We discover what makes great traders tick! My ‘Ten Trading Questions With…’ guest this week is Ray Barros, professional trader, fund manager, mentor, educator and author.
For me, there are two things:
- Facing the challenge of pitting my skills against the market. And,
- Being aware that success in the markets is more a question of self-management then trade management.
Of course, the fact that I have been able to make a better than decent living from trading adds to the motivation.
2. How did you first get involved with the financial markets?
Wow, for that I would have to go back in time. It was the first year of university (1966), and Australian stocks, in particular, mining stocks took part in a huge ball market. Someone wanted me to buy the options on a stock called Peerless.
I bought them, and they went from a couple of cents to about $.45. I held on until they came all the way back so that the options expired worthless.
That was my first trade.
Then in 1980, I went for a holiday to Hong Kong. My father-in-law told me how the trade gold futures. I had what you might call an unlucky start. In six weeks, I succeeded in making enough money to buy my wife a fur coat.
That convinced me that I could make a living from trading. I told Chrissy that I would sell my legal practice and become a full-time trader.
I thought it would be easy, but I did not have a successful year until 1987.
3. What was the turning point that really propelled you towards trading success?
There wasn’t one turning point. It was a series of events. Over time as I came to realise that trading success was not just a function of having a trading plan, but also:
- having a proper risk management approach, as well as
- the psychology necessary to overcome the human hardwiring.
Trading is one of the hardest professions in the world because the limbic brain is focused on survival. Nowadays, ‘survival’ can be defined as anything that raises our anxiety.
Uncertainty is one element that can be relied upon to cause humans to experience fear and anxiety. Markets by their nature are uncertain.
So, you can say that the nature of markets will inevitably cause fear and anxiety to kick in. As a result, no matter how good your trading plan, unless you can manage the 3Fs (fight, flight, or freeze) you will never be a successful trader.
4. What are your personal trading goals?
Nowadays, my personal goal is to show constant improvement. This year, thanks to the Acceptance and Commitment Therapy, my results are showing the greatest improvement I’ve seen for at least the past 10 years.
5. What trading mistake have you learned the most from?
That’s an easy one. I think was about 1985 and I just blown my account for the umpteenth time. I went to Chrissy and better to give me enough money to start again.
She gave me A$25,000. I promised that this time “it would be different.”
That Friday night, I succeeded in buying every high and selling every low. As a result, by the end of the evening I had again blown my account.
That was the evening that I realised that I had to change what I had been doing if I was going to have any chance of success. You think that I would have learnt a lot sooner.
6. What are the main trading strategies and markets that you trade?
I use a concert of Wyckoff and Market Profile, together with my variation of the Elliott Wave (which I call the Ray Wave).
I trade currencies, stock indices, interest rates and gold.
7. What 1-3 trading books should every trader read?
I’ll answer the question in this way:
- read a trading book that describes a trading plan that suits your personality;
- read a trading book that provides you with a risk management style that suits your personality; and
- read “The Happiness Trap”.
The Happiness Trap is an introduction to ACT. After reading that book, I would read “A Primer on ACT”.
As I said earlier, “ACT” is the best psychological theory of this century. If you want to see how ACT applies to traders, then Dr. Gary Drayton’s book “Trading Mindfully” is a must.
8. If you had 1 minute with someone who wants to learn how to trade in stocks, what would you say?
I would ask him to be fully aware of how difficult it is to become a successful trader. There are no exact figures, but the scuttlebutt is that over 95% of traders fail. In fact, I think that number is on the low side.
Successful trading will take blood, sweat, and tears. It will take effort to acquire the knowledge and then effort to apply the knowledge so that it becomes a skill.
9. What separates the average from the very best traders?
The ability to be aware of our own emotions, and how emotions impact our trading.
10. How do you ensure your trading will continue to be successful in the future?
I’ll continue to do what I have been doing. Managing my risk, seek to be more self-aware, and continually seek to better my results.
Bonus Question: If you were not a trader, what would you do?
I would teach trading
Ray Barros’ Bio:
Ray Barros is a professional trader, fund manager, author and educator. Ray closed his private hedge fund in December 2010. In 1990, he started with A$20 million and by the time the fund closed, December 2012 it had grown to A$943 million. The December 2010 result was the best in his trading history, securing a 137 per cent return.
Ray is also the author of two books – ‘The Nature of Trends: Strategies and Concepts for Successful Investing and Trading’ and ‘The Ray Wave’. Ray has been regularly featured in regional newspapers and publications like The Singapore Strait Times, The Sydney Morning Herald, Your Trading Edge Magazine, Singapore Business Times, and Smart Investor. He has also been featured on BBC (Asia), CNBC, Bloomberg, Channel News Asia and a number of Indian TV stations e.g. Channel 18 (CNBC Indian Affiliate) and UtV-Bloomberg. In addition, Ray has given public and in-house seminars in Sydney, Singapore, Bombay, Shanghai, London, Tokyo and Taiwan.
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- 10 Trading Questions With…Ray Barros
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