My Job: Trading for a Living
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My Job: Trading for a Living
What inspired me?
• Author: Michael Lewis
• He went from student to trader at Salomon Brothers in London
• I knew I wanted to trade
• “If he can do it, so can I”
• Worked for JP Morgan for 3 years
• Quit and isolated myself for 18 months studying markets
• Ran out of money to live for
• Went to work in the “city”
Tom Hougaard - Bio
• 10 years on a trading floor
• More than 1000 TV interviews
• More than 1000 seminars
• Expert in calling end of bull markets and bear markets - as well as traditional technical analysis
• Called many MAJOR highs and lows on TV well in advance (2002, 2003, 2009)
Time Discovery – simple example
Tom Hougaard – Bio After London • Made redundant in 2009 (the whole
company was made redundant after huge trading loss (not mine )
• Started live trading room, first with trading partner and then alone
• Went 38 weeks before we had our first losing week
• Started 2-day workshops with trading partner, teaching what tools we use in the live trading room
• Closed the room last year for a sabbatical to study – up 137% for the year
• Spent the last 12 months researching and trading for myself
• Manages accounts and do occasional seminars
• Write on my websites tomhougaard.dk
Trading and the FedEx Enigma
YOU ONLY SEE WHAT
YOU HAVE
TRAINED YOUR EYES TO SEE
My Trader Training
1. Books
2. Mentors
3. Courses
4. On-going development
My Reading List
My Trader Training
1. Books
2. Mentors
3. Courses
4. On-going development
My Mentors
My first real and only true mentor was Larry Pesavento, a 70-something trader with 48 years of experience. He has taught me more about life than about trading. A remarkable man.
His book Fibonacci Ratios is the one I would recommend (he has written 9 others).
The book is a superb primer in pattern recognition.
My Trader Training
1. Books
2. Mentors
3. Courses
4. On-going development
Courses
1. Courses come in all shapes and sizes. Recently in Copenhagen a firm offered a £2,500 2-day course, which teaches very little of value (which you could not get from a book or from searching the internet – I saw the course notes).
2. I have never attended a course for beginners, and I only attended one course, with my mentor Larry Pesavento.
3. I don’t recommend people attend beginners courses unless they are no more than a few hundred pounds. Anything above that is a waste of money.
4. A book like Edwards & McGee (the bible of technical analysis) will cost only £25 and teach you more than the above £2500
5. I run two-day workshops with my trading partner, but the courses are not for beginners. www.whichwaytoday.com
6. Running one-day seminar in Copenhagen Sunday 17th March 2013
lucky or blessed? natural selection or circumstance? genius or hard work?, talent or training?
Mozart Perception:
• A musical prodigy – a marvel of nature – a genius with skills way beyond his years – a boy wonder!!
Reality: • Father Leopold was a musical
composer, performer and teacher – and very domineering
• He embarked his son on an intensive music schooling journey
• Researchers have estimated that by the time young Mozart was 6 years old, he had clocked up more than 3000 hours of practise.
Source: Genius Explained, Michael Howe, Exeter University
Tiger Woods Perception:
• “was born with a golf talent”
• “a golfing prodigy”
• “a golf genius like no other”
Reality:
• Earl Woods started training when Tiger was 1 year old.
• Earl was obsessed with the idea that PRACTISE CREATES GREATNESS.
• Tiger got his own coach at age 4.
• By mid-teens, Tiger had practised more than 10,000 hours.
Deliberate Practise
Practise or playing:
• Merely performing – like a round of Sunday golf with friends
• No feedback
• No program or focus on areas
Deliberate Practise leading to expert:
• Structured training
• Feedback in place
• Great vs. Good: 30-120 min more (extra) deliberate training a day
• Circumstances
• Not a fan of the self-help army (Tony Robbins, The Secret etc.) – but some good things have come from it, such as setting a goal.
• I don’t believe in short-cuts, but that quality training will cut down the learning time
• Too many people focus on the next 12 months and over-estimate what they can achieve.
• Too few people focus on the next 10 years and underestimate what they can accomplish
No “Free” – No “short-cuts”
Program
• Set aside 1 hour a day for Play-BACK
• Set aside 2 hours per weekend day for Play-BACK
• Friendly rivalry with fellow trader/mentor
• Read biographies for inspiration
• Play certain computer games to sharpen focus and concentration
Motivation
• Trade bigger, trade better, how good can I be?
• Why do I carry on trading? You meet some amazing people in this industry. It attracts a certain breed, with whom I resonate well.
How does Tom Hougaard practise?
My Trading Life
1. Preparation
2. Execution
3. Tools
Typical Trading Day - preparation and structure of day
1. Make sure I am well rested
2. Prefer to start day with fresh air – morning run/jog
3. Eat at scheduled times
4. Check for news announcements for the day
5. Check for holidays that can affect the day
6. Trade from 8am – 12pm, then 2pm – 4pm, maybe 8pm
7. After the trading day (& during) I practise by printing out charts
8. I do research
9. I write about the markets (articles – book material)
10.I read books that inspire me
11.I go to bed early
My Trading Life
1. Preparation
2. Execution
3. Tools
Execution 1. Execute my trades with ETX Capital – very solid and simple
platform
2. Charts run on one internet connection
3. Trading platform runs on another
4. Charting package today is E-signal but less and less as ETX Capital’s charts are every bit as good for my purpose (save £450 a month!).
5. Currency trades falls into two categories: “morning trade” (a proprietary trading setup developed by my trading partner David Paul), and Matrix trades (an analytical framework designed to capture the currency pairs most likely to move)
6. Stock Index trades: traded using a simple 1-min and 5-min chart using ETX Capital (but also run tick charts on E-signal)
My Trading Life
1. Preparation
2. Execution
3. Tools
Framework of Trading
1. I scalp trade/day trade FTSE and DAX stock indices
2. I “swing trade” Forex
NOTES:
I may execute as much as 30-40 trades in a day when I am trading the FTSE and the DAX. This is due to my aggressive trading style.
For example, if I have bought the DAX at 7606 and the market is now trading at 7609, I may buy again, adding to the winning trade, and then close the whole lot at 7615.
I put “swing” in brackets because I doubt I truly swing trade, but I tend to hold a Forex trade a lot longer than an index trade due to trade size.
Framework of Intra-Day Indices
1. The screens come handy as I run both tick charts and normal time charts.
2. FTSE and DAX: 89ticks with a 62 MA and a prop Osc.
3. 2 or 3min chart for direction
4. I use support and resistance to place trades (Lost Motion)
5. When market strongly trending, I use harmonics to get into the market
6. I use pattern recognition
7. VERY IMPORTANT: I gauge strength across indices (see next chart)
8. The training aspect (having looked at thousands of intra-day charts) is what I draw my trading decisions on
Framework of Forex Swing Trade
1. In preparation phase I go through the Matrix
2. Use a top-down approach – step by step
3. I use 3 major trading setups
Framework of Forex Swing Trade
1. In preparation phase I go through the Matrix
2. Use a top-down approach – step by step
3. I use 3 major trading setups
Framework of Top-Down Approach- Weekly Chart
1. Is the market trending higher or lower? Consolidating?
2. Is it consolidating after a move higher or a move lower?
3. Is the market overbought or oversold (using Stochastics)?
4. What is the high and the low of last week?
5. Has a major low been hit (support – double bottom)?
6. Has a major high been hit (resistance – double top)?
7. Are there any obvious levels to look out for such as Fibonacci levels?
8. Are there any obvious pattern or candle formations?
This process may seem lengthy, but with experience it only takes a few minutes and it can be done just once a week, usually on Sunday night.
1. Is the market trending up or down according to 89EMA?
2. Is market below or above the MA?
3. What is the 3-day Trend? (see next slide)
4. Are there any major news out today? What about tomorrow?
Framework of Top-Down Approach- Daily Chart
Framework of Top-Down Approach- 3 Day Trend
Framework of Forex Swing Trade
1. In preparation phase I go through the Matrix
2. Use a top-down approach – step by step
3. I use 3 major trading setups
Details of Trading Set-Ups - 1/ Fractal Approach
Details of Trading Set-Ups - 1/ Fractal Approach
Details of Trading Set-Ups - 1/ Fractal Approach
1. The morning trade is a proprietary tool
2. It brackets the Asian trading session from 10pm until 7am
3. The exact rules is a secret
4. The rules are mechanical
Details of Trading Set-Ups - 2/ Morning Trades
1. The Reverse Divergence is a proprietary tool
2. It trades in the direction of the prevailing trend
3. It uses Stochastics and an 89 EMA for trend.
4. The rules are discretionary and makes use of 4-bar fractal
Details of Trading Set-Ups - 3/ Reverse Divergence
Details of Trading Set-Ups - 3/ Reverse Divergence
1. Don’t argue with the market – it really doesn’t care!
2. A market is never so high, it can’t go higher!
3. A market is never so low, it can’t go lower (although zero is the limit)
4. The odds of the trend continuing are HIGHER than the odds of the trend reversing
5. The Market is occupied by the same people year after year – it means the market tend to repeat itself (humans are creatures of habit)
6. There are 3 building blocks: TIME, PRICE, VOLUME
“PRICE” is king
What Truths do I trade with?
Let’s do a live trade!
Conclusion
Contact [email protected]
These were the visual notes used by Tom Hougaard on his recent seminar
For more details on Tom’s next seminar visit
www.tradertom.com
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