Today we gain some insight from a finance blogger and trader. John Bougearel is the Director of Futures and Equity Research at Structural Logic. His blog archives date back to July 2007 and he presents topics in a well written and unique manner. His mix of humor with analysis ensures his blog is never a dull read. One can gain a great deal of insight from his blog. Using Dane Carlsons blog valuation tool his blog alone is valued at $23,710.68. I would strongly encourage you to have a read of John’s blog. Anyway enough from me lets here from John himself.
Trainee Traders 14 Questions
What is your name?
John Bougearel
How old are you?
47
Where do you live?
Outside Chicago.
What is your educational background?
BA of Religion St.Olaf
How long have you been trading for?
12 yrs
Would you classify yourself as a fundamental or technical trader?
A blend of both, but with a huge overlay on behavior models I create out of “the church of what’s happening now.”
Are the majority of your trades mechanical or discretionary?
100% discretionary
What is the one piece of advice you would give to someone starting out there trading career?
You have to undertrade undertrade undertrade. And never average up or down. Risk so little it seems not worth the trade. But that is the point. It should never matter one iota to us if a trade is a winner or a loser because it was such a small bet to begin with. Even the smallest losses can eat at you and if you are not careful and willing to take them, they can turn into big losses. These tidbits of course are born out of personal experiences. But you’d be surprised how well small trades that become winners really add up. But watch those drawdowns, and keep the losses small, so the next winner adds more to the account each time. Oh, and you really should only ever trade when you find the odds are greatly in your favor. Our one advantage of being speculators is we can afford to sit on the sidelines and just wait til the odds are in our favor. That is what blackjack players do, wait to bet heavy only when the deck is in their favor. But this “only bet when the odds are greatly in your favor” is another way of saying undertrade, undertrade undertrade. To paraphrase Livermore, much of trading is doing nothing and sitting on your hands.
Do you believe great traders are Born with that ability? Or can it be taught?
There is always a benefit to have an innate talent to manage risk. But it can be taught. The trutles are well known examples of that. Bottom line not to forget is that great traders manage risk exceptionally well.
What was your most memorable losing trade?
Oh, they are too memorable to count. I have swung for the fences too often early in my career. Global Crossing perhaps, took me most by surprise as I really believed in what the company was doing connecting the world globally, and all the great things I heard about from the Gilder Report ~ the “tech guru” of the day. Trading or investing what you really believe in, can be a really bad investment.
What is your most memorable winning trade?
My first soybean option trade in 1993, long soybean calls, sitting at home with a 6 pack, watching the mississippi flood washing farm homes down the river. Too bad I overstayed my welcome however. My belief in there having to be a “5th wave up” was misplaced, and soon my profits had washed away too. Again, this underscores what I have said above, trading or investing in something you really believe in can be a really bad investment. The rule for a trader or investor to live by is to “trade what you see, and not what you believe.” That should become a mantra for everyone managing risk. I believe Larry Pesavento may have coined that saying.
What are your five all time favourite trading books?
- Market wizards
- Tomorrows gold
- Canslim
- Against the gods
- Manias panics and crashes
What do you see as your biggest challenge in the year ahead?
Gutting out a deep and prolonged recession.
Where do you see yourself in 5 years?
Retired to some tropical island, enjoying afternoon sails, sunset cocktails.
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6 Comments
It is good to read about people who have already walked down the path and have substantial trading knowledge. I was surprised to read Johns thoughts on averaging up. I know that averaging down is not considered good practise. I thought averaging up helped you capture more of the trend.
Matt,
Welcome to the world of futures.
Averaging down is what you do when long and wrong and getting wronger on the way down.
Averaging up is what you do when you are short and wrong and getting shorter and more wrong as prices move higher.
In both cases, you are pissing in the wind.
Adding to a winning trade, long or short is fine, but it comes with additional risks of diluting your cost basis. This is only recommended being down when you are on a very very strong trend and when you are so right it is silly.
There are formula’s to staying optimally levered in your positions providing you a positive feedback loop.
Google “Optimal F” sometime, or the Trading Game by Ryan Jones. This risk management makes a lot of sense if you can systematically deploy it. However appealing it is, it really does not work for me personally. I am not that ballsy!
John Bougearel
Successfultradingtips.com
Actually I should rephrase that, I have been plenty ballsy throughout my investing trading career. But the question I believe boils down to how aggressively do you want to manage risk. There are times that I trade or invest aggressively, other times that I do not.
Thank you John. It can be hard when you are starting out to get your head around so many concepts. I will have to check out your site.
Heys, this is cool. You should do an interview with me sometime
Richard from http://www.hedgeagainstspeculation.com
Matt,
You are right. So much extraneous info has to be filtered out. If a concept is not simple, you most likely don’t need it. It takes a long time to learn what to filter. And of course, you must keep learning. Just cause I have been actively engaged in the financial markets for 15 years means I can stop learning. I can’t, each year is an essential learning block.
What is so neat is that the learning curve is always on the rise. At the end of each year I can look back and see how much progress I have made on the mountain of knowledge available to us. The better you filter, the easier it is to climb. So, always strive to simplify, simplify, simplify.