I first met Nick Radge when, as a young trader working at Westpac, he picked up the phone when I rang down to the floor of the Sydney Futures Exchange to place an order into the bank bill pit. In the intervening 20 or so years Nick has worked for international banks in London, Singapore as well as here in Sydney.
With his wife Trish and a few colleagues he now runs a business, The Chartist, helping traders. He frequently shares his thoughts on Twitter as @thechartist.
So, given the market turmoil and his vast experience, I asked Nick if he’d be happy to share some of the knowledge and wisdom he’s picked up over all these years of trading.
Here’s what we talked about:
Business Insider (BI): Did you change your trading style in the days or weeks leading up to the British EU vote?
Nick Radge (NR): Personally no, as I have a high level of psychological fortitude and am happy to take on volatility within reason. I did lower margin on my short-term portfolio for the announcement but have lifted that now.
We did however advise clients to be cautious and wound down some of the shorter-term portfolios which are more exposed to short-term volatility. Longer term portfolios were left untouched as they provide more leeway and really need a significant change in trend to switch positions.
BI: Why do you think that markets reacted so poorly to the news that Britain had voted to leave?
NR: The rhetoric leading into the vote become quite positive which aligned with various polls and bookies. The market prices future events and was quite clearly satisfied that a Remain vote would prevail. Clearly it got is wrong so there was a significant rush for the doors.
The other issue which I think was very much overlooked, and perhaps not even considered, was the political vacuum that has now been created. This has created a high level of uncertainty around economic management and as we know, the markets don’t like uncertainty.
BI: What type of trading environment do you believe traders are facing now and over coming months?
NR: I suggest we’ll see heightened volatility for a few weeks and whilst a single day isn’t a trend, days like we saw on Friday can start new trends. I think the direction of some markets has now been determined yet for others it’s still up in the air. I would be watching for signs of demand or supply and where they appear. At the end of the day there will be a lot of opinion by the talking heads but trends should become reasonably obvious sooner rather than later.
BI: How does that impact your trading, if at all?
NR: It doesn’t impact us at all. We operate on a purely systematic basis and the strategies we use have been strenuously tested back 20 to 30 years and over many other ‘market shock’ events. Whilst no event is exactly the same we have no reason to believe that our long-term mathematical expectancy will be interrupted. The strategies will take defensive action if an when needed, but at present they’re operating as normal.
BI: If you could share one insight with traders who have never faced these types of markets before what would that be?
NR: If you trade long enough there will always be some type of black swan event and there will always be a slap across the face to remind you to stay humble. I had my first as a new trader in 1987.
What I have learnt, and what I suggest every new trader adopt, is a systematic approach to the trading process – like a road map. It guides you through the complete cycle – tells you what to buy and sell, when to act, how much risk to use etc. It removes the noise and therefore much of the emotion from the decision making process. Ideally this should all be validated on historical data. Once you have full confidence in your strategy and are able to avoid the noise then these events become more academic than career threatening.
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