Describe your style of trading (short / medium / long term, trending / contra trend, what instruments....)

I try to trade a variety of styles depending on market conditions. The majority of my systems trading strategies are trend following using formulas based on easily measurable technicals. I tend to use one or four hour charts depending on the instrument being traded.

Could your trading methodology be programmed into a computer?

Many of my trading strategies are programmed into my computer and are (almost) fully automated. I say 'almost' because I do like to keep an eye on them at frequent times during the day, just to make sure that they're still trading correctly. When I think of a new strategy I always try to develop it further through automated backtesting. I think it's great that you can expose your strategy to several years worth of data and market conditions in a relatively short time frame.

What data services do you use? What does this cost a year?

All of my automated forex trading uses the datafeed from the broker. Whilst I don't have to pay for the datafeed directly, it's probably covered by the spread for each trade placed. The majority of my day trading is through the broker Interactive Brokers. I do a lot of trading using a price ladder, so I connect the Interactive Brokers datafeed direct into NinjaTrader.  Doing this ensures that the price ladder and charts are receiving the same datafeed and are therefore synchronised. When day trading I usually trade European Equity Index derivatives, so I pay for a datafeed for Eurex, LIFFE and S&P futures, it's approximately $60pcm.

Describe your computer set up

My main trading computer is an Apple Mac Pro running Windows with dual quad core processors, 16GB RAM and three flatscreen monitors. My second trading PC is a mid-range HP workstation that I leave running with auto-trading strategies. Reliability and disaster recovery is very important to me, so I have a laptop with 3G card if my main PC suffers a major problem and I'm left with an open position. All of my kit is connected to a UPS too - I've had too many days of power cuts causing problems!

How many hours per week do you dedicate to trading?

What sort of annualised return should a trader reasonably expect?

How long is a piece of string? Trading should be considered to be a career, and it's a tough career. Trading is the only job I've ever had where I have put in a full days work, but still finished the day with less money than when I started! Obviously the long term aim is to have more up days than down, but a running streak of down days can be bad for morale. The term annualised return is more suited to an investment strategy or portfolio. For my automated trading I treat it as a mini fund, and generally look for a return that's better than the current risk-free-rate of return. My day trading focus is to generate enough profit on a monthly basis to pay the bills!

Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)

I've detailed quite a few systems trading strategies in my book - Systems Trading for Spreadbetting, Harriman House - but an easy scalping strategy I've been using quite a lot lately is to look for a change of trend in the S&P about 30 minutes after the open. The majority of the big indices are quite closely correlated. During the European morning session, the FTSE100 and DAX tend to drag Eurostoxx and the SMI along. In the afternoon session, the S&P seems to be the driving force. I usually wait until the first 30 minutes of S&P open has passed, and look for a change of trend at this point. If the change occurs, I then expect a change of trend in my chosen European index, I then scalp in the direction of the trend for a while.

If your trading strategy was a car, what model would it be?

Something boring, safe and reliable. Probably a Volvo.

Yes and no. Volatile markets can be great when scalping, but can cause problems in the longer duration systems strategies.

If you had to recommend one book on trading, what would it be?

I have a library of over one thousand titles, many on trading and investing, but the books that I would recommend are 'Rich Dad, Poor Dad' and 'Rich Dad, Poor Dad 2: The cashflow quadrant'. Neither of these books are related to trading, and they're not great for investment ideas either, however I found the underlying message to be very powerful. Financial freedom is something that everyone should strive to achieve. Trading for yourself can give you financial freedom, it can also give you quality of life. I always think of the saying 'You will never get rich digging someone elses ditch'.

If you had to make just one recommendation to spread bettors, what would it be?

Spreadbetting has many advantages, especially with it being tax free and the low cost entry into trading, but if you find yourself trading full-time you should consider setting up an individual trading account with a professional broker.

Do you agree with the saying: trading is a hard way to make an easy living?

The concept of trading is very easy, but in practise it can be a very hard way to earn a living. Having the right tools and training make a massive impact on your profitability. At the end of the day, trading is a numbers game. If you have a slight edge, and play the game long enough, then statistically you can achieve a consistent and healthy profit. Risk management and discipline are the keys to success. Trading will never be an easy living, but if you understand the inner you - why you do things, or repeat the same mistakes - then it'll make your trading a lot easier.

Do you offer any services to traders?

All of my long duration automated strategies run on the NinjaScript platform, so I do a lot of algorithmic development for trader colleagues, mainly developing their ideas to give them an understanding of how the strategy performed through various backtests. I'm also working on a series of automated high frequency ideas using the development interfaces into Trading Technologies X_Trader. I'm happy for fellow traders or firms to contact me if they're looking for assistance with systems development.

Any other thoughts on spread betting or trading?

Describe your style of trading (short / medium / long term, trending / contra trend, what instruments....)

My style of investing and trading isn’t fixed, it changes over the years and according to the market conditions. Generally, I have a core portfolio (mainly comprising ETFs) and a (much smaller) speculative portfolio for short-term punts. I first opened a spread betting account in 1985 with City Index and over the years I’ve actively traded futures, warrants and spread betting, but at the moment my trading is mainly in ETFs and shares.

I live in France and so getting the currency exposure right is always a bit of a challenge; I tend to keep equal exposure to Sterling, Euros and Dollars. To diverisfy exposure I have accounts with three brokers, in the UK, France and US.

Could your trading methodology be programmed into a computer?

Yes, one part of it probably could – not 100% programmed perhaps, but a large part of it could. In my speculative portfolio some of my trading is similar to the approach outlined by Nicholas Darvas in his book How I Made $2 Million in the Stock Market, which to some extent can be coded.

What data services do you use? What does this cost a year?

I use the data and news services provided by my brokers. For the UK market I also use Sharescope, which I believe costs around £150 per year.

Describe your computer set up

I have a desktop computer, a notebook computer and two widescreen monitors. I work on the notebook and watch the markets on the desktop. The two computers are kept synchonised with each other so that if one goes down (and, given that they are both running MS Windows, this is not an uncommon event) I can switch immediately to the other computer.

How many hours per week do you dedicate to trading?

About one. Because I don’t trade full-time now, and don’t have the time to monitor positions, I never trade live. On Sunday evenings I review all my posititions and watchlists and set stop orders for opening and closing positions for the following week.

What sort of annualised return should a trader reasonably expect?

I would be suspicious of any system that offers much more than 15%-20%.

How do you go about creating a trading strategy? Do you back test?

I believe in back-testing and would like to have the time to do more of it. However, today if I have an idea for a strategy I’ll more than likely test it live with small money and then increase the trade size if it the strategy seems to be working.

If your trading strategy was a car, what model would it be?

Perhaps a Citroen 2CV. Nothing flash, but it bounces along happily. If you want the adrenalin rush then it’s there (crank a 2CV up to 70mph and, in the wet on some sharp corners, leaning over at 45 degrees, those skinny tyres will give you a rush!) And if the car breaks down, you can open the bonnet and fix anything easily enough – unlike the sealed “black box” engines of modern cars.

Do you like volatile markets?

Yes: for my speculative portfolio.
A more qualified yes: for my core portfolio.

If you had to recommend one book on trading, what would it be?

The book that had the greatest early influence on me was Schwager’s Market Wizards.

If you had to make just one recommendation to spread bettors, what would it be?

Making money trading is not too difficult, the challenge is not losing it. Watch those losses!

Do you agree with the saying: trading is a hard way to make an easy living?

Yes.

Do you offer any services to traders?

I am a director of Harriman House, publisher of financial books.

Any other thoughts on spread betting or trading?

Less is more.

Describe your style of trading (short / medium / long term, trending / contra trend, what instruments....)

I would describe myself as a trader in a combination of short-term and medium-term time frames. In my short term trading I would classify myself as intraday with willingness to hold overnight if circumstances warrant it. My medium-term timeframe consists of swing trading and once a week adjustments to my asset allocation strategies. I usually have a combination of both trend following and countertrend trading techniques (otherwise known as reversion to the mean, which is a very important component of my overall strategy.)

Could your trading methodology be programmed into a computer?

I try to analyze my successful discretionary trading into rule sets that could be performed mechanically but currently I have a strong discretionary component to almost all of my techniques. When I do my back testing I always test against a mechanical rule set in order to determine if there is an edge that is persistent. Then in my trading I separate out  the combination of mechanical rules and discretionary trading in order to see what my personal value add as a trader is, if any.

What data services do you use? What does this cost a year?

I keep it pretty simple really, I get live price quotes from ScottTrade which is appropriate to use to manage all my accounts except for a few prototype testing accounts. I use Yahoo real time quotes because I like the way it integrates with Excel.

Describe your computer set up

I use a widescreen monitor for my primary trading machine which is a high performance laptop with a broadband connection. I  keep a second laptop with a separate Internet connection open at all times as my fail safe.

How many hours per week do you dedicate to trading?

I dedicate 3 to 4 hours a night to preparation for the next day's trading session with probably an additional five hours on the weekend for research and additional preparation. And then of course I am alert to the market when the US market is open. I probably work harder in preparation than I do an actual trading, because preparation is all about what might happen, whereas actual trading focuses simply on what is happening.

What sort of annualised return should a trader reasonably expect?

From a design perspective I think you want to target 20% return per year with no negative months and a maximum drawdown of 10%. This is simply a heuristic to use as a target for assessing the potential of specific trading strategies and as a benchmark for my own.

Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)

You should try to catch breakouts and ride them for a long way. I used to try to trade the after-hours market. I used to try to time news events and initial public offerings. All three of these strategies I have proven to my own satisfaction that I cannot do. No amount of wishing will make it so.

How do you go about creating a trading strategy? Do you back test?

These days it normally begins with the observation of opportunity that catches my eye and looks like it might offer signals that I could take advantage of given my current setups and preferences. I start looking for that pattern to manifest with some frequency in stocks or exchange traded funds. If I see it happening often enough I will start designing some rules. I also have other strategies for different time frames and styles of trading that as I look at the interplay between them sometimes ideas for extending them will just jump into my head. I use a lot of reasoning by analogy and many times that will suggest a style of trading that I hadn't previously considered. I read books with different ideas to see if I can find something that appeals to my style.

If your trading strategy was a car, what model would it be?

The 1993 Volvo 940 Turbo station wagon that is blue in color with leather seats and plenty of comfort and safety for long distance rides. It's a steel cage surrounding me, because safety is most important. It has plenty of room to carry all my gear and lots of friends. It gets excellent gas mileage of 25 miles a gallon. I expect it to run for at least 20 more years. It is completely indifferent to the stylistic concerns or opinions of others.

Do you like volatile markets?

I absolutely love volatile markets because it allows me to get the most return in the shortest period of time and features more human psychology than quiet markets. Since I believe my edge consists of trading against human psychology, volatility is for me.

If you had to recommend one book on trading, what would it be?

I think the most important book on trading is your trading journal which reports all of your preparations, your notes and insights and trading records, periodic debriefings, your trading plan, and which represents your professional trading practice in action. If you don't have that book you are in deep trouble.

If you had to make just one recommendation to spread bettors, what would it be?

Work out why the guy on the other side of your trade is in the trade; and then work out what can go wrong so that you can know your risk and avoid running off a cliff.

Do you agree with the saying: trading is a hard way to make an easy living?

Trading is certainly hard work, something you have to do every day to stay on your game. I think it's like anything, in that if you really enjoy it it doesn't seem like work.

Do you offer any services to traders?

I share my strategies, techniques, ideas, and personal records through a website, e-mail distribution, and host a daily live trading chat room for like-minded traders. I charge just enough to cover my costs, and keep my wife off my back. I publish my thoughts about trading on my blog at www.kansasreflections.wordpress.com . A lot of people seem to enjoy reading them and I know that helps me by getting the words out of my head onto paper where I can review and reflect. My website is www.tortoisecapital.com and I invite your readers who are interested to try my unlimited free trial.

Any other thoughts on spread betting or trading?

Respect the game and give it the effort and attention that it deserves. Always know your risk and never be afraid to walk away from something that you don't understand. And remember that when you think you understand, something might just be about ready to change.

I have, over the years, been involved in, and traded, all different time frames, and think this is actually the most important question any trader needs to ask themselves.

I originally come from a Futures Floor background, so understand short term “scalping” very well, and this was my first foray into trading. This is very time consuming, requires extreme concentration, and lighting quick reflexes. This didn’t really suit me as I was analysing the markets as well on a daily basis, so needed time out to do that. So I moved my time frame to longer term; swing trading if you like. But I was in a room full of scalpers. So if I got 20 points on side in a FTSE trade everyone was trying to persuade me to cover it, even though I thought there was another 20 points in the trade. This is when I learnt to trust my own advice, that one needed to finds one’s own way with this trading game; have a system, your system.   

I now don’t trade as I enjoy analysing the markets more, and have carved out a successful career running a growing business to provide analysis to traders (from novices to old timers!), rather than worrying myself with the pressures of trading each day.

Could your trading methodology be programmed into a computer?

I have managed to teach several people the nuts and bolts of the way I analyse the markets, and I equate this to being able to automate it. I’d say that 70-75% of what I do on a daily basis is “mechanical” and therefore could be reproduced/quantified for trading purposes, but that still leaves a good percentage that requires intuition and or a “nose” for the price action, only really borne by experience, and this bit CANNOT be automated.

What data services do you use? What does this cost a year?

I use CQG for my charting service, and it is at the high end for cost, especially for the number of markets that we need to cover (exchange fees for live trading making up a large chunk of my monthly outlay). But it is, without doubt, the best charting system out there. It’s one of those cases of getting what you pay for. One of the things I’ve always been impressed with about CQG is the quality of the data, and when the reliability of the data is key to the job you do (as it is for me) this is worth its weight in gold.

Describe your computer set up

I have a Dual Core PC with loads of RAM and run 4 screens. I write on one screen, have my e-mail on another, and have CQG on the other 2. One CQG page is a summary page with a big quote board, a few charts and CNBC and/or Sky News running all day as well. The other CQG screen scrolls to a different page for each contract we cover in the FuturesTechs reports, so we can view all sorts of different charts for each instrument. In analysing a market we will look at 10 minute, 60 minute, (several) Daily and Weekly Candlestick charts, Market Profile, Pivot Points, and sometimes Point and Figure Charts.

How many hours per week do you dedicate to trading?

I guess I’ll replace “trading” with “analysing” for this question. We get in at 5.30am each morning as we need to have 7 pages of analysis prepared and out there by 7am. We then have a little more time to write the rest of the reports; another 18 in all. We are usually done by 11.30am, after which we catch up with all the usual stuff like e-mails and the like. A couple of times a week I’m in London to see clients or to do seminars/training courses, but if I’m not (the office is in Southend-on-sea) I am lucky enough to be able to pick my kids up from school at 3.30pm, and spend the rest of the afternoon with them.  

What sort of annualised return should a trader reasonably expect?

The best fund mangers in the country will have had a good year if they return 10%. Newbie traders forget this. They think you can start with £2000 in a spread betting account and turn it into £50,000 in six months. It aint that easy. When a trader first starts out they shouldn’t expect to make money for 6-12 months.

Describe a trading strategy that you used to use (and, if you don’t use it anymore, why not?)

I think I kind of answered this in the first question!  - Trading in general! Most people’s answer to this question will have something to do with timeframes, I’d say!

How do you go about creating a trading strategy? Do you back test?

I always suggest to people that they test a trading strategy with the real world in mind. Unfortunately most don’t. I have seen so many “systems” that show a return of 10% a month “before costs”. Why bother testing something before costs? Costs are an inevitable part of trading. You can’t ignore them! I also think you should use “worse case scenario” prices when testing a trading strategy. In other words if you get a buy signal on a 30 minute chart then make your entry the high of the next 30 minute candlestick. After all, you may not be able to get in at the open of the next candle let alone the lowest price of the next candle! If you back-test with the odds stacked against you, and you make money, then you may well be on to something. It’s kind of the reverse of kidding yourself. Reality is so important for a trader!

If your trading strategy was a car, what model would it be?

I’ve always compared analysis services with newspapers, actually! FuturesTechs is not the Sun, but it’s not the FT either. We don’t just make up a load of crap for good effect, and make promises that can’t be kept, on the other hand we don’t go into every detail of the markets until even the insomniacs are sorted!  We try and give it to people straight, without any crap, giving traders a useful, concise read each morning.  So what newspaper does that make us?!

Do you like volatile markets?

I love volatility. We have a real tough job writing something interesting about tight, rangy markets. You end up saying the same thing for days upon end, until in the end you just say “look, there’s nothing happening, find another market to trade!”

If you had to recommend one book on trading, what would it be?

My book (Candlestick Charts, by Harriman House)!! I’m not sure that’s allowed, is it?!  

I am a big fan of Reminiscences of a Stock Operator, by Edwin Leferve. This book really does live up to the hype, and makes you realise just how tough this game is. It’s a cracking yarn with a few gems in it; a few things that will really get you thinking about the business of trading, which hasn’t changed since Jesse Livermore’s days!

If you had to make just one recommendation to spread bettors, what would it be?

Read books. As many as you can. Books on trading, books on Technical Analysis. Read, read, read.

Do you agree with the saying: trading is a hard way to make an easy living?

Totally. To the point where I’ve decided it’s not for me. But I can still see why people want to have a go. It’s a real journey. I’m glad I’ve made the journey, because I wouldn’t be where I am now without discovering about myself through trading. And I’m happy where I am - happy not to be trading.

Do you offer any services to traders?

FuturesTechs writes 25 pages of analysis a day covering Bond, Equity and Commodity Futures, as well as Forex crosses. We have been adding content to our website since it’s inception a year ago (we’d been running an e-mailled service for 8 years prior to that), and this affordable solution is proving popular, adding “retail” customers to our well established “professional” client base. Anyone can try it out, by going to http://www.futurestechs.co.uk/free_trial/

Any other thoughts on spread betting or trading?

Don’t use a spread betting account to “prove” what you think about a particular instrument or market. I’ve seen so many people with passionate views about, say, Gold going to $2000, and they get a spread betting account to buy some Gold, then lose money on a short term move, get stopped out because they run out of money, just in time for Gold to rally strongly. Trading something and having a long term view are two very different things. Treat trading as a business, not a way to try and prove a point about something.

And use technical analysis – it’s the only thing that will get close to giving you an edge.

• Describe your style of trading (short / medium / long term, trending / contra trend, what instruments....)
• I am more technician than fundamentalist, having discovered in a study for my book Stock Fundamentals On Trial that fundamental ratios – and particularly the analysts’ estimates thereof – can be very misleading and not at all indicative of future share price performance. I would describe myself as a position trader who will place a day trade initially (and get out quick if it turns sour) but let it run potentially forever as long as it doesn’t breach my protective trailing stop.
• Could your trading methodology be programmed into a computer?
• As an IT consultant in a previous life, I like the idea of a fully automated trading system. My attempts have so far been unsuccessful; there seem to be some things that the human brain can do that a computer program cannot – such as pattern recognition. I regard a trading system as essential, whether fully automated or not, but I think it’s a very personal thing. My system might not work for you.What data services do you use?
• What does this cost a year?
• I only use the charts, news feeds, stock screeners etc. provided by my stockbrokers and spread betting providers. I don’t pay for additional information. The most important piece of information is the price.
• Describe your computer set up
• Currently a Samsung Q210 dual-core laptop with 3Mb RAM; a broadband connection in my home office and a 3G broadband dongle for when I’m on the road.
• How many hours per week do you dedicate to trading?
• I trade full time interspersed with writing and publishing. I have live portfolios and charts on display while I’m doing other work, and when I see an opportunity I switch into ‘trader’ mode. I nurse a trade initially and then switch back to my other work when I feel it is safe to leave the trade alone. Actually, I spend more time maintaining existing positions (by adjusting stops) than I spend placing new trades.
• What sort of annualised return should a trader reasonably expect?
• I don’t think that a trader can expect anything. Que sera sera (what will be will be). It depends on the state of the markets at the time, the trader’s risk tolerance, and the portfolio size /amount of leverage used. For example I have a spread betting portfolio showing an increase of 2500% (yes, really) in just 15 weeks (yes, really). But this portfolio was created specifically as an example in my forthcoming Stop Orders book, so it started with a very small seed capital of £300 and employs quite aggressive leveraging and pyramiding. Periodically I provide an update on my blog at http://lotontech-money.blogspot.com
• Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)
• My main strategy involves a combination buying on a massive downward correction, using a small position size initially, trailing stops manually to secure profits, and using accrued profits to pyramid additional stakes.
• How do you go about creating a trading strategy? Do you back test?
• I tend to trial my hypotheses in live markets rather than relying on back testing, and I tend to use back testing more as a mechanism for disproving systems. In my book Financial Trading Patterns I proved to my own satisfaction that a fully automated trading system utilising trailing stops with fixed distances will not work under all market conditions; despite the fact that it appears to work spectacularly for some time periods in some markets using some well-chosen stop distances.
• If your trading strategy was a car, what model would it be?
A very fast Ferrari... with a speed limiter, numerous air bags, collision-avoidance radar etc.
• Do you like volatile markets?
• As with fast cars and fast women, they can be very exciting and can provide once-in-a-lifetime opportunities. But they can be very dangerous if you don’t know what you are doing.
• If you had to recommend one book on trading, what would it be?
• Will you allow me two books? How I Made $2 Million in the Stock Market by Nicolas Darvas and Reminiscences of a Stock Operator by Edwin Lefèvre.
• If you had to make just one recommendation to spread bettors, what would it be?
• DON’T LOSE MONEY! Think not only about how much you could win, but how much you could lose.
• Do you agree with the saying: trading is a hard way to make an easy living?
• It’s like riding a bike. You take advice from other people on how to do it, you fall off a lot and get badly hurt, and then you give up. Or you keep going until the penny drops, you develop your own style, and it becomes second nature.
• Do you offer any services to traders?
• I publish trading books at http://www.lotontech.com/money and I maintain a blog at http://lotontech-money.blogspot.com I have so far resisted the temptation of running seminars despite having done so in another subject area until a couple of years ago.
• Any other thoughts on spread betting or trading?
• If I hadn’t already accumulated ‘investments’ in tax-efficient ISA and SIPP accounts with a regular stockbroker, I would probably operate only via spread betting accounts. It’s a common misconception that spread bets are only for day traders, yet I would use rolling spread bets for longer term position trades and investments. Yes, I said ‘investments’.