In this special episode of Truth About FX, Walter is joined by Frank Walbaum, who trades managed forex accounts. They talk about how Frank was able to transition himself from being a part-time trader into trading forex for a living.
Frank also shares how he handles some of his most difficult clients and why you should take a time-off from the charts.
Download (Duration: 55:27 / 63.4 MB)
In This Episode:
00:38 – transition
03:13 – burnt already
05:43 – get wiser
07:24 – upside down
10:02 – hands on
14:19 – totally non-sense
16:09 – initial approach
20:14 – back to reality
22:06 – mindset change
25:30 – mental blockage
27:02 – more adrenalin
30:34 – observe yourself
33:04 – quite quiet
36:00 – double-edged sword
38:55 – how to develop mindset?
40:27 – a gift
44:22 – sleep comfortably
47:09 – floating
49:46 – fixed star
52:03 – limit your risk
Announcer: Sometimes, forex trading can be a wild and wooly place to be but forex trading doesn’t have to be the bad lands for your partner instead hunker down and bend your ear. You will be burning the breeze in no time. Here at the Truth About FX Podcast.
Walter: Hi, there. It’s Walter! Today, we have Frank Walbaum. Frank was a trader who traded part-time while holding down a full-time job and he’s transitioned into managing accounts. Now, Frank is going to talk about how did he transition from part-time trading to trading for a living. He is also going to talk about difficult clients.
He is going to talk about when you should take a break with your trading. Also, how to adjust your life to your trading styles because that is really what it is all about and that is why most of us get into trading. So, tell us a little bit about how you get into trading, Frank.
Frank: Hi, Walter. Actually, great talking to you here. I got into trading when handling some currencies myself on behalf of my old company.
We were travelling a lot and my boss was saying, “Hey, Frank, we’ll give you some Euros. Can you exchange it for our next trip to Australia? We can possibly get some AUD for that one and just like calculate how much we need to pay for our upcoming travelling expenses and stuff.”
That is how I started pretty much with a hands-on approach. I took a couple of dollars, went to the local money changer here in Asia, and then exchanging the funds for our upcoming trip.
While traveling, just doing the receipts and stuff and coming back, I found that there was a fluctuation. That was before the crisis in 2008 that was happening and I just found that “Okay, that makes sense.” There’s a fluctuation, I was looking at the charts in a very limited way at that time.
Then I found like, “Hey, there’s something going on. Maybe there’s something I should meet or should possibly be able to take a closer look.”. Then, coming back from the trips — various trips, of course — to Thailand or everywhere in Asia. Actually, I was still on the TV business that time.
I found the fluctuations quite interesting. So, before 2008, I was saying as well, the USD is pretty much under pressure. Why should I not get some USD? And I exchanged, literally, a few thousand bucks from my own salary and put it below my pillow and kept it.
And then the crisis hit and I was, “Holy smokes, now I know trading works! I have a lot of money now.” I’ve made just by the appreciation of the USD and that was a good fun.
What I did then was putting all that money I made into one of this online brokerage company and since I was there, the wise guy at that time — I really was happy as well. I started trading and I burned it all ,basically.
I burned it all and then there was a time that I thought, “Okay, you need to look deeper into what’s out there. Who could give me some valuable advice?” Because I know that banks are making money with it, hedge funds are making money with it.
There is a possible way to do the same stuff myself but, as the accounts are burnt already, I was in need into more webinars, into more analysis myself before doing the same thing again and again.
So, that is basically how I got into it. It is really a hands-on approach and every time I am talking about that, bankers or fund managers, they were laughing about it. That is a totally different approach to what people in the real industry normally been doing but I am happy that I really got into it from a different way and from a different angle.
Walter: Absolutely! So ,what do you think you did in the beginning with your first online account that was a mistake, or which mistakes did you make in the beginning?
Frank: The mistakes were like I said, I was like a guru from the very beginning. Because of that crisis, I made a few thousand bucks within a matter of days or weeks so I was like very wise, I thought.
I just put the money on the account. I have some trades going off into my direction and this trades going on and I was like, “Ok. Anyways, it’s going to come back. It’s just having a bit of a drawdown.” And then, the drawdown was just growing bigger and bigger. Like from 10%, 20%, and then 30%, and 50%, whatever it was.
I ended onto my losing trades and they were becoming bigger and bigger. The accounts were burned really rather quickly. That stuff I did but I learned from it and went into where I am right now. So, that’s about it.
Walter: Yeah. I remember tripling my forex account the first night I opened it. It was probably the worst thing that could have happened because you feel so confident when you do something like that.
You draw a straight line to the moon and you think, “Ok, this is going to be an easy streak.” So, you’re risking too much per trade and things like that, I suppose?
Frank: Exactly, very much. Of course, I had no idea about the risk aversion in the markets. If one or the other currency moves like a tank or it could really move on for ages especially the GBP/JPY pair, for example. Then it’ll moved,and I was into one of the trades at that time, I still remember that quite well.
They’d moved and went on and I was like, “Okay, it’s going to go up again at some point”. I ended into my losing position and I had no idea how to limit my risk and how important it was to place stop loss between interesting chart marks or chart formations.
I had no idea on how to calculate my risk per trade beforehand. All this approach you get in after a while, you possibly only can get wiser or can get more knowledge after you’ve really burnt something yourself, after you’ve really make those mistakes.
Now, I also go out to the world here and always talk to my fellow trading friends and other buddies I get to know along the way. I’d say, “Really, don’t do the same mistakes. Please just play small, take lower risk in the markets.”
Only by keeping the funds essentially in your account, you can grow them as well. You will eventually lose and will eventually have these losing days, weeks and even months, right?
I have a really good friend of mine recently, as well. He’s been doing the same stuff and he was like, “Oh! Frank, can you do some teaching for me?” — which I did. After three months, he went back to his own bank approach again.
He had two, three months in a row where he grew 10%, then the second month was about 20% to 30%, and the third month he made like 60% growth.
I was like, “Dude, pull the plug now. That’s everything you could do, actually.” It couldn’t be any better. I was like limit your risk and he’s, “No, I know how the markets are working.” Then, just a couple of days ago, I looked back into his account. I looked into it and I was like, “What the..?”
So, the entire thing happening over and over again, obviously, to also our fellow traders in the market. It’s a tough thing to get a risk, like a time-proven approach to the markets because the markets sometimes move in small cycles or in low volatility.
Then, there’s a news and an event like the election in the US: Trump won, currency takes off. All of a sudden, it’s being upside down again. Stuff like that is happening all over again. You’ve got to be prepared for it. You’ve got to be prepared to lose and pull the plug when it doesn’t work in your favor. Just take the loses and move on.
Walter: Yeah. So, how did you develop your style of trading? You, obviously, in the beginning are just basically gambling and doing wild risk taking. Just sort of by the seeds of your pants and that sort of thing. How did you refine it and hone it on your ultimate approach?
Frank: Possibly, I am actually now on the same boat as the guys who were listening to our great podcast. We are getting together right now. Walter, you are one of my mentors at that time. I was searching on the FX3 website and there was a guy from the US and I was really enjoying listening to.
Eventually, I met him at a trader’s convention in Barcelona. You were there, Walter, and I’ve heard from you as well. I’ve just joined your webinars every now and then, from FX3 to from that website.
Long search, sure. There was the good stuff when you get the personal touch as well. So, when you listen to fellow mentors on the web and when you check on how they are doing or how they are teaching.
Of course, there’s a few blogs out there who does not have an idea but it’s just a self- marketing thing so, the best teaching lessons are rather free and the markets offer are limited. I’d say not free but you don’t have to pay very much.
Get a few books which is how I started. I bought myself a few books. Of course, these trading books are not the cheapest ones. If you’d rather buy a book about basic strategies, about trading and about analysis of the markets and stuff, which is possibly worth 50 to 100 USD.
I will rather do that, looking back. I will rather do that now, as well. Straight, go out there. Just buy as many books as you can, log-in to as many webinars as you can then, compare to what I did
I put in the funds a few thousand bucks on my trading account and burnt it because, eventually, either way you will burn the money. It’s rather the knowledge which keeps you going along the way which is the better stuff to do.
Straight, invest in your mindset, invest in your future of your trading career by just getting lots of knowledge. I bought about — I think I still have it with me — I bought 6 or 7 books about trading.
I’ve got some basic ideas out of these books which help me a lot but, obviously, only while following the markets, only while following the real trading action is when I got to this hands-on approach.
I followed guys like Hugh and Walter. I adapted your strategy which is actually a similar strategy. I could really talk about that stuff, as well. Of course, then along the way you adapt the strategy as well. It’ll get into your mindset.
That’s the interesting part I would like to talk, when we meet in person as well, with all you guys who are listening to us now. Just get a bit of here and there and then put them there together with your mindset — and that’s really a long story as well, we can talk about — put that together and then see how you develop. Add a few interesting strings which really help me along the way to get the trigger feeling for myself where I learned like, “Ah! Okay, now it makes sense.”
You’re mentally rather free from your trades of thoughts every now and then. When you’re having money on the edge, somewhere you can feel that the emotions are helping you or even not helping you.
When you learn how to do some analysis in the market and when you know, “Okay, that’s all I can do”, and stuff like that, then you get a different and more professional approach. In the end, it doesn’t matter to you when the market is up or down.
If you’re mentally prepared for either way and if you do that, step out of your comfort zone, then you have an edge. I would say where you’re far beyond anybody else in the markets. It is because we are all participants in this huge fish tank. You just want to be rather the shark in the fish tank than the little one who’s being eaten by the shark.
Walter: That’s right. At least, I prepare myself for the loss when I take a trade and then if it works out well, that’s great. You could manage it if it becomes a profitable trade. You’re kind of okay with taking a loss when you pull the trigger on the trade, I suppose. Is that the way you approach it?
Frank: Very much! Of course. Because, pretty much, I know the risk I’m taking in the market. I know I’m limiting myself to whatever it is — and we don’t need to go into much detail right now.
I think it is much better when we talk about it later on which is the interesting part. The core of my strategy, for example. I am mentally prepared before entering a trade into what’s possibly going to be happening.
So, can I really burn whatever amount, “x”. What’s my reward? I could possibly get out of the market when I take risk “y” or something. Mentally, beforehand I will just calculate a scene.
This trade will be bringing my account down by percentage “x”. If it’s not going to happen on the next day or week from now or something because my trade is pending out the way I thought it would be.
Then I would say,okay. There are certain ways where I’d also, towards the month end, stepped back and say, “Okay, that would be great!” I’ve made my results already. Just remember as well, I’d say 1% or 2% a month only makes really, as well. Twenty percent over a year.
If you can do that in a sustainable basis with a sustainable reward to risk ratio, then you can make money over the long term as well in the markets. You can sustain whatever crisis that are happening and stuff.
That’s actually when I change my mentality a lot. That’s, Walter, what I grasped from you and your book as well. The mentality of trading and the way you train your mindset are the most important ways, so to speak. To make a living out of the markets, which is what I am doing right now.
Walter: Tell us a little bit about how that transition happen. Obviously, you have a full time job and you are trading on the side. You slowly sort of dipped your foot into the other side of trading for others and managing money and that sort of things.
So, how did you approach that? How did you make the transition? There’s a lot of listeners that are probably thinking, “Things would be really good if I could get my hands on some money and manage some money but I just don’t know to go about doing that.”
Frank: Yeah. The tricky thing is it’s maybe too easy to talk about and too easy to say. The first thing is believe in yourself.
I’ve always followed my path and certain part of my life saying whatever happens is what’s going to bring me either to a positive future — which is helping my future as well — and if not, then I have to afterwards see what was the outcome.
When I burnt my first account I was like, “Ok, Frank. I’ve got to learn something out of it. What is this going to teach me?” It was teaching me at that time that I had no idea about the markets. I was just so self-confident with my trading approach, which was totally non-sense.
I had no clue of what so ever of what I was doing. I had no idea about how the markets really work. To be honest, I still have no idea how the markets really work and I don’t care about it. I have an approach which is working and the approach works overtime.
Of course, I have losing trades in a row and I am a bit frustrated but then I stepped back and I have my certain trigger points where I’ll say, “Okay, if this or that is going to happen then I’ll have to adjust myself even if it’s just going out and doing some spots.”
There’s a few other things, of course, which I’d like to share later on as well which is really helping me on how my situation works and how my situation is really helping me at that time as well.
The thing is it is a bit tricky to say it but there were a few incidents, actually, would really help me. It has to do with just going out in this beautiful and colorful world with open eyes, talking to people, just talking about what you’re doing and being self-confident.
Of course, after a couple of years trading when you are having certain track records, you can go on with this one and say, “Hey, this is what I’ve been doing. This is what you could expect so, if you would trust me, we could possibly walk a few steps together. If you want to play some fun somewhere, I could help you out with that.”
“If you are confident with what I’ve been talking to you and with the numbers that I’ve been presenting you, then let’s walk along together and trust me with this one and I’ll manage some of your funds.”
It was, in the end, a bit easier than I thought at some point. Obviously, as well, I’m not in the point where I was saying — where I would be possibly able to say — like, “Okay, that is so easy. I’m just making the life of one of the big guys, having a Lamborghini and the flats. I am being paid for, I’m just laying down by the beach with a notebook and making money.”
It’s tough, of course, and this is hard work. I always took it after this initial approach, what I’ve been talking about burning the funds. After that initial approach, it was just hard work. Everybody, as well as you, Walter, would agree for sure that a professional approach is what you need to the markets in order to make it work for you.
Too many people think about this “Get-Rich-Quick” thing. It doesn’t work. It’s purely hard work, a dedicated mindset, and it’s just dedication to the markets. The willingness to live life differently in order to make the sustainable living funded from the trading.
Walter: It’s interesting that you talked about mindset. In the beginning, a lot of people think what does mindset have to do with it? All you have to do is lock into a profitable trading system, and just do it. What does mindset have to do with anything? Why do these people keep talking about mindset?
What would you say to someone who comes up with that question? I know, in the beginning, it’s just seem so simple. In a way, really consistent profitable trading is quite simple but that does not mean that it’s easy.
It just means that what you do can be simple. One of the things that you said is quite interesting, as well. You said you still probably don’t understand the markets.
There are a lot of traders who make money from the markets and will claim the same thing and say, “I don’t really care why the markets do this and do that. I just know that I have to get in at this point and I have to manage my risk to this amount. Ride the trend or take the swing,” or whatever and that sort of thing.
I think that is really interesting but what do you say to people who say, “Look, Frank, why do you keep talking about mindset? Everyone keeps talking about mindset. All this presenters, this is something that keeps coming up.”
So, why is mindset so critical when you can just simply sit down and follow a profitable trading system?
Frank: The thing is, as all in the end, I broke my trading system and especially my strategies. I broke it down to something I could explain to each and everybody within a matter of half an hour.
I think within two hours, everybody would have understood and would have be able, possibly, to do the same stuff personal for himself but that’s not the way. That’s not how it works.
The mindset kicks in at that time when say you are self-employed and you’re close to firing yourself because you’re not performing right. So, if you are your own boss and if your own boss tells you, “Frank, this is really BS, what you are doing.”
It does not work especially if the bills are coming in, you’ve got to pay your rent, you’ve got to pay the petrol for your car, if you have one. You’ve got to pay the train ticket or you just need to pay for the next flight back home or something.
That is the everyday situation which you have in the markets. Either you have a spare job, you have some stuff on the side which you are doing — which I did at the beginning as well. Which helped because if you have two, three, four month in a row — which I also had — where I’ve made some money out from the markets but it was not enough to cover my costs, of course.
That’s where your mindset kicks in and it says like, “Okay. Look, there’s another month and, actually, I’ve just made 500 bucks. Not too bad but my rent just alone is a thousand dollars plus, I want to eat and I have to be as well with my mate. There’s another thousand bucks I need, for sure, for that.
I only made 500 so it goes down possibly from your trading account, or you take it away from your savings, or if you have, you’ll be selling one of your gold bars or something so that works.
Then, the next month kicks in, right? Same story. “Ah! I made a thousand bucks. Half of the expenses are being covered for.” But then, “Okay, my trading doesn’t work. My trading is not making much progress.” Looking back, possibly, you could have been saying, “But I make like, 1.5%. Maybe it’s just my trading account is too low in top deposits.”
You are going to check on how can you grow your trading account? How can you get more funds to manage or how can you make a higher return?
In the end, it is your mindset which kicks in and says, “Okay, welcome back to the reality. We have had two or three months, we made a few thousand bucks but not enough to pay for all the expenses you need to pay for.” And that’s the critical part.
You have been talking in one of your recent webinars about it. When the reality comes back in, you cannot focus solely on your own trading ideas and on your own strategy. It is when you say drift away from it.
When you see something in the charts — and it still happens actually every now and then. I’m sitting in front of the charts, like after an hour, I am just getting a coffee and when I came back and say, “Hey! This one is not kicking off.”
My position is just like it is moving somewhere. It’s been in a positive territory, and maybe I’m heading into it. Then, I’m having a stuck position, always ending up putting some more funds into it when it’s like on the positive side and then the market turns around.
I’m stepping two meters back looking from afar, telling myself there was actually from the very beginning, all initial trades are positive because this is totally not my trading strategy. But, why did I take that trade?
I took the trade because I was in need of money to pay my rent so, that’s the thing. If you can break away totally from there and say, “Okay, I give myself at least the next five months — which is always what you’ve been telling us, Walter. That you are saying at least you need half a year of funds, not on your trading account but on your real bank account.
Where I’d say, “I don’t care when it’s there. If I need to pay for the rent, it just goes straight away from that account. If you need to go for some food or for some drinks or whatever, you can be paying for that without actually any need of extra money.
I’ve broken away from that and I told myself I’m having a year of expenses being paid for, that’s what I need to know. Within the next year, whatever happens to the markets, to me, I’m good.
That is why my mindset changes as well when I went to that stage. There’s a few other points, actually, which are really critical where I would say, as well. These are really interesting points where you can adjust your mindset with a very few and little steps. It involves a bit of calculations but it’s a pretty easy calculation.
Whenever I’m meeting my Math teacher, the old guy who was really great and helpful, I’ve been telling him, “You know, actually, the most important thing in school that I’ve learned from you was that I am able to calculate 1+1 and multiply that by 2, as well. That’s all I need to make money in the markets and to make a decent living out of what I’m doing.”
That’s actually odd but the mindset, in the end, has served. As you are teaching about it, is really the key to be sustainable over long term or over a long period of time in the markets and actually when digesting also what’s happening in the markets.
Walter: Right. For you, what did you do when you shifted from working and trading on the side to go into trading full time? Did you give yourself a transition period? Did you save up a bunch of money and cut your expenses? How did you do that? What are the mechanics of that?
Frank: I’m, in a way, in my mindset, I’m in the journey of possibility. Possibly rather easy to cut down some expenses because I thought as well I was living decently on a great flat and I say, “Hey! It’s time to cut down and get a little small flat.” Because of the living expenses, especially, it depends where you are. The living expenses in Asia can be very expensive.
Even if it’s just a few hundred bucks somewhere but it still it’s the eating out, going for drinking, and for some quick foods somewhere around the streets so, I cut all my expenses and habit as well to make that less of a pressure at the back of my mind, which helped a lot.
I started as well having a little bit of a side job. Actually, that’s one of the interesting things which I can talk about. There are so many opportunities also doing stuff online, which is like the side job possibly to what you do.
It is something which consumes only time when you dedicate the time to that kind of job. That’s only something while you work, when you want to work, and when you have time to work. The main focus for me was almost on the charts. The main focus was always on my calculations for the actual trading positions.
When I was in need of money and when I was saying, “Okay, I still have time left this week. I haven’t been doing much so, I can still do some work on the side.” There’s a few things where I can do it easily. Adjust your life and say, “Okay, some sort of income which really works for me when I have the time to work for it”, so that’s how I did it.
That really helped me as well then along the way and my trading eventually got better as well. Of course, it’s a market cycle. You cannot always say your strategies are proven all the time. You’ll have times when you have swings in the markets, when your strategy just totally doesn’t work.
We all go through that time. Of course, it is a bit difficult to say it’s your mindset only which is playing tricks on you or it’s the market which is being very tricky to handle. Especially, all the more it was going to the professional world and to the real fund managing world of trading. I learned that as well.
That’s the most important stuff as well. To do something when you can do it on the side, to break away from your own mental blockage in the head. I think that’s what helped me a lot.
Walter: Right. So, you keep it low pressure and it’s not like you feel like you have to make a certain percentage every month or something like that.
Frank: Exactly. That is the initial thing which helped me cutting down my expenses. I know if I make 1 or 1.5% per month, for example, that works with what I have on my trading account.
If it doesn’t work for the next 3 or 4 months or something just like a backtest strategy, I know towards the end of the year, I’m definitely, anyway, making that amount. Even if I don’t get to my goal of making that amount in the markets, then I still have my savings and can take it from the savings which I’ve accounted for at the beginning .
So, low pressure is really the key, especially the pressure we all do on our self. We have to deal with in our daily lives and the pressure we are giving ourselves is the one which really I was cutting down.
Another thing, as well — I think actually, Walter, it was through you. I have a very good friend in Thailand and she really enjoy going to meditating in the temples. Through her, I’ve approached the way of meditation. I have to say I haven’t done it with on the recent month.
But, beforehand, especially at difficult times, stepping back, sitting down on the chair, listening to this meditation video, it’s just calming down yourself. Taking a deep breathe in and out is really what helps.
Doing what helps me, what helps me calm down and after that, possibly, having a tea or coffee or something and then waking up again and getting a bit more of adrenaline. You’ll feel like now, really, I can do something. I can go out, do stuff, or I can sit back and do some trading.
That’s really the other approach as well. T balance myself because the markets are tricky and not enough ways to handle but this is what really helps me.
Walter: Right, that makes sense. A lot of traders, obviously, use hypnosis or meditation to keep you to stay mindful and be aware. It’s interesting. Like, I found that sometimes, for me, it’s almost as if you can see yourself trading. It’s almost like you’re an observer.
If you have a certain mindset, maybe you’ve have done some meditation and then you sit down in front of the charts almost immediately or run through a hypnosis track or something like that. You might actually find yourself, in a way, almost as if you were an observer of yourself, trading.
That can be a freeing way of approaching it. Instead of being so tied to the blips up and the blips down of your open trade and watching it fluctuate up and down and go against you and for you and against you and so forth, you can always have an approach where you’re just like an observer watching yourself.
It’s like a detached way of approaching it. I just find it fascinating but I don’t know if that’s something you’ve experienced or not.
Frank: Yeah, I’ve had that. Just as I mentioned before, when I worked with my good friend and she was also working in the media industry and we went to one of this big meditation temples in Thailand in Bangkok.
My idea was just to just observe the crowd and have some pictures of her and of the entire atmosphere. I think about two or three thousand people sitting down there, all in white and they were all doing meditation.
After a few seconds, when that master guy was sitting down, was talking in Thai — I did not understand a single word — but he was sitting down and he was starting to talk about how you calm down, how you breathe in and out. I could grasp a few words of that Thai language.
The thing was like, I have actually thrown my camera at the corner and was sitting down myself as well. Behind her, I was sitting down, closing my eyes and that was when I had no expectations. I had no expectations about the entire thing, about the ceremony, so to speak, happening there.
I was just totally relaxed and that was really great. After about 5 or 10 minutes — I think he was doing this meditation for about half an hour to 45 minutes. The first 20 minutes, he was talking about this peaceful state of mind. The other 20 minutes, you were just in this deep meditation phase which was feeling like a few minutes only.
As I’ve said, after this 5 or 10 minutes, I felt that I was like lifted above this magic carpet and I saw myself and it only happens at that very first time when I had no expectations happening.
I saw myself flying above me and observing me from above. I was so relaxed which lasted for actually a couple of days after that event, which is great. It happened in a normal and in a similar state. I wasn’t as calm as I was that time but I always feel it when I do meditation. I did have hypnosis course as well which also helped me, by the way.
I feel that it helped me a lot and I would encourage everybody that, as you said, if you don’t observe yourself possibly like a magic hand as clicking the button of the mouse to open your One Million Dollar trade or whatever it is. I’ve even see Five Dollar trade can be equally tricky to do so.
The thing is it helps me to calm down, it helps me to distract myself from the charts. It helps me to distract my glued eyes from the screen possibly and just helps me to step back and be passionate about my job, my career.
Not being only focused on, “Hey! I need to make money.” It’s just to detach myself — that is maybe the correct explanation, to detached myself — from my mindset kicking and saying, “Okay, when this happens and when I lose, I can lose whatever X amount of my account or X amount of funds.”
It happens to detach myself from any involvement of my mindset to being totally flat about any feelings — which is possibly the right way to say. Just being worry free, just opening and closing any position, if it make sense in the markets. That is what I’ve achieved. Also, due to the change of the mindset while doing hypnosis and doing meditation sessions.
It’s easy. Sometimes, it’ll just take as little as 5 or 10 minutes. I have a few interesting meditation possibilities, as well. Some are even actually available for free on the internet and I’m happy to share those ones. It takes a few minutes only.
When I’m getting up in Asia here, maybe 10 or 11 in the morning, got a few trading ‘till rather late at night and I’m just getting myself into the peaceful state of mind. When I start to work, trading the European and American markets and that’s actually then, before, when I take this 5 or 10 minutes, especially when you have an empty stomach, or just had a bit of a fruit juice or something in the morning.
Prepare yourself, do the meditation. Say, 10 minutes is enough, actually, and then you will really relax yourself. Really, you can move on with your daily routine but you are detached from the emotional issues you might get when you are reading the charts.
Walter: I’ve always had this theory that it helps if you live in Asia to have that sort of a morning routine because if you live in Europe or in the US, the first thoughts when you wake up might be something like, “I wonder what my trades are doing?” And, you’d want to go see and look.
Whereas, in Asia, it’s so quiet. Sometimes, you might not be in a trade or even if you are, it’s quite quiet. It’s not that you don’t feel like you’re on edge, I suppose as you would when you’re in the States or something like that.
So, Frank, talk a little bit about what it’s like as a trader transitioning. You had this experience where you started taking it more seriously like a job and then you’ve got to the point where you started to take clients on.
I’m just curious if you’ve noticed whether clients tend to request that you take more risk on than you’re comfortable with after a particularly good segments. Let’s say, you had a good two months or something like that and your clients will ask you, “Okay, can’t you just bump up the risk on this and so we can make more money?” Or, things like that. Do you find those sorts of things pop up?
Frank: Haven’t actually but the thing is, especially this year, it wasn’t that overwhelming for me. I’m not up a couple percent, that’s all good and my clients made money. In 2014, roughly 20%. Last year, also roughly the same. Like this year, I’m just up a couple of percent. No worries about it.
I was telling the client, “Hey! Look, you’ve placed the fund for me, right? We’ve made some interest for you. You’ve left the funds in your account so they also grown as well.”
So, the initial trading volume went up already anyway. Through that compounding, I would call it, it really worked. Essentially, if this account will be up only like 6% or 7%, they net up more than 10% already because the initial approach was a different one.
Another thing is they haven’t, actually. They’ve always left me alone. They’ve always said like, “Hey! We trust you. You do what you want and you think what you are able to do. Just send us a statement whenever you’re ready,” and just talked about it. It’s, say, the main average client.
There’s also one guy who pays actually not much with me but since he’s a good friend of mine, I’ve taken his account on board. He called me rather often and said, “Hey! You did this trade and I saw that. That was losing. How long is the next one?”
I was like, “Dude, maybe it’s not the correct stuff we’re doing together. Maybe you should just look for a fixed deposit or just detach your eyes from that account and look on it only at the month end or only at the end of each quarter.”
This doesn’t help me as well. If I’ll get questioned every trade I’m making, it’s just too tricky for me. Eventually, after a year when we saw, “Okay, Frank, it’s going up, anyways, towards the end of the time period when we do the next calculation stuff.”
He was getting it more easy actually but I’ve had no clients who said that directly to me. They were just like another two guys saying, “Okay, then we can see something in the markets. These has been okay but we know we can perform better. So, why don’t you take more risk?”
I said, “Eventually, it could be the other way around so, that’d be lose quite a bit of only what we‘ve got together towards the end of the year.” It’s a double-edged sword, right? I know I didn’t have that directly now.
I’ve always said what I say to each and everyone, that’s my risk and I’m rather defensive in approach. There are certain things you can definitely do once things are not going your way.
Still, on the other hand as well, the approach is what I do and that’s how I do it. If people want to have more risk, I could just increase the leverage for their respective accounts. Normally, I just do it the way I like to do it when I’m feeling comfortable with it.
At the end of the day, you’ve got to be comfortable within your comfort zone and you’ve got to stay within your trading strategy, and just get back, going only and not just fulfill a need or the idea of somebody who has placed some funds.
I would rather say, “Okay then, withdraw all your funds, do something else with it. I want to be comfortable with what I’m doing in my trading career because it doesn’t help you and me as well.”
Walter: Absolutely. It seems to be the case of the smaller accounts are always the one’s that are watching it like a hawk.
Frank: Very much. Whereas, the guy who placed a quarter of a million and says, “Anyway, I’m having my big business. Whatever you do is what you do. Leave it on and if it’s all loss, it’s all loss because it’s a way of gambling on what you’re doing.” But, it’s a way of structured gambling, as he calls it.
I’ll leave him on his approach and his ideas — but he’s the easiest one, actually. Actually, the guys who’s placing the bigger funds are the one’s who are really having a business background. They have the mentality of making money, anyways. They know how difficult and how easy it is to make money and the real business world of things.
They are the ones who also know very much, actually, that their accounts comes with a certain risk but they are not the one’s who’s having to say,they’re hands on all of their money because anyways they diversify very much. They have possibly some real estate as well or some luxury watches or something that they collect or some precious metals they have in their basement, whatever it is.
They know very much that, and I as well myself know that. For example, this one client caught up a million rights. It’s a lot of money, of course, but for him, I know the entire assets he’s having. So, I will know myself as well, if that will be in the all in or gone.
I would know that he would not end up on the streets and begging because there are so many other things he’s having on the edge as well. It’s a matter of the scale as well, in that perspective and that’s what he want. Especially when growing big, you wanted to be say, actually rather “easy” as well.
There’s a fellow friend of ours here, also a frequently quoted guy. He’s been saying, “It’s easier to make a few percent when you have two or three millions and you can live your life a bit easy as well.” Just to get to that state of mind is the key.
That’s what we should talk about as well when meeting up, about these things. Like, how to develop, again, mindset? How to develop the easiness of things when you’re growing to that stage?
It becomes easy. Say, you need one or two trades to be up for the month and I’m only aiming to 1.5% to 3%, possibly. Once you’ve done that, you can quit trading for the end of the month. You can just go to the beach, play football or go surfing as you still enjoy it, I assume. Playing time with your kids. That’s what really matters actually and that’s what I’ve been doing.
Walter: Do you find it’s easy to or have you adapted to trading on the road like, you say?You go back to Germany or whatever? Do you stay on top of the markets when you’re still trading or do you just shut it down when you take off?
Frank: A few things, and that’s also like going back to the core strategy. I reduced my risk necessarily or I even stopped trading fully and say like, “Guys, I’ve done something. I’m okay”.
I haven’t done it yet but actually what I’m also planning to do next year on wards that I really would say, as well, “Okay guys, month end — even if it’s at the tenth of the twelfth of the fifteenth of the month — I’m planning to set up guys. Monthly straight statements sending out. We‘ve achieved say, 2 or 3% already so I won’t be trading anymore.” But, that’s what’s been done for the month.
Essentially, the customer feels great as well. At the mid of the month, you will receive, so to speak, a paycheck from your investment company or something — as I would see myself. You will receive your paycheck at the middle of the month and you have the result which you normally get at the end of the month. “It must be a gift.”
I have two clients who really enjoy my little “.pdf” documents and when they have these ones in their hands, they say, “Okay, Frank, we’ve got to pay you.” But, actually, that’s the nicest statement I had. “We really enjoy paying you because you helped us a lot.” I can’t get that interest anywhere else. That’s really good fun.
Walter: Absolutely. Let me ask you this, Frank. When you take trades for your clients, do you mirror them in your own account or is your own account also put in in the pool or in the pen or whatever with the other accounts? How do you do that?
Frank: It is essentially all the same. To protect myself as well, in a way because I know using or handling money of others is just a bit easier compared to my own fund. The first time, I was burning some funds from myself. I was talking about it as well.
Transition time was happening, I’ve got thrown out of the markets. I was working for some big guys in the markets and at that time and I noticed that it is easier, in a way, to handle money for others.
There’s 2 things involved. First of all, there’s your name involved if you burned it all. They are going to sue you possibly or your name is being kind of everywhere in the web or within the industry saying this guy has a clue but just a clue how to make out of a million, just a thousand bucks possibly so, he was only able to reduce my funds. You do not want to do that .
That is one thing and that’s what else you’re going to do. Your mindset needs to change a little bit. Say, risk approach need to be very, very much in line with your goals. Take the risk only that you can take and if the risk is getting up to that point where your trade possibly is on the losing end, cut the trade short. As simple as that.
It sounds always so easy but the mentality afterwards is the same that you need. You cut your losing position short and if you could do that, then and then you can move on. I do the same thing.
I’ve made the approach and the guy found some handling our like, close people to me. Anyways, these guys also taught me that lesson. I knew all the trades, it is all the same actually and then I’ve been telling the same stuff as well. I’ve been talking about it and saying, “Well, if you want lower risk, we can do that.”
Obviously, instead of saying making possibly 20% in the year, you can just possibly, only be getting 10% out of your fund. But, of course, to make the 10%, the risk, I would say is between 5 to 6%.
If that is what the client wants, I can just do that by reducing the leverage of their trading account. Nobody has started with me, and they’ve all like, “Okay, take your normal full risk approach to it. Just include my account in the same matter.”
In a similar way, I’ve just put my money into the accounts. I am trading the same as for each and everyone. It works the best, anyway, for me. All accounts combined and then one trade being myriad into all, same accounts for this case.
Walter: Right. When say 5 or 6 % risk, are you talking about a risk of a drawdown or are you talking about risk per trade? What do you mean when you said 5 to 6%? Is that 5 to 6% returns?
Frank: No. It’s a bit part of the core strategy I’m drawing in the markets. I would say, per trade I take in the markets. I want to make every worth of 2 and per trade I’m taking, I want to have a risk of 1.
I’m always aiming to make a, say, 200 bucks off the market but I only want to risk a 100 dollars. It’s a 2 to 1 reward to risk ratio. That means I’m aiming towards 20% around the year end.
I would talk to the customers that way and say, “In order to aim 20% towards the year end, your account would be rather at risk for about 10%.” That is actually the actual numbers that I’ve accumulated over the years of trading.
These are the actual numbers which have worked for me as well to sleep comfortably most of the time. Once in a while, it does work but still that’s it. My overall drawdown is actually fairly low.
It’s about 3 or 4. In the next one, I think I had was 4.7% or something of the maximum drawdown so all open positions combined,went against me far, far for that numbers. That is actually what really makes me sleeping well and that’s what makes me actually worry less.
Of course, there’s something which you can solve quite well. If you are saying as well maximum drawdown is 5% here and the return is 20%. Whew! That works. That’s really a good fun.
Walter: Absolutely. That’s great! Describe a little bit about your daily routines. For example, would there be a case where you had a good first week of the month so the last three weeks of the month you’re actually aren’t trading, you are doing something different?
How do you approach your trading each day? Obviously, you’re living in Asia most of the year. That means that when you wake up, it’s the Asian session and it’s usually quite quiet, there isn’t really a whole lot going on. I mean, there are exceptions but, how do you approach it from a day to day basis?
Frank: To put it simple, waking up, meditation, coffee, trading, beer, sleep but that’s actually not going to happen anyways. It seemed I’m getting up and preparing myself for an SS book about early on.
I’m preparing myself, I’m getting ready. If I’m having open positions, I observe them. Every now and then, I’m meeting friends so they ask me out for lunch or coffee or something.
I will always adjust my position that are calling me. Either I’ll cut it a bit short, maybe I act to them as well but I always have a stop loss or take profit in place so that my positions are really working along my daily routine.
The beauty of this kind of job is that you can adjust your time to your environment. You can adjust your daily routine to the markets as well. Of course, in a way, if there’s news events happening, you’ve got to adjust your work in your environment to the news event which is very important.
On the other hand, it’s a floating process and I have no correct way where I’d say this is the way to go. My day is just like as beautiful and colorful as it should be, I think. If my Mom is coming and visiting me, we’re spending sometime out there especially when I have some couple of percent profits really already banked on the account and makes it easier.
If not, I maybe step back and say, “Okay, next month.” It’s also a month where I could be engaged and involved in the markets.
That’s the thing and if my friends are calling me, “We have a dinner.” Sometimes, I’ll say, “Okay, I’ll tell you later on if I can make it”. Sometimes, I might postpone my decision saying, “Hey, guys! I can’t make it because I have to stay close to my positions. I don’t want to drift away from them.”
It is a bit of a floating thing and I’m adjusting myself really to what’s happening at home feeling comfortable with interacting with the charts in the markets.
Walter: Right, and that makes perfect sense. When you’ve had a good time or a good period, a good month or a good quarter or something like that, you’ll generally take sometime off then?
Frank: Definitely. Of course, sometimes I also say if I want to meet some friends in Thailand and I’m quite often there because I really enjoy it there, getting a foot massage or anything like it — cocktail by the beach and stuff.
Meeting good old friends in Bangkok, that really makes my life as well. As I said, like a bit more colorful. I just really enjoy this self-employedness or enjoying the world of being self-employed. Doing what you really always wanted to do and it sounds a bit easy but that is how I make it easy.
We have the tricky thing like dealing with the markets which can be frustrating. Of course, to me, sometimes it is as well but you have to turn around and say life is colorful and life is difficult as well.
We have to make it easy, we have to enjoy the good stuff and that’s why we live on this beautiful world as well. That’s what we really want to do. That’s the most important thing of being alive and like living that moment.
I mean, living in that moment intensively. I am very intensive. That’s exactly what I do to make trading easier, as well. Just by having my life more colorful and beautiful and meeting lots of friends as much as I can do.
Walter: That’s great! Let’s just probe into your mindset because when we start out and we start trading, sometimes it can be a little bit depressing or you feel like you’re never going to make it work or things like that. So, can you tell us a little bit about how your approach was to trading?
For example, you might have said, “Look, I am going to make this work. I know I am going to make it work. Eventually, I am going to make it work, right? I’m just going to figure this out.” Or, was it something like you did a lot of data, you have a lot of data, so you’re really a data-driven.
You did a lot of back testing and you saw your numbers in your backtesting and so that’s what convinced you that would work. What was it that you could hang your hat on, when you first started and say like I know this is going to work. How did you do that?
Frank: Also in my previous job, I always have the mentality that when I want something, I’m working as much as I can to get what I want. That helped me in a lot of aspects in my life as well and I can answer that very short.
I’ve just always wanted to be in this trading environment and I’ve found ways and pursued the career. I’m really staying in this career just because I want it. I just have this really big, fixed star say, in the skywest where I look at and say that’s where I want to go, that’s what I want to do and that’s, in the end, also what I will do. And that’s what happened to me.
I was not always big in backtesting and stuff. I was doing something but, of course, you’ll actually know and I have to trust the confidence of myself that it’s going to work and it is working. I have proven examples for it that helps me.
It’s the confidence I’m having. It’s the charts I’m seeing and then by starting maybe demos and just trading some demo accounts and bringing those ones up, enduring trades on my real account as like a floating process as well. Those two worlds are being, like, combined into one.
I just, eventually, also saw that my real account is growing. I know that things just work in the markets to me. It’s the stretch of the mindset again, in this case, which helped me pursuing this career and a few incidents actually which helped me as well, which really made it work.
That’s basically it. So, no big data, no really crunching of all that stuff in very detail, but just observing your account, checking your account online. There’s a few great websites where you can track your account, have your numbers crunched actually in that account on that website where you’ll eventually also know that you are on the right track.
Every trade, I make 200, 400 or a thousand bucks. Every trade I lose, I lose lesser than that. Then, if you know that you have a good win rate possibly as well, you know that your real account is meant to grow because you stayed in that certain parameters where nothing much can’t go actually wrong if you don’t vary from that full approach that is working and that’s basically it.
Walter: Right. If you had to, just in sort of a closing here, if you have this, say, one thing that you’d give as a piece of advice to someone who’s maybe not profitable yet but thinking, “You know, I really want to make this work I’ll get to the point where I’m managing money so I can leverage that for getting paid myself off of my trading.”
What would you say to them? Things to avoid or things to do or how is it that you suggest that they tailor their approach to their trading? What should they do?
Frank: Actually, it is too easy to talk about it, in a way. It was like just limit your risk very much. Cut down your risk per trade and on your account just to be able to keep your funds in your accounts for future trading when you are a pro.
On the way to getting pro, just read as much books as you can, read as many books as you can. Listen to as many so-called gurus if you can. Just listen to the guys who have known what you need to do in order to make trading sustainable.
Just by listening to those guys, by reading books and just like getting your knowledge going, that is when you know that you are really on the right track. Just beware, of course, this takes time. It is not working within a month, 2 or 3 at least. I’ve not met anyone yet.
It takes maybe a few years. For me, it took me maybe 5 to 6 years actually to really approach that mindset which works in the markets. That is the only chance you have here. You have to give yourself time and you have to give yourself lots of time to digest everything.
Be willing to learn over and over again in the markets. Eventually, you’ll always get beaten up every now and then and again. You’ve got to take that as a lesson and that’s just then adapt your risk accordingly to those situations. That is the only thing which really works.
Walter: Yup, well said. Just curious, what are some of the book titles that you’ve found most useful? Just for the people who are listening.
Frank: It’s Wallace. I mean, maybe some of these basic books like Warren Edward Buffett. It doesn’t help you really much into the world of trading but, of course, you’ll get some interesting insights on how he’s limiting his risk.
Another guy, Ed Ponsi, really a very good mentor of mine as well. He’s been writing few books about charting hours and stuff. Your books about trading mentality are really helpful as well.
Everything which is related to trading. Possibly, first, you want to build strategy for yourself so get something where you’ll get a bit of confidence, a bit of a technical approach, which is at least my way on the charts and how I can build trades.
On the other hand, get your mindset right which is important to becoming pro. Whatever books you can find, I think, are really useful for you to trade.
Walter: Excellent! That’s great advice. Thanks so much, Frank, for spending time with us. I am looking forward to seeing you at the conference.
Frank: Alright, it’ll be cool. I am looking forward as well and I hope that lots of you will attend this because it was just — Walter, when was it? It was just a couple of years back actually when we met, when I was like one of the students sitting back in the row and was looking at what you had to talk about.
Now, we are actually in the same boat talking about the same stuff about the transitioning time we had on the way to getting pro. It’s really a good fun and don’t be afraid if you really wish to do what you’ve really always wanted to do.
In becoming a trader, get yourself lots of knowledge and give yourself lots and lots of time because you need it. Of course, patience and eventually it’s going to happen. If you really want it, it’s going to happen. It’ll work.
Walter: Great! That’s great advice. Thank you so much, Frank, and we’ll see you soon. Take care.
Frank: Alright. Cheers, buddy! Thanks a lot, Walter. Take care. Bye.