Davie Grant is a trader with more than a dozen years' experience. In this interview he shares his personal methods and philosophies for success.
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!
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.
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?
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.
Which brokers do you use and why?
Interactive Brokers. Low round trips. A good universal account.
What software do you use and why?
Sierra Charts. I need no more than what this package offers and it's VERY cost effective.
Do you have an opinion about trading systems sold to the public?
I don't have much knowledge about what's out there. I've spent my time trying to find a trading methodology of my own rather than spending money on someone's system. I am a great believer in common sense and this trading business is no different to many more main stream businesses. The point is, that if someone had a great system, why sell it to others? Its more hassle than the trading!!
Do you feel a good system can compete with a good trader?
A good system will still fail in the hands of a poor trader. A good trader will always be better in the long run.
In your trading experience, is there one particular trade that stands out as the most dramatic?
Unfortunately it was Sept 11th 2001. I was Short the S&P the day before it happened!
What is the most prominent fallacy in the public's perception about trading?
That you have to wear a striped shirt with red braces! Or with futures trading that you are no more than a gambler.
How much of a role does luck play in trading success?
In the long run, luck is only a very small part of the road to success.
How important is gut feel?
With quite a lot of experience behind me, I now pay a little more attention to my gut feel. But in the early days, my gut was always wrong! Also my gut has exponentially increased in size, along side my trading account! I wonder if this relationship could be traded? It certainly would put a slightly different angle on the term "Spread Trading"!!
How do you judge success in your trades?
If I have entered the trade and exited the trade in the manner of which I planned it, then I call this successful. But like everyone, my monthly bottom line is how I judge my real success.
What are the most important elements to becoming a successful trader?
Self control, ability to rationalise under extreme mental pressure and good money management techniques. Also try to make sure you are in tune with the markets. Like a professional sportsman try to have an almost out of body view of the game you're playing. Become devoid of all emotion. Be in tune with the ebb & flow of the market you trade.
Can you describe one of your most successful trades?
Nothing really stands out in my mind. Each individual trade is quite boring really! I've had a number of trades where the price went to an extreme that was surprisingly high or low. So more profit was collected than expected. Big overnight gaps have usually been the cause!
Is the joy of winning as intense as the pain of losing?
Winning still feels great and is always exciting. Losing has no bearing on my emotions anymore, mainly due to the fact I strictly control my losses and always know up front what the approx. maximum is that I could lose, so when I do it's not a surprise. Unlike winning, which can sometimes produce an unexpected, large move.
Why do most traders lose?
Poor self control and bad money management.
When you do hit a losing streak, how do you handle it?
Plenty of Gin & Tonic and begin to look at why things are starting to go wrong. Has the market changed its character? Is there a fundamental reason I'm overlooking? Are my entry/exit and money management techniques losing me money? A whole host of components are looked at. A total re-evaluation would be done.
Is the ability to accept losses a characteristic of a winning trader?
Yes - we all have them - it's a part of a traders life. Learn to handle them
What was your worst time trading? What went wrong?
Losing two thirds of my capital in 2 months and then taking 2 years to get it back. That was a long time ago now.
Are there any books you have read, that you would recommend to people?
What is the most important advice you can give the average trader?
Don't give up. The rewards are worth it. Keep it simple. Stick to common sense methodologies.
What advice do you have for the beginner trader?
Read as much on the markets as possible. Visit websites like this one, and join in with the discussions. You can learn a lot from others, but find your own methodology and trading strategy. Don't get too sophisticated about it - often the simplest strategies are the best!
What are the traits of a successful trader?
Not sure. Very difficult one to honestly answer. Its easy just to repeat what others have told me or read in books, but from personal experience I can't tell what they have that makes them win and the others lose!
Do you enjoy working from home?
I don't trade solely from home. It is divided between my office and home.
What environment do you trade in, for example do you have a separate office, multiple monitors and CNBC on the telly?
Separate office at work and home. One PC with a 17? screen in both offices. A spare PC is at hand in both places as well, although a PC going down has not happened to me yet. Broadband connection at both sites.
What effect has trading had on your personal life?
My wife has only ever known me as a Company Director and Futures Trader. So she is used to my personal life revolving around the US Financial Markets and my normal business in the Day. At the weekends though, I am totally at the family's disposal!
Do you sometimes need to get away from the market for a few days?
Absolutely. I would say on average about every 2 months I take just a little break from the market if possible for about 3 or 4 days.
Is trading for a living firstly viable and secondly desirable?
Trading for a living is certainly viable, but for me, not desirable.
If you weren't trading what would you want to spend your time doing?
Sailing my yacht.
Do you have any goals at this point?
I am due to finish writing a book on Financial Spread Betting Strategies and Methodologies, at the end of this autumn. My literary agent says, all being well my book should be published for the start of 2004. This at present is my goal.
Do you still see yourself trading ten or fifteen years down the road?
Yes
When you make your first million, what will you spend the money on?
When I make my first million from Trading, I will treat myself to a better yacht and a villa in the South of France.
Any comments about T2W?
Excellent website for beginners and experts alike. I hope the site goes from strength to strength.
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?
- Have a plan and define a goal. Eg. Make 50% on your account by the end of the year etc.
- Trade in a way that fits in with your lifestyle. If you don't, you will fail.
- More time sat in front of a screen trading does NOT mean MORE profits.
- Question the logic as to why a system is for sale - no matter how attractive it seems!
- Trade within your personality. The more you trade, the more you will realise what your REAL personality is!
- Psychology plays a bigger part in success and failure then most people think. Keep your head well trained!
- Occasionally take a break from the markets.
- Don't let good profits turn into losses because of greed.
- Treat trading as a business.
- 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.
Trading - The Tools (Broker & Systems)
Which brokers do you use and why?
Interactive Brokers. Low round trips. A good universal account.
What software do you use and why?
Sierra Charts. I need no more than what this package offers and it's VERY cost effective.
Do you have an opinion about trading systems sold to the public?
I don't have much knowledge about what's out there. I've spent my time trying to find a trading methodology of my own rather than spending money on someone's system. I am a great believer in common sense and this trading business is no different to many more main stream businesses. The point is, that if someone had a great system, why sell it to others? Its more hassle than the trading!!
Do you feel a good system can compete with a good trader?
A good system will still fail in the hands of a poor trader. A good trader will always be better in the long run.
Trading Experiences
In your trading experience, is there one particular trade that stands out as the most dramatic?
Unfortunately it was Sept 11th 2001. I was Short the S&P the day before it happened!
What is the most prominent fallacy in the public's perception about trading?
That you have to wear a striped shirt with red braces! Or with futures trading that you are no more than a gambler.
How much of a role does luck play in trading success?
In the long run, luck is only a very small part of the road to success.
How important is gut feel?
With quite a lot of experience behind me, I now pay a little more attention to my gut feel. But in the early days, my gut was always wrong! Also my gut has exponentially increased in size, along side my trading account! I wonder if this relationship could be traded? It certainly would put a slightly different angle on the term "Spread Trading"!!
Success & Failure
How do you judge success in your trades?
If I have entered the trade and exited the trade in the manner of which I planned it, then I call this successful. But like everyone, my monthly bottom line is how I judge my real success.
What are the most important elements to becoming a successful trader?
Self control, ability to rationalise under extreme mental pressure and good money management techniques. Also try to make sure you are in tune with the markets. Like a professional sportsman try to have an almost out of body view of the game you're playing. Become devoid of all emotion. Be in tune with the ebb & flow of the market you trade.
Can you describe one of your most successful trades?
Nothing really stands out in my mind. Each individual trade is quite boring really! I've had a number of trades where the price went to an extreme that was surprisingly high or low. So more profit was collected than expected. Big overnight gaps have usually been the cause!
Is the joy of winning as intense as the pain of losing?
Winning still feels great and is always exciting. Losing has no bearing on my emotions anymore, mainly due to the fact I strictly control my losses and always know up front what the approx. maximum is that I could lose, so when I do it's not a surprise. Unlike winning, which can sometimes produce an unexpected, large move.
Why do most traders lose?
Poor self control and bad money management.
When you do hit a losing streak, how do you handle it?
Plenty of Gin & Tonic and begin to look at why things are starting to go wrong. Has the market changed its character? Is there a fundamental reason I'm overlooking? Are my entry/exit and money management techniques losing me money? A whole host of components are looked at. A total re-evaluation would be done.
Is the ability to accept losses a characteristic of a winning trader?
Yes - we all have them - it's a part of a traders life. Learn to handle them
What was your worst time trading? What went wrong?
Losing two thirds of my capital in 2 months and then taking 2 years to get it back. That was a long time ago now.
Advice
Are there any books you have read, that you would recommend to people?
- All Larry Williams' books are worth reading.
- Gary Smith's 'How I trade for a living'. Some very good insights.
- Nicolas Darvas' 'How I made $2,000,000 in the Stock Market'. A good yarn.
- Linda Bradford Rashke's 'Street Smarts'. A very good book for ideas. I sold my copy 2 years ago. So if any one out there has a copy they want to sell me, I'd be interested in re-purchasing it for my library.
What is the most important advice you can give the average trader?
Don't give up. The rewards are worth it. Keep it simple. Stick to common sense methodologies.
What advice do you have for the beginner trader?
Read as much on the markets as possible. Visit websites like this one, and join in with the discussions. You can learn a lot from others, but find your own methodology and trading strategy. Don't get too sophisticated about it - often the simplest strategies are the best!
What are the traits of a successful trader?
Not sure. Very difficult one to honestly answer. Its easy just to repeat what others have told me or read in books, but from personal experience I can't tell what they have that makes them win and the others lose!
The View From The Floor
Do you enjoy working from home?
I don't trade solely from home. It is divided between my office and home.
What environment do you trade in, for example do you have a separate office, multiple monitors and CNBC on the telly?
Separate office at work and home. One PC with a 17? screen in both offices. A spare PC is at hand in both places as well, although a PC going down has not happened to me yet. Broadband connection at both sites.
What effect has trading had on your personal life?
My wife has only ever known me as a Company Director and Futures Trader. So she is used to my personal life revolving around the US Financial Markets and my normal business in the Day. At the weekends though, I am totally at the family's disposal!
Do you sometimes need to get away from the market for a few days?
Absolutely. I would say on average about every 2 months I take just a little break from the market if possible for about 3 or 4 days.
Is trading for a living firstly viable and secondly desirable?
Trading for a living is certainly viable, but for me, not desirable.
If you weren't trading what would you want to spend your time doing?
Sailing my yacht.
And Finally
Do you have any goals at this point?
I am due to finish writing a book on Financial Spread Betting Strategies and Methodologies, at the end of this autumn. My literary agent says, all being well my book should be published for the start of 2004. This at present is my goal.
Do you still see yourself trading ten or fifteen years down the road?
Yes
When you make your first million, what will you spend the money on?
When I make my first million from Trading, I will treat myself to a better yacht and a villa in the South of France.
Any comments about T2W?
Excellent website for beginners and experts alike. I hope the site goes from strength to strength.
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