IL N PR IO A IT ED

The e-magazine created especially for active spreadbetters and CFD traders

Issue 15 - April 2013

A Gold Mining Sector Special

We hunt for potential bargains amongst the rubble

Dominic Picarda A US tech focus special

Currency Corner Is it time to buy the pound?

Zak Mir interviews Vince Stanzione

Tom Winnifriths Conviction Trade for April

All your favourite columns including the chance to win 1000 in our Guess the FTSE month end competition

Editorial Contributor

Zak Mir Interviews - Vince Stanzione

Zak Mir Interviews Vince Stanzione

This month Zak interviews self proclaimed spread betting guru Vince Stanzione.
There are cynics out there (including our beloved editor!) who suggest that those who can trade do, and those who cant advise. Do you agree with this and are there any financial markets gurus you follow or respect? I agree 90% of those who offer seminars, tip services, advising etc. cannot trade or invest themselves and are getting rich off the how to bandwagon. It can be argued that I fall into that camp as I wrote my first course on spread betting in 1997. I was however already wealthy at that point, both from other businesses and investing. Most of the people I respect are dead, but Ralph Acampora and David Tepper I follow today. Much is said about trading for a living, but is it really worth it given the anecdotal evidence of a failure rate for most people of over 90% and so the risk reward ratio doesnt stack up? What can those who do, in the face of seemingly insurmountable odds, decide to embark on this pursuit realistically expect to make? I would never just be a full time trader; my experience is that the more time you spend trading the more you lose. My style is trend trading and so I can be in a trade for weeks, months and even years. It means that I dont have to watch a screen all day. I trialled a Bloomberg terminal a few years ago and gave it back as it was simply too much information!

She knew nothing about shares or markets, but she did know about profit margins, buying from the flower market, having too much stock and so on. So really her life experience was helpful when trading stocks. I did a study on the most successful age groups, see: http://www.express.co.uk/finance/ city/350636/Silver-surfer-traders-put-youngstersin-the-shade What would you say that the minimum requirements are for successful trading financial, knowledge, mindset, account size?

I do not use one system, I would describe myself as the Bruce Lee of trading I change and adapt, but at heart am a trend trader, although sometimes can be contrarian, and I also pay heed of seasonality and sentiment. You may not have just one system for taking positions, but of course what kills many a trading account is not the winners but the losers that outpace them. What are your key signs that you were wrong and it is time to get out? Is it just a matter of a certain amount of money, or are there other cues that tell you that the factors that brought you into a trade are no longer valid? Do you find it easy to take a loss something which bad traders have great difficulty doing.

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My experience is those desperate to make money never do, that is why having a second income helps. The majority of my students are over 50 years of age and are already fairly wealthy I dont deal with the unemployed or last chance hopers! So you are effectively vetting your students before they start. Does this mean that the demographic they represent have the best chance of winning in the markets? It clearly helps if they have been successful in their life to date, is that what you are saying?

I think the minimum to open an account these days is 20,000; it can and has been done on less, but really that is what you should be starting with. Knowledge wise, really sometimes less is better than more, my workbook takes the assumption that you have never traded before. Mindset? Really someone that does not get upset when trades dont work out, losing is part of the business and people that are not in a hurry to see instant results generally are more profitable.

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Trading in an incorrect way is very similar to smoking. You get the buzz from the occasional rewards, which keeps you hooked on a path which otherwise is doing you little or no favours.
Yes you are so right, success breeds success, not necessarily that they have trading experience. I will give you an example: I had a lady I taught to trade that ran a successful florist shop.

Returns are also not evenly distributed, trading is not a job or pay packet where you earn X a month, some months you will make nothing or lose money, other months you will do very well.
Returns are also not evenly distributed, trading is not a job or pay packet where you earn X a month, some months you will make nothing or lose money, other months you will do very well. Anyone that is self-employed will know its not a smooth curve. I think trading is like dating, if you are desperate for a date it shows and women dont want to date a desperate man! If you are desperate to make money, you overtrade making trades when you should do nothing and normally it ends badly. Can you describe to us your trading style/ system and why you think it gives you an edge over the markets?

Starting out, I hated taking losses, I would hold on and hope that those bad short term trades would reverse, of course they largely became bad long term ones! I would cut the winners far too quickly as we all like instant gratification. As I matured, I learned to do the opposite. I do have a fairly mechanical exit, so if a trade is not making money and falls below a certain point it is cut and in many cases I reverse a trade from long to short and then back again. I have done that a few times with Netflix (NFLX) the last three years. I have over the months interviewed several leading figures in the markets, whether trading for themselves or managing funds, and one thing has stood out which I did not expect. In general, it would appear they are successful at trading (a losing game for most retail traders) because they are exceptional either in discipline, IQ, knowledge or in most cases all of the above. In other words: just as they are winners in trading, they would be in business, the academic world or probably in anything they put their minds to. Is there any point getting involved in the market if you know you are not highly gifted? I am very interested in people and psychology. I made my first million from car phones by watching trends and what the yuppies wanted. I have no real formal qualifications. Yes, exceptional people, be it in sports, business, TV or trading are wired differently and in many cases have a different emotional make up. We dont really care about rejection or being wrong.

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You have been quoted as saying that your main successes in the markets have not come from day trading, but more from what would be called position trading / trend following.

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Editorial Contributor

Are such trades based on technical or fundamental triggers? Is there a typical set up?

Both, it is funny. The so called technicians often quote fundamental issues and I think they should be used together. My typical set up is a stock that is either hated or loved and then I start seeing a trend change Apple both up and now down is a good example. The impression given in the media is that you are something of a millionaire recluse who was successful in the business world and then came to trade the markets. Why do you want to actually help others make money shouldnt people find out for themselves as you did?

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I believe we are in a glorious time, the US economy will power ahead and the Dow could easily hit 20,000 or 30,000+ in the next 10 to 15 years.
Europe is worrying, however, the demographics are very bad too many older people being supported by less and less youth. Turkey though is the outlier as it has good demographics. So you think issues such as the banking sector, the Eurozone and a possible bubble in China will be resolved successfully? Arguably, the U.S. got us into the financial crisis in the first place via Sub Prime, and has kept us, economically, down with the Fiscal Cliff an issue which is still bubbling under the surface?

Focus swings back onto the PIIGS as the euro crisis deepens. Do you:
a) Eat less pork and consider becoming vegetarian b) Sell the Euro in expectation that the Eurozone will eventually break-up

selling computer games on tape. My dad was a hairdresser and wanted me to take over the business (looking at my own hair no way!), and so I got a job in FX as a junior in 1985 after I watched a program on BBC2, its here on the net http:// www.youtube.com/watch?v=q9brMMxI1RY. I then got wiped out in the 1987 crash and started the car phone businesses. Then I decided to have another go at investing in 1990/1991 (when I had money) and bought penny shares such as Next at 11p via an entity then known as Sharelink. I opened my first IG index account in 1990 and I still have the account today (its a very short account number!). But I learnt from others such as Jess Livermore, Jim Rogers and Nick Darvas, so why not pass my skills on? But youre right, traders must make their own mistakes, its part of growing up in the markets. Do you have a macro view on the UK / Western Economy, and is it as grim as the 20 year Japanese Zombie economic scenario that many people fear? Do you have any strong views on Gold, and especially equities now that they are back at multi year highs?

vs: My first business was set up at the age of 12

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Well if you read certain media, the world is always ending, so far the world has not (in fact wasnt it supposed to on Dec 12th last year?!) and if it does then you have nothing to worry about! But seriously, humans are very resourceful and adaptive, that is why we dont use a typewriter or travel by horse and cart anymore. The times I have read that oil is going to run out, yet truth is we have plenty and cars are far more economical. Here in the UK we have the possibility of the Scots leaving and the UK itself leaving the EU in 2017. Would you not be particularly bearish regarding sterling and also the bubble in Central London real estate? This, along with the regulatory issues in the City of London, give the impression that Zone 1 London may no longer be the Monaco style safe haven it used to be?

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economy will power ahead and the Dow could easily hit 20,000 or 30,000+ in the next 10 to 15 years. The new shale energy and biotech/healthcare discoveries are underestimated. I liked gold and platinum 10 years or so ago, but sold it all a few years ago bar a few Canadian Maple leafs. I dont own gold now as I think you can make more elsewhere. Also I dont buy that gold is an inflation hedge, so are stocks you would have made more in McDonalds the last 20 years than gold. I do still own some palladium.

vs: I believe we are in a glorious time, the US

Well a weaker sterling makes London property look cheaper, especially if youre from Norway or Canada. Markets normally overshoot up and down be it property, fine wines, art or classic cars, but then buyers and sellers regroup and prices adjust, basic demand and supply dynamics reassert. It is hard to predict if the UK would leave the EU, but I dont see the UK turning in to some Third World country. The UK is very respected in many fields such as biotech, fashion & design, television, music & film, tourism to name a few, and these areas can bring a lot of money into the UK.

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