Interview with Nick Radge (by student2trader.com)
Nick, tell us a bit about your history as a trader?
I originally got the bug after watching someone else plot a 5 and 10 day moving average crossover system by hand. I could see how and why the strategy worked, at least in its simplest form. From there I simply progressed through the ranks of working at various banks, both here in Australia and overseas, and taking on the passion. I have now been trading for 25-years, from the trading floor of the SFE to dealing rooms in London and Singapore. I have a passion and work hard at it every day.
You run a service today called ‘The Chartist’, can you tell us more about it?
The Chartist is a technical analysis newsletter and trading system portal. It’s all very good to read books that show picture perfect trades where 100% hindsight has been used, but to see the patterns on the hard right edge, to put a strategy around that and then manage the trade is what we do. The Chartist covers many facets of trading but the underlying pretext is always technical analysis. We now run four systematic trading models that I also personally trade alongside subscribers. The Chartist offers something for everyone interested in active trading without hindsight.
For those students who are learning, can you briefly explain what is technical vs. fundamental analysis?
Technical analysis is the study of price action which is the truth of the markets. Price activity is driven by fear and greed and because humans tend to operate on the same level we get to see the same patterns form over and again. Price patterns come in many distinct forms but added with solid trade management you can create excellent strategies. Fundamental analysis on the other hand is an attempt to place a valuation on a particular stock and therefore profit from a deviation away from that valuation. However, the major flaw in this logic is that deviations away from valuations are generally extreme – driven by fear and greed which in turns creates a state of difficult trade management. One only need look at fund manager performance during 2008 to see that fundamental analysis has some issues to contend with.
What predominately is your trading style; technical and/or fundamental analysis?
Without a doubt I’m a technical trader, albeit well versed in economics and fundamentals. However, there are sub-areas of technical trading such as systematic and discretionary. I have done both over the life of my career but almost all of what I do now is systematic. A systematic approach uses computer simulations to dictate buy and sell signals and tends to remove a lot of emotional input into the decision making process.
Have you always traded with this philosophy or is it something you’ve developed over time?
The irony is that the first time I saw trading work was with that 5 and 10-day crossover method when I was 18, and that was a systematic approach, I have deviated at times but always come back to that style of trading. My philosophy on trading and how a trader should act has certainly developed over the many years, but working inside the business for so long has helped that along.
What advice would you give to a student looking to get into trading?
The first piece of advice is that there is no easy way to make it in this game. Like any profession it takes passion and years of dedication. It doesn’t take a weekend course! I not sure how one develops a passion for anything, but if you have the passion then you will find a way to succeed. On a more practical note I would suggest that any dreams of trading full time be removed. Find a strategy that can operate with minimal time each day then stay employed. The power of compounding and application is what is required more often than not. People are too quick to want the end result now.
In your opinion, what is the best way a student should aim to enter the trading world and build a successful career?
Many industry jobs are not what people expect them to be. Many are sales jobs and today many are not really hands on market related. I know plenty of people who work in the business but because of electronic trading they really don’t have much to do in the way we used to do it. Being a stock broker or financial planner is more being a salesperson. You get paid by commission and funds under management. The best salesman gets paid the most money, not the best trader. Also to consider is that many people don’t have the stomach for risk which is why so many fail at this game. If trading were easy everyone would be doing it rather than working.
What is one thing a student can do to fast-track their learning curve?
There are two core parts to success in trading. The first is the quantitative aspects of the game – that is those ‘hard wired’ bits that you can follow along with and read about in books. Things like building a trading plan, using good risk management etc. Anyone can follow these if they have some discipline. The second is where it all goes pear shaped – qualitative traits. How to deal with losses. How to accept that losses and losing streaks are part and parcel of the game. How do you teach a person to lose? Confidence is another. When things get tough its easier to throw in the towel, place some blame on someone else or the market, then try something different. I call this the beginners cycle. Successful trading is quite simple, but people are their own undoing because they lack the required psychological traits to make it happen.
Traders will no doubt experience both good and bad days, can you remember one of your best trading days?
Whenever I execute my strategy I have a good day. After trading for so many years you need to stay level with emotions. Win or lose its just another day or another week or another month. If you get euphoric at a big win then by the same token you’ll get down when it gets tough. Have no emotion or expectation and you’ll be a lot better off in the long run.
Can you recall one of your worst trading periods and how did you handle it?
A bad period for me is not really about losing money. A bad period for me is when the market moves sideways for extended periods of time and we get chopped back and forth. It’s frustrating and difficult for most people to deal with. I always emphasize to people that success and profits aren’t linear. They need to think longer term.
What potential learning tools exist that students who wish to become traders should know about?
I think it more important that traders think through the maths behind profitability. They need ask themselves. “Why will this make money?” Let’s face it, we could place 200 successful traders in a room and we can pretty much guarantee that they all do different things. A new trader should work out the single common denominator amongst those 200. The answer is simple, but its absolutely vital to understand it.
What educational books would you recommend for beginner and intermediate traders?
I would recommend reading my free e-Book Successful Stock Trading for insights into the answer to the above. Secondly I would recommend reading between the lines of many of the famous trader interview books such as Market Wizards 1 and 2. Don’t just read the text. Read it then ponder what is really being said and understand it. I also highly recommend Complete Turtle Trader by Michael Covel. It doesn’t get any more real than that.
What are the biggest mistake beginners make when attempting to become traders?
If it were easy then everyone would never need to work again. The quantitative traits are easy which is what you’ll learn in books or in courses. Unfortunately you need to learn and accept the qualitative parts of trading in order to become successful.
What final advice can you offer aspiring traders?
Rome wasn’t built in a day. Like any other profession, it takes commitment and passion. It takes psychological fortitude above and beyond what most people can readily deal with. Much of this stuff can’t be found from a weekend seminar. Latch on to someone with years of experience to help guide you.