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Futex Masters
Interviews with Futexs Elite Traders
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Contents
Introduction Paolo Rossi Mark Rossi Daniel Goldberg Gabriele Gandini Adam Percy Whiting Waqqas Ahmed Olly Thomas John OSullivan The Big Interview The Big Interview 2
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Introduction
Futex is the leading Proprietary Trading and Investment House providing individuals with successful trading careers. As a group, we have been training individuals to trade for more than a decade beginning on the LIFFE floor and as a result we offer unparalleled opportunities to those individuals with an absolute passion for the financial markets and a burning desire to succeed.
In an effort to lift the lid on just what it takes to become an elite trader within the Proprietary Trading industry, we have compiled transcripts from a series of interviews and panel discussions conducted with our traders during 2010/11. The traders in question have each achieved trading success they are now part of the trading elite - and their experiences serve as a priceless insight for those of you embarking on a similar trading career. Trainees that join Futexs 12 week Trading Floor Training programme enjoy the benefit of such experience on a daily basis. We hope you enjoy this snapshot of that experience and that it helps you in your own trading.
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Paolo Rossi
Paolo Rossi is the Executive Chairman of the Futex Group. Paolo has been a government bond trader since 1990. Specialising in futures, he became one of LIFFEs leading participants in the bond futures markets by the end of the 90s. With a keen eye on the derivatives industry he was the instigating partner in the worlds first electronic trading floor for independent traders and investors in 1998, specialising in highly liquid, professional-level markets such as CME, CBOT and LIFFE. Now, as founder and chairman of The Futex Group, he has made it his goal to achieve new levels of excellence in derivatives trading; establishing trading floors second to none, and providing training programmes for new talent that are the envy of the futures and options world. The following transcript is taken from one of the many Q&A sessions that Paolo holds with trainees that join Futexs 12 week Trading Floor Training programme. These sessions give trainees the opportunity to fire questions to our experienced traders and they dont come any more experienced than Futexs founder himself. This particular session gave trainees an insight into the mind and lifestyle of a successful trader and provides invaluable experience for those of you starting out in the industry. Paolo began the session by highlighting Futexs philosophy which has at its core the ability of traders to establish and maintain an edge over the market. Futex enables this philosophy by providing both an impeccably high standard of training and state-of-the-art facilities; this gives every Futex trainee the opportunity they require to become successful. Q: What are the essential lessons you must learn as a trader when starting out? Paolo Rossi: First of all being able to identify the probability of you being right or wrong in a trade. This is commonly referred to as a risk/reward system. An increase in the amount of risk taken on in a trade should be proportionally reflected in your reward. Your ability to measure this among other skills defines how good you are as a trader. Observing a process repeatedly enables you to pick up on information that will give you an indication of the final result. It enables you to spot factors indicating specific outcomes and to develop a familiarity with what is happening thereby increasing your probability of being right. Only through constant guidance and concentration can this ability be developed over a period of time. This goes for anything in life and even more so in the trading world. At the beginning you are wrong a large percentage of the time - or being right for mostly the wrong reasons - but over time you form a bank of information for the rules and patterns which take place in front of you and develop the instinctive ability to understand the markets and make money. As a trader you are not going to develop this ability over night, it will only come after years of hard work. opportunities@futex.co.uk | http://www.futex.co.uk 4
FUTEX Q: What are the key components traders must include in their everyday approach? Paolo Rossi: Every morning before sitting down at their desk to trade, every trader must read the Financial Times. This is an investment in your own knowledge and gives you the ability to get in tune with the markets. If everyone else who trades in the market reads the FT then it is vital that you do also. It identifies whats current in the market, what the markets are concentrating on and enables you to form a list of topics on which to focus throughout the day. Before the markets open be prepared for the day. You should know what levels you are looking out for, the highs and the lows from the previous day and how you will act when the price reaches those levels. You must be confident of how you are going to trade when the prices reacts and behaves in a certain way giving you conviction in your trades. Conviction only comes from planning and conviction is what gives traders opportunities in the markets. Hard work and discipline combined give those traders starting out a chance of making it. Any cutting corners will only be cheating yourself and will not provide the answer to becoming successful. Q: What is the key to increasing your size? Paolo Rossi: Increasing your size at any stage of your career is mentally a difficult process so try to do it in an invisible fashion. This is done by increasing your size by small increments each time for example from 10 to 12, then from 12 to 15. It is important that upping your size does not affect your trading style and is based on successful performance at the size you traded previously. If you are trading poorly upping your size is never the answer. It is important for a trader to start off trading no less than 2 lots as this means a trader can either add size to their position or have the ability to take profit but remain in the trade. This is impossible when trading with a one lot as you are either in or out of a trade. It is important when adding to a position to be able to exit the trade if the markets turns against you as this could well prove costly. Q: What separates a really good trader from an average trader? Paolo Rossi: The best traders have the same characteristics and it is vitally important for traders to adopt these in order to be successful. The best traders have the ability to get involved in the markets all the time. When you first begin and are on the simulator it is essential that you trade and trade and trade in order to build up your experience and get to learn how the market behaves. You should be looking to add to positions as well as decrease and practice, practice, practice so you can learn as many lessons as possible while they are free! On another hand, it is important you look to understand the economic effects of what goes in the markets. Emerge yourself in the economics and how it affects the markets you trade. The hard part is to fully understand the economics behind the market and how it affects market behaviour; once this is grasped, the trading part becomes understandable.
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FUTEX Q: Does trading become easier throughout your career or is it continually this difficult? Paolo Rossi: It becomes easier. The longer you are trading, the greater your bank of knowledge and understanding of the markets, the better trader you become and the less difficult it becomes. The continuous hard work does not stop but once you gain an understanding of how to make money then the less stressful trading becomes. When traders first begin it is usually a negative and sideways pattern in which they struggle to make money. It is often when they are about to quit or give up that the concept of using their huge range of knowledge and trading skill to make money finally clicks and they become profitable. For a trader to become profitable they must understand why things in the market are happening. The only way to learn trading is through trading. The more you trade and the longer you trade for the better chance you give yourself of becoming profitable.
Tip from the Chairman: Do not fall into the trap of having resting orders. It is vital to let your onside positions run and approach these with conviction r ather than cutting your profits quickly.
Q: What is your opinion on goal setting? Paolo Rossi: It is extremely important to have goals, to write them down and read literature on goalsetting. You should have goals in life and goals in trading. The profit-split structure at Futex is designed to give our traders clear goals so that they can strive to achieve a 90%-10% level of profit split in their favour. Goals provide direction to your personal development and demand improvement; this is vital from a traders point of view. Q: What would be your one piece of advice about the markets for a Trader starting out? Paolo Rossi: The markets are impersonal; they are neither working for nor against you. The markets consist of thousands of people with their own agenda. It is not always in your interest to understand what the other side of the market is doing, it is just important to make the market work for you. The market demands explanation and it is your job to understand this; every participant wants something different from the market as each participant has different goals to achieve. In terms of understanding the market you must know that the market is not rational or intelligent. It will ignore the obvious and it is not down to you being right - it is down to understanding how the market is going to act. Always bear in mind the obvious market behavior and develop your own opinions on it. Often, when the obvious behavior does sink into the market, this is when the quick moves appear. Traders make their money when a crisis takes place in the markets. Therefore, as an intraday trader you must be prepared for these Armageddon Trades. What would you do if President Obama was shot or if a tsunami hit the coast of New York? In these situations you must know exactly how to react and combine your trading instincts built over time with experience and knowledge to capitalize and make your money.
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Mark Rossi
The next elite trader interviewed is Futex Managing Director Mark Rossi who discusses the industry and how to succeed in trading. Mark Rossi has been a futures trader since 1993. He has been Managing Director of Futex since 1995 and is a partner in Futex Investment and Trading Academy.
Tell me about your personal approach to the markets and what you trade today.
For me there is no substitute for enthusiasm and preparation. Unless you have a genuine, unwavering passion for the financial markets, you should not embark upon a trading career. You also have to embrace the fact that you will have losing trades every day. You dont have to like that fact but you have to deal with it, get over it and trade. With regards to my personal trading I focus almost exclusively on the Euro Stoxx and CAC.
How has proprietary futures trading changed since you first became involved in the industry?
It is like comparing two different worlds! I never used a chart on the LIFFE floor, whereas they are absolutely essential to trading today. The volatility is much higher and rather than competing against a couple of hundred other guys you are now competing against thousands of highly competent participants. You used to be able to relax in the pit and discuss the markets, maybe even the football from the previous night! Nowadays, it is essential to be watching your screens at all times and to be the ultimate professional if you want to beat the rest.
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Daniel Goldberg
Welcome to Futex Masters, a series of Interviews with Futexs elite traders. This interview was conducted with Futex Director Daniel Goldberg and reveals the secrets behind the longevity of his futures trading success. Daniel, 33, has been a futures trader since 1997 and is also a partner in Futex Investment & Trading Academy.
What products have you traded in the past, what are you trading now and why?
I have traded Bund, BTP, Gilts, Bobl, FX, FTSE and Notionel in my career to date. I currently focus exclusively on the Bund and have done for a while now. I feel very comfortable with this product; it is very familiar to me, it suits my personality, my character and also my timeframes of trading.
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Gabriele Gandini
In this interview Senior Futex Trader Gabriele Gandini lifts the lid on his personal approach to trading. Gabriele has been a trader at Futex since 2007 and currently trades Dax and Crude Oil.
Tell me about your personal approach to the markets and what you trade today.
I have a very short trading time frame and I try to open and close positions in a few seconds. I think that the more you stay in the market, the more you are exposed to risky events and that a small price movement is easier to predict than a big one. I think it is very frustrating to be onside a few ticks and then be forced to take a loser on that trade so I prefer to take my profits quickly, and try to get back in again at the appropriate time. I dont use trend lines, indicators or market profile. I passionately think that the price action, in a small time frame, tells you everything you need to know to trade. Im aware of support and resistance just in case there is a chance stops might be triggered. In the past I used technical analysis as a way to justify my losses. I strongly believe that the more you go around talking about the market instead of watching it, the less money you make. After a couple of years trading EuroStoxx 50 I moved to Oil and DAX in 2009. I believe it is easier to be disciplined in a faster market because if youre not, you will be out of the business quickly! opportunities@futex.co.uk | http://www.futex.co.uk 11
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If you could have your time again, would you do anything differently?
In terms of trading, it would be easy to say I would have avoided that bad trade or eliminated that trading behavior. However, I think that every trade, good or bad, like all the missed opportunities, has been important in making me into the trader I am at the moment. So, if an awful day can help me to be opportunities@futex.co.uk | http://www.futex.co.uk 12
FUTEX a better trader in the future, its more than welcome, as long as I learn the lesson (and as long as that loss doesnt kick me out of the business!). So, when in the past Ive done something wrong in the market, it means that at that time it was the right thing to do for me, so I would probably do it again. The only thing I regret is that I didnt start trading earlier!
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Tell me about your personal approach to the markets and what you trade today.
I predominantly trade short-term. Im heavily involved in the markets looking to job or scalp with the occasional long-term trade. Employing a short-term trading style really works for me by preventing me from becoming too stubborn. I dont get married to any trading ideas and reassess quickly when conditions change. Ive traded numerous markets over the past few years but currently focus on European Equity Indices. The opportunities within these markets for locals like us are excellent.
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Waqqas Ahmed
Waqqas Ahmed is Futex Groups Chief Market Analyst and a Senior Trader. Waqqas has a depth of both knowledge and experience and is thus a great trader to whom we can put the following questions.
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Olly Thomas
For the following interview we had to drag Olly Thomas kicking and screaming away from his screens and the Sovereign debt crisis to talk to us about his trading. Olly joined Futex in 2007 and currently trades the Bund.
What products have you traded in the past, what are you trading now and why?
It is vitally important to be flexible in trading and to follow the best opportunities as they will not always be in the same market. However, every trader at Futex has a base market they fully understand which provides the consistent profits they seek. My base market is the Bund but I have also traded S&P, DAX, Euro Stoxx, FTSE and T-Notes. Trading more than one market at a time takes a lot of skill and experience but can reap massive rewards.
Do you use technical and fundamental information to make your trading decisions?
Both of these are important to understand otherwise you leave yourself exposed to failing to understand what is currently driving the market; a potentially expensive mistake. I lean more on the technical information when the markets are quieter but find it very hard to separate the two. Without the ability to understand price behavior, your chances of making consistent money are limited.
How do you see your trading evolving over the next 12 months?
It is important to keep pushing yourself beyond what feels immediately comfortable. Over the next 12 months I will continue to do this by pushing my trading size to allow me to achieve my goals. As I have developed as a trader I have noted that my discipline has improved. It is a skill that is often talked about but is very difficult to master, requiring repeated practice. I hope to master this over the next 12 months.
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John O Sullivan
In this interview we managed to sit down with Futex Investment & Trading Academy Director John OSullivan to pick his experienced brain on what it takes to be successful in both the Trading and Training business.
How has proprietary futures trading changed since you first became involved in the industry?
Some people say that the Algorithms/Black Boxes have taken over and that its difficult to trade these markets as a result. What I do see is those traders that were successful continue to be successful. That is no accident; talent, dedication and hard work pay-off in the long run.
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You all use scalping as one of your key tactics in the market, what is this?
Oli: For me scalping is the term used for when a trader looks to get in and out of the market quickly, looking for relatively small profits. When trading in this manner it is essential to ensure you manage your risk well and dont lose money through stubbornness. Your target on the day shouldnt be to make a profit but to ensure you dont get caught on the wrong side of a trade. You should never lose more than you set out to, particularly if your profit target is a few ticks. Adam: Scalping is a tactic I use to extract 10/15 prices a day from the market. It is an approach that encourages you to trade consistently which over time will allow you to increase your trading size meaning you can earn more money in the markets without excessive swings in your P&L. As Oli says though you must show discipline in knowing when to exit a trade. Artur: You must know when you are in a bad trade and when to cut your losses. You must be able to judge when the market is going against you. When you make a losing trade you must reassess the market, identify why the trade was a loser and look to evaluate what is going on in front of you before re-entering the market.
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What time of day do you trade and does the time matter?
Oli: Sometimes mornings are easier to trade as the market has more structure. Afternoons can often be more erratic due to the presence of US participants and particularly at the cash open. However, you must ensure that even if you are making more money in the afternoon that you continue to trade in the mornings. Market conditions can change overnight and if you have eliminated your trading activity in the mornings, this will inhibit your ability to generate consistent profits. Artur: It is vital that you never panic when it comes to making money and let the opportunities come to you. Times of the day to watch out for are the economic figure releases, bond auctions and the opening/closing of the underlying cash markets. The US participants often dont pay any attention to your trend lines and technical levels, and the market can often jump violently. You must be cautious. It is also vital that you do not change your trading style whether you are up or down. For example, do not increase your size just because you are down and looking to chase the market. Dont increase your activity (over-trade) just because you are chasing losses or through overconfidence. For me this is gambling and not trading according to a concrete plan. This will only result in even greater losses or giving back money that you have made. Adam: You are an insignificant fragment of the market. The market is still the market if you are up or down and therefore you should treat it in exactly the same way no matter what the time of day. It is not against you at a particular time of the day but you must demonstrate discipline throughout the day to win. Ensure that you stick to your rules and plan otherwise you will not be able to monitor the effectiveness of your approach. If you stick to your rules and you are consistently losing, then you can look to change your rules in order to become profitable. If you deviate from your rules and trade in many different styles, then how can you identify the mistakes you are making, eradicate them and progress to become a consistently profitable trader?
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How did you change from trading inconsistently to being a consistently profitable trader?
Paolo: Every trader starts as a loser and its the ones who put in the hard work and commitment that become consistently profitable in the long run and give themselves the chance to earn large figures. On this path many traders go through a variety of lessons. Artur: It is vital to learn plenty about the markets, the overall economy and to learn from the people around you in order to get your own knowledge to a level where you grow in confidence and are able to make consistent profits. It is important to learn about yourself, what suits you and to maintain a long-term vision such that if you work hard and develop your trading, whilst learning from your mistakes, you will eventually reach your destination. The discipline must be there and you must come to work prepared every day both psychologically and physiologically. Adam: It is your primary responsibility to know the markets, the economy, what is going on and how these factors impact the price in front of your eyes. Eventually you will grow in confidence and be able to forecast market movements and confidently trade using these to give you the opportunity to make money. As mentioned previously it is vital you stick to your plan and dont react to your own P&L, changing the way in which you trade. Over time you will develop the resources you need to be successful and you must remain patient. You must not blindly copy others as how they make money is unique to them. Share ideas but develop a style that suits you. Wait for your opportunities in the market as they will come to you. Do not over trade but trade with good reason. Paolo: Developing as a trader involves increasing your trading size. It is difficult to increase your size to begin with because an increase from 2 lots to 3 is a 50% increase. You must look to increase your size only by an amount which is unnoticeable to your fear monkey. Ensure you do not change the style with which you trade due to fear; you must remain comfortable and confident. Also, look to change opportunities@futex.co.uk | http://www.futex.co.uk 24
FUTEX your size by different amounts; for example from 15 to 17 instead of to 20 so that psychologically it isnt a huge step. Within a week the new size will seem irrelevant and you will behave in the same way as you did with the previous size. Oli: The key driver for me in becoming profitable was confidence and this only comes through long periods of hard work. You must read plenty and research/review your trading constantly. You must analyze every aspect of the markets and the economy, understand every economic figure and bond auction, and know exactly the impact they have on the market. Look at both the charts and these figures to identify patterns of movement so that you can identify what the market does. When you can do this you can trade confidently and quickly take ticks from the market. You must spend every day glued to your screen till the late hours of the evening so you know how the market behaves at all times of the day. There will be evenings when you have to trade until 9 oclock because you have had a bad day. If you have consistently left early every other day at 5 oclock, what chance do you have of understanding the markets and what is taking place. Look back at your day at the errors you made and identify why you made them. Make a commitment to eradicate them from your strategy; this is essential to your development as a trader. There is no shortcut to becoming consistently profitable; you must put in long hard hours of dedication to get the results you desire. You cant change how smart you are but you can change the amount you know about the markets through consistent hard work and dedication.
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Matt has been at Futex since the summer of 2009 and trades the Bund, S&P and US T-Note markets. He
discussed in the Q&A his trading style - a method called scalping - where he looks for 3 to 5 ticks/trade using a combination of market profile, point and figure and other simple charts. Throughout his career he has developed an edge which enables him to spot patterns in the market. He does this by taking a short term view often around tales in market profile charts and at resistance levels. Matt often looks to fade the market by going against the immediate market flow using price action indicators to enter. He uses his experience to spot stops in the market and/or changes in price momentum. Matt stressed the importance of getting to know the price action of your market inside out which comes through hours of committed and disciplined hard work. Matt also has the ability to take a fundamental view in the market around economic announcements. Using his web of macroeconomic intelligence he looks for larger profits from individual trades employing a trailing stop loss once onside to allow his profit to run and to ensure at least a small profit is made. When starting out as a trader, Matt commented on how he took lots of small losers. This is why it is so important to build familiarity with your market so that you understand even when offside the probability of still taking a profit from a trade. On an average day Matt does no more than 30 trades, focusing his trading on parts of the day when the market is most volatile. He has the ability to change his trading style to adapt to the changing market behaviour at different times of the day. Throughout the questioning, Matt constantly referred to the ability to read the price action. He commented on how no matter what charts or patterns you use as a trader, your ability to read the price action is the only real tool which will tell you when to enter and exit the market. Another tip he provided was to look at the volume consistently and be able to identify whether the price is moving because of a big buyer or a lack of sellers or simply because there is low volume in the market.
Matt s Trading Tip: Do not be scared to take losses on the simulator! Become comfortable when you are both onside and offside . Do not worry about your P&L, just look to trade as much as possible and build up your knowledge of price action in your market to give yourself as much exp erience as possible to prepare you for going live.
Raja joined Futex at the start of 2010 and trades the Bund market. His background consists of both an
internship at an investment bank and experience abroad working at a Hedge Fund. He called himself a opportunities@futex.co.uk | http://www.futex.co.uk 26
FUTEX profile trader and someone who looks for value in the market. Like the trader above he uses price action to gauge entry and exit points in the market and to identify the least risky prices at which to do so. Raja stated that it is the simplest things which give you the edge in the markets. He also looks to trade tails in the market profile, often fading the highs and lows of the day. For example, a low volume move to the highs of the day followed by resistance in the markets and Raja will look to fade the price back to previous levels; going back into the earlier range. He spends time on the weekends looking at a variety of market profile charts, identifying patterns and variations of the bell curve shape to give him an edge when trading. He looks for larger moves in the markets than Matt and often targets 10 tick winners but he also has the ability to notice changes in price momentum. This is essential and he is always prepared to exit the market whenever he feels a position has the potential to go against him. Raja identified how each market has a style of behaviour and it is your job to understand what takes place in front of you. It is using your reading of price action and the tools you feel comfortable with which will give you your edge when trading to allow you to become profitable.
Raja s Trading Tip: Look for your own patterns in the market which regularly occur; use market profile, candlestick charts and your knowledge o f price action to turn yourself into a well-rounded trader. Harry has been at Futex since the summer of 2009 and trades the Bund, S&P and T-Note markets. He
looks for points in the market where the risk is small relative to the reward opportunity. Harry uses similar methods to the traders above, also prioritising market profile as a method to give him his edge when trading. He looks for tails in the profile as well as using his experience to identify market symmetry. Unlike the other two traders, Harry looks to trade ranges rather than at the extremes. He therefore looks to trade the movement of the price when it is in the middle of a profile/range, looking to extract between 1 and 5 prices. He stressed the importance of changing your style at different times of day. The market behaviour changes throughout the day and it is your responsibility to recognise this and change your style accordingly. When the market is more volatile you must allow yourself bigger stops but also look for greater profit targets. He identified how to use price action as a method of market entry and how he follows the flow and momentums in the market when trading. He mentioned identifying when the market is over-extended as it gives you ideal opportunities for fading. Harry also stressed that when trading you must not look to fight the market; you must be patient and wait for the right price action and resistance against momentum before entering. When you first begin trading you must keep track of losing trades and investigate what youre doing wrong. It is important to ensure you do not continue to repeat mistakes; monitoring your trading is essential.
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Harrys Trading Tip: Find 5 or 6 things in the price ladder that work; exploit them. This enables you to find consistency in your trading in order to help you build your account which is essential at the start of your trading career.
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Trading Floor Workshop Do you want to learn how to trade from a Professional Proprietary Trading House with more than a decades experience of training individuals to trade? Do you want to uncover the strategies and styles of the professional Proprietary Trader? If the answer is a definite YES! then Futex Investment and Trading Academy can help you. Futex Investment & Trading Academy specialises in identifying and training Proprietary Traders the elite of the trading community. We have condensed a wealth of trading experience into an intensive 2 day programme to give ambitious individuals the best opportunity to succeed.
http://www.futex.co.uk/futex-academy/trading-floor-workshop/
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