T2W Trading Community

Davie Grant is a trader with more than a dozen years' experience. In this interview he shares his personal methods and philosophies for success.

Starting Out

How long have you been trading for?
Approximately 12 years.

How did you first get involved in trading?
I bought some penny shares in a company called “Sleepy Kids” which a tip sheet publication had recommended.

Do you remember your first trades?
Oh Yes! I was doing stuff that I would never dream of doing now. Basically I was following this London “tip sheet” and all its recommendations on ‘Penny Shares’.

What were your first few months like? Were you profitable initially?
Initially I did very well. I had good success with the company “Sleepy Kids”, which tripled its share value within 6 months because of its “Budgie the Helicopter” product by Sarah Ferguson.

Has your trading style changed radically from when you first started?
Very much so.

How did you learn to trade?
By reading as many books on the subject as possible.

Are you a self-taught trader, or did another trader teach you worthwhile lessons?
Self-taught at the very beginning. Certainly for the first 4 years. Then as I started to get to know people within the industry through brokers etc. I started to get to know some professional traders who worked in the city and some very successful investors who were essentially large position traders. Also I have to admit I have 2 good friends who both work for different SB companies. The tales they tell are very interesting about what sort of trader makes money and what sort eventually lose!

Trading - In Practice

What markets do you trade?
Mini S&P 500 and Currencies (Forex).

What is your basic approach in analyzing and trading the markets?
I have several different approaches depending on how the market is behaving and what time frame I’m working in.
- If the markets are trending on a regular basis, I will tend to use a methodology that evolves around a 34ema with a CCI indicator as a filter.
- If the markets are obviously trading on a particular day, I will use breakout strategies combined with critical time of day methodologies and Bollinger Bands.
- If fundamentals are causing large swings in prices (as they are at the present time), I will position trade based on market sentiment and any breaking news.

I will then manage my trade carefully and often exit my position in 2 halves. My first half at my 1st Technical target price and the remaining half when I feel the technical and fundamental reasons have both agreed or I feel a degree of price resistance.

So basically, I have a toolbox with each tool being used for the correct job at the correct time……..and that’s the tricky bit!!!!

How would you define your trading style?
Position trader and Swing trader.

How often do you make a trade?
4 to 5 times a week.

Do you prefer to trade long or short and why?
No preference at all. I do what is necessary.

How do you pick your trades?
I have one purely mechanical system in place which trades the Mini S&P500 Futures. That runs in the background to my normal trading activity. It only trades 2 or 3 contracts about 3 times a week, but has always shown a profit by month end so far. Although in the last 4 months I am beginning to suspect it is starting to breakdown in the current market conditions. Then my normal position trading is just watching, managing and seeing if there are any opportunities (fundamental and technical) within the financial instruments I trade. As I stated above mainly, S&P500 and currencies (forex).

Is there anything you can single out as the most important element in deciding to put on a trade?
For me the most important element is psychological. If I have a nagging doubt or just a feeling that this trade is not right for some reason. Even if I can’t put that into words or figures I don’t do it. Now, in the early days, this psychological feeling did more harm than good. If I didn’t trade because of this feeling, you could be sure that if I had of placed the trade, the trade would have been a magnificent success. Also vice-versa, some trades I thought were sure winners, were NOT. But now after 12 years I follow my instincts. The only way I can explain this simply is, like all businesses, trading or otherwise, the more experience you have in the market place, the more you become used to its unique behaviour patterns and subtle nuances.

Thus you become more in tune with the markets and then get a “Feel” for them. Combine this with a good bit of technical analysis for the entry and exit prices and all should be well in the long run.

Do you use trading systems?
Only one. This trading system I have used for about 30 months now and has always shown a profit on a monthly basis. It only trades 2 or 3 contracts on the mini S&P500. Sometimes the profit is large, sometimes it only just scrapes a profit. By and large I do not like mechanical systems, but this one is very simple and is easy to manage in the background, while I’m trading my main account. A good mechanical system is also very good for your self-discipline. I was lucky enough to be given this system by another trader, who usually gave it to his junior traders to improve discipline and make a little money at the same time.

How much do you risk on any single trade?
With the mechanical system only ever 2 or 3 contracts on the Mini S&P. With my position trading I risk a maximum of up to 5%.

Do you use stop or limit orders?
Yes.

Do you use chart patterns such as reversals and breakouts?
I used to use some momentum breakout strategies on the S&P500, which Larry Williams had written but tend to shy away from them now. I now have a breakout strategy which is based on some of Larry’s ideas combined with a CTOD (Critical time of Day) filter.

Chart patterns I don’t use at all, apart from the basics of analysing an intermediate or long term Trend. Just to get a simple snapshot of what has happened or support and resistance levels.

Do you use Level 2 data to trade?
No.

Do you decide where you are getting out before you get in on a trade?
Yes. I always have an initial profit target and then once that’s hit, I slowly scale out of the position, just trying to milk the last bits of profit, out of the trade.

What is the maximum percentage of equity you will risk on any individual trade?
15% is the largest amount of equity I ever risk and that is only on my position trades. With a position trade such as mine, you cannot have too tight a stop, otherwise the normal volatility of some of the markets keeps stopping you out. So I have to let the market run a bit.

How do you decide when to take profits?
I take profits on a short term trade if it stalls at overhead resistance or breaks its uptrend. I also take profits if it spikes up a long way above the trend, on the basis that it will most likely revert to the mean and I can always re-enter if it finds support at the trend.

Is slippage/bad fills a problem in your trading?
In general no!. Slippage, within reason, on position trades, does not massively compromise my bottom line. On the mechanical S&P500 system, it’s a bit more of an issue, but its something you have to live with, and generally, the slippage is due more to me, rather than the broker or the system.

Do you use the opinions of other traders in making trading decisions, or do you operate completely solo?
Completely solo. Although I am always interested in what other traders have to say or ideas they might have. I still want to learn as much as possible, and like any business, you have to keep your ear to the ground.

Trading – The Theory

Do you believe chart reading can be used for successful trading?
If it's totally on its own, then No.

Are there any technical indicators that you have found to be particularly valuable?
CCI and combinations of EMA. Also ADX/DMI.

What are your thoughts about using fundamental analysis as an input in trading?
I don’t trade the S&P or Currencies without a fundamental reason being in there somewhere!

Do you ever use contrary opinion as an aid to trading?
No.

What are the trading rules you live by?

1. Have a plan and define a goal. Eg. Make 50% on your account by the end of the year etc.
2. Trade in a way that fits in with your lifestyle. If you don’t, you will fail.
3. More time sat in front of a screen trading does NOT mean MORE profits.
4. Question the logic as to why a system is for sale - no matter how attractive it seems!
5. Trade within your personality. The more you trade, the more you will realise what your REAL personality is!
6. Psychology plays a bigger part in success and failure then most people think. Keep your head well trained!
7. Occasionally take a break from the markets.
8. Don’t let good profits turn into losses because of greed.
9. Treat trading as a business.
10. A loss is one of the costs of doing business. Just try to keep them to a minimum.

How important is having a sound risk/money-management philosophy?
I would say the most important part out of everything. It’s the difference of being here one day and gone the next.