that you want to put in if mathematically you start with $5,000 and you want to be a short-term trader and you're going to have to make 40% return just to break even well that's your responsibility to to remove that you've either got to don't trade wait till you've got more money or put more money in if you can so it comes down to the responsibility of the individual to to make that happen and a lot of people don't they'll just give it a go and see how I go and of course they're going to fail so it's important to make things easier for yourself those things that you can control and that way the probability of success will increase okay excellent so just one other thing I wanted to ask you how do you track your pro your progress does it all come down to the value of your account or do you sort of regularly set goals do you document every trade and then sort of reassess afterwards do you have any sort of method behind that I personally don't at the end of the day your account balance is going to tell you how you're going that's the bottom line I've been doing this for almost 29 years now so I get a good understanding of of what the market is doing and why my strategies may be underperforming so so long as I understand that I'm not really concerned about what's going on if I don't understand why a strategy is performing then I will certainly look into it further and research that and look we have had those incidences in the past I used to trade a strategy in the Australian market that just seemed to be going nowhere to backwards and it just made no sense as to why that was happening so we research that and went through about four years worth of trades and we found out the problem was the wanted price that we or the price that we wanted to buy or sell out was actually considerably different to the price we actually got filled out in the market and we calculated that on every single trade we made for that four year period we paid an extra $45 so the bottom line was that slippage was costing us between eleven and fifteen percent per annum and that comes down to the Australian market just being a liquid but that's why the strategy wasn't working because the liquidity was meaning we were paying away in slippage but consistently you know having slippage on one or two trades is fine having slippage of $45 on every single try you make well that adds to the bottom line considerably at the end of the year absolutely you know they're definitely soon out up so yeah back testing was very important there oh it's this sort of moves us towards the end of the interview so we'll go into the closing bell which is a series of just sort of short sharp questions that we asked them everyone on the show so what is the best piece of advice you've ever received yeah I think understanding why your strategy makes money that's that's key if you don't know why your strategy makes money you you're never gonna make a work if things get a little bit difficult so the more you can understand why your strategy makes money the better you'll understand the market and why our strategy is not working well during that period of time and that really helps the bottom line success but I think a lot of people just throw good money after bad just punting around if you like I don't really have any kind of rhyme or reason or if they think they do they don't really understand why it's making money so I think that's the best piece of advice that I've ever got understand why your strategy makes money I think that's really important very very very good so next one why what does a typical day in the life of Nick look like what does your daily trading routine look like if you have one I'm a little bit different I guess to what the model trader would be I'm what's called an end-of-day trader which means I download my data at the end of each day I run my strategies place my orders for the next day and that's pretty well it I don't sit there and watch prices through the day I've got better things to do in my life than do that so generally first thing in the morning we run our us strategies and I place those orders that's tends to be done by 8:00 8:00 a.m. in the morning 8:30 a.m. in the morning and once that's done I'm done with the US market until the next day and then after the ASX Bowl each evening I download the data run our strategies place those orders then I'm done so that's that's pretty well the routine it's it doesn't take long some of our strategies only take five or ten minutes that seems a little bit difficult to understand for some people I understand but it's taken 29 years to get to that point everything we do is predominantly automated now the computer does most things we simply put our account balance in the computer it tells us how many shares to buy where to buy where to sell and it can actually place the orders for us so we've got that routine down pat awesome good ones so what is the one trading resource you couldn't live without I would say the one trading resource that I couldn't live without would be the ability to back test our strategies I am the kind of person that needs to know what and why the strategy is how it operates how its operated in the past and that will give me a very good understanding on how it's expected to operate in the future so the software we currently use is a me broker so I think that's a core resource that I couldn't do without very good what is one book you believe is a must read for any trader just starting out that's a good question I think if you're an absolute beginner trading for a living by dr. Alexander elder would be a very good start as a very basic introductory book it's an oldie but a goodie I think if you're looking to do any kind of basic trading that would be a great place to start if you're more specific in your needs for example that you want to manage your super fund be an active investor well you know my book unholy growls would be a great place to start because it builds a strong foundation without going into all sorts of other areas but yeah those two books would probably be the best okay great knowing everything you do now what would you have done differently come day one again stick to the strategy I look I've fallen in the trap where I warn people today about the exact same thing you know The Beginner's cycle it's it happens to everybody it's happened to me I've certainly had strategies and then doubted them and then gone off on a tangent and then come back and thought gosh why did I go off in that tangent why didn't I just do it so you know I think that you have to find a strategy that suits your personality understand why that strategy works and do not deviate from it just let it run and let it go if you find that strategy has periods of time that make you feel uncomfortable and rather than deviate from the strategy add other strategies to it to diversify so I think that's the big key staying with a strategy over the longer term awesome awesome all right Nick next level responses thanks so much for giving up your time to share so much value with myself and the listeners before you go do you want to tell us the best way we can connect with you and then we'll wrap things up that's great thanks Erin thanks for having me well the best place to connect is through our website for Chartist comm a you we're also on Facebook and on Twitter the chart is calm that I you or you buy our book on holy grails alright thanks a lot Nick we'll put those links in the show notes below great stuff thanks for having me Aaron you're welcome you've come to the end of this episode of chat with traders but don't worry more great episodes are on the way to stay updated with each great new episode be sure to subscribe to the podcast in iTunes and we'd love it if you leave us a rating and review we'll see you next time on chat with traders

Channel: Chat With Traders

Views: 34,741

Rating: 4.871345 out of 5

Keywords: Nick Radge, The Chartist, Trend Following, Systematic Trading, System Trading, Trend trading, Stock Trading, ASX, NYSE, NASDAQ, Finance, Forex, Equities, Futures, Options, Commodities, Trader, Stock market, Wealth, Success, Interview, Podcast, Penny stocks, Shares, Wall Street, Dow Jones, SPY, Investing, Investment, Investor, How to trade, Stocks, Business, Technical analysis, Fundamental analysis, swing trading, day trading, risk management

Id: Ur78U_89LM8

Length: 49min 30sec (2970 seconds)

Published: Thu Aug 13 2015