Brent Donnelly: Alpha Trader - The Mindset, Methodology and Mathematics of Professional Trading

Brent Donnelly has been in and around trading for close to 3 decades and has held major trading roles at investment banks and hedge funds with a strong emphasis on the FX and Global Macro, where he has been involved in both market-making and proprietary roles. 

Brent started trading in 1995 and has worked at several illustrious firms in the markets, including Citibank, Merrill Lynch, Royal bank of Canada, Lehman Brothers, Graham Capital, Nomura Bank and HSBC. 

Since 2004 Brent has been writing a brilliant free daily newsletter on the markets called AM/FX – This newsletter is read widely by professional traders across the world inside Investment banks, Hedge Funds, Asset Management Firms, and Even Central banks. Brent has also authored two books: The Art of Currency Trading and his most recent book, Alpha Trader: The Mindset, Methodology and Mathematics of Professional Trading. 

In this interview Brent tells us about AlphaTrader and talks extensively about trading, markets and what he believes it takes to be a successful trader. 

This interview pulls back the curtain somewhat on what it’s like to be a professional trader, and some of the challenges pro-traders face as they seek to battle the markets within a high pressured trading room environment. 

You can find out more about Brent on his personal website: http://brentdonnelly.com

Also visit Brent’s new venture Spectra Markets, where you can sign up for his free AM/FX Newsletter: https://www.spectramarkets.com

You also follow Brent on Twitter at https://twitter.com/donnelly_brent

Episode Links: 

🎧 Podcast: https://link.chtbl.com/Brent

📺 YouTube: https://youtu.be/UTWSAyUzOJk

 

The AlphaMind Podcast
The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets. To find out more visit the AlphaMind podcast website.

The AlphaMind Podcast is produced in partnership with 'The Society of Technical Analysts'.

Followers of the AlphaMind Podcast can gain an exclusive GBP 100 (or local currency equivalent) on the full cost of the Society of Technical Analysts world beating Home Study Course and Home Study Course and Diploma programme. Go to this link to find out more.

Sign-Up for the AlphaMind Newsletter
The AlphaMind Newsletter is a free bi-monthly email, that explores how people develop, cultivate and grow optimal mindsets, behaviours and attitude for better and more productive performance when engaged in risk taking activities in Financial Markets. Sign-up here.

AlphaMind Trader Coaching Programmes.
The AlphaMind Trader Performance Coaching Programme
The AlphaMind Peak Performance Trading Programme

To find our more about the programmes email info@alpha-mind.net

'Behavioural Trading. - A new name for an old blog.

I have been running this blog for some years now in various disguises. In the early days I shared my views on markets, whilst also adding occasional thoughts about Trading Psychology and Behaviour. I then started to focus more on my thoughts about trader performance and trader behaviour. I felt that there was more than enough talk and discussion about the market, about price action, about central banks; 'will they, won't they, should they, shouldn't they'. I admittedly also lapsed on my blogging, posting occasionally, about once every 2 to 4 months. I stayed active managing the Linked-in group 'Trader, Trading and Risk Psychology', which continues to grow and thrive, and at the same time, I have continued building up my business as a 'Performance Coach' working with traders. This continues to proceed, and I am delighted with the outcomes that my clients are now seeing from my work, I have shared a few examples on a recent post (Which I shamelessly plug here).

The post, which I shamelessly plugged, highlights just some of many examples where traders, who have passed through my coaching programmes, are now making significantly more money than they ever were, whilst at the same time being far happier and more content. I have now worked with many hundreds of traders over many years, first as a trader than a coach, I feel I have continued to grow and learn from them all. During this time, my views on trading psychology, trading performance and trading behaviour have transformed and taken on a very different shape. My earlier contentions about trader performance were largely shaped and coloured (or for you on the other side of the great pond 'colored') by my own experiences as a trader working inside investment banks. However my views have come along way since then, twisted and contorted by others sharing their experiences and travails with me, shaped by my own journey into Gestalt Psychology, which has opened up a whole new world, and continually polished by additional reading and learning. It is this journey which has led me to this place, and to the renaming of my blog, 'The Being of Trading'. For it is not enough to just do the right actions that lead to success in trading, rather it is to know and understand 'how you are', the 'being' of trading, both as a person and as a trader, which is where true success come from. I often use a quote made famous by Sir Edmund Hilary 'Its not the mountain we conquer, its ourselves'. That as true in his world, as it is in the world of trading, where the mountain is replaced by the  'market'.

That is what I aim to focus on with this blog from now: How one 'is' a trader, and how one applies their own personality, beliefs and attitudes to their trading. I will discuss and explore what I have learned and what I have discovered along my journey. About how engaging with risk and uncertainty requires special skills and capabilities, which everyone has within them, but which are so rarely understood and often so poorly practiced. I can not promise that I will be update this as regularly as I currently hope to, so please bear with me and be patient. - I do hope to bring some valuable insights over the months and even years ahead, which I believe will prove valuable to many people, themselves battling to succeed in the world of risk.  In the meantime please feel free to follow me on Twitter @chrysalisperfco, where I will post and re-tweet interesting articles on related themes. i also hope to turn this blog into an email newsletter. If anyone woul like to subscribe to the email newsletter, then please email me your name and email address. My contact details are at the bottom of this post. 

My first article , will ask 'Whether one can actually make money from trading on a consistent basis'. I ask this question, because this is a theme which has come up on more than one occasion with clients. Until then thank you and kind regards.

Steven Goldstein

steven.goldstein@alpharcubed.com 

Twitter @chrysalisperfco

The Good Old Days of FX Trading - 1986 Style

A reminder for some of us older folks, and some eye-opening for some of the younger ones.
The following links are to a documentary about FX Trading from 1986.

The top video clip is a the short 5 minute version.



For those who wish to see the full 30 minute documentary, click below:




Some of the highlights:

• 10 point spreads. 
• Phoning your overseas office before leaving home to tell them you plan to bash the currency lower when you get in.
• Overt price manipulation as part of normal activities.  
• Phoning on a handheld phone.
• Smoking in the office.
• No bonus (Commission) for trading.
• Barclays known as a sleepy high street bank. 
• Surprise that a trader is earning more than a high street bank manager. 
• The use of the term City Gent.
• A bank even allowing the cameras in to see its activities and allowing its name to be used.  
• Chemical Bank (For those younger viewers, a giant of its day, and eventually merged to become a significant part of JP Morgan Chase)
• Some of the names on the Reuters terminal. E.g. 'Coco Cop' and of course the BFT Moscow.
• Using a pager.
• Cassettes in cars - and the Wall Street Shuffle.
• Overt price manipulation.  
• NO CHARTS 
• NO INTERNET or EMAIL ANYWHERE, People spoke to each-other.

But what is also clear, is that cutting through the Social, Technical, Cultural and Fashion Changes, is how little has really changed and how much is still the same.

A ‘Candid Camera’ Perspective in Social Conformity & Herding Behaviour in the Markets.

I love this amusing clip from the classic 1960’s TV show ‘Candid Camera’. It beautifully captures the way humans conform to the behaviour of the crowd.

Conformity - elevator candid camera from Prof. Keenan on Vimeo.


Whilst it might be a bit if fun, and almost certainly heavily edited, it does nicely emphasise the way humans conform to the behaviour of the crowd. There are many reasons for this, and I think it’s helpful to understand these when we try to understand markets and market behaviour.

No matter how much we know, or we think we know, the truth is we are limited: We cannot know everything and we have limits to how much information we can process. Therefore as a species we have learned to pool our knowledge and to rely on the knowledge of others. As a result we are prone to thinking in this way, and sometimes, even if you are convinced that a particular idea or course or action is incorrect, you might still find yourself following the herd, believing that they know something that you don't. This is exaggerated in situations in where an individual has little experience. I like to refer to the writing of Jon Maynard Keynes at this point, he once compared the way investors pick stocks to how participants would be successful in winning a type of newspaper beauty-picking contest common in the 1930s:

‘It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be.’

What he describes, is one of the reason why markets display herding behaviour; people make conscious efforts to pick those stock that one believes other people are likely to pick. Personally I can’t think of a better reason to buy a stock than the belief that everyone else will be buying it. Nonetheless, I believe this is a good example of acquiescing to one’s belief in the knowledge of others. This is what everyone who trades is trying to do, whether their tool for picking is fundamental assessment of value, quantitative measures of expectations of value, or attempts to identify patterns in price action as a predictive tool.

A further strong reason for herding behaviour, which has its roots in our subconscious, is the fact that
we are hard-wired to confirm to the behaviours of the crowd. We evolved to be this way: Early humans learned to cooperate, share and to be mutually dependent on each other, this almost certainly greatly increased their chances of survival. Those ‘conforming individuals’ were far more likely to pass on their DNA, through the millennia, than those who failed to conform. Those who preferred not to confirm were more likely to have been rejected by social groups, and thus left to fend for themselves. Though I would stress, that this does not preclude competing, which is also part of the human condition. Nonetheless, as much as we like to think of ourselves as individuals, the fact is that we're driven to fit in, and that usually means going with the flow. As stressed somewhat humorously by the candid camera clip.

Successful trading and investing requires understanding not just the behaviour of the crowd (the market), but also a degree of knowledge of why they act in certain ways, as well as how that affects you and your decision-making. This does not mean one should not stand against the crowd when trading and investing, however this makes the timing of trades and investments all the more important. Anyone (and there were many) who had a very good reason in their mind to short the stock market in recent years will be all the more conscious of that fact.

Chrysalis Performance Consulting are leaders in the field of ‘Performance Improvement’ for Traders, Portfolio Managers and Fund Managers. We work with some of the world’s leading Hedge Funds, Asset Management Firms, Commodity Trading Businesses and Investment Banks, helping  risk-takers and leaders gain an edge in the financial markets.

To find out more about how Chrysalis Performance Consulting can help you or your people improve & enhance Trading and Investment Performance, email us at trading@chrysalis-pc.com or visit our website www.chrysalis-pc.com. 

You can also view & download our ebrochure at www.chrysalis-pc-ebook.

                                       
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