Gary Portugal talks to Agnieszka about his core beliefs on finding success in trading, and it has nothing to do with quick wins large amounts of capital. For Gary, trading is a process that requires an honest look at yourself, learning from mistakes, and evolving the process over time. Everyone makes mistakes when they first start trading. It's how you handle those mistakes and grow from your experience that sets the professionals apart.
With decades of experience in trading and working for large financial institutions, we hear Gary share the valuable lessons he learned and his philosophy on getting better at trading: train, learn from your mistakes, get a second opinion on your process, work on your confidence and patience, and continuously refine your system. Gary's biggest advice is to embrace changes and make peace with being wrong.
About Gary Portugal
Gary Portugal began his FX journey in New York in the 1980s as a spot G10 Market Maker, before specializing in European Monetary System currencies in the 90s. After the creation of the Euro in 1999, he transitioned to trading emerging market currencies and to developing a spot FX e-commerce business at a major financial institution in London. He then spent a decade at a proprietary trading group as a market-maker in emerging market currencies to various electronic currency networks. He now trades and invests independently across all asset classes.
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Transcript
Agnieszka 0:00
I'm Agnieszka Wood and on today's show, I'm very excited to introduce my very special guest, Gary, Portugal. Gary has been a professional trader for 35 years. And now he's still trading mostly on a swing basis, and also managing his investments. I asked Gary to join us today to discuss his point of view on the topic that most traders are wondering about all the time. Will I ever make it? Welcome to episode number three, Trading for a Living. Hi, Gary, and welcome to my podcast.
Gary 0:35
Thank you so much, Agnieszka, I hope that I pronounced that right. Yes, I think, yes.
Agnieszka 0:38
Yes, you absolutely did. Wonderful.
Gary 0:42
First attempt, wow.
Agnieszka 0:43
Yeah, you're very good at it. Gary, you started in 1983, as a commodity and foreign exchange trader in New York, worked all the way up to become a head of European Monetary System, currency trading desk in London. And finally became a wealth management consultant. Not long before you decided not to work for anyone else, and trade for yourself. That's pretty much the dream of most traders, right, to quit their job and trade for a living.
Gary 1:14
Absolutely right, to be able to pick and choose when you work.
Agnieszka 1:19
Exactly how to spend your time, right? Nobody's gonna tell me what to do. Tell me with all your professional experience in trading, I'm sure you were able to make consistent profit long before you actually started for yourself. What made you wait? How come you didn't make that decision to start trading for yourself years earlier?
Gary 1:40
I think to be fair, most of my career was spent market making. And then as part, as part of the market making, I could indeed take some proprietary risk, but there was a certain amount of income that I was able to generate from market making. And then I could leverage some of that to take proprietary trading risks, as well. And then as markets, particularly say, from 2000 onwards, and even more so from the financial crisis onwards. FX markets, and I think all assets, in all asset, came increasingly automated, electronic, and it became more difficult to compete, basically, as a market maker, foreign exchange and in particular, it became clear to me that I would have to probably rely less on market making income, and more on taking proprietary risk. And then I just reached a point where, as we said, off air before, I felt like I'd have a better chance of making money, if I could trade more selectively. As opposed to necessarily trading every hour of every day, if I could pick and choose my moments, and then maybe take more risk. In those instances, even if that meant doing nothing for two or three days after that, but I'd have a better chance of succeeding. And I think also, I reached the conclusion that I was more likely to succeed, taking risks myself, if I was doing it rather than day trading more of a, on a swing trading basis. In other words, seeing if I could pick out a trend that I felt might last a week, two weeks, maybe even a month, mainly a foreign exchange, but also in equity markets, interest rate markets, and commodities, but the key was trying to see if I could envision a move that would happen over time. And, and capture, not necessarily all of that, but at least a reasonable chunk of that, as opposed to just trying to day trade every day. And I just felt like the best way for me to do that. And trade sensibly, rationally, was just, you know, trading my own money. I mean, it's scary in a way in that if you, if you lose, it's, you know, it's your capital, it's not your employer’s capital. But the upside is, you know, you really do trade as and when you think it makes sense to trade. And not just because oh, I’ve gotta pay my boss, you know, to pay for these computers that I've rented. I've got a, I got to pay for my brokerage and for my charting service. And so, that's basically how I ended up in doing what I’m doing now. Now, it's, to be fair, it's been a transition. Yeah, it means in some ways, it's a lot. And I still love the markets. But in some ways, it's a lot less exciting than it was, you know, being on the market and making bets where you're literally in and out of the market all the time. And where you felt there was necessarily there might have been opportunity every day, this is different, I'm more happy. So, there may be a handful of times during the week where I have a really strong feeling about where the market is gonna go. And not only that, but I think that the move is going to be meaningful, so, I can really get something out of it.
Agnieszka 4:57
Oh, that’s so interesting. So, It's actually you sort of, you're trading less than when you were.
Gary 5:04
Much less, I mean, the biggest difference is the frequency is way less. And that is, that has been so difficult to adapt to, it's taken me time, and yah I'm getting better at it, I'm still, I'm still adapting, because part of me, will never totally let go of what it was like, you know, to be active. It was like, it was fun. It was it, you know, I've thoroughly enjoyed that. But this is, this is totally different. It's not market-making, and it's not even short-term proprietary, you really gonna have to be taking somewhat of a view, well beyond just the next 24 hours. I'm not saying that there isn't scope for, for some short-term trading, of course, but I think on balance, you're gonna make more if you're looking to capture bigger moves, and not necessarily doing the micromanaging, that you do on a market making desk or elsewhere.
Agnieszka 6:01
Yeah, I can compare it to when I day trade, you know, and I evaluate and look back at the bigger picture of, you know, the moment in time that I trade a momentum stock, and then I look at the bigger move. It's just so revealing, like how much you can make yourself, you know, emotional and crazy about this little move on, I don't know, five minutes or one-minute chart? Well, in a bigger picture, you think if I would just get in here and stay for a few days, I would not lost all my emotional capital, and I would have much more money. You know.
Gary 6:37
Absolutely. I mean, you hit on. And that's a great phrase, emotional capital, which I think is overlooked. Yes, obviously, we all do this, to make money, we want to be profitable doing it. But there's, there's emotional capital that you expend as well. And you have to make sure that that's being used wisely, that you're not just burning yourself out or spinning your wheels. And the biggest reward, I don't think and, obviously, there are exceptions. But generally speaking, I don't think it's reward, it's gonna come fly, be able to predict the next hour's move, the next five minutes of me, you can drive yourself crazy doing that, unless you're doing that in very significant size, I'm not sure that it's going to really be that productive anyway. Whereas, if you're, if you see a bigger moves in whatever it is, whether it's Tesla, whether it's a currency or whatever, and you're not rushing yourself to make the money within 24 hours and saying, Oh, the P&L has to be made by Tuesday morning. If there isn't that sort of time limit on, I think you have a greater chance of success. In other words, because the move doesn't happen immediately, doesn't mean that it's not going to happen. And because it hasn't happened by the end of the trading day doesn't mean that you should take the risk off either. And so yes, that's kind of a place I got to eventually, but literally trading less frequently was much more productive. And then trying to couple that with what I have, you know, less frequently meeting when I really have strong conviction. And then backing myself, trying to back myself accordingly, instead of just trading elective with a normal size might be if I have like an idea or hunch or whatever, actually trading over and above that, a bit more, because I really have a high confidence level. And because I know that I've been disciplined, and stayed away from a lot of what I call the garbage trades, of you stay away from the junk, and you have more, both actual capital and emotional capital, to invest when it counts, and I think you almost feel psychologically entitled to it. And so you know, what, I've been, been good, I haven't wasted it on on junkie trades, I’ve been patient, this is what I've been looking for. And we're gonna do this. And If it doesn't work, you know, that's okay, you're allowed to get it wrong, you'll have to get out of the mistake, if you make a mistake. Because if you take time, if you have 10 trades provided at the risk-reward ratio, which I haven't really gotten into yet here, but provided the risk-reward ratio is good enough. I mean, it's not easy, but my preference is to look for three-to-one. And if you, if you're looking to make three times what you're risking, it's really an incredible figure. If you do the math, you can actually be wrong 70% of the time, and still, make money. So, it's not in my opinion, it's not about being right like all the times, of course, we all want to be right as often as we can, but that's not the requirement.
Agnieszka 9:46
Yeah. And that's what actually stands us in a way, right? Trying to be right all the time.
Gary 9:51
Exactly. And I think this is where, you know, you can get into, can get into trouble. Whereas, if you're trading less frequently and then if, if you're really focusing on those higher quality trades, or hopefully you're going to be making three times what you're risking, I just think you're in a, you're in a much better place. I think the difficulty that a lot of people have with that is that if they feel that they're sitting, they’re sitting on their hands, they might feel like they're doing nothing. They're not being productive.
Agnieszka 10:19
Exactly. That doing thing, right?
Gary 10:21
I can’t make money if I'm not, if I'm not in the market.
Agnieszka 10:27
Yes and this is exactly you're hitting on the points that I, they might seem so obvious, right, but they are so deep in our belief system, how we achieve success, how we make money, like we have to do something.
Gary 10:41
Exactly. Those words, we have to do something.
Agnieszka 10:44
Yes, hard work means more money, but in trading, it is the exact opposite,, I like to compare it to fishing, if you go fishing, you just sit there and wait for the fish to come to you, you're not jumping into the water running behind the fish, right? And you have no guarantee and no idea if you're actually gonna catch something. But once you catch something, then you take action, right? So, what I wanted to ask you, from a professional trader point of view, right? Do you think it is realistic to think that trading for a living is actually possible for regular people, like, you know, retail traders? Or is it just a dream? Like, if you, if you look from the perspective of like you worked professionally, so many years? Are retail traders being seen as like, what, what are you trying to do?
Gary 11:35
I think the way I would describe this, I think it's, I think it is possible. But I think that it's only possible, if you're prepared to quit to take quite a bit on onboard in terms of discipline, in terms of preparation that you need to do. If you're prepared to take on things like mindset. And I would argue that a lot of people aren't prepared to do that, that extra work, that to me is the real work. Being able to maybe sit in front of a screen and read and learn, do some research, you know, put some thoughts together, actually not trade, I think to make money, a lot of what you have to do is it can sometimes be very unsexy. But I think it's not going to be for it. It's not going to be for some people because of that. In other words, for anyone who thinks that the route to doing this profitably is like, as you suggested, just trading constantly and equating trading constantly with working hard. That's not the case. And I think that there are a lot of people who will fall in or fit into that category. So, realistically speaking, I would say probably, you know, for the majority of people, it's not realistic. And when I say majority, I'm not saying that 90% of the people are going to fail, I don't, I don't think it's that. We all know what the statistics are about strengthening platforms and how many people lose money. But maybe a more positive way of phrasing it is that, if you are prepared to have a process and work on improving that process, and operate with discipline, both maybe in trading and other aspects of your life, that that's not going to guarantee you of success, but that's going to, that's going to increase the likelihood of success. And then getting back to what we've said before, is the element of time. In other words, if you have time on your side, if you're able to allocate a period of even years to get good enough. That I think, can work. The issue is that for many people that, that isn't realistic, they need income now, they can't just give up their day job. And then so I'm gonna spend the next three years, you know, barely or barely covering my costs, they have to live, they have to eat. That's why I think for a lot of people, it may not be realistic. If you can do it in the beginning, such that it's a supplement to your income rather than maybe being wholly dependent on it. I think that increases your odds of success. But, I mean, I don't think there's any quick route and that's the other thing. Anybody entering this, if you're looking for a quick route, it's not going to happen unless you have tremendous natural talent and of course, there are people like that. I think they are the exceptions.
Agnieszka 14:35
It happens, right? A little bit of luck, a little bit of talent, sometimes it happens. But I think the success doesn't lay in the, you know, the first lucky trades or the first money you make, it's really in keeping that money.
Gary 14:49
Absolutely right. I think if you're, if you're willing to invest in a process of some sort, and that can be your own process, or a process that you develop, in combination with somebody, whether it's someone like yourself or someone else, that you have a better chance, because I think the success will come from a process that's refined and improved and developed over time. And, and the process is not something you just read a book and say, right, here's my process.
Agnieszka 15:21
That's theory right, now you need to practice.
Gary 15:25
Which, it's useful. I mean, it's definitely useful. It's definitely helpful. But it's in the practice. And this is, this is really another anecdote that I can give you. I'll mention his name, I don't think he’d mind me mentioning his name. Oliver Velez is his name, he’s been in markets for close to 40 years. And he's all, you're probably aware of it, he has all sorts of webinars on trading, he's got an expression that in the beginning, as crazy as it sounds, you might actually lose your way to success. And what he means by that, is that, you know, you make mistakes in the beginning, that are unavoidable, they are going to be made, because you're not born with the knowledge of trading. You get that through experience, and obviously, as you referred to earlier, it's a case of learning from those, so that you don't repeat those mistakes, but just a lot of mistakes that you're going to make in the beginning. I don't care how many books you read, you know, or webinars you watch. You’re going to make those mistakes, so what do you do with that knowledge?
Agnieszka 16:26
Exactly.
Gary 16:27
And can you, you know, do you have the psychological makeup, to deal with making those mistakes, and then move on from them. And I think a lot of people, it's, it's tough. I mean, I think, to be fair, I think for anybody, it's tough, but some people are better at dealing with that than others, and those who can learn from mistakes and not let themselves get too discouraged by them and not repeat them have a better chance of the end of succeeding.
Agnieszka 16:55
Totally, I think it's really the matter of taking things very personally and you know, that has to do again, with, with experiences that people have, and that are getting triggered on a deeper level. Because a lot of times what I see is that mistakes instead of being taken as feedback, and in a way to adjust the course, are being taken as failures, and a way to cut your confidence. And if you don't have confidence, your commitment is gonna also get less. Yeah. And without commitment, you're going to question everything. And then this whole process just collapses.
Gary 17:37
I think as well had the, the element of ego is important. And that, you know, we this, you see this often, people mentioned this dealing with trader psychology. But when we go to school, we're trained to be right, we're trained to get it right, you know, 90 to 100% of the time. So, entering a field, where actually, that's not necessary, it's okay to even be wrong half the time or even if you're you might even be able to get away with being wrong more than half the time. That goes against the grain. I think people, it hurt their egos, like, how can I have done that wrong? How can I get it wrong three straight times? You know, why did this not happen in my previous line of work, or my previous job, or in school? I was always a top student. And, you know, markets are different. It's not just about the percentage of times that you're right. Obviously, that helps. But that's not the only element. I think a lot of times, people's egos can get in the way and so I don't want to do this because, you know, I can't handle being wrong. I can't handle how it makes me feel being wrong. What that feeling does to me. You know, and I suppose it takes an element of humility, that as well to be able to say, yeah, you know what? I do get it wrong. In fact, I get it wrong often, but I'm willing to recognize that quickly, and not let it build up and fester.
Agnieszka 19:05
Yeah, and don't, don't make drama out of it. Because it is. It's a matter of focus, right? You're, you're wrong many times, but it is not about being wrong. So, why putting so much focus on it, the moment that you start putting focus on being wrong. Now you're only fighting to be right. So, and that brings a lot of traders into trouble, like if you take the wrong decision and start fighting the market. Now you're really wrong. All right, so let's talk about your trading journey. Did you go through the same struggles that every retail trader goes through as a professional trader, when you started? Or do those journeys differ, you think?
Gary 19:49
I think to a certain extent I did, I think anybody who starts out in trading, whether it's working for a bank or a fund or working, or just trading as on a retail basis. Certain amount of tuition that you like, if you like that you pay just through inexperience, I think, by virtue of being of doing it, through an employer, there were people who I could speak to who are more experienced than I was, you know, who I could learn from, and that, you know, that ultimately made it a lot easier. And sometimes I could learn from other people's mistakes as well. In other words, like I was able to in different environments to see, you know, not only what people did that was positive, but also people did negative and learn, you know, what to avoid. And that was, that was very much a process, and it never ends, by the way. I mean, in my opinion, it's, that's an ongoing process. And I think, when I switched to just doing it on my own, completely, there was a little bit of backpedaling, and I have to almost sort of like review and then sort of, like, almost view myself from the outside. And say okay, I don't have somebody that I can, let's say, necessarily bounce ideas off of or talk to you about this. What am I doing here that's working, what isn't working? Why? What habits need to be improved, or what habits need to be eliminated? And it is different when you're doing it on your own. And I think it can be, for a retail trader, it can be scary. First of all, you have to have the, the willingness to want to look at yourself in that way. And that's, some people might not want to do that, you know, they might want to have to be self-critical.
Agnieszka 21:38
Especially if you're starting and you're not even sure how to do it, you know.
Gary 21:42
Exactly, exactly why then, which, you know, that's, that's an argument for if you're new, completely new to this to do seeking out some sort of guidance. And it's an issue of finding somebody that you can trust, you know, to work with them. And I do feel that ultimately, as a trader, whether you're working as a retail trader, or whether you're working in a fund or a bank, it all, it ultimately has to be your own. In other words, you ultimately have to come up with your process, your methodology, you know, you can get people's opinions, you can get the feedback, but you can't just be executing someone else's process, or someone else's methodology. You can take onboard suggestions that they make them, you ultimately have to make it yours. What am I, how does this work for me? Do I really believe in this? Or am I just doing it because someone else says I should do it? Am I buying this because a very experienced professional, who seems to always be getting it right, is buying it? Or am I buying it because I really believe that it's going up?
Agnieszka 22:51
Yeah. And I think it's pretty difficult to make that judgment, especially you know, when you're not sure if what you're doing is, is right, because you're you're not making money yet, right? And the second point that you have touched upon, to let someone else look at your process, what you came up with, that requires vulnerability, because that is pretty much absent in the market, because all you see, is all the money that people that, all the money that traders make, right? There is not many people really showing, hey, I made a mistake, and this is what I've learned from it. So, you kind of keep it to yourself and hope that one day, maybe you'll get it.
Gary 23:30
FOMO, I think can, is probably the biggest, the biggest obstacle. And leads to the sort of negative thought processes that also might make you less receptive to, you know, having somebody examine your process and say, you know, you need to be doing this better, you need to be doing that better. Business, as you mentioned, you know, you look and say, Oh, God, all these other people seem to be making money. So, you know, how come I'm not? Or, you know, what do I need to do to like, make that happen? As opposed to like, taking a look at the process first, and then refining that to a point that puts you in a much better position to make money more consistently.
Agnieszka 24:15
Exactly. Yeah. And have you ever questioned yourself as a trader and in the professional trading world, like what is the success because obviously for a retail trader like as long as I make money and, and I'm consistent with that, you know, so I have some profit at the end of the month, and usually people have some kind of an amount in their head? Right? That's, that's success. What is that in a professional trading world?
Gary 24:43
I think two things, I would say one, one, longevity is one. If you're able to do it over a sustained period of time, I think that's a measure of success, perhaps, as much or even more than the absolute amount, you know, that you make. And then I think another measure of success is, are you getting incrementally better over time? And I don't necessarily mean, like, today versus yesterday, I'm thinking more of, you know, year over year or, you know, can you actually see real progress over a three to five year period, you know, compared to what, you know, the way you were before, before and, you know, I, there are many times where I have questioned myself over the length of time that I've been in the business, probably less so, in the early to mid years, where I was very heavily involved in market making, and where markets were less or less electronic, as markets became more automated and became you’re more in competition with computers in a way to try to react to news on it became a bit harder. Yeah, I think there was there was, there were more occasions where I might question, am I myself, can I still do this? Do I have, do I still have, you know, what it takes or to, you know, to carry on doing this? And that's where you need the benefit of time to be able to kind of evaluate your process and say, okay, I think some things need to be improved here, I can't just keep doing what I was doing before, because the regime has changed. And to try to do that without, like, being angry about the fact that the regime has changed. Kind of like with mobile phones, you know, when we went to from rotary phones to mobile phones, that there was never any going back. And, and technology is the same in markets that we were never going to go back. Or before they ever became fully electronic. And market structure has changed. So, that requires changing with it. And it's still changing. You know.
Agnieszka 26:52
It will be changing fast, as we, as we talked about, is just changing faster and faster.
Gary 26:55
Exactly. I mean, and the algorithms get better and better and faster and faster. So, you know, ways of doing things that were successful 10-20 years ago, may not be as successful now. So yeah, getting back to your original question. I think longevity is a, is a measure of success and your ability to learn from mistakes. I'll go to you, it's sort of recognizing that something needs to be changed, and then implementing that change.
Agnieszka 27:26
And I hear you saying a lot about process. So, going back to the process, even when you question your, yourself and your confidence about yourself, it's going back to the process. It is not questioning yourself as a person, it's how can I do it better? What can I do better?
Gary 27:39
I think process is everything. I actually think that too, not to the full extent, but I think that certain extent, I think process determines outcome.
Agnieszka 27:50
Yes, assuming you can follow it.
Gary 27:52
Yes, absolutely.
Agnieszka 27:56
So, for everyone who is listening, I really want you to take those words from Gary, very deeply to your heart, because a lot of times what I hear from traders is frustration and a lot of high expectations of the progress. So, if things are not changing, or not progressing fast enough, and I'm really talking about going from zero to hero in, let's say, three months, which is a long term, a lot of times it's a month or you know, matter of weeks, you're getting frustrated. As a professional trader, you're talking about improvement over the years. So,...
Gary 28:38
This is it over a period of years, weeks or months. And I haven't really mentioned that so far in this conversation today. But I think something else is to try to accumulate little things that give you some sort of an edge. You know, whether it's information, whether it's your physical fitness, you know, whether it's your diet and it just cumulate bits and pieces in it just even as simple as being able to identify sort of what podcasts or what webinars you think are really good and what ones aren't so good. What is helping my performance as opposed to what is not. It's not just about okay, trading a head and shoulders pattern isn't working for me. I mean, alright, that's part of it. But process is a lot more than just which chart patterns, you know, you're told that process encompasses so many things.
Agnieszka 29:31
Yes, I always think that, and that's what I teach my students, we look at the whole lifestyle as holistically, basically, I'm saying trading for a living, it's a lifestyle. It's not a job. Yes, it's a business to trade for a living, but it's a lifestyle. And every single element of that lifestyle has to support that performance. It's just like, being a professional athlete, right?
Gary 29:55
I totally agree with you on that.
Agnieszka 29:58
It's not just going to the gym for two hours a day, it's like everything around it has to support those, you know, pretty much few minutes, maybe when you are in the trade, because obviously, you're not going to be hitting, I mean, some people do hitting buttons all the time, right? Buy and Sell. But it is really picking those moments, where you know, okay, now I'm absolutely focused and convinced, to put everything, 150% into that trade. And, you know, just like an Olympics, you train the whole year, and then you have the moment of your performance, pretty much.
Gary 30:32
Accumulating, like positives are things that can help, your performance. You know, they can come from all different areas.
Agnieszka 31:15
Totally. You were saying that when you work for yourself, it is easier to stop. But actually, what I see from traders who are still struggling, it is the opposite, right? Because the moment that they step over to, I have to make money trading, they think they have to be there all the time. Because otherwise, how are they going to make money? And that detachment is so difficult, but it actually brings them to the attitude of being desperate. And that is never a good adviser in trading, to be desperate.
Gary 31:15
I completely agree with you. And I think that there's definitely a distinction between, say, literally trading to pay the bills, because that is, effectively your full-time job, as opposed to trading is not necessarily as a hobby, but it's sort of a supplement to your income, or they're two very different things and different levels of pressure. And I agree with you. But if you're trading out of sort of necessity to pay that bill, it affects your judgment and can affect your judgment. That's something to take into account, when you consider if, if you want to do this. Do you, do you have the capacity to wait it out? In other words, while you learn your trade? In other words, it could take you a year or two maybe even longer, before you're making what I would call meaningful money on your own? And are you in a place to be able to afford doing that, and without getting discouraged? Because if you're not in a position to do that, then you are going to be making very pressurized decisions, and probably not the best decisions. And I think you have to be honest with yourself as to what you can afford? And do you have the capacity to take the time to learn how to do this properly? Or maybe you don't, and maybe you have to accept that I'm going to do a job to provide me an income and then maybe I'll trade as a supplement to that. But not rely on it to pay my bills, until I demonstrate that I'm good enough to do that.
Agnieszka 32:49
Yes, and I remember that when I started. And I've read that book, I think it was Trading in a Zone. Yes, that's, that said, you need two years of income. And everyone was saying that. So, you just need about two years for you know, savings. Just to be sure that you can actually trade for a living, so you don't have that pressure. And I thought that I would be different. I'm like two years? This is not going to take me two years. Absolutely. That it absolutely did.
Gary 33:24
Interesting because I, I've actually come across people in the market, including some experienced professionals who've been in the markets for as long as I have or longer. I mean, one person that I've come across his claim that it took him actually five to six years. You know, before he, he got to a point where he felt really, really comfortable with what he was doing. And you know, he says, the next 35 years have been very productive. So, okay, yes, he was relatively young when he began that journey and maybe one year 23, 24, 25. It's a bit easier to say, okay, I'll take that kind of time because you don't necessarily have children to support and all that. But the point was, he had that time and he utilized it. And he benefited from it. But I mean, routine, routinely. I've never heard anybody say that, oh, this is something that they just get within six months. I mean, of course, there are exceptions, maybe people who just have a fantastic natural talent, but I think for most people, it's time that has to be invested. And not just like passing an exam or taking a course or whatever. It's observation and experimentation.
Agnieszka 34:41
Yeah. And, you know, improving too.
Gary 34:44
Seeing what works and what doesn't work.
Agnieszka 34:47
Exactly. Because if you do, if you keep, you know, you can take 10 years, and but if you keep doing the same things that don't work, maybe it will take you 20. Right?
Gary 34:57
I think this is it, I think what you hit upon is, I think it’s a major piece of the whole puzzle, which is identify what's not working, but not only identifying, saying that it's not working. I think it's difficult for people to do that, myself included, when you use strategies before that historically have worked, and then you encounter conditions that have changed, that make the strategy less useful? It's difficult, because I think human nature be okay, I'll wait, I'll stick with the strategy, I'll just wait. Because eventually, the market will return to what was before. But that's dangerous, because sometimes, sometimes conditions never return to what they were, I mean, as an example, is now. I mean, we may never see zero interest rates. I mean, we're, you know, we're in a very different environment than we were pre-pandemic, or even a year ago, and, you know, volatility regimes can change. And if you're not willing to accept that, I think you're really, really setting yourself up for you know, for obstacles, because not only you're not going to make money, then you're going to draw down. And it becomes even harder, because then you've got to recover, just to get back to break even again, before you can start money again. Probably, I think it's easier for people to accept that something's not working, if they can identify why. If they can sell, okay, the strategy isn't working, because I'm trading breakouts when the VIX is trading between a range of 18 to 22. And, you know, the chart suggests that when certain levels break, the market should follow through and continue and fundamentals back my view. But if we're in a very low volatility room, regime, you, you know, you may have a lot of false breakouts, you know, you may have a lot of situations where I mean, I think you can say we just have one of the stock market recently, where we began the year very strong, even though there were problems that we could all identify, not just Ukraine, but just all inflation, and just there were issues, if the market kept rising and look strong, and it was difficult, because you say, okay, fundamentals aren't great, price action is positive. And, you know–
Agnieszka 37:21
But the feeling wasn't there, right? The conviction.
Gary 37:25
Exactly, the conviction wasn't there. And I think part of it as well was that we had been in a low volatility regime prior to the last two days. And that was also going to work against the upside breakout, but it's difficult for markets to really race either higher or low. You know, if the VIX is that low, you have to ask yourself, okay, what am I going to do on that? Am I going to keep trading? You know, breakout strategies in this environment? I think the answer that is probably, not necessarily straight, yes or no, but I think the answer to that is probably, maybe I'll trade breakouts sometimes, but less often. I'll be more selective in my criteria, lower my expectations about how far you know, I think the market can go, in other words, make changes, either to your strategy or the expectations around the strategy or both. But if you reach a point where it's continuously not working, and I think you have to accept that and say, I'm not going to do this anymore.
Agnieszka 38:27
Yeah, having the flexibility to pivot, right, and adjust and be flexible.
Gary 38:32
I'll give you a great example of something that I've experienced in recent year and it's been going on for recent years, I would say, over the time that I've been in the business, historically, when you had a major technical breakout, and then you had a retracement to the original breakout level. This is let's say the 1980s 1990s, maybe even 2000s, that return to the breakout level, original breakout level would often be an opportunity, it would be an opportunity to like add to the position and like it took some off, you can start to put it back on and you wouldn't hesitate to do that. You just say wow, this is Uh, thank God for this, like what, you know, how wonderful. And you would never think that oh, you know, actually, it's not an opportunity, it might mean that breakout was false. And because for many years, you got continuation, you know, before markets became more mature and more sophisticated and more automated if you like. And, you know, all of a sudden trend, trend following over time, became not such a guaranteed strategy. And I think especially, let's say in the last three to five years, where you've had monetary policy, so really, really dominant over markets, you see this a lot, where if a market breaks out, and then retraces, most of the time, I don't want to re-enter. If it actually returns to the original breakout level these days, I'm not saying that I'll never re-enter the trade. But I would say seven or eight times out of 10, I'll say hang on a minute, there’s a reason why the markets not following through, why it's not continuing and an example that when we broke up, say, 4000 on the S&P, whatever was in January, February. I financially did well, I close to 4200. I said to myself, if we get back down to 4000, I'm not going to be so quick to buy that dip. Because I've seen this time and time again in recent years. And l and below, what's happened? You know, we've now gone global 4000 below 3900. And I'm not saying that the market is gonna like crash. And what I'm saying is not even in response to what happens SVB. But it's an observation. But it wasn't working for me in recent years. Buying the retracements. I stopped, I don't do it. Unless I have a really good reason. You know, the market retraces to the breakout level. And there's something going on in a related market or a piece of news that supports the trade, then I'll consider it but I'm not robotically doing it as I would have 20 or 30 years ago. It’s a huge change and it's disappointing in a way.
Agnieszka 41:11
Of course, it is. Because it's not, you know, it's not predictable, and you cannot assume things, but I think this is the part of trading that is so important to realize that it's all about responsibility, right? Your ability to respond to what is happening, not just kind of go on automatic pilot, because there is always something different and you, you just cannot keep assuming things. You making your thesis, but you have to acknowledge that you might be wrong. It's just like with life, instead of living on the automatic pilot, just experience what is actually happening, and then respond to that. Right? Instead of reacting to that.
Gary 41:51
Absolutely, I think it was easier, say decades ago to like, formulate a strong thesis, and just kind of stick with that and milk that and hope that it would persist for a number of weeks or maybe longer. But you know, if you look at what goes on and markets, even before the pandemic, certainly since the pandemic. The narratives can change so quickly. You know, sometimes in what, 24 hours, 48 hours. So, if you're looking for a sustainable trend, sometimes that's not going to be there. I mean, all right. We had one an interest rates last year with the trends just were relentless. But I would say more typically, in the current environment. Trends don't last that long. And part of this, I think, is because of technology in the sense that we all process information so quickly.
Agnieszka 42:42
Yeah, exactly.
Gary 43:39
It just takes a nanosecond to process it. So, it's reflected in prices quite quickly. And I think that's why when, when prices break out and then fail, and return to their original breakout levels, and maybe put it's the same the price order. You know, we all access to instant information. We don't need to wait for research reports to be physically mailed to us, we just click and we can read all that we want about what's going on. So, I think that, that changes the speed with which markets move.
Agnieszka 43:13
And the character of those movements too, but I think that somewhere inside people there is this nostalgia of hanging on to the old and things being predictable and like attaching yourself to it. And that's what is causing the issues too, to detach and to move on, to just say, Okay, no, it's not like this. It's like that, right? That ability to pivot. And when you don't have as a person, that agility, but the market pivots all the time. Now you're not in alignment with each other. And I think that is causing a lot of issues.
Gary 43:53
Absolutely. I think could almost be more of a problem for more experienced traders in a way. Where it's somebody very young or new to the market doesn't have those previous ideas as with the old habits to cling on to, so he might, he or she might find it easier to sort of change and adapt whereas the more experienced person, you can be resentful about it.
Agnieszka 44:15
Yeah, because people don't like changes.
Gary 44:19
No. I think as well, sometimes, you know, making the pivot means, A - identifying that the previous thing you really doesn't working. And it might mean that there's a pivot gap, before you find the new thing to replace the old thing. Not as simple as you go to sleep, out with the old and wake up in with the new, it might not be that quick, you may need some time to come up with a methodology or an approach that suits you and better suits the current regime. And I think also that might frighten people or anger people, because I'm, I wasn't supposed to be this way. I'm not supposed to. What do you mean, I can't trade for two weeks until I figure this out? And.
Agnieszka 45:00
Right, exactly like, how am I going to make money?
Gary 45:03
Exactly, exactly right.
Agnieszka 45:07
Yeah, yeah. So, um, being a professional trader, have you ever felt it, I made it. Because we talked a lot about having success. And traders have this idea of the day that will come at some point, when I made it. And I always tried to bring over the message, day like that doesn't exist, because that would mean that once you reach it, is then you'd have can relax and just not work hard anymore. And I don't think it exists in trading. But have you ever had that moment? Okay, I made it, or is there always that uncertainty?
Gary 45:49
I, I think there's always an element of at least for me, there's always an element of uncertainty. Although there have been, I think there have been times to in my life where, when I felt like my confidence has risen. And like my competence, you know, has risen, that I've been, you know, through experience really knowing when to recognize situations that are in the react to those situations faster, when I recognize them. But I agree with you, I've never felt, where I reach a point and I go, oh, wow, I feel like I've got this figured out. And I can therefore allow myself to lower my discipline or get lazy with my process. I say this all the time. I think it never ends. I mean, whether you're 30, 50, 70, or during this, this, you know, you're always growing, and there's always room for improvement. And I think it's better to look at it that way, instead of saying, I want to reach a day where, you know, I can just turn on the light switch, I can say I've made it. I mean, I think, if that's what you're looking for, I think you're gonna be disappointed. Whereas, if it's more a case of just ongoing, incremental improvements, your results and your process, you're going to be happier and I think you're going to do better, in the end, and also accepting that you're never going to fully figure this out. Never. I mean, even the best, you're never, you know, they're always going to be times when you get something dead wrong, even when you thought you had 100%. You know, properly analyzed, and I think it requires that sort of humility as well. And rationality to say that, you know, that's okay. You know, the goal isn't to be like, the Lewis Hamilton of trade.
Agnieszka 47:33
Right. And most of traders who are getting into trading is because they like challenge because they're ambitious, right? But then the moment they're there and it starts to be difficult. The focus switches to, when it's gonna stop to be difficult?
Gary 47:52
Exactly. I mean, like, Can you, can you just embrace the fact that it's not just gonna all of a sudden become easy? Can, Can you just take that on board and say, okay, it might get a bit easier, but it's not going to become easy? And I'll tell you why it won't be easy, it won't become easy, because conditions are always going to change. And I think is part of what makes it challenging and difficult. Is that regimes change, conditions change, and I think now faster than ever. You know, because of what I said before because of the availability of information. You know, narratives and trends are changing like at lightning speed compared to how they did before. So, you could find yourself maybe making some money in the early part of the week, but if you're not careful to sort of recognize the shift in the narrative, in the middle of the week, in a lot of parts of the week you can end up giving a lot of that money back.
Agnieszka 48:49
Yesh. So, what do you enjoy about trading?
Gary 48:53
I think, I think the, what you said the fact that it's a puzzle, you know, that you're all and you're trying to put a lot of different pieces together. And that, you know, it's not, it's not easy. If you like, I think that's what you said, a challenge. It's almost like, it's gonna sound strange, but like, you know, with being with a woman who challenges you, who is complicated or not, you know, whatever, just.
Agnieszka 49:22
Yes and I love that analogy, because I always say, don't be easy. Just don't be easy, you know, be a little bit difficult. Don't, don't be desperate, just let the market convince you, you know.
Gary 49:35
Exactly, right? In other words, that's a good way of putting it. In other words, let the market show you something that warrants putting, you know, putting the risk on? It's nice also, when you're proven right, I have to admit that it's, it is a very rewarding feeling if you have an idea, even if it takes time to be born, right? So, that, I guess, probably the thing is, it never bores me. I've never, after doing this for all these years, I still I never get bored of it. There's always something different. The fact that there's so many things, moving markets, whether it's political politics, economics, technicals, and I like that, and I feel privileged in the way that to do something that, that I find interesting.
Agnieszka 50:17
It's like being in a relationship, in the honeymoon phase for always, right?
Gary 50:24
Yes. Yes, it is. Frustrating at times, but on the whole. Certainly don’t get bored. Grateful for that.
Agnieszka 50:35
Well, that brings us to the end of the episode. And thank you so much, Gary, for joining us. And for this candid conversation, I hope that it will help traders who are listening to this to gain some perspective and understand that trading is a never-ending story. It's not once done and that’s it. It's every day putting effort, putting focus and that's also what makes it so exciting.
Gary 51:07
Yes, I agree. I, thank you so much for having me. I really appreciate it. And I hope that you are able to communicate with the people you work with and help them in their journey to develop and you've made a lot of points here. So, hopefully, people will pick up on that.
Agnieszka 51:25
Thank you. Thank you so much for listening. And thank you so much for joining Gary. Thank you so much for listening to the Confidence in Trading podcast. If you enjoyed my show, please rate and review it on Apple podcasts. And be sure to subscribe so you can come back for a real live conversation in the next episode. Until then, this is Agnieszka Wood from Ahead Coach. And don't forget you too can realize your dream without losing yourself and your confidence in the process. Thank you so much for joining us today. Thank you.
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