The following interview was originally published in Trader's Journal (TJ) November 2007 issue and is reproduced with their kind permission.
Part I: On Trading
TJ: John, when and how did you get started into trading?
JD: I got started in 1968 as a biology and physics teacher in Milwaukee, Wisconsin. I was the Director of the teacher investment club with a $100 per teacher contribution in a pool and some hopes and dreams. I read Harry Browne's book in 1970 about Nixon closing the "gold window" for the USD. The title of Harry's classic book is How to Profit from the Coming Devaluation and it changed my life and all I have touched in this space forever.
TJ: What did you find trading interesting?
JD: The daily intellectual challenge of market change and the "thrill of the hunt" captivated me. I cannot image a life without the global markets to trade and invest.
TJ: What was it like when you first started trading?
JD: Hey, I lost money, lots of money through the trial and error method because I did not take it seriously and thought my buy and hold bias investing methods would work as a trader. Wrong. Then, I abandoned my buy and hold bias. You know pain has a way of capturing your attention. As professional traders know from experience: "Trading and Investing are very different." The public learns that lesson the hard way.
TJ: How much capital did you start with in trading? How much do you recommend somebody put into a trading account?
JD: I started with a USD$15,000 account. How much to start with depends on their appetite for risk, time allocated, capital base, formal education in trading and many other personal variables. One size does not fit all in our world. I suggest all new active traders find a coach and mentoring program before putting $1 of their capital at risk. Experience is a great teacher but her price is expensive.
TJ: What instruments do you trade now?
JD: I started out 100% trading NASDAQ equities and now 40% of my trading time and capital is in Forex trading.
TJ: Why?
JD: Most buy and hold biased investors do not consider the currency risk when buying securities or other asset classes. I believe there is a global bull market coming in cash and cash equivalents in the Globalization 3.0 era, especially gold. Gold is the world's only "real money" that central banks cannot print. Paper currency is a real money substitute. I trust the 2000-year integrity history of gold to store value and be a global medium of exchange. I do not trust central bankers.
TJ: Do you specialize in any one of these instruments?
JD: No, not really, 60% stocks and 40% currencies via spot and futures contracts on the CME. I do mostly trade USD/Euro pairs and gold/Dow index.
TJ: What timeframe do you use?
JD: I mostly swing trade but do significant shorting of high probability rallies in each class. I never catch the falling knife; I always look for the higher probability countertrend rally to short. There is much lower risk.
TJ: Do you decide what to trade based mainly on the timeframe you want to trade?
JD: I do both momentum and swing trades. I am not biased either way. It depends on volatility.
TJ: How many charts do you view at a time?
JD: Usually 4 and I try to keep it very >simple. Most new traders I meet get too much paralysis through analysis. Especially pipe smoking engineers who cannot pull the trigger on the trade.
TJ: Do you use mainly classic chart setups or are these setups that you have devised on your own?
JD: No, I stick to the common chart setups that the pros use - nothing beyond the proven classics. Too much data via studies is more challenge than a benefit. Keep it simple.
TJ: What about indicators? Are there any specific technical indicators you prefer?
JD: Yes, I like Fib ratios, Elliott Waves and moving average combinations with a touch of MACD.
TJ: Do you ever consider breakouts if volume is strong?
JD: Of course - usually I find volume precedes and confirms price change variables.
TJ: Are you continuing to develop new trade setups?
JD: I am always exploring new systems, but I am very comfortable with my methods that suit my lifestyle and appetite for risk at this stage of my life. Money management skills are under-appreciated by new traders.
TJ: On average, how long do you hold onto a position?
JD: It depends on my risk tolerance and daily volatility. Recently, I do not like to hold positions overnight and never over a long holiday weekend.
TJ: You have been trading for some time. I think one of the most difficult things traders are faced with is dealing with emotion. How do you avoid falling into the type of trap?
JD: Trailing stops - For me, technology takes most of my ego and tempers my emotions of fear and greed. I know I will have losing trades because they come with the turf. So what! Just get out of denial, disengage the male ego and get out of the position with a defined risk via the trailing stop. Have a well-defined written trading plan.
TJ: Do you still make the same mistakes that you made in the past after you have been trading so long?
JD: Sometimes when my discipline is weak or I do not follow my plan properly.
TJ: How do you handle losing periods and slumps?
JD: I stop trading and reassess the situation and move to smaller size positions.
TJ: What about times when a winner become a loser?
JD: I work very hard to prevent that from happening by adjusting my trailing stops. Allowing a winner to become a loser is a mortal sin in my trader world.
TJ: What about placing stops?
JD: I like to keep stops very tight and it does not bother me anymore to get stopped out like it did as a newbie trader. I expect it.
TJ: How do you define success in trading?
JD: Am I following my written trading plan? Is my risk management tight? If I focus and not lose money on each trade I know at end of day, all will be fine. I do not focus on the winning trades.
TJ: In terms of personal characteristics, do you think there's a certain type of individual who makes a better better trader than others, or do you think everybody is capable if doing it?
JD: We have found in the last 10 years of running Online Trading Academy that the Asian community has the best traders. Why - because they are smart, focused and disciplined.
TJ: Given a chance, what would you like to do differently in trading again?
JD: Start younger by giving up my buyand- hold conditioned bias earlier. We need to teach our youth these skills.
TJ: What do you foresee for the markets in the next 2 to 3 months in trading opportunities?
JD: I think we are in for a short rally in the Dow back up to test the 14,000 area, then I forecast a recession in the USA led by the depressed homebuilding and finance sectors with much lower consumer spending as "Joe" cannot use his home as an ATM very easily like in past cycles. I am not bullish on the dollar index at all in this area and expect it to decline further now that it has broken its .80 support level from 1992. I am very bullish on gold and see central banks returning to hoard gold and Euro as alternatives to the US dollar. We have observed several global central banks drop the US Dollar exposure and move to baskets of currencies.
Part II: On Online Trading Academy
TJ: Could you tell us about OTA?
JD: Online Trading Academy started educating students in the art of trading in June of 1997. As the leading trading school in the world, we offer state-of-theart teaching facilities and professional instruction, as well as a wide array of beneficial home study materials. We offer a spectrum of trading styles and instruments from day trading, swing trading, position trading and investment theory for stocks, exchange traded funds, options, futures (E-minis & commodities) and currencies. We are committed to offering the best in financial education! Our mission is to transform lives worldwide through exceptional trading and investing education and our vision will be the premier financial education community for peopleenriched life style.
TJ: Tell us about some of your key colleagues in OTA and what they do and their background?
JD: Mr. Shahar, Co-Founder & President, is a seasoned executive who started his first business importing diamonds in 1983. After developing the business to supply over 600 major wholesalers, the business was profitably sold in December 1990. In 1991, Eyal Shahar purchased 50% ownership in a struggling publishing house with a new vision to publish guides for the performing arts. With marketing experience, creativity, and leadership, he opened eight offices throughout the country and within 6 years increased company revenues by eighteen times. This business was successfully sold. He entered the securities business, forming Newport Exchange in 1997, the predecessor to Online Trading Academy. Mike Mc Mahon, Director of Education, brings 20 years of experience in the markets as an investor, trader and licensed commodities broker. He has taught classes in such diverse topics as battlefield medical aid, scuba diving, hazardous materials handling and motivational salesmanship. Ralph Loberger, VP of Franchise Development, has 20 years of experience in successfully growing franchise systems. Most recently, he served as Vice President of Global Franchise Development for New Horizons Computer Learning Centers, Inc. Tony Harkey, VP of Marketing, leads the development of the Online Trading Academy brand, customer acquisition marketing and all marketing support for the Online Trading Academy franchise network. For the past 20 years, Tony has held a variety of marketing leadership posts with E*TRADE, Isuzu, Yamaha and Fleetwood.
TJ: What does OTA focus on?
JD: We focus on independent DMA active trader education needs for equities, Forex, futures and options. All our learning experiences are in OTA brandedfranchised computer labs with classes up to 50-hour live trading executions with drills and exercises using our capital and coaching from our expert faculty. We also produce and publish 100+ hours of extensive multimedia cd-rom and DVD home study educational tutorials by asset category. See our inventory, titles and subject summaries at www.tradingacademy.net.
TJ: What are the principal products of OTA?
JD: Live classroom trading with expert instructors for: equities, Forex, futures and options. We also offer proven continuing education via webex voice over Internet protocol (VOIP) forums we call XLT with 4 specific rooms hosted by our faculty by asset class. See complete XLT descriptions per experience at http://www.tradingacademy.com/xlt.htm.
TJ: How can one benefit by attending OTA workshop?
JD: Our Free Power Trading Workshop Course, which is ½ day. In it, you will learn how to cut through the noise and hype of Wall Street. You will get a clear view of how the financial markets really work and you will understand the importance of education and the Online Trading Academy "Education First" philosophy. You will leave with a clear understanding of what it takes to establish a trading plan and consistently execute profitable trades. Online Trading Academy instructors, all of whom are experienced, professional traders, will deliver hands-on "live trading" instruction and a framework for building a disciplined trading plan. You will learn
- Tools, techniques and market indicators used by industry professionals
- The true skills necessary to be successful at trading in Globalization 3.0 Credit Bubble economies
- The 7 OTA Pillars of Trading
- The power of a live Direct Access Trading Platforms
- The secrets of NASDAQ Level II quotes and NASDAQ Total View
- How to use technical analysis to execute trades at the right entry and exit points
You will also discover which DMA brokers will actually pay you commission rebates on your trades to finance OTA tuition. Plus you will have an opportunity to ask questions of our instructors and get your questions answered. In this ½ day class, we will introduce you to trading tools that put you on a level playing field with industry pros. It is a playing field where you can acquire the skills and tools of a pro; have charting, news headlines, and order entry capabilities all integrated together and at your fingertips; and get the same split-second executions that were once only available to the big-time Wall Street traders
TJ: What key successes has OTA seen in the last three years?
JD: We are now the industry recognized proven global branded leader and franchisor of DMA trading education space with instructors and platform solutions that are boom/bust tested since the 1997 dotcom era.
TJ: What are OTA's long-term objectives?
JD: Open 100+ global branded franchised centers in the top international 100 metro markets to serve the active communities of traders/investors and adult learners. Then, support them via a web-based social network community.
TJ: Any plan of setting up more offices in Asia?
JD: Yes, we are in conversation this month with local prospects to award franchises in Hong Kong, India, Korea, China, and Japan. Our existing Singapore franchisee has plans to open in Malaysia in the first quarter of 2008.
TJ: What do you teach in OTA?
JD: I personally focus on teaching our students in classes and XLT webex forums for alumni only. I teach active trading/investing and macroeconomics via the Austrian School pioneered by Ludwig Von Mises and Hayek for my "Globalizaton 3.0 Credit Bubble Crisis" perspective and forecasts. Visit www.mises.org for more Austrian Economics School transparency.Discover why the Dow/constant dollar index and Dow/Gold index is telling us that we are still in a secular bear market from the top in 2000. If you do the math, you will be amazed and make better choices in your trading.
Part III: Recommendations
TJ: What books would you recommend to our readers?
JD: All of the obvious trader books are good values in my mind and add value to the discussion and debate. I want to focus your readers on two books I have found to be the most valuable in forming my forecasts in the Globalization 3.0 Credit Bubble environment. One book is The World is Flat by New York Times author, Tom Friedman. Ed Ponsi, an OTA Forex instructor has just published through Wiley Books a must read for Forex traders called Forex Patterns & Probabilities.
TJ: What advice would you give to someone who is thinking about trading for a living?
JD:
- Start slow with small position sizes as there will be a steep learning curve and set realistic expectations.
- Get a formal DMA trader education from OTA before you put one dollar at risk, as we support our students? life long DMA learning needs with proven techniques in both bull/bear markets.
- Learn to short sell with tight trailing stops, and give up your buy-and-hold bias that Wall Street and the media has conditioned.
TJ: Do you have any final comments you would like to share?
JD: Visit our website and share it with your friends who need this important information:
www.tradingacademy.com for our free webinars and subscribe to our free Lessons from the Pros eNewsletter. We publish 3 or 4 times per week with specific forecasts. And I hope all your DMA trading days are green.
Thank you for your time, John.
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