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Interview with Bill Wermine - Part 3
** Trading Mindset ** Q. Equally, profits and losses can have a significant psychological impact on traders. How do you deal with them? They are a part of our business. Try not to get exited about profits or upset about losses. Just accept them and move on to the next trade. Just work your edge like a casino. I give my trade plans to a dealer with risk and profit taking levels. The dealer executes profits or losses and that allows me to be detached from the trading process (For my fund management business) Last year I had more losses than wins but my returns were positive. I have confidence in my method through extensive back testing that my losses are relatively small and manageable so I mentally accept them while profits in some cases are open ended. The secret is to keep losses small. Q. Isabelle, 36 is a mother of two children and stays at home with them during the day. Her husband works full time and his salary meets all their financial obligations comfortably. Isabelle arranges an appointment with you to discuss trading – she has never traded before but knows you can help her get started with some initial guidance. What will be the 3 most important things you tell her in the appointment? What are your trading objectives ? What is your mandate/ risk level - would you be willing to come to my traders club meeting and meet our fellow traders to see what might fit with you ? Q. Jack, 58 is a very successful business owner who wants to start trading as he slowly moves into retirement and away from work. He has arranged a similar appointment to Isabelle – would your advice to him be identical to Isabelle’s or different? Identical as when he meets and networks with fellow traders he can find a method that fits him. Q. Is trading as difficult as many people appear to make it seem? Trading is very simple if you follow a plan and run your venture as a business. Q. What are the 5 most important character traits of successful traders? Please feel free to briefly explain them. Humbleness, acceptance, being a follower, avoid giving opinions of what the market may or may not do. In fact, I listened to an executive of Man Hedge Funds who spoke on CNBC. The interviewer asked him his opinion about the Euro- up or down versus the dollar- He said I have no idea- we follow the market and if our trade doesn’t work we reverse. The executive refused to be drawn into making a forecast, he said our focus is on risk management not forecasting. Q. Trading can be a very solitary existence – especially in the early days when you are learning, and often feel as though you have no idea what you are doing. Do you find trading a lonely experience? Does this sit well with you? If not, how do you deal with the loneliness? I manage funds for an asset management company and run a traders network so loneliness is not a problem. In my early days I was a share broker in a busy office environment so trading has never been a lonely thing for me- my feeling is for me, I work better with like minded individuals- especially with those who can contribute to my knowledge so my advice is to choose well those who you deal and make friends with. Q. What would be or has been your most significant weakness in trading? Have you learned to overcome it or do you continue to work on it? My biggest weakness has been my ego- I have found that having a trading plan and delegating its execution to a dealer is my best way to keep ego out of the process. Q. Assuming you are now consistently profitable, do you still have times when you experience self doubt over your ability to trade? If yes, how does this make you feel and how do you overcome it? I have no doubt in my ability, I am certain of my methods. They have earned me a good living and continue to do so. Q. Ideally, we would like to be emotionless when we trade – we would certainly make more sound trading decisions more often. How do you control your emotions when assessing potential trading opportunities or open positions? Do you get very emotional at times? My plan keeps my emotions out of the process. We are human beings and emotions are part of us so all we can do is control them and a plan created and back tested allows me to be detached from the process and accept what the market gives me or takes from me. I suppose it is like a battle hardened soldier who goes into battle. He has no fear of death. He accepts that he might be blown up but he soldiers on and does his job. Good military training- you were a military man and know more about this than me- mentally programs a soldier to face death without letting emotions get in the way of doing his job which is to kill the enemy. Q. If you experience a large profitable trade, do you reward yourself in any way? No - winning is part of the process and we should accept and not get overjoyed. In fact I recommend traders read Nassar Talebs book 'Fooled by Randomness' which describes why we should never get overjoyed by winning or depressed by losses. He says it better than me. Q. In your entire trading career, what are the biggest lessons you’ve learnt and how did you learn them? Pain is a great teacher and I have had my share. Facing clients who you have lost their money which I was responsible for their losses was my biggest lesson and resolved me to find a better way. Q. To finish off, if you were to start trading all over again now, what would you do differently to what you did originally? I would attend workshops by professional traders who offered coaching services and find one who fitted with my objectives. When I started I followed the crowd, tips listed to opinions, had no knowledge of charting, jumped in and out of the market like a jackrabbit.
Bill Wermine lives in Kuala Lumpur, Malaysia and has been involved in markets for over 30 years as a broker, fund manager, trader and author. Return to the Index of Interviews ...
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