Saturday, 27 May 2017
I knew that trading course I did would come in handy
As you’ll know if you’ve read the opening section of Midland on my Unbound homepage, one of book's lead characters is an investment banker. Midland is in many ways a book about money - or debt, to be more precise - and the story is set shortly before the financial crash of 2008. So, in the interests of research, and because I’ve had a long-standing interest in the financial markets and found myself with the time on my hands to indulge it, a couple of years ago I did a course in futures trading.
It wasn’t just curiosity. I’d been managing a small ISA of stocks since my father had died in, yes, 2008 - just months before the crash - and I’d had to sit and watch my already fairly meagre life savings get sliced in half more or less overnight. Shocked into doing something about my level of fiscal ignorance, over the ensuing six years I had taught myself the basics of portfolio management and - aided by a rising market, the work I was doing on the Finance pages of the Telegraph, and a subscription to the Motley Fool - I slowly managed to rebuild my capital and, indeed, to grow it well beyond the sum I’d had before disaster had struck.
Emboldened by my success, out of a job following the sale of the video platform I’d found myself having to save from bankruptcy (long story), and in the throes of trying to bootstrap a new company with zero funds (longer story, still unfolding), I began to wonder if I could actually make at least part of a living trading stocks. Other people did it, right? How hard could it be?
Not that easy, as I soon found out. I read some books and took some risks and discovered very quickly that a little knowledge can be a very dangerous thing. Despite my earlier successes I clearly didn’t know what I was doing. On the other hand, I’d been bitten by the bug - and was keen to learn more.
Then one evening I saw a documentary about trading on the TV. The programme featured a company that ran full time courses for aspiring futures traders, and by bizarre coincidence its founders had been interviewed in the very restaurant in which I’d had dinner the previous night. This had to be karma (something that I now know bears a striking resemblance to the gambler’s fallacy), so the next day I called them up and asked them if I could pop in for a chat.
Now there are a lot of crappy and over-priced trading courses out there, and I have no hesitation at all in saying that Amplify Trading is not one of them. I was very lucky to have found my way to one of the best futures training outfits that you can find outside of actually getting a job on a trading floor (and even then I imagine that Amplify quite often has the edge). Though they were still quite early stage when I was with them they’ve subsequently grown at a rapid clip and their clients now include universities and investment banks from the Middle East to Shanghai and back, and I heard recently that they now have the Financial Times on their books.
The course itself was full-time, utterly rigorous, and a lot of fun and in the year of trading that followed it I lost a fair amount of money, came quite close to having a nervous breakdown, learned an enormous amount about the financial markets, learned even more about myself, and - eventually - mastered a few of the basics about how to trade. If I had to reduce it to one line, I think the most important thing I learned was when NOT to trade, which at the moment in my case is most of the time.
If that sounds like a facile conclusion, believe me when I tell you that it really is not. That single piece of self-awareness - and, crucially, the ability to act on it - came as the result of what is possibly the hardest personal battle I’ve ever fought: the ultimate showdown against my own particular brand of internal compulsion which, once all the bullshit and self-denial has been stripped away, is probably not all that different to your brand. If you’ve ever traded, or gambled, or been addicted to anything; or if you’ve ever read Daniel Kahneman’s Thinking Fast and Slow, you’ll know what I mean. If you haven’t done any of those things, then I advise just reading the Kahneman. It could save you a whole world of pain.
So the trading gurus are absolutely right when they tell you that trading is 70% psychological, 30% technical - if anything the psychological percentage is even higher. They will also tell you that everything in life is a trade, and increasingly they are right in that too. By the time I went to study with Amplify, I’d long since started to believe that my writing career was, quite literally, a gamble. Each of the four books I’d painstakingly fashioned over many years had proved little more, when it came to it, than chips on the roulette wheel of the publishing market, chips that were lost in at best three or four spins. Whether or not those chips had value in themselves, or any inherent quality at all, was a question that had started to seem not just irrelevant but naive. What counted was whether or not they paid out, and that in turn depended largely upon whether the ball of the world’s cultural attention happened to clatter down on them when the wheel span. And if it didn’t, then that was that, over and done, into the dustbin with it and onto the next - if I could stomach it.
My career choice might have been particularly precarious, but it struck me that it wasn’t just me gambling like this, it was most of the people around me, whether they knew it or not. Economic realities have always dictated the development of societies, but it’s now a commonplace to remark that the current environment is more ludic, contingent and downright random than that in which our parents’ generation lived, where the rising post-war tide raised most ships and pushed them along relatively well-defined channels.
Trading, given that it’s full of people who have accepted and internalised this existential state of risk (and even fuller of those who have not - a second category whose trades pay the wages of those in the first), looked to me like a good place to find out more about how to cope with this. And it did do that. It showed me how to invest less emotionally in decisions while committing to them utterly with every bit of my intellect. It stopped me looking for single big payoffs and taught me instead to run multiple strategies in parallel and de-risk those that were doing well instead of overextending them only to watch them go sour. It taught me how to be satisfied with the outcome of a plan well executed and not to hanker for more. And it taught me, as mentioned above, to be happy to sit on the sidelines when I’m not in the right frame of mind or general situation to commit sufficient mental and financial resources to the process of making a trade.
Case in point: I’m not trading futures at the moment, haven’t done for over 18 months now, although I’m keeping my hand in with occasional forex trades that won’t cost me the month’s mortgage payment if I drink too much coffee and make an ill-timed decision. This has allowed me to get a little distance from it all. But I’m pleased to say I’m still able to spot a good trade when I see one, which I did earlier this year when bitcoin, which had been testing the $1000 handle, dipped to $750 or so. I’d not traded bitcoin before, but someone I work introduced me to a good broker so I was able to buy some of the blockchain-based currency. A couple of weeks ago I offloaded half of my stake when the price hit $1800. I’d made a profit of £1000 - money that I think the gods meant for Midland, so I’ve put it all into the book.
Thanks to that, Midland is now 69% funded. No Unbound book that has hit the 70% mark has failed to get to 100%, so the next couple of pledges are crucial. Can you help tip me over that magic 70% level, perhaps by upgrading to from a hardback pledge to a Harry Harris CD, an extra copy of the book to give to a friend, a signed copy of the manuscript, or a invite to the launch party? Here’s an offer: if you pledge for the party I’ll invite you over to my place for lunch and tell you what I know about trading. It might not make you much money. But it might save you some.