Title

Market Warriors

Coordinator
Diana Qin

Cover
Ainoa Carceller


All rights reserved

JIM ROGERS JOS ANTNIO MADRIGAL

TOM DORSEY YASUJI YAMANAKA PAULO PINTO
STEEN JAKOBSEN JASON WANGKE HLIO OLIVEIRA

MARKET
WARRIORS

CONTENTS

ACKNOWLEDGEMENTS
PROLOGUE
JIM ROGERS
JOS ANTNIO MADRIGAL
TOM DORSEY
YASUJI YAMANAKA
PAULO PINTO
STEEN JAKOBSEN
JASON WANGKE
HLIO OLIVEIRA
GLOSSARY

ACKNOWLEDGEMENTS



Many thanks to the traders and investors who graciously agreed to be interviewed
whilst donating their share of the book rights to AMI (Assistncia Mdica
Internacional).
Despite demanding schedules, everyone was forthcoming and generously
accommodating.

PROLOGUE


As I write the introduction of this book, the price of gold, silver, oil and the stock markets continue to swing
wildly. The volatility of the XXI century is the new norm in the markets, movements of 1 or 2% are no longer
considered volatile.

Never have we had so much market information, thanks to the internet and TV channels; never have
we had so many experts commenting on these swings. Today, the market is up because of an ECB (or
the Fed) statement and the experts claim the future is bright, yet tomorrow the market may be down
and different experts will claim the economy is going nowhere because of political risk. I do not think
people have the patience anymore to listen to these experts explain the markets day after day.

This is the reason we decided to interview great traders and investors, so they could explain what the
right plan, if any, is, and to help the rest of us to navigate confidently during the uncertain times
ahead.

It is their plan that you can see here. It is their ideas of how the market evolved and what you have to
do to follow the markets. We interviewed people in Europe, USA, South America, China and Japan.
We interviewed day traders, cycle traders, long-term investors and frontier investors. From diversity,
we only looked for one thing: honesty. They all recognize that they do not fight against markets, but
against themselves. They are market warriors.

In todays world, everyone wants easy money, quick money, but honest people know that markets are
not so cooperative.

Tom Dorsey and Jos Antnio are drawn toward stocks that have already gone up; one following
relative strength, the other looking for new highs. This type of strategy can perform strongly during
constant market environments, but can become unstuck at major inflection points, when technical
regimes change.

Jim Rogers does not try to time the market. He makes a choice and sticks with it. He also prefers to
look where no one is looking. Because of this, he says he is too often too early on his trades, but he is
able to hold stocks indefinitely.

Hlio Oliveira is a fantastic day trader, a man with the IQ of a genius, able to transform two minutes
of the markets into an eternity. We had the most fantastic time with him, learning about his own
theories. According to Hlio, prices are not random. There is an underlying order to all markets and
price action. According to him, great trading can be learned, but one must understand and act on his
goals for trading. We were present at one of his rare one-day real time seminars where he trades real
money and a real account. Hlio takes his chances in the prevailing market, trading his own cash in
the pressure of the moment, but for those lucky enough to be able to be there at the seminar, what a
rare opportunity it is to see a professional trader at work. Hlios approach to trading is the same as

his approach to life. He likes things at full speed, he is a city animal, he likes the stress the style, the
technology available. When asked if he would like to trade from the beach the answer was, Hell
no! He finds the slower pace a problem.

Paulo Pinto is the opposite. He has progressed to the point where he wants simplicity. Fewer trades
mean fewer decisions, less stress, and at the same time, allow him to concentrate on factors, such as
average profit per trade, win/loss ratio, and trade efficiency.

Curiously, both Paulo Pinto and Steen Jakobsen think these are worrying times for the portfolio
managers competing to win and maintain the worlds richest customers. As stock exchanges around
the world enjoy a sustained rise after a bear market crisis, wealthy individuals are recovering from
the shock of seeing paper fortunes destroyed and are reassessing the performance of their financial
providers. Clients will forgive bad judgement mistakes, but they will never forgive bad faith. The
difficulty, according to them, is how likely is it that the optimism, prevailing at this moment in time
and supported by many reports, while cheering that the crisis is over or at least getting that way, how
can this be correct when the recovery in employment is non-existent?

Steen is gentle and sharply dressed, he is suave and slender, and his style is refined almost effortlessly
groomed. Steen is one of the 10 most cited economists, so fundamentals are very much his bread and
butter. However, his views always seem different to those of the establishment. As he wrote in the
Economist, So how can it be that stock markets are hitting multi-year highs while employment is
hitting historic lows? In a real bull market, everyone partakes in the upside - but those who have access
to central bank funding drive this market and the economy. In short, they are detached from reality.
Like a David Copperfield stage act, it is a grand illusion.

Because we are in a grand illusion and because we are in unusual times, it is interesting to see how
these very experienced traders and investors see the evolution of the markets, what kind of
methodology or system they use, how good is their understanding of the markets and how they enter
their trades.

Most investors go from one method of trading to another, from one popular advisory service to
another, and from one kind of charting software to another, searching for the perfect way to generate
winning trades. I hope that this book will help you put everything together. One of the conclusions we
get from these interviews is that professionals stay with their systems long enough to let them prove
themselves. The second conclusion is that they never make it too complex.

Yasuji Yamanaka realized that he was an outstanding trader when he developed mechanical trading
systems. Chinese Jason Wangke found that having a solid understanding of the fundamentals always
gave him a much better hedge. Warren Buffet is the guru of his investing religion.

Another important conclusion is that every investor should learn from his trading experiences, so over
time you can learn the exact style that suits you.

It is important to realize that even great traders like those in this book do not always win on every
trade. What they do is to maximize their particular strengths. None of them are insecure,
undisciplined, unstable anxious or fearful, but all of them have a great respect for what losses can do.

I have also asked what they consider to be the most important tool for trading and realized that, for
them, the answer would have changed over the years, which means that the reality of the markets has
changed.

Hlio Oliveira was adamant when asked how we go about determining whether a system or method is
realistic. Unlike in the 90s where it was important to have access to the latest computer modelling
systems, today access to those are impossible not because the best trading models are complicated but
because access to light speed technology is expensive and only accessible to few banks and hedge
funds.

For Hlio, misconceptions about trading are plentiful because it is a foreign profession to most
people. According to him trading can be as demanding as practising surgery because of daily
emotional demands. Trading seriously requires serious effort, and it is not an occupation to be taken
up as a retirement activity. Many people have the silly idea that, because they bought and sold a few
stocks and made money, they can go into trading. Trading with this idea in mind could be a very
costly mistake. What separates Hlio from the pack in this cutthroat industry is his obsession for
perfection.

For Paulo Pinto trading is a lonely occupation even when people surround you. Trading favours
introverts. It takes a special person to do it on a daily basis. Yasuji Yamanaka confirms that most
people are not that psychologically independent. Again, Hlio Oliveira gave a very clear example of
what it means to be psychologically independent: You cannot trade well if your spouse thinks you
are gambling or if she is afraid of you losing money when you are going through a losing streak. A
trader needs to force himself intellectually to override counterproductive emotions.

When asked what he likes most about trading, Tom Dorsey said that he enjoys every aspect of trading,
because trading is his passion.

Jim Rogers is a legend, but he does not consider himself a trader. He is a long-term investor with a
very critical view about politicians and central bankers. When asked why, he says that central banks
are giving their friends and favourite banks access to almost unlimited amounts of money at nearly
zero rates of interest to buy assets like bonds and stocks and expensive real estate, while ordinary
Americans are not getting the money. Under the excuse that they print money to stimulate the
economy, the reality is that they are not stimulating the real economy and because the debt is so
staggeringly high, he is worried about the near future and believes the economy will have a recession
as part of a cyclical trend.

Nevertheless, trading is still one of the last frontiers of opportunity in our economy. It is one of the
few places where someone with a relatively small investment can still become a millionaire.

This is the other reason we interviewed these great traders and investors - to learn the secret of their
success. From the interviews, we can learn from these market warriors, hear their fascinating stories,
and then discover the secret formula, as many believe it exists.

We formulated a set of questions that served as the basis of our interviews. We focused our attention
on what it was that made them start in this business, how they learned to trade and what was the result
of their first trades. We decided to interview different traders and investors with different

philosophies because different philosophies imply different approaches to risk.

We hope this book sparks further curiosity and forges future market warriors.

JIM ROGERS


When talking to successful people, we often wonder, how intelligent are they? How did they get to the
pinnacle of their profession? What talents do they possess? What separates them from everyone else?

Jim Rogers is different from everyone else and is praised as being one of the smartest investors, but
he often says, I am not smart enough to know this or that. How high will gold go? I am not smart
enough to know that. What gold stocks should we buy? I do not buy gold stocks because I am not
smart enough. He will probably respond, I have judgement, which I gained with hard work and
experience.

Born in Baltimore, Maryland USA, with the name James Beeland Rogers. He is the living legend in
the investment world with a clear vision of the future, easily recognized by statements like this to
Forbes: The stock brokers are going to drive taxis; the smart ones will drive tractors so they can
work for the smart farmers. The farmers are going to drive Lamborghinis. With 70 years of age
now, this international investor is based in Singapore, and is Chairman of Rogers Holdings, and the
creator of the Rogers International Commodities Index (RICI).

He is a specialist in Commodities and Asian markets, advising Russian VTB capital agriculture
division and Leopard Capital in the Sri Lanka Fund.

Jim Rogers started in Wall Street in 1964 with Dominick & Dominick, one of the oldest financial
services institutions funded in 1870. Later in 1973, Rogers co-founded, with George Soros, the
famous Quantum Fund, which in 10 years gained 4200% while the SP500 advanced 47% in the same
period. In 1980, Jim decided to retire, at the age of 37.

Jim Rogers has a bachelor s degree in History from Yale University and a second BA degree in
Philosophy, Politics and Economics from Oxford University. He is the author of the following books:
Hot Commodities: How Anyone Can Invest Profitably in the Worlds best market. 2004
Investment Biker: Around the World with Jim Rogers. The result of 160.000 km across six
continents on a motorcycle and recorded in the Guinness Book of World Records. 1995
Adventure Capitalist: The Ultimate Road Trip. Another Guinness World Record set for
journeying through 116 countries, covering 245.000 km. 2003
A Bull in China: Investing Profitability in the Worlds Greatest Market. 2007
A Gift to my Children: A Father s Lessons for Life and Investing. 2009

Jim Rogers is married to Paige Parker and has 2 daughters, Hilton Augusta and Beeland Anderson


Jim, how did you start in financial markets? At what age and why?
Well I didnt know anything about markets but I had a summer job while studying in 1964, working for
the Wall Street firm Dominick & Dominick. I didnt know anything about it except that I liked the guy
very much, he gave me a job and I fell in love with the markets. I thought it was wonderful, I always
worked hard, followed what was going on in the world and here was a chance to pursue what had
started to be my passion, while they were paying me a lot to understand the world... it was wonderful, I
loved it.

Did you start to make it right from the beginning?
Yes, I guess I did what I was supposed to do right, because you know they hired me and they kept
hiring me back, yes, I guess I did what I was supposed to do, but as I say, I started it off not knowing
anything, but they hired me and kept hiring me and here I am.

This was before 1970, right? Because you started the Quantum fund in 1973 with George Soros,
am I correct?
Well, yes, we started Quantum Fund in 73 but after my first job I went to serve in the army and
graduated and got to Wall Street, again joining investment bank Arnhold and S. Bleichroeder where I
worked with George Soros.

What made you start this Quantum Fund with George Soros? How did this idea start?
Well, we were managing a fund already at that company, but then they changed some regulations in
Washington and we couldnt manage the fund for the company any more. So we just took the fund
offshore, or part of the fund, and started managing on our own what was the first truly global macro
hedge fund.

The fund was a tremendous success. Have you always been a winner as a fund manager?
Yes, we had a good record; we did very well from the beginning.

I believe the fund made gains of 4200% in about 10 years while the SP500 only raged 47% in the
period. What was the secret or the recipe for success you had in those days?
Well, it was a lot of hard work, finding the right investments and investing in them. We invested in the
long and the short sides. We invested all over the world. We invested in stocks, bonds, currencies,
commodities, and we also borrowed a lot of money, used a lot of leverage in those days. Leverage is
great if you get it right. Its a disaster if you get it wrong. Fortunately, we got it right.

Was it fortunate or was it because you had an edge compared with other people in the market?
The edge was that we got it right, we did a lot of research and we knew what we were doing and so
the edge was an enormous amount of homework, and thats what I can say.

Was it all based on fundamentals?
Yes, yes, thats all we knew. We used to look at the charts just a little bit. I would look at the charts to
see what was going on with companies in the street. I did it more as a way to educate myself rather
than make decisions. George used them a little more, but we were basically using fundamentals.

It seems that the markets have changed a great deal since those days. Where would you say that
they have changed the most?

I wouldnt say that markets have changed. The world has changed. We have more information, more
software than we used to. We all know whats going on. We are getting more exposed to the
accumulated knowledge of the past, what has been going on for a couple of hundred years through
telegraphs, through phones, through radio and TV. We have been getting more and more
knowledgeable for a long time. So, I dont think markets have changed, its a lot more information,
everything happens a lot faster now, thats one change, but the judgement required to do it right hasnt
changed.

You still have to get it right even if we get lots of information faster, we need to get it right,
and the other thing of course is that the markets are a lot bigger. When I started, in 1964 my
first summer on Wall Street, a big day on the New York Stock Exchange was 3 million shares
and now 3 million shares and even a lot more than that is one trade before breakfast. So the
markets are much bigger much more widespread than in those days, but apart from that, it is
the same people trying to buy and sell based on what they know and people still making
judgements based on hot tips and bad information, even though there are not many people
being successful at investing. None of that has changed.

Are you still an active trader?
No, no, I am not a very good customer for brokers now. I make one trade a quarter, I do not trade
very much at all; I am not a trader at all. I am not good at it; I dont even try to make short-term
trades.

Have you had bad periods in the markets in your career?
I had bad periods of course, periods when I didnt do anything right. I guess everybody has, I dont
know. So far, I have been able to succeed, I can still pay my bills and I can get it right enough in the
markets so I can still pay my bills (laughing).

When one goes through these bad periods, is there anything that you have to change in order to
go back to winning trades?
No not really, I just continue trying to figure out what or where I can find another investment that
would be right. I guess I probably should try to figure out specific changes, but I guess I am too lazy.

What defines you as an investor?
Well, I guess the main difference is that I always go to places where people are not investing. Thats the
main difference. I look at the areas where nobody goes and most people just follow what everybody
else is doing. I rarely do that. I try to find things that are new, that are cheap, where change is taking
place. Most people try to follow the crowd, it is easier to follow the crowd as everybody knows, but I
prefer thinking my own way.

So basically, apart from being a pioneer investor, you have never had any rules for trading? For
you its just hard working on the fundamentals, either countries or companies, and no specific
techniques normally used by traders.
Yes, thats correct. Everything you said is correct.

How is a typical day for you now? What do you do the moment you wake up until you go to bed?
You go around the world, you travel a lot, and you speak in a lot of different places. Is your
mind always thinking about investments and opportunities?

Well, I dont think too much about investments. I have got two little girls. I try to spend as much time
as possible with them. I wake up in the morning, usually at 6 oclock. I have to take one daughter to
school at 7am, then the other at 8am. We have breakfast together, I come back, I go to the gym; I have
a gym in my house. I exercise for a couple of hours. I work on my computer while I exercise, mostly
on a bicycle that I use. Then I pick one daughter up at 11 oclock and then the other at 1 oclock. I eat
lunch with them, then the rest of the day depends on what I have, meetings or work from my
computer. Sometimes I follow the markets but mainly I am an observer of everything around. At
night I have dinner together with my family.

So you dont follow the markets during the day now, but it was much different at the beginning
of your career?
In those days, you know, markets were my life, 24 hours a day, 7 days a week. We had to visit
companies, talk to managements and also trade. But now I have got everything on my mind. I am a
little more experienced. So I know a little more about markets and its easier for me to make
decisions. That does not mean better decisions, but its easier to make decisions now.

Why is it easier to make decisions now?
Well, I now know, for instance, some things, for example, the system in the West is not working the
way it is supposed to work. When people get into trouble, competent people take over the assets.
These days central banks and governments step in to save everybody instead of letting the system
clean itself and that is why recession lasts longer. When I see something happening in a country, its
easy for me to decide if I should make any investments in that country or not. When I wasnt very
experienced, I didnt know a lot of things about this. I had to learn, I had to do a lot more research.
Now, for instance, I see Myanmar opening up and I know what to do. I know the things happening in
Myanmar are going to be good for investors. But now I know because I have 40 years of experience.
The first time something like that happened, in the old days, I didnt even recognize it. I had to do a lot
of research and home work to see.

So, as an investor, you put your money before the crowd. You are not typically a
contrarian, you just follow your instincts and you are a good observer of whats going on
in different countries, is that correct?
Its not just my instinct. Its based on a lot of experience. I have been doing this for a long time, over
45 years. If you are a farmer you are not going to know there is a crisis in Greece, because people are
too busy going to work every day to make money.

What do you see now in Myanmar that attracts you to this market?
I am going to say, accumulated experience, after over 45 years of doing this and travelling many
times in most of these countries. In Myanmar, in 1962, Burma as it was called then, was the
richest country in Asia. They then closed it off. They threw the foreigners out and over the
following 50 years they became the poorest country in Asia. But now Myanmar has decided to
open up, let in the foreigners, try to attract capital, try to develop markets and develop expertise.
Myanmar is a country of 60 to 70 million people, a big population, huge natural resources and an
educated and disciplined cheap labour force. Whats more, its neighbours are China, India and
Thailand. So, its in the right place with all the right ingredients and they are opening up again
just as China did in the late 1970s. I have the experience to understand that now, that this is a
country regaining former power but its only starting on that road. You know, 40 years ago I
wouldnt have had the experience and I would have had to have done a lot of research and lots of

digging and checking and trying to find answers. I probably wouldnt have known where to go
and look 40 years ago but now I recognize these things because I have seen them before.

So, its very important to be an investor that remembers past experiences in the market and not
to forget to learn from these past experiences, right?
In my case, yes. History is a very good teacher and history repeats itself. You asked whats
different now? I dont think the markets are so different. Markets are still pretty much the same.
Whats different is technology; that is whats different. We all have computers and things like that,
which we didnt have 45 years ago. It was nothing like this 45 years ago; everything was by the
telephone or on paper. Thats all changed now.

Do you still trade on the long side and short side or are you more focused on specific countries
like Myanmar?
I still invest all over the world. I still invest both the long side and the short side. It depends on whats
going on in the World. I dont say Ive got to do this or that. My investments are dictated by whats
happening in the World.

You must have rules for the long side or the short side when you invest. What are the rules to
get you out of a position either to take a profit or to stop a loss? Do you have rules for that?
No, if conditions change, I just change my mind and if I am short, I cover and if I am long, I sell. I
dont have any rules. Perhaps I should, but I dont.

You never had rules then?
No, no, some of my friends, you know they have things like if it goes down 12 percent they get out or
if it goes against them 12 percent they reverse. I wish I had some of those rules sometimes but I never
have.

Would you say that the markets are always right?
No. I would say the markets are always wrong. No, no, they are always wrong its just sometimes it
takes a little while for people to understand the markets are wrong. Everybody has to figure out the
market somehow, but I dont know, people get carried away with their emotions. Markets, contrary to
popular belief, rarely look forward because of either last year s news or yesterdays news. You have
to look forward, not back and I think markets look back.

What would you say is the error you tend to repeat most often, if any?
I am always too early. I still try to refrain myself but I know I am always too early, so I still try to do
something about that. When I decide to make a decision, I decide well I better wait a while but I am
usually still too early, on both the long side and the short side. I always assume that everybody knows
what I know but unfortunately, most of the time, they dont.

Because you are too early, do you get frightened with the position you have on the wrong side
or not ever?
I am always worried but I dont pay close enough attention to really know most of the time. You know
I dont sit and look at my portfolio. I make a decision; I stay with it until I think that the world has
changed. Sometimes, yes, I am aware of whats going on in my portfolio but I dont sit and check the
prices every day, sometimes I dont check prices even once a month. That part doesnt scare me. I do
get scared when I see things going against me quickly and I try to re-examine my position, but I dont

sit and look at my portfolio, I sit and look at the reasons that made me take that position. You see I do
not believe in predicting short-term moves or price fluctuations, I prefer to focus on long term
growth trends and that is what needs to be examined.

When have you had more success in trading? Was it at the beginning? Is it now? Was it during a
specific period? Was it a specific environment that made you more money? Can you explain it?
It was clearly the 70s, thats when I was working 24 hours a day, 7 days a week at this. I was using
enormous leverage and doing it all the time. Going around visiting companies and the usual thing
fund managers do. Since then, remember I retired when I was 37; I have spent a lot more time with
other things like travelling. I drove 400,000 km around the world, writing, and now much more time
with my children and other things. Now with my experience and my money I have different interests,
in particular my little girls.

Would you say that the 70s were good years to make money or success came only because of the
efforts that you were putting into your work?
No, no, of course they were good for that. But it was not a particular good period. Anybody who
wants to spend time and energy can always make money in the markets. Always, if you can do your
homework and figure out whats going on. Understanding whats going on is the most important
thing. Identifying change equates with making smart investment decisions and growing wealth.

Why would you say there are so many losers in the market? What is the reason for that? What
would you recommend to these people?
Thats always been the case. It cant be changed. It has always been the case because most people invest
based on hope or emotion and that is why most of them lose money. They dont do their homework.
They think its easy and they just fly around, I mean they just jump around making investments, today
here tomorrow there. Its very difficult; a very, very, difficult way to make money but most people
think its easy. They read in the newspaper about people making fortunes in the market, they dont read
in newspaper about the millions who lose money in the market. So people think its easy and they dont
know how hard it is. They dont do the necessary work or they dont have the necessary ability. I mean,
some people are good at making money, with different strategies some with algorithms some with
complicated formulas some with charts. I am not, but even those, most of them dont get it right
because they dont know enough or they are not willing to do enough work or they do not understand
changes in the markets or they let their emotions get the best of them. I wish it was easy to make money
in the markets. Its not and it has never been and probably never will be.

So, would you say that, for any newcomer in the market in the 21s t century that it is going to be
more difficult or easier for them to be successful?
Its going to be the same. It has always been the same. Whether 200 years ago or 30 years ago you
know most people lost money. Most people had access to the same information, some had access to
more information than others and thats exactly the case now. It really doesnt matter if a hundred
people can go into the same room and hear the same thing. Only 3 or 4 percent are going to come out
and make the right decision. Judgement, no matter how much the world has changed, no matter how
much technology has changed; judgement has not changed. You still have to have good judgement if
you are going to make success of anything whether its music, art, politics, law, anything. Its
judgement that counts.

Would that be your advice for any investor, to have judgement, along with hard work? What

would be your advice to any new investor in the market?

I certainly would advise people to have judgement but you know you just cant go down to the shop
and buy it. I dont know how you get it, I really dont. I personally got it from experience and from a
lot of work and a lot of reading. So to most investors I would suggest they spend a lot of time reading
and researching and doing homework before they earn that judgement. It will probably come from
experience but I wish there was an easier way to get it, I wish I could sell a pill to give you judgement
and I would be very rich. What I suggest to people is to do a lot of reading and research, study some
history and study some economics and see how these things play and get experience; if they dont
have natural judgement that would lead to them being able to judge. Also, although expensive, it
would make sense to put aside some money, to lose some money first because thats the way to learn.

You have gone a few times around the World. Do you still have a dream that needs to be fulfilled
or have you fulfilled all your dreams?
My dream now is my little girls; my main focus now is these two girls, for the future. Thats my most
important task, trying to prepare them for their lives and teach them as much as I can.

Prepare them for their lives, how do you foresee the future? What is your vision of this 21s t
century?
Well, we have moved to Singapore in Asia because that is where I believe the future will be. I feel
there are enormous changes taking place in Asia which may be compared to Britain in 1807, before
Britain emerged as a world power and compared with the US in 1907, when America was on the
verge of becoming the greatest success of the 20th century. Asia is the place to be in the 21st century.
My little girls speak mandarin. I think that is a skill that I can give them, to know Asia and they now
speak perfect mandarin. There are other things I would like them to know as well but thats the basic,
the language, a knowledge which many other people dont have. You see, China has had recurring
periods of greatness three or four times in the last few thousand years. Britain was great once. The
20th century was great for the USA but the 21st century may see Chinas growth reign supreme and
may one day lead the world.

JOS ANTNIO MADRIGAL

Jos Antonio Madrigal Hornos was born in Valencia, Spain in 1975 and is the oldest of three brothers
and sisters. His interest in the stock market began when he was 17 years old, and he has worked in the
world of finance for all of his adult life. He has worked in various firms, including Emerging Trade
and Silver Line. He started managing capital at DIF Broker, where he is currently the Head of Strategy
of a JP Fund.


How did you start off in the financial markets?
I think in the same way as most people, from a conversation between two wealthy gentlemen that I
overheard before I turned 18. They talked about how much money they had made and lost and how
quickly you could make a profit on the stock market. I was a teenager and I started to investigate the
movements of the market prices that I was passionate about.

At what age did you start to operate and how long was it until you actually made contact with
the market?
When I was 17 years of age I had no money with which to invest, neither did anyone in my family.
After studying and reading everything about finance that I could get my hands on, I applied for a job,
even though it was only answering the phones for a very small salary. It was there, at a young age,
that I made my big discovery. The markets were more difficult than I had originally thought,
however, instead of giving up it made me stronger because I had a lot to learn.
The first few years were difficult but there were people who believed in me and it wasnt long until I
started to see the fruits of my work. A few years later when I was 23, my big contract, the type that all
operators desire, arrived. From that moment, I was in the big league with an in-depth knowledge of
the market and of myself. The results started to arrive, and with them, a higher level of knowledge.

How have the markets changed since you started?
It depends on your point of view. From the perspective of someone looking at the past 100 years, the
markets act in the same way as they always have -euphoria and depression.
From the perspective of the advance in technology, markets are completely different nowadays from
the ones I started out in 20 years ago when bearing in mind the beginning of computers and the
internet. In the year 1993, mobile phones didnt even exist. Nowadays, one can carry out transactions,
in the market, directly from their mobile phones.

You have dedicated your life to the stock market for 20 years; did you make a profit from the
beginning?
No, absolutely not, but I had a big advantage. I observed that everyone manipulated everyone else
from their sub consciousness. When someone bought, the person next to him bought as well, as they
didnt want to miss out. And this happened with everyone. Many of them made a loss so I found my
window of opportunity. I would do exactly the opposite. If they bought, I sold, if they sold, I bought. It
worked for a couple of years until I lost this advantage that was basically a feeling of the market when
I looked back at it.

How long did it take for you to turn into a constant profit maker in the stock market?
When I started to trade more substantial amounts of money, things got more complicated. I had to
discover what the investor behind the charts did. I was lucky in the first two years the time that I
needed for completing the strategy that I use nowadays.

What things did you have to change in order to become successful?
I had to learn to win the battle with myself. During the first few years on stock market floors, I
discovered that no one took the blame themselves, everyone had someone else to blame; journalists,
analysts, bank directors, etc. Everyone blamed someone else for their mistakes. I discovered that it is
oneself who wins or loses; who always wants to be right and doesnt accept losing. This meant that
when an investor made a profit it was small because they were scared. And when they made a loss it

was largely because they were hopeful that their shares would go up in value.
For me, this was a great advantage. I had to silence the voice inside me and develop a strategy with the
result being independence.
My ego liked to pat myself on the back when I was successful and hide it when I made a loss. I tried
everything to silence this voice and what really helped me was Buddhism. To pay attention to my
inner feelings and to try and control them, that was the biggest change.
On the other hand, the more you pay attention to your ego, the more you operate in the short term. Ignoring
my ego helped me to expand my operative side and instead of using daily graphics, I started to use the weekly
or even monthly ones.
The results arrived later, but they always arrived.

Do you make a profit every year?
Yes, although I have had some years with only one digit, many with two and also one with three. Ive
had bad weeks, even some difficult months consecutively. However, if you do things correctly, the
results always go back to how they should be.

What markets have you operated in?
I have operated in practically all of the markets in the world, although there are some restrictions in
some countries in which it isnt possible to operate in. Nowadays, using the internet, it is just as easy
to buy a share in Germany as it is in Australia. But, mainly I have operated in the Spanish, French,
German and also American stock markets.

In which markets do you operate in nowadays?
I manage a Hedge Fund that invests mainly in the American stock market, in reality 70% has to be
invested there. The remaining 30% I invest in which ever country looks interesting and has interesting
stocks. You can say that I only operate with the best shares that exist in each country.

Would you change markets in the future?
I dont see why, now that I currently have access to nearly all countries. Maybe one day I will manage
a different fund, exclusive to a certain country, and I will have to change. However, at the moment I
have access to any listed share on a worldwide level.

Does your method work with any asset or just one?
My method works with the equity market. I have to say that its unlikely that I would be in any other
asset. You see, in the equity market I can spend a bit less than 10% of the life of a share invested in it.
For me, this is really important, to spend a certain amount of time on a share. While the methodology
indicates that I have to stay in the same position, I need to be that time with that share.
Considering that a share has an average life span of 20 years, I would only be invested for a couple of
years in it, the rest of the time will be spent on other shares that comply with the methodology.
In the same way there are shares in which I havent invested in and others with a shorter history that
Ive invested in for longer. On average, my methodology will be invested in the stocks for less than
10% of their existence.

Are you more in favour of diversification or do you prefer to concentrate your investments on
the shares that you are familiar with?
Of course, I operate with all the shares that are available to me. In this moment, there are more than
100,000 shares in the world, available to any investor.

After selecting the best of each group, diversifying is one of the most important premises that any
portfolio manager needs in order for its capital to increase constantly.
I diversify through different countries, different currencies, different shares depending on the
volatility, the timing, the type of entry, the direction, expected amount of profit and especially the
cycle of each share.
In my point of view, good diversification helps to obtain more solid profits, and above all, reduce the
risk level of the portfolio.

What type of charts do you use to operate?
Well known charts with bars OHLC, (Open, High, Low, Close), are the usual charts I follow. In these
charts, you can find all the information required. They are the most traditional charts and also the
most popular ones, I believe.
Technology and knowledge have enabled many more charts to be created, but what is important is
what I need in order to operate and the most basic charts have all the information I need. I dont see
why I should complicate things more.

In which time-frame do you operate?
I work with long term charts, as these trends are easy to see in weekly and monthly charts. After
calculating risks and rewards in the different time frames, I discovered that the best data is obtained in
the long term as long as your portfolio and your management system allows you this.

What characteristics are important for being a good trader?
Patience. I think this has made a difference for me. Few investors have the patience to stick with shares
for months or even years in shares that make and keep making a profit. In Spain, I have taught more
than 3,000 investors and the main thing I have taught them is to have the patience to continue with the
stocks even if they show big profit in the portfolio for however long they last.

It is important to know that when a share has made, for example, 100% profit, the numbers quickly go
in our favour each minimum added gain in the share multiplies the profit in that particular stock.

Heres an example to help us understand: If you buy a share at 100 and it rises in value by 100% its
value is 200. This is when our results in this share are going to multiply. Now, if this share rises in
value another 50%, its value will go up to 300, but in our portfolio will have gone up 100% more. So
now, the share has increased by 200% and your patience has paid off.

Its important to let the profits flow, the more the better, for our portfolios.

Which is the most important, and why?
As well as being patient, it is important to be disciplined too. Discipline makes us follow rules time
and again and doesnt give us the opportunity to change.

When one has a complete methodology, he should have the discipline to carry it out whatever the
market does and whatever upcoming event there is. He should stick to his rules as long as his
methodology indicates that he should.

What is essential in order to be excellent in the stock market?
You have to have an iron will and take control of your feelings and know how to control them in each

moment. The markets make us fight with ourselves and only after this can we fight with the market.
We have to be completely sure of the transactions we carry out and leave everything else to one side
and, of course, be capable of doing things correctly and independently of what our minds want.

What are your principles in negotiating?
Buying shares at new highs when they are more expensive than ever. This gives me a great advantage, as
someone very powerful is investing in this share and probably has more knowledge than me on the key
aspects of the stock.
Once I have selected the shares that have made new highs, I make a selection of the ones that have
volatility adaptable to what I need and levels of profitability that I need in my portfolio. It is also
important that the stock has a wave cycle that doesnt have too much correlation with other stocks that
are in my portfolio. Having all the stocks with the same correlation would mean that when one stop is
activated, all of them would be at the same time.

Is there anything else that should be emphasised?
For me, correlation is a really important factor. If many of the stocks in the portfolio have the same
correlation and something occurs to trigger the stops, all of them would be activated.
I am always interested in looking for stocks that are going up in value when the index is not doing the
same. With such stocks, it helps to make a portfolio rising regularly. This is a great advantage.

What is a typical day for you when carrying out transactions? What do you do from the moment
you get up until you go to bed?
I only meet with my traders on Fridays and we talk about how the week has gone and we prepare the
coming week. We are interested in looking for good stocks that balance out the portfolio perfectly
with the stocks we already have.
Nowadays, with technology, it is much easier to do this. There are programmes where you can enter
the details for what you want and the programme searches through the whole database. These
programmes are on the internet and are pretty much exact.

How many transactions do you carry out in a day, week, month or year?
At the close of business on a Friday, we introduce orders in the systems, which are valid for the whole
of the week. There will be days when none of the transactions go though and others when fifty go
through. Its something we dont worry about because we do not try to anticipate any events that may
occur in the market.

How sure are you of your transactions?
Nearly 65% of our transactions are winning ones, but the fabulous transactions where the big money
can be made, it only happens maybe in 20% of them. Thats to say that out of every ten transactions; in
four of them we make a loss, in four of them we make a profit that covers the loss and in only two of
them we expect important gains.

What reward/risk do you look for in transactions?
We always look for the most possible, even though theres only 2 in 10 that give us the risk multiplied
by 10. Only in these is there a real profit to be made. This is why its really important, for me, to let
the winning transactions flow.

If I was to close these trades earlier, my results would be much more regular, even probably bad.

Having the patience and discipline to let these good trades continue is what makes the risks/rewards
go in my favour.

How much do you risk in each transaction? Do you do it using a percentage or a linear method?
The risk has been getting smaller over time. When I first started, I risked 2% per transaction which is
the maximum an investor should risk when they are starting trading. Today, I do not risk in any trade
more than 0.05%, which doesnt seem very much. However, when your portfolio has more than 300
securities, reducing the risk of each transaction gives you an enormous advantage. If you have
correctly diversified and selected your securities well, its the market that should do the rest.

Do you use technical or fundamental analysis or a mixture of both?
I only use technical analysis. Im one of those who think that if a large fund or a great investor has
information from a fundamental analysis which indicates a security should rise in value, they would
buy it and they would keep it in their portfolios. This, in turn, would make the listed value rise and
thats where I would enter.

I leave the fundamental analysis for those who really understand it and Im not just referring to the
stock analysis. Im referring also to the market analysis in general, the macro and micro economics,
the interest rates, all of it is certainly important, but not for me.

Are technical analysis and fundamental analysis related in any moment?
I dont think so. I think that technical analysis magnifies whatever fundamental information is
known. If the company is going well and its shares rise in value, they will probably rise even
more than they should do. In the same way, when a security is negatively affected by fundamental
analysis, this too is magnified by technical analysis. This isnt good or bad, it simply means that
there is an opportunity and we can take advantage of it.

Do you agree with the statement that technical analysis works because everyone uses it?
Hahaha, yes that could be right.

Do you use historic data to make decisions on trading?
Of course, I use the whole history of a share. In fact, I dont buy a share until it has broken its highest
high. If, at any moment, the share is worth more than ever, it means that it is rising in value and that it
has an upward trend. This is indisputable, Dow said so in 1896. The long term trend is upward, even
though when any share breaks its record value, the long term, medium term and the short term do as
well, at least in that particular moment.
I only invest in clearly defined trends and when a share is at its highest high, there is absolutely no
doubt.

Bearing in mind that the economy is cyclical, do you think we can learn from past situations?
Sure, as human beings we are only a product of our past, markets too. He who doesnt learn from past
mistakes will only make them again in the future. Learning from the past will help us to be better in
the future.

What does a feeling of the markets mean to you?
To have discovered in which situations I can make money in the markets and forget how everyone
else does it. To know when to invest, and much more importantly, when not to invest. For me, not

doing anything is sometimes doing a lot.

Knowing when to invest and when not to invest is, for me, a feeling of the markets.

Does having experience help you to predict possible movements in the market?
Well, no one can predict what the markets will do in the next few minutes, days or months. Any
unexpected event could happen that could change any predictions, natural disasters, wars, attempts to
overtake a government, etc.
In my opinion, we play with probabilities; and thats it. Knowing what the market will do in the future
isnt my job.

Do you use a trend analysis strategy or a counter trend strategy?
I only use trend analysis. I always operate in favour of the trend. I will never again sell a share that is
at its maximum or buy a stock that is at its minimum value. Its much easier to operate using trends.

Can you explain what needs to happen in order to make you pay attention to the share you are
trading in?
What I said earlier, most importantly, that the share is at its highest high. From this moment on I am
with the group of investors that really interest me; the profit makers and I want to be with them.

Can you explain what would have to happen in order for you to open a long position?
Firstly, that the share is at the highest high, secondly, that it has a wave size that will give me some
sort of advantage, thirdly, that it has good profit making potential and fourthly, that it isnt too similar
in chart pattern to other stocks that I already have in my portfolio.

Can you explain what would have to happen to make you close a long position?
If it drops to my stop level, probably below the previous cycle, where I always put a small security
filter, depending on the size of the position.

Do you also enter into shorts with downward trends?
Yes, I look for shares that are cheaper than ever and when this happens, they are all making a loss.
Many people dont care if they are at 10 or 2. They want to sell them at least at the price they bought
them at, which was probably higher. Whats more, many people are happy to buy at this price because,
obviously, they think they are cheap.

What would have to happen in order for you to open a short position?
The share would have to be cheaper than ever in its history, it would have to have a wave size that
would give me an advantage, it would have to be suitably profitable and not too similar in its chart
pattern compared to other low value shares that I may have in my portfolio. In essence, the same as
the long term but practically the opposite, apart from the fact that profitability in short positions is
much more limited in my system, which makes me much more cautious.

What would have to happen to make you close a short position?
Either that it would reach its objective which was decided at the entry or that the stop would be
triggered because of a change in direction.

Do you ever accumulate positions when you are already in a position? When?
I increase positions for necessity of the strategy. I mean, I wouldnt do it if I could make only one

entry into that particular stock. When you manage orders, there are times when, executions are only
partial or liquidity is low and we may take a week to invest in a security, buying a bit every day until
you reach the amount you require.

In the 20 years that youve been a professional operator, have the markets changed?
Human nature hasnt changed and we still operate the same in markets. Euphoria and depression: Yes,
the speed with which we carry out transactions has changed. Nowadays, you can divide a second into a
million parts in order to carry out high-speed transactions. The internet has revolutionised this and
computers are getting more and more powerful. They are capable of doing many things in just a split
second.
Therefore, yes, markets have changed, but not the way in which new investors act.

As a result of this, have you changed the way in which you operate?
No, I operate today in the same way I did 15 years ago, although it is true that computers help us today
in the search for our ideal stocks and institutional investors with large servers are capable of doing
transactions in milliseconds. This doesnt affect me as I operate in medium and long term.
I understand that short term traders have been having a difficult time in these last few years, and they
will probably have even more difficulties in the future.

Do you think that financial markets, and the way in which they move, are logical?
Completely logical. They couldnt be any other way. They are life itself.

What do you think is the mistake that youve repeated most?
Giving the markets an importance that they dont have. In the beginning, I was always watching the
news about the country in which I was trading, also about the companies, in particular, the ones I was
investing in, and anything that could affect my portfolio. I also wasted a lot of time thinking about the
reasons why the stock in my portfolio would move one way or another.

Today, all this has changed. I keep away from financial news completely; in this way, Im not
contaminated by what others want me to know.

I have discovered that however bad the world is, even if WW3 starts, there will still be business that
will increase in value, for example, pharmaceuticals, oil or even arms, who knows. Now, I only
worry about investing in stocks regardless of what others say. I have seen countries in extreme crisis
and in these countries; some stocks manage to rise without stopping.

Is there any other error you have detected?
Yes, even though it is related to the previous one. Before, if the stock market fell, I would get
depressed and if it rose, I would be happy. Its been years since that has happened to me because now
Im aware that the stock market goes up and down every day, and probably will spend 50% of the time
going up and 50% of the time going down.

If anyone is affected by what the stock market does, and they have 40 years left to live, they should
know that 20 of those are going to be bitter and sad. Seriously, its really not worth being affected by
it. It may sound strange, but the more you distance yourself from the stock market, the more clearly
you will see everything.

What has been your wisest move through a result of using your methodology?
There have been times when, for example, at the end of the 90s, with the technology bubble I managed
to get some shares in companies like Dell, Yahoo and Microsoft and profitability was more than
1000%.

In the years 2005, 2006 and 2007 I had shares in my portfolio that had a profitability of more than
700%.

What has been your biggest mistake, caused by using your methodology?
I dont think there have been mistakes, only normal happenings in the market. For example, I
remember 6th May 2010 in the American stock market; a flash crash caused some shares to fall by
90% in just a few seconds. I had shares that suffered a major depreciation, with the stops being
triggered much lower than was expected and in two of them the stop was executed at almost zero.

I have also been negatively affected by some gaps that have caused me to lose more than I had
predicted. However, all of these things are normal in the world of financial markets.

Do you think diversification is essential?
Of course, its the basis for having even greater profits.
Also, any time we may have a losing streak, it helps to make it less dramatic

How do you diversify?
I diversify in different markets, different countries, in shares with different currencies, shares with
different waves, different profit making potential, different wave size, different wave shape, even
different directions. Also, I try to invest in different sectors.

For people who want to start investing in the stock market.
Why do you think the percentage of people who lose money on the stock market is so high?
Its very simple. Everyday new people start and open new accounts with new brokers. These people
invest money without having a game plan, a strategy. When you invest in financial markets, you are
investing against the best investors in the world. You should never forget this.
I think that many people invest without knowledge and above all, without experience. If they dedicate a
year to learning, they would have much more chance of being successful. I wouldnt recommend
anyone to start until they have a methodology from A to Z. Only in this way can you carry out a plan,
when the conditions are correct.

Could a novice investor be successful from the beginning?
Of course, but they should still train and study and study and continue studying until they have a
methodology that gives them an advantage. Read everything about this topic.
It is the same as a good medical student who studies for years and then puts his knowledge into
practice. Prepare yourself over one year or more than one if necessary and then trading the real
market will do the rest.

Whats the ideal age for trading well in the markets?
I think that any age can be good, although obviously the older, we are the more responsibilities we
have, which means we have to be responsible in order to make a profit. Today, I dont take the same
risks as I did 5 or 10 years ago. As we get older, we get more scared of losing.


How much should someone who is just starting out risk?
As little as possible, and dont think the commissions are responsible for the risk you are taking.
You should never risk more than 2% of your capital, given that, the more you lose, the more
difficult it is to recover those losses.

Heres an example; if someone has a loss of 10%, they will need more than 11% in order to get back
to where they were. In the same way, if they lose 20%, they will need 25%. If someone loses 50%, they
would need to make a profit of 100% just to enable them to get back to where they were. If this person
has 100 and they lose 50%, they will now have 50. For them to have 100 again, they would have to
make a profit of 100% because if it is only 50%, they would only end up with 75.

How long would it take a newcomer to the markets to start to make a profit?
Its the same as asking, how long it would take for a beginner cyclist to become the country
champion. It depends; there are people who could do it in just over a year and others who would take
three or four years and others a whole lifetime.

What advice would you give to someone who wants to enter the world of analysis?
That they have patience, that they bear in mind that the markets wont end tomorrow, that they exist
today and they will still exist in one hundred years. That they prepare themselves as much as possible,
and dont rush to invest money and when they do start, that they learn from themselves and how to
control their deepest impulses. That they manage the risks well and above all that they use rules that are
100% logical. That they forget the maximum of the indicators, oscillators, averages and everything
else but use the price, as any indicator needs the price in order to work. Get ahead of any indicator,
using the price, and remember something really simple; if more bars are going up than going down,
there is an upward trend; on the other hand, if more bars are going down than up, there is a downward
trend.

What personal values does a newcomer to the markets need to have in order to become
successful?
You need to have your feet on the ground and know who youre up against. The markets are simple
once you understand them but very complex if you dont. At the same time, you need to accept that
anything can happen tomorrow, and that anything could happen just a minute after making an
investment.
Taking control of our impulses is a fundamental pillar and for this, I find Buddhism really helpful.
Novices to the world of investing are scared when they make a profit, they quickly collect their gains,
and they are hopeful when they lose even if they are losing nearly everything. Its really important to
learn to change these concepts; to be scared when you make a loss and be hopeful when you make a
profit that will make you gain even more.

How should a trader diversify so that he will have more chances of being successful?
He should buy shares that are different in many ways. He could buy in different countries and different
sectors. If I invest in an American bank and a European bank, this would not be diversifying well as the
two are related.
You can diversify in different markets that use the same currency but in different sectors.

What should a new trader be willing to risk?

As I said before: the minimum possible. If at any time he loses 25% of his capital that he pulls out and
doesnt lose any more.

Which strategy do you think would be the most worthwhile for a new investor?
I would recommend long-term investments. Buy shares that are going up in value or that are at their
highest and sell them when this ceases to be the case or they make waves in the opposite direction.
Dont invest in stocks that are at a standstill.

And a bit about your private life:
How do you balance your private life with operating in the markets? Does it have a good effect?
Yes, it has a good effect. I never talk about the stock market in my private life. I never look at
financial markets or listen to economic news. My orders have been placed in the markets and will do
what they want; its not in my hands.

Financial markets help me to control my internal state and this has really helped me in life. Its shown
me how to be my best, not just when investing, but also when Im with my family and friends and how
to make the most of every moment because things could be really different tomorrow. Financial
markets teach you how to adapt, in an astonishing way, to the current truth, the present moment and
therefore, life as well.

Do you have a dream?
I try to make any of my dreams come true. Napoleon Hill said that whatever the mind can conceive,
that mind can also achieve. I have had some dreams that I have accomplished and others that I havent,
yet.

I want to be an excellent friend, a good brother, a son to be proud of, a superb partner and a model
father. In essence, I want to learn to be the best I can in all walks of life.
I remember reading once that in each of us there is good and bad, happy and sad, faithful and
unfaithful, generous and miserable. Whichever I nurture, I will be. I try to be the best me.

Do you think you will achieve this?
I fight for this every day. I try and if I succeed or not, its the others who will have to see it.

To finish, is there anything else you would like to say to new investors?
Yes, nothing is impossible. Being successful in financial markets isnt impossible. Its a beautiful road
to take and it will make you a better person, not just in the world of investments. Fight, fight and fight,
and on your journey, dont forget the people you have around you. Enjoy every moment you can with
them.
Every moment is magic if we stop to contemplate. I wish you many magic moments in your lives, and
lots of happiness and love.
If you want to, you can.

Is there any saying about the stock market that you will never forget?
Ed Seykota says to always follow the three golden rules:
1. cut the losses
2. cut the losses
3. cut the losses.

TOM DORSEY


Tom Dorsey is a living legend when it comes to Point & Figure charting, a method of technical
analysis founded by Charles Dow in the late 1800s. According to Tom Dorsey, the Point & Figure
methodology is the only proven objective form of analysis that is based on the fundamental laws of
supply and demand and not on superficial market trends.

Thomas J. Dorsey, is founder of Dorsey Wright & Associates, an investment advisory firm, owned by
Nasdaq, Inc.

He is the author of nine books, including Thriving as a broker in the 21st Century, Point & Figure
Charting: The essential Application for Forecasting and Tom Dorsey Trading Tips. Point & Figure
Charting has been translated into German, Polish, two dialects of Chinese, Hindu, and Japanese.

Dorsey Wright & Associates offers a web-based technical research platform and the firm has over $10
billion in assets under advisement, ranging from mutual funds, structured products, to exchange traded
funds (ETFs). Tom Dorsey is an award-winning speaker, having taught the Point & Figure
methodology around the world. He is also a former World Record Holder in Power Lifting (50-55 age
group) and married with three children.


How did you start in the markets? At what age?
I started in the business after college and after 4 years in the Navy. I was 27 years old when I started at
Merrill Lynch, Pierce, Fenner & Smith. The 1970s decade was a tough one. One of the worst market
declines happened in 1973-1974. Many brokers went out of business. All stock got hit and most clients
lost much of what they had in the market. 1978 saw inflation go through the roof. I remember buying
my dad an 18% treasury bill. Along with this inflation came a new term for the economic mess we
were in, Stagflation. It was the debut of a company named Bridge Data Systems. It was expensive and
only for institutions, most brokers had no access to this type of system. In 1981, the personal
computer made its first appearance but it was still not of much use to the average investor nor did
many people have these newfangled things, investors were not using them.

Do you feel the markets have changed since you started and if yes, how?
Not really, apart from technology. Back when I was a broker at Merrill Lynch, Pierce, Fenner &
Smith, technology included a ticker tape, a pneumatic tube to send and receive the orders we entered
for clients, a Bunker Ramo quote machine that was on a swivel used by four brokers and a news wire
you stood and read every half hour (as if the news would be of any help to you at all). The Bunker
Ramo quote machine had a screen about 4 inches square and gave you high, low, close, and last sale.
Research reports from the home office were sent down by overnight courier, Federal Express didnt
officially begin operations until 1971. We communicated to our clients via mail or phone. There was
no internet or online anything. Mutual funds were just beginning to be accepted by the major wire
houses but we primarily dealt in stocks and bonds. Fixed commissions were deregulated and Charles
Schwab entered the playing field in 1974 when the SEC allowed limited discounting. Naturally, we
have been through the Dot Com craze, Technology craze, Cell phone craze. But nothing is new. We
have flash trading, and that is like Day Trading in the 80s. There is virtually nothing new under the
sun. Stocks go up and stocks go down. Bonds go up and bonds go down.

From your career in trading have you always been a winner or did you have bad periods?
Early on, I had bad periods simply because I knew NOTHING. I later gravitated towards Options, and
that made more sense to me, to use options with stocks to adjust the risk reward characteristics of the
trade. I still believe that the covered write is the right strategy 68% of the time statistically. At
Dorsey, Wright & Associates we have moved to relative strength as the basis for our management
style. It has worked well. We now have 4 ETFs, PDP, PIE, PIZ, DWAS, and two mutual funds made
up of ETFs, DWAFX, DWTFX. I am not just a trader; I am also a portfolio manager where I take a
longer-term view. I do have a trading account at DIF where I trade everything from commodities,
currencies and CFDs.
Also at DIF I have what is called, a Model Account which is a separate account designed to run
Dorsey, Wright Models. I run my serious money in our models.
We have world stock models and many other ETF models that can be auto-run at DIF Broker. We are
operating in the future with this account. I am the architect of the account, determining what models I
want to populate it with. Once I do this, our computer talks to their computer and when a change is
made, which always consists of a sell and a buy combined, DIF automatically executes it. I then get a
text message on my phone and an email reporting the transaction. There is no question as to why the
trade took place because the rules of engagement were designed by us. I could manage a total global
portfolio from a year long cruise. I also have a Municipal Bond Portfolio and a Global Bond
Portfolio. I cover all the bases.

What did you have to do in order to become a winner? Was there anything in particular you had
to change?
Simply learn an operating system I could embrace and understand, that was Point & Figure Charting.
The next step was to just listen to what the market was telling me. The management of our ETFs and
Separately Managed Accounts are all Rules Based. We have taken the human emotion totally out of
the equation. Many years ago we found that emotion was creeping into our decision making process.
It was severely affecting performance. Once we realized this we immediately went to a rules based
program and it has been clear sailing since then.

What markets do you trade and what markets have you traded in your career?
I trade all markets. I trade all commodity markets, all international markets. At Dorsey, Wright we
follow all countries that have an exchange. We are just as adept at Indonesia as we are at the U.S.
Everything we do in any country comes from the same basis of Point & Figure Analysis and in
particular, Relative Strength. I also trade all bond markets through DIF. Mostly I take my bond
recommendations from Paulo Pinto the COO of DIF who is very up on the world bond markets.

Do you think you will change markets in the future or believe you will keep trading the same?
Since the world is open to me, I will continue to trade the world. However, there are some pitfalls in
this. The whole world is not politically stable. I experienced a bad situation while I was investing in
Egypt. I was investing in our Egyptian Stock Model. One day before the revolution, our system
suggested that cash had overtaken the Egyptian Model. I immediately tried to sell but could not find
anyone to answer the phone at the bank I was dealing with. My broker ultimately turned up in Saudi
Arabia 7 days after the revolution. The lesson cost me some profits but was well worth the tuition. I
will not invest directly in Egypt any more.

I have no problem with revolutions, these happen somewhere in the world every day. Its not
answering the phone at banks that is intolerable. I will use Exchange Traded Funds that trade on the
U.S. exchanges to invest in Egypt from now on even though our models outperform the ETFs. There
is always a lesson to be learned when investing worldwide. You never know everything.

Interestingly enough my best profits in 2007 came from the Russian spinoff of Georgia. I Googled
brokerage firms in Georgia and came up with one in the capital city. The exchange was only open
three days a week and only traded six stocks. Bank of Georgia was one of them. So since I wanted to
invest in the country the best bet was Bank of Georgia. It ultimately was listed on the London
exchange and provided a great profit. It was none too soon as a year or so later Russia invaded
Georgia. This is what makes it interesting to invest worldwide. My motto is The World Is Open for
Business; never get stuck only investing in your own backyard.

What is the methodology you use to trade? Are you active in your trading? Are you considered
a short term or long-term trader?
I am a position trader for lack of a better term. Most of what I do is rules based. We have laid down
all the rules that must be followed and in fact, its exactly what we would be doing by hand if we had
the time. There is no computer algorithm from MIT or any of this. Its the same thing we did by hand
25 years ago only we have taken the human emotion out of the equation. Relative strength
comparisons are what we use for the management of our ETFs and Funds. For trading purposes, I do
focus more on the individual issue but for portfolio management I use our models, which are all
automatically driven, Rules Based.


What would you say is your main characteristic as a trader? What defines you?
What defines me is simply the Point & Figure method of analysis and nothing else. I do not allow
anything else to creep into my thought process. We are world class at this method and leave the rest
to others. We are strictly defined by this method. I am also well versed in Options Strategy having
developed and managed an Options/Derivatives Strategy Department for a major brokerage in the
U.S. for nine years. Options are part of thought process at all times. Although I am not an options
trader, I do use options to adjust risk reward characteristics of some of the positions I might have. I
also run for myself a Covered Writing portfolio as neutral strategies are warranted 68% of the time
statistically.

What would you say would be the most important characteristic a trader should have and why in
order to succeed in the markets?
A trader should have discipline, control of leverage, and no preconceived ideas. Most disasters in
trading happen when a trader over leverages a position. Above all settle on one methodology and
know it well. If you find it works for you, continue to move forward with it. Dont jump around and
dont mix methods of analysis. It will only serve to confuse and you will never be able to learn from
your mistakes. This is what I call an Operating System that must be firmly put in your mind before
you trade. No computer can operate without an operating system, like Windows 7. For me its Point
& Figure Analysis.

Can you explain what the rules are, if any, for your trading?
In general, our modelling system will push to the top of the places where I should be looking for
trades, whether they are asset classes, sectors, or individual commodities or stocks. Say, agricultural
products are the play. I can either try to select one or two of those to trade looking at the charts or I
can buy our commodity model and let it auto manage or I can buy an ETF that is made up of
agriculture products. There are many ways to do this. The most important is to determine what you
will do if things go right and what you will do if things go wrong. Then stick to the program. I have
no problem selling a position for a loss. My focus is on the portfolio value. Losses are a natural part
of the process.

How is a typical day? What do you do from the moment you wake up until you go to bed?
The moment I wake up in the morning my mind goes to what has taken place in the markets over
night. Each day for me is like waking up to Christmas morning as a child might view it. I am filled
with anticipation and expectation. I know this day will be different from yesterday. There will be
opportunities for profits and opportunities to fine-tune what I already own. If the day is slow, I read
extensively. I read, in articles each day, the equivalent of a normal sized book. I never read articles
that would not be corroborated by my charts and in that a theme begins to be formed. If I read a
fundamental article and the chart is negative, I defer to the chart no matter how compelling the article
or fundamentals might be. I can be wiped out waiting for the fundamentals to play out. Like right now
one of the biggest themes in investing is the downward trend in oil production worldwide. This has
been in effect since the 1980s. But there appears to be a war breaking out in the Middle East so oil
might present some long opportunities.

How many trades would you say you do a week and what is the ratio of good trades to bad
trades?
It all depends. I am not a trader as a business; I am an investment advisor, money manager, and

research provider to professionals. My investing is for long term, however whenever the chart or a
model suggests a change, I make it, no matter how long I have held the position. My trading is
confined to DIF platform. Take, for instance, I am now long Feeder Cattle, Coffee, short Gold, and
long on ETF of Spain as a totally contrary play. I have a covered writing portfolio. I am always
amazed when I watch that portfolio generate profits on the short options as well as the long stock. I
love seeing time premium evaporate and collect in cash in my account. My weeks vary on trades, but
I would say average five a week with some weeks nothing.

Do you have an expectation of gains per trade in relation to your stop?
The risk reward must always be a minimum two positive to one loss. Often it only requires a pullback in the stock to make this minimum but it must be adhered to. Generally buying on pull-backs
results in a good risk/reward relationship.

How much money do you put at risk in each trade, and is this part of your money management
rules?
I often put half a million on any given trade. I might use CFDS and buy 1000 shares of Apple for a
trade but at the same time in my covered writing portfolio I might own 1000 shares with in-the-money
calls sold against the position. One is nothing but a gamble and the other is a calculated trade where
the leverage is controlled. One is adrenaline rush while the other is adrenaline reduction. I actually
love watching the covered writes come home so to speak.

Do you use technical analysis or fundamental analysis? What do you look for in particular, if
anything?
We strictly use Point & Figure Technical Analysis. This is all that is needed, as its simply a logical
and organized way to record the battle between supply and demand. In the end, a stock must reach this
point before its price changes. Fundamentals might be all right for long term but someone once said,
We are all dead in the long run. News on stocks is unimportant, how the stock reacts to the new is
all that is important. Fundamental analysis is a game Wall Street plays to sell research and it works.
Anyone with a degree in Finance from a University only knows fundamental analysis. But this
research has nothing to do with whether the stock will rise or fall. In 2008 there were many
fundamentally sound stocks that collapsed. There were no technically sound stocks that collapsed.
Sell signals accumulated, trends were broken and relative strengths turned negative. It was all there
for anyone who chose to watch.

If you use more than one technique, are they related somehow?
I do not use anything but Point & Figure on a technical basis. I do feel there is only one more thought
process that is valid in investing, and that is Statistics 101, or the normal distribution. This is where
the options business was derived in 1900 in Paris, France.

Do you use historical data in order to take decisions?
Absolutely, it helps to see how particular stocks reacted to particular news, events, or cycles. But it is
more important to pay attention to the here and now. When we create a model that is rules based we
need to back test with Point in Time testing to see how the strategy fares in all types of markets. This
requires going back about 25 years to get a picture of how the model will work.

Taking into consideration that there are cycles in the economy can we learn from the past?
Yes, The Past is a Prologue.


Can you define what is to have a feeling of the markets?
Having a feeling for the markets is nothing other than being around them for a long time. Its not
unlike walking around the same block time and again and ultimately you see things each time you
walk that you did not see before.

Ultimately, you know that block pretty well. You know that Mrs. Kelly had a major party on St
Patricks Day and Mrs. Kwong has a major party on the Chinese New Year. You know the kids that
ride their bikes after school and that is generally around 4pm. Its the same with the market; you
develop a sixth sense for it. Not unlike the old tape readers. That was truly an art.

Do you believe experience can help predicting market moves?
Absolutely, experience is the same as walking into a bar filled with bikers with tattoos, and Biker Club
emblems on the back of their jacket. You intuitively know this is not a place you need to be to have a
beer. Trouble could easily be brewing in that bar.

Are you a contrarian in the market or do you prefer to follow the crowd?
I am a contrarian which is why I am long Spain now. No one else in their right mind would buy Spain
but when the blood began running in the streets of Madrid I stepped up to buy and the chart supported
it. It has worked so far. But when a trend has been initiated, I always let the trend be my friend.
There were great trading profits to be made in Apple when in 2000 all the brilliant fundamental
analysts were writing about the death of Apple. All of a sudden, they came out with the iPod. Traders
were in early and probably out early. But when the trend started, it ran to $700. That is where the real
money is made, from $30 to $700 not $20 to $25. Bernard Baruch once said he was not interested in
the bottom 20% or the top 20%, he was only interested capturing the 60% in the middle. He also said,
When you sell a stock make sure the person buying it from you also makes a profit.

Can you tell what must happen in order for you to open a long position and do you use the same
parameters to open a short position?
Long positions should have the market going in its favour, the sector in its favour and the stock chart
supporting both. If the market is not supporting prices, long positions will have a difficult time at
best making money. Conversely, the same is true for short sales. I try to stack all the odds in my
favour. I have to admit I sometimes shoot from the hip and in most cases that doesnt work, just like
playing the slot machines. You must remember this is the greatest casino mankind has ever created. I
get a kick out of some friends who like to go to Las Vegas and risk a few thousand. Thats nothing
compared to being long 10 contracts of Coffee for a trade; that gets your adrenaline flowing. I have
never found Las Vegas that interesting other than the shows and the glitz. I like that.

What should happen in order for you to close a long position and what must happen to close a
short position?
Simply stated, my stop must be hit. However, there are times I have found myself over leveraged. In
other words, I owned more contracts or stock than I really had an appetite for. When I wake up in the
middle of the night thinking about the position that is a sign I need to sell down to my sleeping level.
Sometimes its hard to overcome human nature and were all human.

Is it the same to trade long and short positions?
I find that I have a temperament to be more long than short in stocks and in commodities, I dont have

any bias. In stocks I am most comfortable when I am hedged with options. I have always had a good
feeling for covered writing. In selling calls, when I start with your money in my pocket I have an
advantage.

Do you pyramid your positions? Do you do it when they are winning positions or do you do it
also with losing positions?
I do both. Although I hate putting good money after bad in a losing position, Ill do it if the
pull back provides a good entry point. Ill just sell if a position turns technically bad. I know
my probability of success is limited at that point. Again, I have no problem selling for a loss.
It is the portfolio value Im interested in, not necessarily the individual position.Like chess,
you must sometimes give up players to advance.

If you consider markets have changed through the years, have you also changed your trading
style?
For me its all the same. As much as we like to think things have changed, they havent. The
irrefutable law of supply and demand still reigns supreme.

Would you say the markets are always right?
Yes, the markets are always right. We might like to conjure up things to prove the market is not doing
what you think it should do but with respect to the market what is, is.

What would you say is the error you tend to repeat most often?
I tend to be impulsive at times. Not a good trait for a professional trader or investor but something I
have to live with. We all have certain demons we have to overcome.

When have you had more success trading and what would you say were the causes for that
success?
The older I get the better I get. Its all about whiskers. When you are young, you want it now.
When you are older, you realize things take time. The older I get the less impulsive I am. And the
older I get I find it less important to trade a lot. I like position trading where I can put a position on
and ride it into the sunset when younger traders might have taken a profit and moved on. Being
over leveraged is always the regret. I remember trading BIDU when it was $300. I often use CFDs
and buy 1000 shares a trade. That is a $300,000 position. I wanted to catch it just right and ride it
into the sunset. Only it never happens. Invariably it wiggles the wrong way and the pain gets too
high and you close the position only to see it reverse and do what you hoped it would do. So I
decided one day to cut this volatility monster down to size. I bought only 10 shares to prove a point
to myself. I forgot I had it and ended up making 100 points on the stock. Over leverage is like high
blood pressure, its the silent killer for traders.

Are you a believer in diversifying and what is the scale of your diversification?
I like to diversify. This is why I construct portfolios for investing purposes that are made up of our
models. The models will have five stocks each in them. This automatically diversifies me rather than
buying one stock, say to represent the Healthcare Industry. Or I buy a model that is made up of 5
ETFs which has over 100 stocks underlying the model. This is the future of investing. At www.dif.pt
there is a model account platform.

Why do you think there are so many losers in the markets?

Investors have a tendency to sell at bottoms and buy at tops. This is simply a basic human emotion.
When the pain gets too high they sell, when the elation rises they want to buy. Most investors have
never focused on addressing these problems and why should they. They have productive lives being
Doctors, Lawyers, Plumbers and investing is foreign to them. Many treat it as a casino.

When I was a stockbroker 35 years ago, I was often asked when a client called me: whats hot, whats
not. I knew I had a trader on my hands. Today everyone has to take a risk tolerance test. Guess what?
Everyone comes in moderate risk that is until the market goes up and they become aggressive or the
market goes down and they become risk averse. Welcome to human nature.

Do you think a newcomer in the markets can have success?
Certainly, once he has become a craftsman in some method he finds is best for his personality and
objectives. Its not unlike Billiards, Bowling, Chess, Checkers, Backgammon or any other game. It
takes practice and dedication. Most people are better off finding someone who is a professional in
this business that fits their profile. This is really a multilateral question. A book could be written on
this one question.

How long will someone need in order to be successful in the markets? Do you have any advice for
new investors?
Each person goes at it at his own pace. I have seen some who grasp it rapidly. Its not that
complicated. It is important to actually trade real money. Paper trading does nothing but create false
courage. Real money causes pain and this is instructive.

How do you merge your personal life with trading? Does trading have any effect on your
personal life?
I think it does have an effect because you think of it all the time. There are so many variables to
consider like War in the Middle East, shortages of commodities, elections, economic causes and
effect and on and on. Its a chess match that never ends. I love it.

Do you have a dream? If yes, do you think you will fulfil this dream?
Yes, my dream is to make it to 75 years old. Thats ten years from now. Then I will dream that I can
make it to 85 never leaving this business.

Anything else you would like to say?
Its been a great ride.

YASUJI YAMANAKA


Yasuji Yamanaka, 52, born in Tokyo and of Japanese nationality, has been in the markets for more
than 30 years.

He is now one of the most popular instructors of Forex in Japan, and is also famous for making
revaluation programs for any kind of derivatives and for daily execution probability charts for many
currency pairs. He trades his own money along with clients money, some of them being banks.

He started his career at Bank of America, where he worked for 15 years in both Tokyo and New
York, as Chief Trader then Manager of Proprietary Trading. He then spent 5 years at Nikko Citi Trust
and Banking as Deputy General Manager of Treasury and the last 10 years as a private trader.


How did you start in the markets? At what age?
When I joined Bank of America, I was assigned to the Forex department as a Forex dealer of the
Treasury division. I was 22 years old.

Do you feel the markets have changed since you started? If yes, how?
We have had an enormous evolution of technology and an increase of market participants, which has
resulted, in my view, in making the market more stable and with a narrow spread. When I started
trading at Bank of America in 1982, it was easy to drive the market with smaller amounts like 100
million or even 50 million dollars sometimes.

From your career in trading have you always been a winner or did you have bad periods?
I had a very bad period with continual losses throughout the year, once in Bank of America. When I
worked at the bank, my trading tickets (the amounts I was trading) were very big and sometimes I
would make huge losses (eg, more than $1 million in a week, which in those days were very big
amounts). The reasons for those huge losses were lack of money management, and I can only
attribute the reason to the fact that I was too young, and also because everybody in the market knew
my position was too big for the market. That period was not only bad for trading it was also bad for
my health condition. I started to develop an irregular heartbeat each time I became very stressed. I was
forced to change if I wanted to continue, so, I changed my money management and immediately my
health condition improved.

What did you have to do in order to become a winner? Was there anything in particular you had
to change?
As I said, I had to apply better money management rules, stop averaging my positions and sometimes
even step away from the market when I was feeling really down.

What markets do you trade in and what markets have you traded in, in your career?
I have started trading Forex (both spot and forward), then bonds in Japan also known as JGB
(Japanese Government Bond), also interest rate swap. This is very interesting because I traded JGB
until 1996. In those days we had a good chance to trade JGB but then interest rates went to zero.
Trading conditions in bonds is really different depending on interest rate levels. Under low interest
rates, the price changes are relatively narrower and it reduces the chance to make money for bond
traders.
Going back to other instruments that I have traded, there are: Forex options, stocks, particularly in
emerging markets and commodities, mainly metals and oil. Now, after all this, I trade only Forex,
commodities and the stock market, but mostly Forex.

Do you think you will change markets in the future or do you believe you will keep trading the
same?
No, I believe I will be trading the same, mostly Forex, because I have a real passion for it. I started my
career in trading in December 1982 as a cable (GBP) trader. So I can say that I have spent 30 years
in the Forex market and I really like it. There is a saying Once a dealer, always a dealer and for me
it means to keep trading the Forex market.

What is the methodology you use to trade? Are you active in your trading? Are you considered
a short term or long-term trader?

I put emphasis on technical analysis. More specifically I research market movement and planetary
cycles with a high probability. For example, when the moon crosses the equator USDJPY often
changes the trend (turning point). If some technical indicator shows an overbought/oversold
condition, I refer to my cycle research as well. Planetary cycle is my second opinion for trading.
Im not as active now as I used to be because I have to run my business besides trading. I would like to
say I trade for fun and to keep myself in the market, but in reality it depends on market conditions as
to whether I can be a full time trader again any time. I consider myself a short term trader because I
mostly do day trading and short term swings in the market.

What would you say is your main characteristic as a trader? What defines you?
I am a good technician. I trade only with charts and technical analysis tells me all I need to know.

What would you say would be the most important characteristic a trader should have and why,
in order to succeed in the markets?
To be strong in his mind, to always have a clear will to execute a stop and clear rules to enter the
market. One must go with the other and for both you need a strong mind.

Can you explain what are the rules, if any, for your trading?
I use stop rules with both money management and technical indicators to exit my trade. My
management is very simple. The basic idea is a breakout system of 2 or 3 days, high/low for short
term swing trades and breakout of a previous days high/low using hourly chart close for a day
trading. Of course these levels should be inside my money stop rules. I have a couple of variations in
these rules.
.
What is your typical day? What do you do the moment you wake up until you go to bed?
Just before the NY market closes (its 5:30 daylight saving and 6:30 normal time in Tokyo), I start to
check what happens in overseas market and to analyze major currencies charts. When I have a good
trading idea from the charts I setup my orders (entry and exit), then forget about them. Sometimes I
go jogging in the daytime, but not so often. After that I just check rates, news and charts from time to
time, but this doesnt change the decision which I make in the morning.

How many trades would you say you do a week and what is the ratio of good trades versus bad
trades?
Lately, I only do a couple of tr ades per week, which is r elated to mar ket conditions and
tr ading r esults. I also r un an automatic technical tr ading system with a ver y small amount.
Befor e and depending on mor e mar ket conditions, I tr aded about 10 times a day. My goal is
always to have pr ofitable tr ades within the r ange of about 40-45%.

Do you have an expectation of gains per trade in relation to your stop?
Yes. I set a tighter stop than for profit making. And for automatic trading, I try to set pay off ratio at
more than 1.5.

How much money do you put at risk in each trade and is this part of your money management
rules?
Less than 2% of total margin money. Even if I am fully confident on a trade, the exposure will never
be more than 5% of the portfolio and this is a strict rule.

Do you use technical analysis or fundamental analysis? What do you look for in particular, if
anything?
I think about fundamental but trade only with technical analysis. If my fundamental analysis shows a
clear trend, I use only one side (either buy or sell) signal by following technical analysis. But
fundamental factor does not tell me any entry or exit as a signal.

I like to use Heikin-Ashi and Ichimoku Kinko Hyo indicators for short term trading and often use
pivot with high probability zone for a day trading. Heikin Ashi is a modified formula of Japanese
candlesticks basically using average bars (Heikin Ashi means average bar in Japanese) to predict
futures prices. Ichimoku Kinko Hyo is a technical analysis method that used with candlestick charts
improves the accuracy of forecasting prices.

If you use more than one technique, are they related somehow?
I use at least two technical indicators. One is for setup (filter) and others are for trigger (entry and
exit). I basically use longer parameter or slow timing signals as a filter and shorter parameter or fast
timing signals as a trigger.
I also use multiple timeframe and use higher time frame as a filter.

Do you use historical data in order to make decisions?
Yes. I often see a chart pattern in historical charts.

Taking into consideration that there are cycles in the economy; can we learn from the past?
Yes. I check cycles and refer the long-term trend. But it is only information not for trading.

Can you define what is to have a feeling of the markets?
It means one should be objective. See ones own position just like it was someone elses position.

Do you believe experience can help predicting market moves?
Sometimes, yes, because there are many typical chart patterns that keep being repeated every so often.

Are you a contrarian in the market or do you prefer to follow the crowd?
Im absolutely not a contrarian. I prefer to follow the trend with my own rules.

Could you tell what must happen in order for you to open a long position and do you use the
same parameters to open a short position?
Basically, yes. However, I only run long or short for one strategy, if I believe only one side trading is
more profitable. I normally just follow an entry signal to buy, but occasionally I trade just from my
experience using chart pattern recognition.

And what should happen in order for you to close a long position and what must happen to close
a short position?
Only the stop rule that I use determines an exit.

Is it the same to trade long and short positions?
Definitely, they are the same.

Do you pyramid your positions? Do you do it when they are winning positions or do you do it

also with losing positions?

I dont pyramid with winning positions or average with losing position. My trading rules only allow
me to make one decision. This decision goes to the market with a set of rules and adding positions to
the same trade is not one of them.

If you consider markets have changed throughout the years, have you also changed your
trading style?
I try to change but after analysing markets, most of the time I stay the same, doing the same thing.

Would you say the markets are always right?
Yes, otherwise I will be rejected from the markets.

What would you say is the error you tend to repeat more often?
To change order and not to enter the market with confidence.

When have you had more success trading and what would you say were the causes for that
success?
A recent case where I had success in trading was in commodities in 2008. I entered at an early stage
and the market trend continued.

When have you had more regrets trading and what do you feel were the causes?
Im experiencing this feeling right now. Recently, my strategy (automatic trading strategy) doesnt
often work. I suspect High Frequency Trading and algo trading has had a big influence everywhere
now and it has a big impact on more traditional system trading as well. Since the market is a living
thing, market participants (including me) have to change their trading style from time to time to
adjust accordingly. I am having difficulties now and I suspect it is because the market is not even
with High Frequency Trading.

Are you a believer in diversifying and what is the scale of your diversification?
Yes. Only one market and/or only one product in one market increases the risk in trading. To put all
your money in one market is too risky under such a global market. I put my money in stocks, bonds
or interest rate products and leverage markets such as commodities and Forex.

Why do you think there are so many losers in the markets?
So many participants are unable to establish and decide on their trading rules; that is certainly not
helping. I feel that especially the lack of a stop order in trades is having a huge responsibility.

Do you think a newcomer in the markets can be successful?
Yes for sure. But only a few will, probably less than 5%.

How long will someone need in order to be successful in the markets? Do you have any advice for
new investors?
Its up to the individual everyone is different, but I think the first year will be a repetition of trial and
error. Assume trading as a business.

How do you merge your personal life with trading? Does trading have any effect on your
personal life?

I have spent nearly 30 years with trading (markets); it is part of my personal life as well.

Do you have a dream? If yes, do you think you will fulfil this dream?
Yes. Related to trading, I would like to be in the market for as long as I can continue.

Is there anything else you would like to say?
If you have no experience in trading, please try! You will sometimes be disappointed by the market,
but the majority of the time you can enjoy it.

PAULO PINTO


Paulo Pinto is an opinionated individual, who has conviction in his opinions, to the point that some
people construe him as a difficult character, but at the age of 59 years, he says he is too old to change.

After refusing to work for Merrill Lynch, where at the offer interview he was told that his role would be
to sell and not to think, Paulo felt that the financial industry was not taking clients in a high level of
consideration. We will tell you how to dress, how to talk and how to eat with other people, you will just
have to sell what we tell you to sell. This was the comment that turned him off.

With a group of shareholders, Paulo created a Broker company that he himself would like to have, if he
was a client. That broker company is called DIF, as in different because it was created for different
clients, intelligent clients, as he likes to say. Clients that understand who is trying to sell something and
who is trying to provide a service. Clients that can understand that price is not everything because what
looks too good to be true probably is.

His vast knowledge of the financial markets comes from his experience as chief operating officer and
portfolio manager, as well as consultant, in matters related to markets.


How did you start out in financial markets?
I started investing in my portfolio in 1979, later in 1985 I became the publisher of a magazine entitled
Dinheiro, meaning Money; which, following the revolution in 1974, was the first Portuguese
magazine to talk about financial markets. The stock market had closed after the revolution and there
were hardly any listed companies in 1984, and at that time, the SP500 index was at about 160 and the
Dow Jones index at 1000.

Our first article about the stock market took us to the Lisbon Stock Exchange to take photos. There we
saw three individuals standing in the middle of the trading floor, these were the stockbrokers who ran
the market from a pit and I think about 20 investors around them following the market. It was so small
and intimate that we stopped the session and even managed to fit the investors into the photos.

As the publisher and director of the magazine, this was the beginning of an important journey and one
which gave me the opportunity to meet and interview many interesting people.

I have always been interested in technical analysis and from 1978 to 1984, as an individual investor, I
used to draw charts by hand. During those years, I followed 20 American shares and every day I drew a
bar on my squared sheet of paper, especially designed for charts that my American friend in the USA
sent me regularly. It was another world because doing this by hand enabled me to feel the movements
of the market and feel how it could be the next day. Bar analysis is still for me today the best basis for
decision-making.

I didnt know anyone in the markets but I knew everything I needed to know from the 20 securities I
was following, the price action. In 1984, it was the beginning of the era of the computer as a
consumer product, mainly for games, but as well to work in different fields. In the markets there was
this amazing software called Meta Stock (release 1.0) that enabled me to follow a new world of
markets. That year I met a gentleman whose name was Luis Alvim, who had a company in the USA
and worked in financial markets and money management. He became my mentor and helped me to
move from the world of drawing graphs by hand to a world based on software analysis. Everything
was much quicker, but above all, I started to analyse more than just the 20 securities that I had been
following for years.

I started to work in a brokerage company when I was 34 years old, the age at which some people in the
financial world retire. When I was 35, I was managing portfolios for clients. I was no longer a child in
terms of markets.

Do you think financial markets have changed?
They are nothing like they used to be. Everything has changed. At the end of the 70s, everyone
invested long term using fundamentals. In England, visiting a broker, everything was very private,
there were few people with money and investing in the markets and those people were generally
recognised on the streets with their pinstriped suits, hats and umbrellas.

I was probably the only person in Portugal who followed charts, and did it by hand, and probably
only one of a few in Europe. With the arrival of Meta Stock came about a new era and the new
problem was how to get hold of the information on the computer to have the charts, in order to avoid
having to introduce data by hand.


I remember that there was a company in the USA called Dial Data for such service but there was
nothing in Europe. The telephone with a modem was used to download the data using the service of
Dial Data. If I remember correctly, I had to call a telephone number to access the network, Telenet, as
it was before the time of the internet. The download of the US market could take 20 minutes.

Everything changed again with the arrival of the internet, it was so much easier to get data and access
to information and people started to talk about Intraday trading and online trading. From their homes,
people could trade in the markets. It was becoming a job. Since the beginning of this century, we have
algorithms and, high frequency trading, called HFT. There have been many changes but I personally
do not think they are for the better.

When I started, you could invest for the very long term, not like nowadays. Fundamentals were
important. Technical analysis could measure fear and greed in the markets, whereas now it cant as
the majority of business is conducted by computers, which dont have feelings. The dimension has
changed, regulations have changed and products have changed. Nowadays there are CFDs, binary
options, forex; products that were previously not available or accessible to everyone are now
available for anyone to use.

Globalisation has also made changes to investments. In 1985, it was impossible to negotiate with
Germany or Japan unless you understood the language or had contacts in that specific country. Now
we can do it just by using a computer and having access to the internet, without having to actually talk
to a person from that particular country. Its nothing like it used to be.

The only thing that does not change is the fact that most people are willing to risk money; looking to
improve their financial conditions in bad times, more than in good times. A bad economy is an
opportunity for scams and they all have one thing in common, they promise people fast money with
little effort. The reason being is that everybody believes that there is always someone who has an
infallible system in financial markets.

From your career in trading have you always been successful or have you had bad periods?
I made money, almost without problems, when I could measure fear in the market by using technical
analysis. I only lost money when I started to think I was really good at what I was doing and I lost
money in all of the crashes; in 1987 and 1989, in the Asian financial crisis in 1997. I was not able to
avoid them although in 1997 I was not invested in stocks; I lost money because I was in currencies.
The worst times are related to important changes in our financial system. The biggest change is
related to the famous Greenspan Put, which gave the big banks the conviction that Greenspan
wouldnt allow losses in the markets. This change, along with the effect of the internet, was difficult
for me. I didnt understand either the quantity of money that could be moved in the new economy nor
the imbalances that had been caused between supply and demand. Bottom line I did not profit from the
internet craze. Everything was so fast with those new stocks coming to market, most of them with no
business model and outrageous valuations, there was a new reality. I didnt like to invest in businesses
I didnt understand, with movements I couldnt explain.

What did you have to do in order to become constantly successful? Did you have to change
anything?
I dont believe that anyone can be constantly successful. The most difficult thing, when operating in

financial markets is adapting to the changes that are happening in the world and inside us. I started out
being successful because I carried out technical analysis which was a great advantage in those times
and also because they were years of growth, when the markets were rising. The great danger to an
investor lies in his ego. We would all like to be more intelligent and better than we are in reality, and
in markets, you pay for this with money. Next, there are the changes that happen around us; changes in
the economy, in the world, in the markets, and for someone who spends a lot of time on financial
markets, its very difficult for them to see the changes that are happening.

Financial markets are a reflection of the world, in reality, the same as what happens in the economy
but much faster. If interest rates are going up companies will have more credit problems and this is
normally adjusted gradually in the economy, but in financial markets, its immediate. I dont think that
we, as human beings, are able to adjust our reasoning and thoughts at the same speed.

This is the hardest thing about financial markets; to evaluate the implications of whatever change that
happens in the market and make a good judgment.

What you have to do, when it doesnt work, is make sure that you understand what has changed. Find
out if there are reasons to change what you do if you need to change the products you trade or even
change your technique.

Sometimes the motive is just bad luck and then the best thing to do is to stop for a while. One can only be
100% successful if one is doing something illegal.

Sadly, I dont think you can always make a profit. I would like it very much but there were years when
I didnt and I believe the future will bring more years of small profits. Profits of double digits that
have been made in the past will be much more difficult and maybe impossible in the future without
taking too big a risk.

In which markets have you traded and in which do you currently trade?
I traded first in shares, then bonds and after in futures, options, forex and CFDs. Now, I continue
operating in all of these, depending on the risk my clients are willing to take. I prefer trading in
futures because they are the markets that have changed the least of all. For every winner there has to
be a loser, but in shares, it isnt like that.

Would you change markets in the future?
I think I will continue doing the same as I am now. For me, it has to be all markets as what I look for
are investments with the least risk involved. I look for what seems to be opportunities offering good
reward with smaller risk.

Which method do you use for negotiating? Are you an active investor? Do you consider yourself
to be a short term or long-term investor? Do you work with any type of assets or just one?
I work with my own methodology. I look for the rhythm of the market and work with any type of
asset, but it is important to know the assets well, because they do not react and behave the same.
Each one has its own particular identity with different participants and for this reason; they react
differently in the short term. Im not a very active investor; I could carry out two trades a week,
but never on a Monday, as Mondays dont have the same rhythm as other days because of the
weekend. Markets have their own biorhythm and Monday is nearly always difficult to read. My

trades in leveraged products are always short term and my trades in shares or ETFs are always
long term. I dont like automatic trading and I dont like robots; I dont identify myself with these
methods. If it were so simple to make money with robots writing a few lines of code, anyone
could make money and we know this is not the case.

The big banks and big hedge funds use these methods because they can invest millions in programs
and servers, but they do it because they gain an advantage in relation to other investors in the market
over a certain period of time and then move on to something else.

How do you define yourself as an investor? What are your main characteristics?
Im an investor who follows the cycles of the different instruments I trade in the markets. In
reality Im an investor who follows and analyses the biorhythm of each of the instruments that I
invest in. I think this is my characteristic, being capable of finding the biorhythm of each
instrument.

What do you think is the most important characteristic that any trader should have in order to
be successful in the markets, and why?
Without doubt, the most important characteristic is to not have emotions in the market, together with a
rigorous money management system. Good money management is the most important thing for
being successful in the markets and its important to not be scared and to think with your head. Next,
hard work and a good memory so you dont forget the mistakes you have made. This, with time, will
allow you to create your own investment system.

Can you explain what your trading rules are?
To obtain the biorhythm of the instrument to be traded is the first rule. This can take a long time. After
finding the rhythm, its easier to decide whether to enter the market long or short, but it has to have a
stop placed. That stop order should represent a loss that is inferior to the amount of profit trying to be
made; Im trying to make. When you go into a position, what you need to obtain is the difference
between two points. The same thing happens when an investor tries to carry out a swing trade but what
I try to do is a longer movement with an acceptable risk involved. In order to do this, its necessary to
identify that biorhythm.

Financial markets are fractal, which means they behave in the same way in different time windows, or
better said, they have the same cycles in different time windows. What you have to look for is the
dominant cycle and when you have found it, you know which side has the most risk, buying or selling.

What is a typical day like for you?
A normal day for me is to get up at 6am. I put the television on to see if there is any important news
and then spend 10 minutes on my vibro training machine, so that I can say I have done exercise! After
this, I go to the office, where the financial market day begins which, since Dodd Frank and Mifid, I
spend much more time on bureaucracy than carrying out trades.

As an asset manager, I have to do a lot of preparation, which means looking at different markets,
seeing what their biorhythms are like and seeing if anything is changing. If something changes, I have
to evaluate the risk, which could mean closing a position or changing a future for an option or an
ETF in order to reduce leverage. The days are repetitive and I usually finish work 12 hours later. At
8pm, I go home to have dinner, read, watch television and then go to bed at midnight.


How many trades do you carry out in a week and what percentage of them are profit making?
I could do maybe 15 trades a week including opening and closing positions. My percentage of profit
making trades is more than 60% in short term trades. In long-term trades, time is more important
because time allows you to make more money on a transaction. It all depends on the risk profile of
the client. My job is to individually manage family investment portfolios with certain risk profiles,
each having a different objective.

At the moment, some of them are more worried about keeping money and need a diversified strategy,
which includes all of their assets in order to reach the objective. Others look for more risk on a small
part of their estate, so need to invest in leveraged products of higher risk. Its the client who defines the
type of risk on long and short-term investments. More important than how many successful trades I
have, is the profitability of the portfolio.

Do you have an expectation of being successful when you start a trade?
Yes, of course. I only do trades which I calculate to have a higher probability of making a profit than
a loss. I will only enter a trade in the direction of the trend and I dont like it when that doesnt happen.
Sometimes there are other problems that come later. Its normal that a trade on a long-term portfolio
can go into a loss before turning into a profitable trade. Its important to give it time. The rule of the
market states: dont let a profit turn into a loss, doesnt apply to my portfolios. What is important is
the objective and the stop. I dont really like to see a profit turning into a loss, but I prefer to do it this
way.

How much money do you risk in each negotiation? Is this part of your money management plan?
In futures, the money that I put at risk is the margin of each contract. What is important for me is to
have money for four contracts for each commodity and no more than five commodities. When it
comes to shares, each line shouldnt represent more than 5% of the portfolio and if its ETFs, more
than 20%. My money management system has to include the percentage of cash, which, in the last year,
has been almost always around 40%

Do you use technical or fundamental analysis?
I continue using technical analysis and, since 2003, more and more I have been using
macroeconomic, following, monetary policy because the central banks are making it very difficult to
evaluate risk in the market. What I try to do is trade with the minimum risk possible which is
becoming more and more difficult when the central banks are manipulating monetary policy. Capital
is more and more concentrated and liquidity is false now when 60% of the market belongs to High
Frequency Trading.

If you use more than one technique, do they correlate?
Technical analysis isnt related to macroeconomic analysis. I do keep the economic calendar handy to
be sure that I am not trading or even in the markets if there is an important report to be out at 1.30
pm. Central banks talking are having more and more impact on market prices and there is no
technical analysis to be used at those times. Personally, as I said when there is relevant information
coming out, I try not to be in the market with leveraged products. The market is supposed to be
always right, thats why we say the price is always right, but it isnt true anymore, in my opinion.
There is no more Price Discovery, all there is, is Central banks interested in maintaining assets above
a certain level.


Do you use historic information to help you make decisions?
Yes, charts continue to be fundamental for me. If they are leveraged products, I look at the hourly and
daily charts. In other cases, I like to look at daily and weekly bar charts.

Taking into account the economic cycles, do you think we can learn from the past?
My methodology is based on these cycles and they do repeat, but not in exactly the same way. The
world is round but rotation of the world around the sun is in an elliptical movement. This is what
justifies that the cycles are repeated, but not in the same way. About the economy, its true, you can
learn from the past because, in reality, everything gets repeated, we keep repeating the same mistakes.
Obviously central bankers dont read about history, otherwise they wouldnt think they are trying to
create something new.

Define what it means to you to have a feeling of the markets?
For me, there is no such thing as feeling of the markets. The only person to have made money with
feeling was the singer Andy Williams with his music feelings. You can have experience, you can
say that a certain session in the market is similar to another one, but feeling in the market is the same
as gambling in a casino, in my opinion.

Do you believe that experience helps to foresee what is going to happen in the markets?
Experience in the markets is a sign that you have lost money in the markets previously and more than
once. This is good because it helps to remind you that you can always lose. If you mean, by
experience, that you have studied a specific technique for trading the market, that you have back tested
it and it seems to work, that is not experience but is also important. However, if experience to you
means spending time in the markets without learning anything, this isnt worth anything. The personal
characteristic necessary for being a great investor is time and knowledge of how the real world
works. Its not experience. Time is necessary in order to see Apple go from $7 to $700 in ten years
and its necessary to know the risks of keeping that particular stock. A trader who is always in the
markets is like a gambler in the casino, experience doesnt help either. A trader has to have a rigorous
money management method.

Are you a contrarian in the markets or do you follow the trend?
I dont like doing the same thing as everyone else, because for me, this is an indication that something
isnt right. But, saying that, Im not a contrarian in my methodology. When I take positions contrary
to the majority its because of my methodology and I think that the markets are in agreement with my
method, but if my methodology tells me to go with the trend its also ok. To go with the trend or be a
contrarian are phrases that, in my point of view, dont mean anything. The most important thing for
any type of investor is to have the discipline to do things in the way they should be done. Without
discipline, people lose their references which are what keep us balanced. If you dont have discipline,
you arent thinking with your head, but with something else, such as fear! In order to follow a trend
or go the other way, its necessary to use a money management system that allows you to follow the
trend to a certain point or to get out of the position as soon as you are losing an amount of money that
tells you, you are wrong.

However, money management is more than this; its also about knowing what type of weighting
stocks should have in your portfolio. Should you have a portfolio based on the capitalisation of your
stocks or of equal weight? Having 100 IBM at 200 and 100 Apple at 100 is not the same as having 50

IBM at 200 and 100 Apple at 100 and another 100 in cash. These are two portfolios with the same
stock; same amount invested, but will have different results.

Can you tell us what has to happen in order for you to open up a long or short-term position
and if you use the same principles for the two.
For me to enter a position its important first to identify the trend of its rhythm. If the trend is rising, I
will invest long term; if its falling, I will invest short term. Next, I look at other issues, for example, is
this particular instrument used to complete its cycle regularly or not. If the cycle isnt regular, I wont
invest. After this, I look at where to put the stop. If its far away for the amount of the portfolio,
meaning I have to risk too much money, I wont carry out the trade. However, if the potential profits
justify it, I will look for the best moment to enter. If there are many recommendations about that stock, I
dont like to trade it regardless if I had decided to go long or short. In conclusion, I try to trade with the
least risk possible.

What has to happen for you to close a position?
For me to close a position the price has to reach the stop loss level I have defined. It could happen when
something changes in the market and the level of risk becomes more than I had anticipated. My stop is
almost always mental. I rarely place a stop in the market but always have it in my head. Sometimes this
allows me to close at a better price after passing the stop I have in my mind.

Is negotiating positions in the short and long term the same?
No, its not the same. The majority of people dont feel natural to be short and the market behaves in a
different way. The movements of short-term positions are much quicker and more volatile. If a stock
goes into a bear market trend, then its the same as having long positions; slower movements, less
volatile and time to do what needs to be done.

Do you like to accumulate positions? Do you do it when youre making profit or when you are
losing?
I dont like accumulating positions in any situation. Its very unusual for me to do it and I have to
justify it really well if I am to add in my positions in leverage products like futures. However, in
stocks and long-term positions I can average down. I try to follow a methodology Top Down, that I
started in 2002 when trying to evaluate macroeconomic risk. I feel we are living in strange times now
in which the risk in the markets is difficult to evaluate, if not impossible, because the central banks
intervene in the markets giving liquidity through the QE (Quantitative Easing) or LTRO European
programs. Interest rates have gone to zero and this doesnt allow you to correctly evaluate the risks.
This risk valuation is what makes me decide the percentage of money that can be invested in a
particular moment, meaning also the amount of cash that I will keep. Only after having decided this
do I decide the allocation of the portfolio, in agreement with the risk levels of the client, and only then
do I use my technical analysis based on cycles. Accumulating positions would mean having to justify
all of this a second time to myself.

If you consider the markets to have changed over the years, has your style of negotiating
changed too?
Yes, I started out using technical analysis, drawing charts by hand, deciding everything based on
supply and demand and for years, using technical analysis was a good solution. Today, its not like
that. The technical analysis that I used to use isnt the solution for me anymore.

I dont like to complicate things, I dont like doing things that I dont understand and I dont like to
gamble. Im a risk manager and I like to have the probabilities on my side. The financial crisis, which
we have been living through since 2007, isnt good for me. Many people tell me, You just have to
buy! and they have been right until now and maybe they will be right for a period. I like to think and I
know that whatever has to happen will happen.

Do you think that markets are always right?
No, markets are hardly ever right because what happens in them almost never corresponds to the
economic reality. However, its true that a kind of market consciousness exists which makes the
market correct in reality. To think that the markets during 2012, 2013 and 2014 knew more than we
did doesnt seem correct to me. What do they know that we dont that keeps them going up?

Obviously they know Central banks would keep printing, but is there a new energy to replace oil;
cheaper and more efficient? Is there another industrial revolution? No. The market is simply a voting
machine always searching for balance between supply and demand and thats it. We vote in elections
as well and it doesnt necessarily mean that whoever wins is the best.

What is your most frequent mistake?
My biggest mistake is not being able to be completely insensitive to all the information around me.

When have you been most successful and for what reasons?
When technical analysis was able to recognize fear, greed, and only a few people were following
technical analysis, it was really easy to make money. This happened until the internet boom and in
particular, the NASDAQ craze, which brought many day traders. The interventions from the FED
since 1997 and then from other Central banks have prevented the markets from making the
corrections they should have made. Every correction that has happened was the correction allowed by
Central banks as the result of efforts to prevent disasters in the markets. In trying to help markets
Central banks brought so much debt that we are now living a capitalism; without capital.

Do you believe in diversification and what type do you use?
Diversifying investments is very important, more now than ever before. I always discuss with my
clients the need to have a diversified portfolio, covering different countries, different assets classes,
different sectors, different leverages, different currencies, different everything. We talk about all this
and we talk about money management.

Why do you think that so many people lose in the market?
Because investors dont work hard, dont think with their heads and they prefer to follow opinions.
Someone elses opinion is exactly that, someone elses opinion. They may have other interests and
another vision and they may even have much less knowledge on the subject. To work hard as an
investor is the only solution. Nothing in life is free.

Do you think that a novice investor can be successful?
Thats the same as asking can a newly qualified doctor be a good doctor. What you have to do is the
same, learn before starting. If you start without knowledge, you cant be successful, but you could be
lucky.

How long does someone need in order to become successful and what can you say that will help?

The amount of time depends on how much time one dedicates to learning about the markets. If theres
anything that I can say to help, its that: investing is an activity that needs a lot of work and study.
Work to have a methodology when starting trading and study to apply your methodology and adjust it
according to changes in the market.

How do you manage to have a private life? Does investing and negotiating affect this?
It does have an effect because living in the world of financial markets is very intense. Losing
money, and in particular clients money, doesnt make one happy. Losing money in the market is
recognising that were not always capable of doing things right. Its always worse if its clients
money!

Do you have a dream? Do you think it will be fulfilled?
My dream is to be happy in relation to the markets because my whole life I have been in
competition with them. Being in competition is being happy because Im doing what I like doing,
but the moments when I lose money are awful. I dream of being capable of not suffering with the
losses. After almost 30 years, the losses, even the normal ones, still make me suffer.

Is there anything else youd like to say?
Yes, I would love for people to think through their heads, to question what is given on main news, to
make their own judgments on any investment decision and to be responsible for the decisions they
take, because they are based on knowledge and personal judgement. These are characteristics of
intelligent investors, different investors the kind of investors that we find at DIF Broker.

STEEN JAKOBSEN


Steen Jakobsen is the Chief Investment Officer at Saxo Bank. Previously he was a Prop trader for
Chase Manhattan, Swiss Bank Corp, UBS and Nordea. Steen has been trading since he was 18 years
old and as he says never had a real job.

It all started in 1989 at Citibank N.A. Copenhagen, and from there he moved to Hafnia Merchant Bank as
Director. Now at 48 years old, he lives in Denmark, where he is paying his taxes, but travels more than 100
days a year around the world for Saxo Bank and also because he is invited to speak at other bank events. He
has more than 25 years of experience within the fields of proprietary trading and alternative investment, and
is the most cited economist in the world.

Steen is a true citizen of the world, having lived in London when he was working with Chase
Manhattan and New York while working for UBS. He is quoted as saying you have to work for
whatever you are going to get. He started to work at a very young age and it served him well. He has
been on the first row all his adult life to see the changes that he is now talking about every day.
Changes that make him say with conviction that private business can always operate more effectively
than the government.


How did you start in the markets? At what age?
I started when I was 18 years old. A friend of mine worked for a broker house and he had a trading
tip, which could not lose money - of course, it did, and in the process, I lost my savings plus some
of my familys money. After finishing my studies in Economics at Copenhagen University in 1989, I
started my career at Citibank N.A Copenhagen

Do you feel the markets have changed since you started? If yes, how?
The market was truly a free market when I started out in the business. EURUSD or better the
USDDEM as it was in those days could swing 3-5 figures in one day. The market was mainly based on
Reuters Dealing, accessible only to institutions, but there was a strong interbank market where
everyone was obliged to quote prices and take risk. PCs and IT was not a big thing yet....

From your career in trading have you always been a winner or did you have bad periods?
I have tried it all - I started being trained by an old-fashioned macro trader, who took massive risks and
then went to the pub for hours. I definitely learned a few things with him. The 1992 ERM (European
Exchange Rate Mechanism) crisis was my baptising as a trader. At the time, I worked at Chase Manhattan
Bank, London Proprietary desk. It was there that I lived the famous Black Wednesday September 16th
1992 when the British Conservative Government was forced to withdraw the British pound from the
European Exchange Rate Mechanism because it was unable to keep the pound above its agreed lower
limit in the ERM. So to go back to your question the answer is yes early on I was a winner, but in
hindsight mostly because I had a great teacher.

I also think, and not only from experience, that any trader will go through very bad spells, but until
2009 I had few really long and bad spells.

What did you have to do in order to become a winner? Was there anything in particular you had
to change?
Discipline is everything in trading, making sure you are unbiased. We all have a tendency to take long
or short risk, and you need to contain it. I worked 20 hours a day trying everything you could
imagine: macro economy, charts, momentum, mean-reversion, commodities, FX, bonds - anything
because you have to work for whatever you are going to get, I truly believed working hard was the
recipe for success, but I was brought up in the Forex market, and today I see that as a major asset. FX
is the only asset where you need to be right about both your long position and your short position.
The currencies are what define almost everything in the economy and we need to get it right there.

Having said that, without discipline even the most gifted trader will start losing money. So I had to
develop a trading plan and follow it. A piece of advice I would give anyone trying to make a living
through investing; make it your priority to have a trading plan.

What markets do you trade in and what markets have you traded in, your career?
Today I trade in all markets I call macro markets: FX, Futures, options, equity, commodities, and
ETFs. Anything which give me portfolio allocation reflecting the major market trends.

Do you think you will change markets in the future or believe you will keep trading in the same
ones?
I have always traded in most markets, but in 2012 the market became artificial in the sense that price

discovery disappeared. Normally you use the fixed income market to derive the price of money and time,
but as central banks continue to intervene and make markets in government bonds and liquidity, we can
no longer get the right and proper price of money. This concerns me as I have always used this for
benchmarking all my investment. The price of money and the cost of money will affect all other risk
evaluation process, and that is why I define the markets since 2012 as artificial markets, because the sad
truth is when you have a zero interest rate, any asset with a 0.1% return or higher looks attractive for
those that need to trade everyday like the pension funds insurance companies or banks or hedge funds. So
if anything, with this new reality I will trade less, but will keep trading the same products.

What is the methodology you use to trade? Are you active in your trading? Are you considered
a short term or long-term trader?
I am a medium term trader, not short term and not long term. I think my strength is to understand
complicated macro analysis. Often my biggest risk is the market reaction expected from my analysis
is too slow for my trading style. I am often too early. Patience is something I constantly need to work
on. I use two different trading concepts: Mean-reversion and momentum trading.

The older and hopefully wiser I get the more I believe mean-reversion trading is how you extract
additional return. For those not familiar with mean reversion its a theory suggesting that prices and
returns eventually move back towards the mean or average. The concept of course being that you buy
what everyone sells and vice versa. The risk is that you often need to fight the consensus and the
overall trend.

This is why I generally use momentum trading only when volatility or risk-off is rising in magnitude.
So, essentially, in low volatility, I am a mean-reversion trader, and in medium to high volatility, I am
a momentum trader. Again, for those not familiar with momentum trading, I focus on instruments that
are moving significantly in one direction on high volume

What would you say is your main characteristic as a trader? What defines you?
Grey hair and experience. I have been through ERM crisis 1992, Mexico crisis 1993/94, Russia
devaluation 1997/98, NASDAQ bubble 2000, the recent crisis, known as subprime crisis. Many
traders today have never seen a bear market as they grew up under Greenspan and Bernanke,
probably the two worst Federal Reserve Chairmen in modern history, who both firmly believed you
can print money forever at no cost.

Otherwise I am extremely risk-averse on my P&L - I simply hate losing money. I do everything to
control the losses, my modus operandi, to reflect preservation of capital, being the key component in
my trading.

I think few people realise that if you lose 10 USD on 100 USD - you have lost 10%, but getting
from 90 to 100 again, it requires 11.1% profit, which is to show that keeping money is more
important than risking it.

What would you say is the most important characteristic a trader should have, in order to
succeed in the markets, and why?
Discipline, discipline and discipline; followed by being unbiased. The best traders do not care if the
market goes up or down - neither do they take the market personally, they trade, they lose and respect
it as part of being a trader. That part is not easy. You will often see among traders some referring to

markets as if it was a person. Those traders take the market personally and its not good.

Can you explain what are the rules, if any, for your trading?
Never invest more than 1% of your capital in any one trade - if possible use averaging - timing is
impossible, hence, split your final position up into three or four portions and do this little by little.
Always have a stop loss before you enter a position. Never get married to a position. Generally
respect the market, but always be willing to look out for when reality and consensus is too far
apart.

How is your typical day? What do you do from the moment you wake up until you go to bed?
Read, read and read some more. I wake up at 05:30, check my emails, positions and news. Then I have
breakfast with family and I start work no later than 08:00. I work typically to 18:00 with charts, news,
analysis, writing, investment meetings. 18:00 - 21:00 I am with family then I watch the close of the US
market until 22:15. Then it is bed and then start over again.

How many trades would you say you do a week and what is the ratio of good trades to bad
trades?
I do two to three trades a day with an average win /loss of 55:45 - but remember winning is about how
much you win, when you win, and how little you lose, when you lose!

Do you have an expectation of gains per trade in relation to your stop?
Not really - I risk 1% and expect nothing.

How much money do you put at risk in each trade, and is this part of your money management
rules?
As I said 1% maximum, sometimes, mostly in commodities, only 0.25%, that way I know even if I am
wrong on all my trades today the maximum loss will be inside 3-5% for the day. I have another day
tomorrow, the market will always be there and if you lose all your money, you cant play. Trading
with no money management will lead to being bankrupt. Its called the Speculators Dilemma.

Do you use technical analysis or fundamental analysis? What do you look for in particular, if
anything?
Yes, I use both - I use technical analysis as a filter, as I trade both mean-reversion and momentum. I
firstly look for the general status of the market: Is it risky or not? Is it low or high volatility? If low
volatility I look for cheap risk plays, something everyone has sold, but where both fundamentals
and technical are slowly changing back to normal.

With momentum I look for strength of trend, and for confirmed breakouts, as so many people like to
trade on new highs or new lows, I find it useful to wait for confirmations before I enter trades.

If you use more than one technique, are they somehow related?
I use Bollinger bands for mean-reversion combined with divergence in either RSI, ROC and MACD ...
and for momentum, I use Donchian Channels.

Do you use historical data in order to make decisions?
Yes and no. I use historical data for getting a sense of relative price and history, but not for actual
trading. I need both a fundamental and technical history to do trades.


Taking into consideration that there are cycles in the economy; can we learn from the past?
Yes, I do not believe per se in cycles, but 70% of the market does. Cycles are human pattern
recognition, so you need to know them and where they are. Its a paradox that technical trading and
pattern only works because people believe they work - there are no fundamental reasons for it, but as
a trader, you need to ignore facts and deal in the false reality of the perceived traders concepts, like
patterns and cycles.

Define what it is to have a feeling of the markets?
Sometimes you know what news changes the market - you are winning on 80% of your trades against
a normal 50/50 or 60/40, everything you do makes money, but a long time in trading has taught me
this: In mathematical terms a trend is merely a cluster of data - ie. sometimes it is random and data
points in your favour, but they will (and I know this to be true from 25 years of trading) be replaced
by periods of under performance unless you have risk control and money management stopping you
out.

Do you believe experience can help predicting market moves?
No, but I think experience can help you interpret live events and its impact faster. Right now no
one thinks the stock market can fall as central banks are printing money - of course its a totally
wrong premise, but the gray haired people, like me, remember the 1970s where inflation, big
government and high rates made life difficult for stocks and for business.

Are you a contrarian in the market or do you prefer to follow the crowd?
I hate being in the crowd, Im a complete contrarian - the most money is made by being in opposition
to the crowd.

Can you tell me what must happen in order for you to open a long position and do you use the
same parameters to open a short position?
Yes, the same parameters. The mean reversion of the price needs to be at 90% quartile or 10% with
divergence or trend change emerging. High volume is additional confirmation.

In momentum, a confirmed break of a recent high is necessarily combined with relative nonexcessive RSI and ROC.

What should happen in order for you to close a long position and what must happen to close a
short position?
Lose 1% of capital or fundamentals change before that. Most of the time what happens first is the loss
of 1%.

Is it the same to trade long and short positions?
No difference.

Do you pyramid your positions? Do you do it when they are winning positions or do you do it
also with losing positions?
No and yes - I like to average into a position but never for more than 1% of my assets under
management.

If you consider markets have changed through the years, have you also changed your trading
style?
I have tried all styles: Models, swing trades, fundamental, technical, everything as I told you before.
Now I prefer to stay with few very simple rules. Trading is not about how you take positions but how
you get out of them. In other words - money management is far more important for your return than
how you trade. That is at least my experience.

Would you say the markets are always right?
No, thats nonsense; markets are always squared, but constantly changing their equilibrium price.

What would you say is the error that you tend to repeat more often?
I am not unbiased enough - too emotionally attached. From talking to people, I believe this is also the most
common problem. Investors tend to be emotionally attached, and I have the same problem and could not yet
get rid of it.

When have you had more success trading and what would you say were the causes for that
success?
Being unbiased, disciplined and unemotional, how a true Viking should be.

When have you had more regrets trading and what do you feel were the causes?
Over trading, being biased, confused and nervous. I hate to recognise but I am human even if I have
been fighting all these causes of regret.

Are you a believer in diversifying and what is the scale of your diversification?
Yes, I believe in the concept of an all weather portfolio. A portfolio which can withstand most big
waves and cycles of the market. I use 70% of my assets under management to invest in that. Then I use
30% for Alpha-trading - directional risk.

Why do you think there are so many losers in the markets?
Simple - over trading.

Do you think a newcomer in the markets can be successful?
Yes, randomly, but not over time.

How long will someone need in order to be successful in the markets? Do you have any advice for
new investors?
Minimum 10 years - recent academic studies have shown that to master anything you need to invest
10.000 hours or ten years. Trading is harder than golf, brain surgery or anything else because it
involves the most volatile changing component, the human mind, which is far from rational.

How do you merge your personal life with trading? Does trading have any effect on your
personal life?
In the sense that I have lived from it since I was 18 years old, absolutely; I am sad to say I am a better
person when I make money, than when I dont. (smiling).

Do you have a dream? If so, do you think you will fulfil this dream?
I have had money dreams - my trading dream is to be perfectly unbiased, disciplined and

unemotional, but Im afraid I am far from that.

Anything else you would like to say?
Trading is a calling - I would not recommend it to anybody. It means thinking about the market 24
hours a day, and it probably makes you less of a good person - but mastering or trying to master
trading is also the ultimate challenge. Forget doing a Triathlon or climbing Mount Everest - the
market will punish you instantly, every day, every hour, every minute when you make mistakes, and
sometimes even disillusion you, but when it works its sheer joy.

JASON WANGKE


Jason Wangke is a successful, self-made man, and a very big player in stock markets, trading for his
own account. He considers himself a value investor, who follows the criteria of Warren Buffet in
every investment he makes.

Among the people being interviewed, it was important to have someone from the rising power,
China, which is where we now have the largest concentration of money, the biggest increase of new
millionaires and billionaires, along with a new way of looking at trading and investment. Jason
Wangke, 37, is from China, a tycoon, and has been a successful market investor for the past seven
years.

We went to interview him and asked him to tell us a little bit about his life:
When I was in my last year at the University, I started my first high-tech company called Syntech
in Beijing. This was a company making high definition projectors for home use. The business was
sold to a public company in China two years later. I went back to my home town to start a new
business with a German company in traffic surveillance products. When the business went on
smoothly, I hired and employed a professional manager to run the company. That allowed me to start
investing in land and real estate development projects in China because I saw there was a good
opportunity.

A few years later, the German partner acquired my second technology company, the traffic business,
from me. Being lucky to have sold my first two companies, which had proved to be two very
successful businesses, and most of my real estate, I moved with my family to Singapore and decided
to live there. It is in Singapore that I was finally able to dedicate all of my time to the stock market,
building my portfolio, looking for good value stocks in worldwide financial markets. My life is now
spent investing in stocks.


How did you start in the markets? At what age?
It was only after I made money from selling my business, and I started investing in real estate that I
felt I had enough money to start investing in stock markets. I started investing in the stock market at
the age of 30.

Do you feel the markets have changed since you started and, if yes, how?
I had been following the markets for about 10 years before I started putting real money in stock
markets. From my observation, that has been more intense in the past seven years, there are of course
lots of new products and new trends in financial markets, but fundamentally, it does not change too
much. People always get over optimistic and over pessimistic from time to time.

From your career in trading have you always been a winner or have you had bad periods?
I never think I TRADE in stocks, because I only invest in the markets, I have therefore different
views from traders. When I buy into a company on an exchange, I spend most of my time and capital
investing in a business that I can understand and that business must be attractive to me and must be
selling below its intrinsic value. I only want to pay less than 50 cents for every dollar of stock value.
There are of course times where I make mistakes. Times when the stocks turn out not to be worth 50
cents on the dollar, but most of the time I get a good return.

What did you have to do in order to become a winner? Was there anything in particular you had
to change?
The most important thing I have learned while investing is to never overpay for a stock. I never look
at stock as a piece of paper. A ticker on the exchange to me is always a real business and I always try
to buy stocks with a certain margin of safety. That means it must sell much below its intrinsic value.
I think and believe that I still need to make continued efforts to improve my experience and skill in
identifying the intrinsic value of business behind stocks, but that effort is something that I make every
day in order to be a better investor.

What markets do you trade and what markets have you traded in your career?
I only invest in stocks, nothing else. The markets I follow are: Hong Kong, US and European markets.
I like to invest in countries with mature legal systems so that the shareholder s rights can be protected.
The rule of law and protections of investors is very important to me. With that said, I particularly like
to invest in markets where people are pessimistic. I will be greedy when others are fearful and I tend
to be fearful when others are greedy. I made a lot of money from investing in real estate projects
when land cost in China was cheap, years ago, and a lot of people were fearful to buy. I sold most of
my residential projects when everybody became enthusiastic. I apply the same principals in the stock
market.

Do you think you will change markets in the future or believe you will keep trading in the same
ones?
No, I do not think I will ever invest in other instruments. To me nothing changes, in the future I will
still invest in business that I understand and they must sell below their intrinsic value.

What is the methodology you use to trade? Are you active in your trading? Are you considered
a short term or long-term trader?
I am a value investor. I buy a stock when it is significantly below its intrinsic value, I will sell it when it

is close to its intrinsic value. I can be considered a short-term investor if I hold the stock for a few
months or can be long term if I need to hold the stock for a few years. Obviously, these considerations
cannot be applied to traders who see things with a much shorter time frame. Based on fundamentals
short term takes always months.

What would you say is your main characteristic as a trader? What defines you?
I have never been a trader. Could never do it, it feels like gambling to me. I invest in stocks and I act
as if I were buying the business; the only difference is that I am not running the business myself.

What would you say is the most important characteristic a trader should have, and why, in
order to succeed in the markets?
I do not know how to be a successful trader. To be a good investor you need to spend lots of time
reading annual reports and understanding the fundamentals of the business. At the same time, you
need to have the right attitude towards the volatility of the stock prices.

Can you explain what the rules are, if any, for your trading?
Rule #1: never lose money.
Rule #2: is to look at rule #1.

What is your typical day like? What do you do from the moment you wake up until you go to
bed?
I get up at about 7am. After breakfast, I take a short walk in the garden. After reading Wall Street
Journal for about 20 minutes, I start reading financial reports. After lunch, I take a nap and swim or do
some exercises in the gym for half an hour, then read financial reports. After dinner, I take a walk in the
garden and then spend a few minutes looking at markets, set prices for a few stocks that I want to buy
and sell, then I read financial reports. I go to bed at about 11pm. Whenever I see something unclear in
financial reports I will make conference calls to companies to find out details.

How many trades would you say you do a week and what is the ratio of good trades to bad
trades?
I like to buy lots of stock when the stock price is low. I will stop buying or sell when the stock price
goes up. I do not buy and sell like an ordinary trader. If I spot a good company, I buy and keep buying.
If I sell, its because I want to get out.

Do you have an expectation of gains per trade in relation to your stop?
I will buy stocks when they are significantly below their intrinsic value. I normally stop buying when
the stock price goes up above a level that I do not consider interesting.

How much money do you put at risk in each trade, and is this part of your money management
rules?
I try to avoid risks in investing. I do not care about the daily change of the stock prices but I try to
avoid permanent capital losses. The amount I invest depends on the company and the investment I
want to make.

Do you use technical analysis? Or fundamental analysis? What do you look for in particular, if
anything?
I do not know anything about technical analysis; I only care about the fundamental of the companies

that I invest. I look for good assets, good cash flow, good management, good franchise etc.

If you use more than one technique, are they related somehow?
I do not use any other technique in investing.

Do you use historical data in order to make decisions?
Yes, I like to read historical data as much as I can and for as long as possible.

Taking into consideration that there are cycles in the economy; can we learn from the past?
History tell us that there were ups and downs in economic cycles, but in the end people will still eat,
work and have better lives. The unseen hand of capitalism will always adjust itself. In my opinion, the
world economy will always grow stronger after big recessions.

Define what it is to have a feeling of the markets?
I do not have much feeling of the markets. Normally I will find more cheap stocks when others feel bad
and I will feel disappointed when others feel good.

Do you believe experience can help predict market moves?
I do not believe anyone can predict short time moves. In the long term, it will always go up in free
capitalism markets.

Are you a contrarian in the market or do you prefer to follow the crowd?
I am a contrarian and prefer not to follow crowds.

Could you tell me what must happen in order for you to open a long position and do you use the
same parameters to open a short position?
I never open a short position. I invest in a stock when I think it is significantly below its intrinsic
value.

And what should happen in order for you to close a long position?
I sell a stock when it goes up to its intrinsic value or the fundamentals of the company turn out to be
worse than expected.

Is it the same to trade long and short positions?
I never have short positions, because I am only investing my own money and because of my
philosophy, I do not care about volatility of my portfolio. If I was investing other peoples money, I
would probably have to consider selling short to hedge performance. However, I do not believe in
selling short, because using my methodology, even if the share price of a company is overpriced it
is difficult for me to estimate when the rest of the people will realize that. I can recognize when a
stock is wrongly priced but I never know when it is going to be readjusted.

Do you pyramid your positions? Do you do it when they are winning positions or do you do it
also with losing positions?
If I buy a company, lets say at ten, and it falls to five, I will spend more time analysing the company.
Only if I am sure that my initial analysis of the company is right and fundamentals of the company are
not deteriorating will I buy more stock to pyramid.

If you consider markets have changed through the years, have you changed your trading style?
I do not change my investment style.

Would you say the markets are always right?
I would say markets are wrong most of the time, but they will be right from time to time.

What would you say is the error you tend to repeat more often?
Very often, I buy too early when the share price has not yet reached bottom and sell too soon, when
the share price keeps going up. But I believe this is something that cannot be avoided.

When have you had more success trading and what would you say were the causes for that
success?
Because I always try to buy at a bargain price, a mediocre sell may also make good profit.

When have you had more regrets trading and what do you feel were the causes?
Most of the time I have had regrets on my investments because I did not understand enough about the
fundamentals of the business behind the stocks.

Are you a believer in diversifying and what is the scale of your diversification?
I am a believer in concentration not diversification, but I need some diversification because I know
that I will make mistakes from time to time.

Why do you think there are so many losers in the markets?
Most of the losers do not do enough fundamental research, in my opinion, and lack patience in the
stock market. Most of the time they take the stock market as if it were a casino, for quick profits.

Do you think a newcomer in the markets can be successful?
Yes. If he has the right knowledge and attitude, a newcomer can also be successful, and he can become
even more successful the more he practices.

How long will someone need in order to be successful in the markets? Do you have any advice for
new investors?
I do not believe that anyone can be rich overnight in the stock market. Even the greatest investors in
the world can get no more than 30% annual returns over long term.
If you are patient enough, the magic power of compounding will make you more and more
successful. If one wants to invest in stocks, he must read the book Intelligent Investor by Benjamin
Graham 10 times before starting any real investing. I would also recommend reading letters by
Warren Buffett as much as possible.

How do you merge your personal life with trading? Does trading have any effect on your
personal life?
Investment is now the most important part of my life, I really enjoy it and so it does not collide with
my personal life.

Do you have a dream? If yes, do you think you will fulfil this dream?
I have fulfilled most dreams that I had when I was a child. Now I only want to go step by step to make
my investments more and more successful which to me is like improving a painting to try to make it

more and more beautiful.

Is there anything else you would like to say?
The only thing I want to add is that even though I started my business career with high-tech, I find
high-tech businesses highly competitive and very challenging to be analysed. When I invest in stocks I
try to avoid high-tech companies, because even if I can understand the business I still have great
difficulty imagining what these business and products will look like 10 years from now. That is the
part that I find very difficult for me to calculate; how much these businesses can generate in free cash
flow for shareholders in the long run. That is what makes it very difficult for me to calculate the
intrinsic value of these companies, and that is why I avoid technology although I started in
technology.

HLIO OLIVEIRA


Hlio Oliveira is 55 years old and was born in Rio de Janeiro, Brazil. He has been trading the
financial markets with his own money for 28 years. He started trading in order to become financially
independent at an early age. This was the main motive for starting trading. Then he realized that
money is great but the intellectual challenge is what keeps him going, the money is just the end
product.

That is the moment when he said that trading is for him. In his own words, It was like an epiphany
because it made me change considerably in terms of the psychic income. It is one thing to trade
because of the money, but another thing is having an intellectual challenge with the market. I would
like to emphasize that having an intellectual challenge is not an ego exercise where you have to be a
winner all the time. An intellectual challenge is your internal dialogue; it is what you are telling
yourself.


How did you start in the markets? At what age?
I started in the markets, specifically in equities, in 1985, mainly Portuguese equities at Lisbon Stock
Exchange (at the time considered an emerging market), and some fixed income instruments. I
immediately had an incredible willingness and commitment to study everything about markets. I
wanted to figure out what works. I wanted to forecast price levels correctly in the markets, but the
truth is in those days everybody was a genius in this market up until 1987.

Do you feel the markets have changed since you started and if yes how?
Markets never change. Only people and the methods used to manipulate the markets change. Jesse
Livermore once said, Wall Street never changes. The pockets change, the suckers change, the stocks
change, but Wall Street never changes, because human nature never changes.

From your career in trading have you always been a winner or did you have bad periods?
Summing it all up, I can say that I have had as many bad periods as winning ones. Just as any (real)
trader in the world, I believe. In the process over 28 years, I was able to make three fortunes and
destroy two of them.

What did you have to do in order to become a winner? Was there anything in particular you had
to change?
No one is able to be a consistent winner in financial markets. And this is not only a mathematical
certainty but also a statistical proof, and it is verifiable. If you win big and do not leave, you will lose
all your money and give it back to the market. Trading for a living is a very difficult endeavour with
low probability of being achievable in day trading. The main reason is because you have to anticipate
an entry into a trade, not react, and then you need to give the trade some initial room to work. Day
trading has always been difficult but now with high frequency trading its a road to disaster.

What markets do you trade in and what markets have you traded in, in your career?
I have traded all financial instruments from bonds to commodities, currencies (or forex), equities,
interest rates, even exotics.
Nowadays, I trade forex markets (spot), options and futures. To be an equity trader I would have to be
a stock picker to try to pick what is going to outperform the rest of the market. With futures, it is
easier for me to apply technicals. I am usually at my desk at six in the morning so I can see the close
of the Japanese market. I start early because I deal now with the currency market. A trader in
currencies needs to make a conscious effort to start following his market a good hour or two before
it opens. The European market starts at 8:00am. If I am going to trade the SP, I also start one hour or
two before the New York market opens.

Do you think you will change markets in the future or believe you will keep trading the same
ones?
I deeply believe that I will leave trading altogether one day. But if I am not able to leave markets, I
will keep trading in the same ones.

What is the methodology you use to trade? Are you active in your trading? Are you considered
a short term or long-term trader?
I use mainly price action in direct correlation to the DOM (Depth of Market) and book order for very
short term trading, as it implies. I do not use indicators to make my trading decisions and I do not have

automated systems. No automated system could replace my discretionary trading. My biggest problem is
with data because I am paying for real time feed when, in fact, many others have a better feed and more
real than the one I have. In order for you to understand, Basic market data is known as level 1 market
data. It includes Bid price: The highest price that a trader is willing to pay to buy.

Bid size: The number of contracts that are available at the bid price
Ask price: The lowest price that a trader is willing to accept to sell
Ask size: The number of contracts that are available at the ask price
Last price: The price at which the most recent trade was completed
Last size: The number of contracts that were traded in the last trade.

Level 2 market data provides the additional information that is needed to trade if you follow the order flow.
That is why Level 2 market data is also known as the order book, because it shows the orders that are
currently pending for the market, and is also known as the depth of market, because it shows the number of
contracts that are available at each of the available prices. The reality is that what you see is not true or
better said it can change before you see it.

What would you say is your main characteristic as a trader? What defines you?
My main characteristic as a trader is fearlessness. Fear is a psychological barrier for most traders.
The ability to overcome natural emotions is a very difficult aspect of trading, as you probably know.
The fear of losing, when the market goes against you and the fear of greed, when you have the market
going your way.

What would you say are the most important characteristics a trader should have, and why, in
order to succeed in the markets?
A trader has to be lucky, extremely lucky, and fearless. For that he needs to have discipline and be
unemotional, otherwise he becomes superstitious. Being a day trader is all about being a player as
opposed to being merely a trader. Its not just science, there is also luck involved. For someone who
is day trading its really hard to be focused for many hours without going through mood swings. You
have to be positive in order to be lucky.

Can you explain what are the rules, if any, for your trading?
There is an interesting saying from the floor that goes as follows: There are 3 rules in trading: The
first is always follow the rules, the second always follow rule number 1, the third always follow
rules number 1 and 2 and the fourth one is sometimes break rules 1, 2 and 3.
I think this answers the question. No strategy or system will work forever. We have to adapt to market
conditions and make the necessary adjustments, but the most important thing is money management. I
do not have a sophisticated money management system but I adjust to the markets when volatility is
surging.

How is your typical day? What do you do from the moment you wake up until you go to bed?
This is a typical question for institutional desk traders, not for independent retail traders like myself.
Because the first ones have a wage, they have an employer, they have a timetable, they have to follow
many precise schedules during the day. But at the end of the month, whatever the end results are, they
will receive a salary.
An independent retail trader does not have a wage; he depends completely on his results. You cannot
have a typical day, but as I said, I try to be at my desk at 6 am. At 10:30 I go to the gym to do exercise,

have a massage and a sauna. After that, I sit down at my desk for about an hour before the US market
opens and see how Europe has been trading. Then I trade, sometimes for an hour sometimes four
hours. It depends on the mood and on the gains or losses that I am making. I will always come back to
my desk after a while to just see the market passing by in bars of 1 minute, as an exercise to relax and
at the same time to sharpen my knowledge of the price action.

How many trades would you say you do a week? What is the ratio of good trades to bad trades?
There have been days when I traded for three days in a row, thousands of contracts, no matter what
markets. Because when you are making money, you instantly try to make more! And there are times
when I just trade one contract a day, for the same reason as above, just the other way around, because
I need to be in the market I need to be able to know what the market is doing and how he is doing it!
Losing is devastating, but winning is exhilarating. I discourage people from trading if I have
sympathy for them, because not everybody can cope with the painful moments.

Do you have an expectation of gains per trade in relation to your stop?
As a trader, I try to let the profits run, and cut the losses when they become unacceptable. You cannot
play a game of illusions trying to impose ratios of expected return, like 2:1, 3:1, in day trading
because the trader only has control over the amount of money that he is capable of losing.

How much money do you put at risk in each trade, and is this part of your money management
rules?
I could answer this question in a politically correct manner, saying I would not risk more than 1%
of my entire account per trade. With such a management rule, I would be able to stay for longer in the
market and the strike of losses would not affect my ability to return to the market.

Unfortunately, it could take a long time to show how silly most money management rules are
when applied to trading in financial markets. Most of the trading public is now aware that the
majority of writers of trading books have not placed a real trade in their lives. How could they
elaborate a set of rules and methodologies concerning trading financial markets? Risk
models?! Please As a day trader, I lose what I can afford to lose but I believe in myself and
in my abilities. I have always had that attitude about myself and that is my money management
system.

Big banks have teams of mathematicians to develop different risk models to try to limit their losses,
but we all know the result of that. For individuals the principle is very simple: control the leverage of
your portfolio. There is a measure called the Kelly formula that is very useful for applying to risk
management. Basically, what it says is that if you lose money, you need to cut back the size of your
portfolio.

Do you use technical analysis or fundamental analysis? What do you look for in particular, if
anything?
I knew that this question would come! I started with fundamental analysis and then went to Technical. I
can confidently say that I know everything about technical analysis. I can say that markets can be
predictable at times, however what I do now is a sort of Fusion Analysis and Behaviour Finance! In
order to trade forex it is important to know your fundamentals. In forex markets, you have the central
bankers telling the world what they plan to do. For example, the Swiss National Bank has made it
clear that they want a weaker currency and they have acted on that by selling Swiss Francs. Now we

have the prime minister of Japan saying the same about the yen and he is going to choose a Central
Banker that will be able to apply his requested policy.
To answer your question specifically, I use price action directly correlated to DOM and the book
order. I have done all the courses and learned all the methods or techniques to make money from the
market on a consistent basis. Some of those courses cost a lot of money and some were almost free,
but in the end, price action continues to be, for me, the most accurate method.

If you use more than one technique, are they somehow related?
I use only price action, directly correlated to DOM and the book order. The only realities of the
market are price and volume for the retail trader. Anything that goes behind that is a waste of time,
unless someone has inside information, which, truth be told, is the most valuable and profitable
information someone can have. Unfortunately, it is not available to the independent retail investor.

Any retail investor should ask himself; what services are available to provide such information
to support his daily decisions. Why are charts widely spread and today even free of charge for the
retail investor? This question should open the investor s eyes. Today most of the fundamental
information about companies and trading platforms is free of charge. However to have access to
real time information traders have to pay exchange fees. Traders should think about that. Being
able to read the order book and tape is, or was, extremely powerful. The tape could show me
clues on short term market direction, supply vs demand at key levels.

The order book could show me interest vs no interest, confidence, support and resistance, etc... at
specific price levels. I like to watch the strength at each level combined with the orders that come
across the tape. Unfortunately as I said above this is not happening in real time for independent
traders that pay for the real time feed.

Do you use historical data in order to make decisions?
Historical data is probably one of the main reasons, if not the most important one, why technical
traders lose money in the markets. It gives the illusion that a strategy or set-up was able to produce
considerable profits under all kinds of past historical conditions, and that those profits will be
obtainable in the future, based on the same assumptions.

People forget that the random Walk Theory in 1950 and 1960 was also very popular as the efficient
market hypothesis in theorizing that market prices are unpredictable. Historical data induces the idea
that now prices are predictable. The difference is that in those theories the conclusion was that you
cannot systematically generate profitability, while with historical data it produces the illusion that you
are able, with a correct strategy, to produce results.

With that said, I do not use historical data. I only use intraday data.

Taking into consideration that there are cycles in the economy can we learn from the past?
Kondratiev believed in cycles. Unfortunately, he is dead now!

The expansion and contraction waves of the economic business cycle have been killed by a
person named Keynes (in theory) and then by most of the Western Governments since 1935 (in
practice), creating what we can now coin the government economic cycle, which is
comprised of only one wave, the expansion one, even if really small. Many investors and

traders move their money from cyclical stocks to non-cyclical ones depending on where the
economy is in the growth rate cycle. The importance of knowing the difference between
cyclical stocks and defensive stocks used to be important to the investors. Maybe it still is, but
I doubt it, with the new trend of rotating stocks or industries.

Define what it is to have a feeling of the markets.
I cannot define what I have never felt. I try to trade based on the only two realities available to the
retail trader: price and volume. Taking that into consideration, I try to predict if the market is going
up or down in the few minutes that follow. So, there is no room for feelings or opinions.

Do you believe experience can help predict market moves?
No, I do not. Experience based on the screen time, even if years, only gives you knowledge of what
worked in the past. Experience in the markets only gives you the opportunity of being a witness,
except he who takes advantage of what works. Only knowledge can help you predict market moves.
Personally, what makes me successful is that I have a lot of doubts, and even if I am confident of my
knowledge, I also worry about things. I dont take anything for granted; I know what can go wrong.

Are you a contrarian in the market or do you prefer to follow the crowd?
I follow the book order and the DOM. There is no such thing as a contrarian or a crowd follower in
day trading. This is a propagated idea, but untrue in my view. Is the contrarian a trend follower upside
down? If yes, probably the trend follower is a contrarian upside down. That is Quantum Physics.

Could you tell what must happen in order for you to open a long position? Do you use the same
parameters to open a short position?
The analysis of the order flow shown in the DOM and in the order book is a subject that cannot be
explained in a few lines. Nevertheless, briefly, I can say that a large number of orders sitting on the
bid (for short positions) or on the offer side (for long ones) that get filled in a certain given time will
trigger my decision.

And what should happen in order for you to close a long position and what must happen to close
a short position?
Same answer as in the previous question.

Is it the same to trade long and short positions?
In regard to the order flow, it is the same.

Do you pyramid your positions? Do you do it when they are winning positions or do you do it
also with losing positions?
Yes, in both situations. If the order flow, analysis supports the decision.

If you consider markets have changed through the years, have you changed also your trading
style?
Markets have never changed but I have changed, according to Jesse Livermore! My name is my
reputation and I am only as good as my last trade. That alone is enough to change you. I trade for a
living, nobody criticizes me, but if you dont do it yourself, your self-worth is going to be measured
with nothing. I believe I am much funnier than I used to be because I dont take a lot of things
seriously.


Would you say the markets are always right?
Absolutely! Mainly for the inside traders! (laughing).

What would you say is the error you tend to repeat more often?
My biggest mistake is to enrol in another seminar each time I see one that looks interesting and to buy
another book regarding the market for the same reason.

When have you had more success trading and what would you say were the causes for that
success?
The years I have had more success were 1984-86, 1993-94, 2002 and 2008. The cause for my success
has been luck.

When have you had more regrets trading and what do you feel were the causes?
When I decided to be a trend follower and a value investor, basing my trading decisions on sound
money management and trading analysis based on fundamentals and strength of the trend.
A total disaster.

Are you a believer in diversifying and what is the scale of your diversification?
I am a believer in putting all of my eggs in one basket. Latest studies on capital allocation show that
diversification does not affect the ratio of returns when compared to a single allocation if both face a
sudden market movement.
Because the market moves in tandem, most of the correlations that used to work in the past are no
longer effective. In those days, you could witness several times a year, US dollar, gold, equity market
and oil going up all at the same time. So, diversification by itself is not a solution for a consistent
return.

Why do you think there are so many losers in the markets?
There are many losers in the market because the information or edge that benefits the winners is not
available to the majority of investors and traders.

Do you think a newcomer in the markets can be successful?
If he is lucky, yes!

How long will someone need in order to be successful in the markets? Do you have any advice for
new investors?
It depends on what a person considers success in the markets and for how long. In 28 years in the
market, I have met many very successful traders. Some of them were very well known names in the
world of trading. Most of them were off the floor traders, and a few were legendary pit traders.
Unfortunately, I also know the other side of the story, their unsuccessful times. Most of them are out
of the business now. Selling books and doing seminars, or just in the confinement of their retirement
wages, or as landlords.

From people who have been able to make a killing in the market in just one year, from 200.000 US
dollars to 100 million and kept the money because they never came back to trade again, to value
investors who took decades to amass a considerable fortune holding portfolios of private companies;
time has not been a factor directly correlated to a success ratio in financial markets trading activities.


How do you merge your personal life with trading? Does trading have any effect on your
personal life?
When we are in a winning streak life is unbelievably good. You travel around the world, you drive
fast cars and you have no limitations. It is exactly the same the other way around; when you are in a
losing streak, you feel like you have no floor underneath you. So, I suppose that, absolutely, trading
affects my personal life.

Do you have a dream? If so, do you think you will fulfil this dream?
No, I do not have a dream. I am a trader. Traders do not have dreams. They know too much about
reality.

Is there anything else you would like to say?
I urge everyone to read Nicholas Talebs The Black Swan and Fooled by Randomness.

GLOSSARY


Arbitrage To arbitrage is to undertake a trade with little risk, by simultaneously buying and selling
different forms of the same risk.
Bear Market Describes a period of falling securities prices and sometimes, more specifically, as a
market where prices have fallen 20% or more from the most recent high. A bear market in bonds is
usually the result of rising interest rates, which prompts investors to sell off older bonds paying
lower rates.
Bretton Woods The location of the meeting in 1944 between Britain, USA and Canada at which the
IMF (International Monetary Fund) and the World Bank were established.
Bond Bonds are debt securities issued by corporations and governments. Bonds are loans that
investors make to the issuers in return for the promise of being paid interest. Because most bonds pay
interest on a regular basis, they are also described as fixed-income investments.
Bottom Lowest price reached during a market cycle.
Breakout When stocks price breaks out of its limits (support and resistance), and jumps or tumbles
suddenly its called a breakout. Usually the breakout is fuelled by a particular event.
Broker A broker acts as an agent or intermediary for a buyer and a seller. A stockbroker works for
a brokerage firm, and handles client orders to buy or sell. A broker-dealer (B/D) is entitle to buy and
sell securities for its clients accounts like a broker but may also act as principal, or dealer, trading
securities for its own inventory.
Bull market A prolonged period when stock prices as a whole are moving upward.
Business cycle All countries in the world regularly swing between periods of prosperity (booms)
and periods of economic slackness (recessions). The causes of business cycle are complex and hotly
debated. These cycles influence the markets, through their effects on the profits of companies and
investor sentiment.
Capitalisation Is the price of a listed company multiplied by the number of shares issued by the
company.
Cash flow - Cash flow is a measure of changes in a companys cash account during an accounting
period, specifically its cash income minus the cash payments it makes. It is called positive if the
closing balance is higher than the opening balance, otherwise called negative. Cash flow is increased
by (1) selling more goods or services, (2) selling an asset, (3) reducing costs, (4) increasing the
selling price, (5) collecting faster, (6) paying slower, (7) bringing in more equity, or (8) taking a
loan. The level of cash flow is not necessarily a good measure of performance, and vice versa: high
levels of cash flow do not necessarily mean high or even any profit; and high levels of profit do not
automatically translate into high or even positive cash flow.
Central Banks Most countries have a central bank, which issues the country's currency and holds
the reserve deposits of other banks in that country. It also either initiates or carries out the country's
monetary policy, including controlling on the money supply.
Chartist A person that believes that the only data worth studying for the analysis of market prices is
price. Some also look at volume and other market data, and for that reason are also known as
technical analysts. The chartist places most of the emphasis on past price action.
Cycle A full orbital period. In markets its the observation of rhythmic events. Cyclic analysis uses
various seasonal factors as a basis to determine trends and prices.
Compounding When your investment earnings or savings account interest is added to your

principal, forming a larger base on which future earnings may accumulate its called compounding.
Your investment like this grows faster.
Consensus Majority opinion
Contrarian One who go against consensus.
Correction When a price moves against the underlying trend, temporarily
Correlation The degree to which factors influence each other
Demand Quantities that potential buyers would want to purchase. The quantity is usually inversely
related to price.
Crash A sudden, steep drop in stock prices. The two great US crashes of the 20th century, were in
1929 and 1987. The 21st century saw a sequence of crashes in 2008.
Drawdown The reduction in equity value from any given level. Nor the same as loss. Maximum
drawdown from peak to trough is a commonly used measure of historical risk.
Devaluation Is a deliberate decision by a government or central bank to reduce the value of its own
currency in relation to the currencies of other countries.
Discipline Adhering rigidly to a prepared formula of trading rules, making the difference between
successful and unsuccessful traders.
Dow Jones Dow Jones Industrial Average (DJIA), sometimes referred to as the Dow, is the bestknown and most widely followed market indicator in the world. It tracks the performance of 30 blue
chip US stocks.
ECB Is the European Central Bank of the European Monetary Union (EMU), whose member
countries use the euro as their currency. The ECB, which is based in Frankfurt, Germany, issues
currency, sets interest rates, and oversees other aspects of monetary policy for the EMU.
Emerging Markets Countries in the process of building market-based economies.
Equity In the broadest sense, equity means ownership. If you own stock, you have equity in, or own a
portion however small of the company that issued the stock. Having equity is the opposite of
owning a bond which is debt.
Forex short for Foreign exchange
Fractal An object in which the parts are in some way related to the whole; that is the individual
components are self-similar . A never ending pattern.
Futures The purpose of commodity futures markets was to allow producers and users to fix a price
for crops or metals that would not be available for delivery until a later date. After the dollar began to
float in 1971 the main dollar parities were added to the array of commodities, quoted for future
delivery. The currencies were the first financial futures.
Gold Standard a monetary system that measures the relative value of a currency against a specific
amount of gold. By the late 19th century, the gold standard was used throughout the world. The US
was on the gold standard until 1971, when it stopped redeeming its paper currency for gold.
Government bond The term government bond is used to describe the debt securities issued by the
government. The cash raised by the sale of government bonds is used to finance a variety of
government activities
Hedge A strategy designed to minimize risk.
Hedge Funds Are private investment partnerships open to institutions and wealthy individual
investors. Some hedge funds use leverage, which means investing borrowed money to boost returns.
Because of the substantial risks associated with hedge funds, securities laws limit participation to
accredited investors.
Inflation A sustained, rapid increase in prices, as measured by some broad index (such as
Consumer Price Index) over months or years, and mirrored in the correspondingly decreasing
purchasing power of the currency. It has its worst effect on the fixed-wage earners, and is a

disincentive to save. There is no one single, universally accepted cause of inflation but is often
triggered when demand for goods is greater than the available supply or when unemployment is low
and workers can command higher salaries or caused by the expansion in money supply (due to
printing of more money by a government to cover its deficits) called Monetary inflation.
Interest rate An interest rate is the discount that individuals place on the value of future goods
compared to present goods
IMF (International Monetary Fund) Organization created to set up a system of monetary and
currency stability in the post war period, involving exchange rates fixed to the US dollar, which was
in turn fixed to gold at 35 usd per ounce
Intervention The exchange rate is regarded as part of the tools by which an economy can be
influenced. For countries with an independent central bank the value of the currency is managed by
the central bank. The only 2 ways to directly move the value of the currency is by manipulating
interest rates and having a direct market intervention to support the currency by buying or depressing
the currency by selling. Central Banks have become very sophisticated in intervening in the markets.
Index Any index is a good indicator of the combined price movements of a group of shares or
futures.
IPO for Initial Public Offering. The first sale of stock by a privately held company to the public
an initial public offering (IPO)
Leverage A means of enhancing the return or value of an investment without increasing the amount
of your investment by the use of borrowed capital. Options, futures and CFDs are examples of
leverage products.
Liquidity Is measured by the least cost at which one can enter and then close out a position in the
markets.
Logarithmic scale On a graph, comparable percentage changes in the value of an investment, index,
or average appear to be similar. However, the actual underlying change in value may be significantly
different. The graphs in this book from stckcharts.com are logarithmic.
Margin Cash or securities required as a good faith deposit to establish positions in derivative
markets.
Margin Call A call for more margin. When it happens investors are required to either put more
money as collateral or by closing positions.
Momentum trading A momentum investor focuses on stocks that are rising in value on increasing
daily volume. The logic is that when a pattern of growth has been established, it will continue to gain
momentum. Momentum investing is essentially the opposite of contrarian investing.
Monetary Policy A countrys central bank is responsible for its monetary policy. It employs three
major tools: (1) buying or selling national debt, (2) changing credit restrictions, and (3) changing the
interest rates by changing reserve requirements. Monetary policy plays the dominant role in control
of inflation in an economy.
Nasdaq Founded by the National Association of Securities Dealers, the NASDAQ began trading on
February 8, 1971, as the world's first electronic stock market, trading for over 2,500 securities. In
May 2007, NASDAQ announced a transaction to create global exchange and technology company
with Swedish exchange operator, OMX.
New York Stock Exchange The New York Stock Exchange (NYSE is the oldest securities exchange
in the United States and the largest traditional exchange in the world.
Option The right to buy (call option) or sell (put option) without the obligation to do either. The
greater the volatility of prices the greater the value of the option. When one buys an option the cost is
the extent of the possible loss.
Online Trading To trade online, you use a computer and an Internet connection to place buy and

sell orders with an online brokerage firm. While the orders can be executed immediately while the
markets are open, there is also the option of placing orders at your convenience, outside of normal
trading hours.
Overtrading Can be used when trading too often or too big.
Pension Funds Pooled-contributions from pension plans set up by employers, unions, or other
organizations to provide for the employees' or members' retirement benefits. Pension funds are the
largest investment blocks in most countries and dominate the stock markets where they invest. When
managed by professional fund managers, they constitute the institutional investor category with
insurance companies and investment trusts.
Point and Figure Chart A chart constructed to detail a continuously flow of price activity without
regard to time. Plotting direction is determined by a preset number of price changes in sequential
order.
Quantum Fund Amazingly successful leveraged fund created by Jim Rogers and George Soros in
the 1969 investing in currencies, financial futures and major commodities and it grew to 3 billion in
1990 mainly by performance a 500 fold from inception.
Quantitative Easing The process of increasing the money supply, typically only seen when interest
rates have already been reduced to zero and when the government is still trying to stop a credit crunch
situation. The first notable usage of quantitative easing was by the Bank of Japan in the early 2000s,
and similar tactics were used again since 2008 by the Federal Reserve to deal with the United States
credit crisis and the European Union with the BCE.
Return Is the profit or loss you have on your investments, including income and change in value.
Return can be expressed as a percentage and is calculated by adding the income and the change in
value and then dividing by the initial principal or investment amount. Percentage return and annual
percentage return allow you to compare the return provided by different investments or investments
you have held for different periods of time.
Risk In Modern Portfolio Theory risk is an expression of the standard deviation of security returns.
Risk is any uncertainty with respect to your investments that has the potential to negatively affect your
financial welfare. The level of risk associated with a particular investment or asset class typically
correlates with the level of return the investment might achieve. You cannot eliminate investment risk.
Short sell Having sold what was not previously held, with the obligation to repurchase. The idea is
to sell at a higher price and buy back lower at a profit. The opposite is being Long
Shares Ordinary shares are the equity capital of company. These are the shares usually traded
on the Stock Exchange, and which receive normal dividends from profits. In Company shares a
distinction exists between stocks and shares which although largely technical must be
understood. A company must first issue capital as shares. Each share is a capital unit carrying the
same rights and responsibilities as all other shares of the same class, although there may be different
classes of shares. Unless shares are fully paid they cannot be converted into stock. Stock can be issued
in units of any size, so stock is usually issued in a specific quantity (eg. 1 usd or euro).
Speculator One who attempts to gain from anticipated change in prices of commodities or
financial instruments. Speculators aim primarily at quick profit from a short-term acquisition of
assets. When someone makes a financial commitment because he believes something will happen in
the market where he is trading that will provide a profit, he is acting as a speculator.
S&P 500 The benchmark Standard & Poor s 500 Index, widely referred to as the S&P 500, tracks
the performance of 500 widely held large-cap US stocks in the industrial, transportation, utility, and
financial sectors.
Spread The difference in a price quotation between the bid, the price at which a dealer is prepared
to buy, and the ask, the price at which a dealer will sell.

Stop Order An order, which instructs your broker to buy or sell a security once it trades at a
certain price, called the stop price. Stop orders are entered below the current price if you are selling
and above the current price if you are buying.
Swap Exchange of one type of asset, cash flow, investment, liability, or payment for another.
Common types of swap include: (1) Currency swap: simultaneous buying and selling of a
currency to convert debt principal from the lender's currency to the debtor's currency. (2) Debt
swap: exchange of a loan (usually to a third world country) between banks. (3) Debt to equity
swap: exchange of a foreign debt (usually to a Third World country) for a stake in the debtor
country's national enterprises (such as power or water utilities). (4) Debt to debt swap: exchange
of an existing liability into a new loan, usually with an extended payback period. (5) Interest rate
swap: exchange of periodic interest payments between two parties (called counter parties) as
means of exchanging future cash flows.
Technical Analysis Technical analysts track price movements and trading volumes in various
securities to identify patterns in the price behaviour of particular stocks or commodities. The goal is
to predict, often short-term, price changes in the investments that they study, which allows them to
choose an appropriate trading strategy.
Treasury bill Treasury bills known as T-bill are the shortest-term government debt securities. They
are issued with a maturity date of 4, 13, or 26 weeks. The 13- and 26-week bills are sold weekly by
competitive auction to institutional investors.
Valuation Valuation is the process of estimating the value, or worth, of an asset or investment.
Other times, valuation means estimating future worth.
Volatility The term volatility indicates how much and how quickly the value of an investment,
market, or market sector changes. The volatility of a stock relative to the overall market is known as
its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's
alpha.
Volume Volume is the number of shares traded in a company's stock or contracts traded in futures
markets, or in an entire market over a specified period, typically a day. Unusual volume in an
individual stock reflects new information about that stock.