Amateur forex trader turns pro
Hi everybody, this is Shaun Overton with OneStepRemoved.com
and in this video I have Peter Brennan from Fisic.ie
Peter is an independent money manager, but the unique thing about him is that he started
out like most of the
viewers out there where he trades his own independent forex account and now
he's wound up as an independent money manager
so Peter thanks for joining us.
Peter has one of the more interesting backgrounds how he wound up trading forex
How did you get started?
Well, my background is engineering and I worked – I live in Ireland
most of my career I worked for American high-tech companies: Hewlett-Packard, Intel
Seagate Technology and a friend of mine got involved in an Israeli startup
company called Tradency.
which was started by a couple of Israeli guys
Yeah, that's one of the bigger trend following, er,
signal following services. It's pretty big now. They've got something like
160,000 retail clients. I would say that's pretty big.
It's pretty big. Japan is the main market but basically what happened was
at their offer a lot of money around 2006 by venture capital company
but there's a lot of tough conditions on that they weren't reallly
happy with. So, what I did was approach them and say, "Look."
"I'll give you X amount, a lot less than the venture capital companies
but I won't have any conditions on it.
So, it'll be a lot less work.
So, they agreed to that.
I sort of got in involved in forex then.
You had no forex experience when you invested?
No, not at that point. At that point I had dabbled in stocks and I dabbled in other sorts of software companies.
I was still working as an engineer at that stage but then I got involved in
currency trading specifically and
I basically, it was something. It's quite up to do, as you know. It's a lot tougher than
Yes But it's it's another one to crack. So, I set myself that
challenge of learning the business. I was also very attracted by
a lot of the advantages of the business. You've got a lot of personal freedom
you can live wherever you choose
You've got infinite upside
you know, you have no inventory. You have
no customers really. Yeah, you can just do it by yourself
started currency trading and I've been doing that full time now for about
five or six years
When you you started, you said it was "challenging".
Yeah, I think like everyone, every retail trader, I was pretty naive when I
started about how difficult it was going to be.
There's been a lot of epiphanies along the way.
yeah, and really, I know that before the interview
one of the things you mentioned
you want to me to talk about how long it took me to learn how to trade
And what I would say to that is
You don't just say, "Well, in six months time I'm going to be a trader."
I think what happens is
a development process. Sure. And you have to have a lot of hard knocks on the way to learn the business
Okay. And I you know it compare to a sport
it's a bit like say golf. Somebody can tell you what you need to do
how you needed to hit the swing, but actually doing it is a completely different skill
and execution is very tough. Okay. Even if you know what you should be
it's a very tough to do it. Can give us an example of where you
graduated from the school of hard knocks? Well
I think every trader goes through losing periods and periods of big drawdown.
Periods of where you get into the hope cycle.
That you put on a trade and it goes against you. You do things like
take off your stop and you hope it comes back. And I the problem with that is the market's very
getting you to adopt those techniques whereby
they're gonna let you off the hook say 90 times over 100, but it's those ten times
out of 100
when the price doesn't come back and wipes out half your trading account
Yes. That's the problem So what the market does is it lures you into these
high success rate techniques Sure And it teaches you how to trade badly
by give you validation when you make the wrong decision. So is that the process
you went through? You're
attracted to winning all the time. And it works
until it doesn't… Exactly. Right. And I suffer from what a lot of traders suffer from
You know, every trade has to be a winner. And when you put on a losing trade
even though you know theoretically that's part of the process, losing, having losing trades
emotionally it's very difficult to accept that. You want every trade to be a winner.
Well you're responsible, right? You're the one pulling the trigger so it's your
Exactly. So, it's really
a lot of trading. I think the most part for me the most important part of training…
trading is self-discipline. You really gotta be a really disciplined guy.
You've got to do the hard thing.
You got to take losses when you need to take the losses
You've got… most of the strategies out there are going to lose over the long term.
You probably know. We call them negative skew strategies. Strategies that will work
for a while. The market's like a leopard. It keeps changing its spots.
So these strategies suck you in. They work for six months a year
you're making money like a lot of the semi-Martingale algos, for example
but you're making money
then suddenly the market starts trending you start losing
you blow your account a whole year's worth of
profits gone and you have losses on top. Right. So the market is always sucking you into these
losing strategies. You really have to go through these epiphanies. I'm not going to
use these losing strategies
I'm going he's gonna use things that work in the long term
so when you started out in you were just basically
flooding through the account and you're doing high win strategies
what did that look like and where was the point where you started following
something that was more of a defined plan? How was that process for
its… I can't give you definite goal posts
where I said I did this for six months and then I realize this
I think it's its been like like everything you get better over time if
you stick at it
and you're resilient and you're persistent
right now what I've done is I've refined my trading down to four specific setups.
Okay. And I really need to train myself that unless I see this
I'm not gonna take it. The other thing I've learned is to keep things simple
so for example if you have a risk reward ratio of 2 to 1
and you can get a hit rate on the trades of 50 percent, you make plenty of money. That's
a home run strategy.
But it's so simple but we don't do it. It's like the simple thing works
but somebody said to me once, one guy, one trader, said to me once, trading is like
being on a diet
everyone knows what you need to do to lose weight, but only something like two percent of people
stick to a diet over the course of a year. Sure. And trading is the same.
You know, I can sit you down or I can tell you
this is what works and this is how you make money
but what I found is doing it is a completely different thing
So did you ever try something as generic as a moving average cross or
a MACD cross?
Wel,l I mean, I think I learned really quickly that
almost all of the stuff sold to the public like that is nonsense
And almost all of the training is nonsense
Actually, I have some experiences to share with the viewers on that.
I remember I went to see one guy who was training
and I looked at his material and I said to him
"Um, you know, none of that stuff works. Anybody who is using techniques like that is going to lose money."
and his comment to me was
well, he knows that, but he's selling dreams
okay well you know, a plus for honesty, I guess
Well, he was honest to me, but he wasn't honest to the suckers who he's selling the courses to.
That's unfortunately common. Unfortunately now
the way I am now, I have to confess, I'm quite cynical at this stage when I meet a
I've never met a trader that's sunny and optimistic all the time. Usually, it's
you know, I've been around the block, got punched in the face for a couple years
It's not an easy business but now
now what I do is when somebody tell me they're a trader
I always ask to see some evidence of performance.
Okay. Because my experience is that's very rare. Right.
Successful traders… I don't know what's your experience, Shaun?
Well, it's a teeny handful of traders that actually make money
You hear people on the internet talking about
5 percent, two percent are people that make money. Yeah
Believe it or not, that's true in other industries, as well. The tech
industry very few companies survive and make money
Yeah. I mean, for example, I worked in the disc drive business for awhile
There's been over 100 disc drive companies in the last 25 years
Right now there's about 4 Right and only one of them makes money
Okay. So in nature, too
I've studied this in nature. Nature, too.
Something like, I heard a statistic once on a course at Jersey Zoo and I heard a
statistic that about 90%
percent of surviving chicks are reared by 10 percent of the parents
among small birds. Okay. Yeah, and while we're on the subject now
I read another more macabre statistic about, they did an analysis of the
fighting at Stalingrad
and they found out about, well, 1 percent of the Russian soldiers did all of the killing of the
Yeah, it's pretty macabre. It's pretty macabre.
But again, it's like trading. One percent of traders make all the money.
Yeah, it's true. It's true. Whatever
those people who are special, who got some special skills got some
execution ability that the rest of us don't have and I'm trying to get there
Sure. And so that statistic
It might shock people to hear that very few traders
are successful. Sure. But it's also true in other businesses and indeed in nature
It's actually not unusual
So when you were in the much bigger group of everybody that's not doing well
yeah how did you get to the point where you felt like you had a strategy are you
following mechanical rules did you take somebody's course did you read a bunch of books
Well, I think, I would put down as having epiphanies along the way
and one of the epiphanies would be that the markets are largely random most of the
Okay. And you can't make money out of randomness.
but within that randomness you do have what are called trader effects.
Trader effects, for example, is when the market adopts a different bias
And really what it becomes is you got to get good at recognizing these
and that then allows you to come up with those risk reward trades I talked about.
then,so for example, if the market adopts a bias like
an example trader effect would be the Japanese Central Bank announced
earlier this year that it was going to basically devalue the yen massively
devalue the yen
so then traders adopted a bias on the yen that they were going to sell the yen.
Now the problem with that his even if you know that
the markets, it's got a negative bias towards the yen
when the markets adopt a different bias, because you can still lose. The market can still
stop you out and then make its move. Right. So what you need then
is a strategy whereby you can exploit that effect.
so if you, for example, can recognize
a buy or sell extreme on a chart then you know at that specific point traders are
pointing at support. So, the fundmentals are on your side
and then use technicals to find the right risk reward ratios on the trades.
Okay, and since you're using fundamentals What is your time frame for a typical
I'm a swing trader, so my time frames are typically the hourly
and four hourly charts. I would say between one and two to three days.
is typically my time frame. Okay, so you do maybe a handful of trades
every week. Yeah, I'm probably like a lot of people
one of my weaknesses is that I over-trade.
Sure. Because one of the things you got to get good at that I'm not good at is
Right. The money's made in the waiting. It's a Jesse Livermore quote.
I'm not good at sitting there you really have to train your mind as a trader that
when you're sitting there and there's nothing happening
you are actually working by watching the market. Right. But, you know,
We were all brought up in school and were told you have to be studying all the
time. You have to be working all the time
you have to be pushing all time. I'm actually not good at that. I need to get better at that.
Again, that comes back to a point I was making earlier. Knowing what to do and doing
it are two different things
Yeah . So, I've gotta get a lot better at my execution
okay But, that's a process and I am doing that. I am getting better and better
all time and I can feel that in myself developing
and my confidence level at this stage is also quite high
that partly comes as a result of the fact that you know you've been through
the learning mistakes
on you know not what to do and you know what work works after awhile.
Ok. That's the road I'm on.
When we were talking initially, you described yourself
as trading a system, but its discretionary
that's one of the more interesting descriptions I've heard. What does that mean?
well basically, I'm using, my approach is to use a combination of fundamentals and
technicals. That's where the discretionary part comes in. Ok. And the system part comes in
whereby I need to have very specific things before I enter the market
and I also need to have specific risk reward ratios
Ok. So, for example, and then basically the game becomes, it's like a casino
You don't know which trade is going to work but the casino knows it has an edge over
so you know then if you have a specific set of entry rules
and your risk reward is two to one, three to one or sometimes I use five to one
then I know that if I get forty percent of those right, I'm going to make money
Yeah. So, it's simple, but it's powerful and it works if I execute it correctly.
and usually, where I do go wrong
is when I get weak on the execution, which happens at times
Sure. It happens everybody everbody I've ever talked to. Yeah.
Well again, it's like the diet analogy. You know you're not supposed
to eat this
but you do it. Or people who
maybe abuse substances. They know it's bad for them,
and they still do it. Trading… self-discipline and preparation and planning is the other thing I
would say that I've learned along the way
I'm not a natural planner. I'm more of an impulsive character by nature.
But, I've really had to beat it into myself.
Good planning and good preparation are absolutely essential and what really separates the
winners and the losers
It's how you get into that one or two percent group of people who can do this
Your preparation and your planning.
You know, they all feed into your execution.
Good execution. Okay, and I know that since you are trading
a combination of fundamentals and technicals with specific entry rules
if you told everybody your strategy and you laid it all on the table
Yes? Would they be able to use it? Absolutely not.
Okay. And the reason is, it comes back to
to what I said like golf.
if I was Tiger Woods, I could tell you how I swing
but doing it. I mean golf is not a secret
Or another good analogy I like to use is boxing.
If I was a professional boxer, I could tell you
how I box and how to throw a punch, but chances are
if you got in the ring with another professional boxer, you're not going to last long.
And trading's the same.
I think you have to go true the pain of the mistakes
learn the business. Another side of that
I heard a story once. People suffer from what's called anchor bias
I heard a story once
where a guy said… You said, "Anchor bias?" Anchor bias.
I heard a story once of this guy training in New York, and he said to these stock
How much did you make last year or how much do you make a month?
One guy says I made 50%, another says I made 20.
He said, ok, tomorrow then I want you to just come in
and bring in your brokerage accounts
and we'll go through and see what you really made
and when the guys brought in their brokerage accounts the next day
Almost none of them… most of them had made a loss.
Really? Yes. and then he said well where are you getting these
20 percent or 5 percent a month figures from
if you made a loss and it turned out that they what they do is they looked at a winning
They looked at a winning month and that became their anchor
for telling people. Interesting So they're lying without really
choosing to lie. Yeah, but what one of my strategies now
having clients is
I report my performance, as you know, every week in the newsletter. Sure.
And it's also independently verified on MyFxbook
I actually can't do that now. I actually have to face the music.
Right. when I'm not doing well. And actually, I find that's good for me.
because that really keeps me disciplined knowing that
the clients are checking the accounts every day Right
they're checking it every week and they're certainly checking it every month, actally, if you have a bad
They're getting upset, even over one bad month. Knowing that
it really make you say to yourself, I really can't afford to start
pushing things under the carpet When you're when your trading and you're
managing people's money, yes you're your own boss
but not really. You do have bosses that are watching your
Well, there are some people who are watching it constantly.
which is a bit unnerving.
The upside of that is you really have to be disciplined. You really can't be like these
guys with the anchor bias
telling people that you know you're making fifty percent a year and you just lost
which apparently is what a lot of traders are doing. Especially retail traders.
A broker told me, too, is what a lot of retail traders do
is they blow up their account
and then they reload it and they might have a good few months. People might ask
how they're doing. They obviously tell you what the reloaded account was
They don't tell you, "I've just blown up the account several times."
There are various words for the biases around the recency bias
and the anchor bias and
selection bias. So when you were doing retail trading
you're trading for yourself. It's kind of a hobby. You're still an engineer
At what point will did you have the confidence and what was the process of
Well, some of the background to that is I worked in engineering for a long
Anybody who's done that knows that
Engineering is a young man's game. It's very tough work.
I worked in a computer fab. It's a 12 hour a day job
and there's a lot of time line pressures. Also, you get paid a salary
after a while, there's no up side. I actually got bored with it, to be honest.
I guess like a lot of people that markets have the lure of easy money.
Any idiot can do it. You push the button and you
got a fifty-fifty shot.
You can make milions and you can move to a resort
You can tell everyone you're Gordon Gecko.
I'm sure you've been there.
It's a pretty common fantasy. Everybody's got the idea that their
life's gonna change. At some point they're thinking oh I'm on the big
traded and my life's about to change. I don't know anybody that didn't at
least have that
dream at some point. Now, everybody's got a different period where
they hold on to it but
everybody's been there Yeah it's lure of easy money, I guess
I really got bored with engineering, and I decided… I remember reading a book
by Andrew Grove called "Only the Paranoid Survive". One of the points he
makes in the book, he said the modern world is so competitive
that if you're doing something and you don't commit to it full-time and give it 100%
it won't work
Okay So, I decided that if I was working 12 hours a day as an engineer
and coming home and trying to trade, I'm just wasting my time.
So I decided… and also, at that stage, I had put the money into Tradency.
okay. And Tradency was looking pretty good at that stage. It's been a bit of a roller
coaster ride since then but it looked like
I was got to do pretty well out of that company, so
So I decided basically to go pro
But I started off with the stock markets. I started trading stocks initially.
and spread betting because that's tax-free in the British Isles.
And then I
gravitated towards forex for a different reason
it's a long story. We probably
don't want to get into it now. But, of course there are a lot of advantages. We won't get into them in this
But one of the advantages is it's easier to trade clients' money, as well.
Because you can just electronically link
the MT4 accounts.
You know, I've learned some of this from the ZuluTrade and Tradency world
Basically, just gravitated towards forex over time.
And how long were you trading before you traded other people's money?
I would say about four years.
And how long have you been managing money?
In the current format with Fisic? No, just in general. Because I had a couple of
private guys who just asked me to do it
a couple years ago, so that's something that's been going on for 2-3 years.
and then with Fisic about a year. Okay.
So when you made the decision, "Okay.
I'm tired of my engineering job. I'm gung ho trading. I'm doing okay"
What did you do to go get clients? How did you get your name out there?
Well, basically, I started trading my own money
and then what would happen, people would know I'm a trader
and I would get offered money. Initially,
I used to say no because I knew that would be a lot of hassle.
Then I started with one guy, and then I added another guy
and then I went through patchy periods with that, to be honest.
It wasn't always successful. It wasn't a disaster, either.
And then I decideded… I met a Russian guy who was a programmer.
We decided we'd set up a company together and
explore algos. That was 2-3 years ago.
So, that's when I set up Fisic initially.
That was the original trust of the company. But then
he got offered a job in London.
It was more of a sure thing, so he took the job in London.
So then I decided to take Fisic in a different direction. I'd start
trading people's account through the MT4 platform. They'd just link to my account and
follow me basically
Okay. And that's been going on about a year now
Initially, I started pretty successfully
went off the rails a bit this summer. The markets… because my strategy. I was using a
basket strategy and that stopped working.
I've had to refine my strategy since.
How do you deal with that? You're trading and you're doing well
you've built up this expertise and then this happens all the time. The strategy
The tech industry is the same.
Look what Apple and Samsung have done to Nokia and Motorola in the mobile phone business
They had a great business. They were leaders in their market. Apple came in and
took it away.
And Samsung took it away. You've got to understand this is part of
the process of trading. If you've got a strategy that works today
it's not going to work tomorrow. It's the story of
Alice In Wonderland, that of the Red Queen looking in the mirror. She has to keep
running faster and faster to stay in the same place.
Basically, this is the environment we live in.
The market is changing all the time. You've got to understand that process
and use you've got to you gotta move with it.
So when you're in a patchy period, obviously
you know that you're in a patchy period because your losses are
mounting. At what point do you realize this
Again, I find it very difficult to say
something specific like after a week or after a month or something.
I can I think that's a process. But one of the things I've done lately is
I switched my strategy today to be a lot simpler. I was using a more complicated
at the start of the year. But, one of the things I've realized is
Simple is better. Now I'm back
to a strategy I used a few years ago, which did better, actually
which is very simple
hit right versus risk reward strategy
A hit rate of 50 percent
at a risk reward ratio of 1:1, 2:1
5:1 is about the max I go
My focus now is I want to try and
get a minimal hit rate of 50% with favorable risk reward ratio.
The I know if I do X number of trades a month I can reach much higher
which is five percent a month
You just went through the process of looking at the changes that
you start modifying the strategy? Yeah, you modify the strategy.
at the start of the year when the yen was trailing,
I was using a basket strategy which had
I won't go into the details now, but there's some very nice things about that
you don't tend to have losing periods. One of the difficulties of
working with retail clients is they are
really intolerant to losses. Really intolerant.
I have client that think every day should be a winner.
Actually, every trade should be a winner. I get people
asking me for guarantees.
which is silly. In markets you get paid for taking the risk
That's why they would get paid. But they they think they come along
it's free money and there's no risk and every trade's a winner.
How do you manage those expectations? Well you've probably read my newsletter
I write a weekly newsletter and I report
performance, I say
what's going on and what I'm looking for. I also have a trading perspective in there
every week where I talk about the analogies with sports
the mistakes traders make and I try to set realistic expectations
in the newsletter. I found also clients to be really good
very tolerant once you explain stuff to them. Where you get into trouble with
a lot of money managers fall into this trap. They try to hide things and they
make excuses. They don't tell people the real reason for the drawdown
the real reason for the bad performance
Most clients are understanding, but then again, I do send all the clients a
We are trying to avoid the crazy people. Hopefully that's not you
You know that if somebody sends you an email saying
"Do you guarantee results?" Yeah, of course. That's a
you don't belong here email.
What I do is to write back and say you have to understand that the market
pays you for taking the risk
that's what you get paid as a trader. Otherwise, it'd be free money. If there's no
it'd be like walking to a bookie and saying if I back this horse, do I get my
Why would the bookie
let you back the horse? It's a silly question, but I get it all the time.
I remember speaking to Janus
another trading outfit in Germany. He said he has some
Turkish guy who calls him every month saying if only he'll guarantee the performance
he's raise X amount for him. And every month he tells this guy no
no guarantees and the guy calls him every month to guarantee it
yeah that's a trail of tears waiting to happen
The reason I send clients a questionnaire. My target
client base is people who traded before
And I ask people
this question on the questionnaire,"Have you traded before?"
"What were your markets? Do you know how well you did?"
Most of the people who come to me have traded before
That's a big advantage.
I think the newsletter
A lot of the clients tell me they really enjoy reading the newsletter every week.
One of the reasons, too,you know there are thousands of newsletters out there.
Most people don't bother even reading them. But, when you report performance
in the newsletter
people's money is on the line they really do read the newsletter.
Yeah. Honest confession, when I get your newsletter the first thing I do is scroll
down I look
cause you always put it right in the middle so I scroll right down to the middle
After the first paragraph.
So, so I go look. That's the first thing you look at? Yeah.
I was curious,"How did Peter do this week?"
Exactly, because I think if I was just writing a newsletter like
other generic newsletters, nobody would even read it.
And the other thing I want to do, Shaun, that's important to me is
I don't have the stomach for conning people. Right.
Good for you, Peter.
As you know, it's an industry of charlatans. It is, that's absolutely the truth. The amount of people out there
who are selling training and they have no idea how to trade.
They're just repackaging stuff that's available for free on the internet.
The amount of people out there who claim they can trade
but who can actually do it is tiny, as well.
When I got into the business, when I was writing the newsletter, putting it
I wanted to try and be an honest guy because this is a huge opportunity as well, if you are honest.
and you have real performance then there's almost nobody like you out there is
It's really hard to find people like that.
It is. For people coming, I see the opportunities of of the business
You can build your name and build your reputation
if you've got the performance and you're honest about it. You can also build up
trust over time, which is very important
I think we're running out of time. I wanted to thank you for
joining us and if you're
if you're interested in getting Peter's newsletter you can find it at Fisic.ie
www.fisic.ie and it's free
Peter thanks again for joining us. Thank you for watching