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If you've been following us for a while there are bound to be questions you'd like to ask Andrea Unger...
Questions related to his personal experience as a trader, his successes (the 4 world championships he won), the mistakes he made, how he handles losing periods, or why he devotes so much time to study and research...
If so, then don't miss this video in which Andrea answers just these kinds of questions!
You'll find lots of useful advice based on his 20 years of experience in the world of markets that will help you learn more about the life of a systematic trader and how to handle the most important aspects of this activity.
Here are some questions Andrea answers in the video:
➡️What have been your best achievements and worst mistakes you've made in your career?
➡️What are the rules a systematic trader must give himself and how can he stick to them?
➡️How do you deal with a particularly "negative" period?
➡️What is the correct attitude to have when embarking on a career as a trader?
➡️If systems work automatically what need is there to keep studying and working?
➡️… and many more questions from the audience!
Enjoy the video! 😎
Welcome to this new video. I am Davide Tagliabue, one of the coaches at the Unger Academy. And today I'm here with Andrea Unger himself, our founder and the only 4-time world trading champion. Hello, Andrea!
So in this video, we are going to be talking about the life of a trader or, more precisely, the life of a systematic trader. And who, better than a professional in this field for over 20 years, can help us understand what it means to live in close contact with the markets?
Today I've prepared a few questions for Andrea, and if you have one, please leave it below in the comments.
Before we begin, however, I invite you, as always, to leave us a like to this video, subscribe to our channel, and click on the notification bell to stay updated on the release of all our new videos.
So, Andrea, let's start with the first question I'd like to ask you. We know very well that the life of a trader could be compared, as we often say, to that of a businessman. And during one's career, it's inevitable to run into mistakes. But we know that if we work well, sooner or later you will be successful. So the question is, what have been your best successes and the worst mistakes so far during your career?
So first, thank you for this opportunity to discuss the problems and the opportunities of a systematic trader. Now coming to the question itself, I actually most often speak about my mistakes because I strongly believe that we can learn much more from mistakes than from success stories. Success stories are motivational, of course, but in the end, we mislead the attention of our goal. Our first goal, we don't have to forget it, is not to be wiped out of the game. We don't have to be killed by the markets, let's say, okay?
So we have to control risk, first of all. And when we see success stories, of course, we are somehow pulled into the enthusiasm of doing maybe too much. And when we talk about too much in trading, this is often too much risk.
In any case, well, success stories... I don't remember particular days when I went to bed, "Yeah, I made it!" No! I can just tell you, of course, the four victories in the World Cup Trading Championships, a real-money contest. That is for sure an achievement, and I'm very proud of it. But apart from that, I'd rather talk about mistakes, and they are all related, more or less, to ignorance and laziness - laziness that implies ignorance.
I already recorded a video for our blog years ago where I talked about a mistake that I made on an overnight position, which not only was overnight, but it was also over-weekend and over-year because it was right at the end of the year.
My plan was to close all positions, so be flat, and start trading again in the early days of the new year, also because I believe that, especially from a systematic point of view, the last week of a year and also the first week of the new year are not very representative of the markets. They don't help very much in building up potential profits. So to take a vacation is not the worst idea in that case. Systematic traders, be careful because systematic traders rely on the statistical behavior of the market. They rely on what is normal in the market. So when the markets are not normal and during the period of Christmas, of course, everything slows down because people think about things they do think about, so the behavior is sort of... I don't say lazy. I'd just say "quiet," and it's not reflecting the real identity of the market. So, obviously, all our systems might become weaker.
So, actually, it's a good idea to stop trading and start again once things start again to be alive and kicking. I didn't do that in the past. And what's worse, I had a position open on the DAX future, European DAX future, 3 contracts, long. And I was planning to close that position at the very last moment I had, and I believed on the 31 December, because I knew American markets were trading, I think, a half-day short session. But okay, they were trading... But German markets did not!
So I didn't even check the calendar of the exchange just to be sure that everything was fine. So I just waited, and on the 31st, in the early morning, I sat down at my computer, and I looked with a strange face at my monitor: the market was closed. So okay, I couldn't do anything.
So the first thing I said was, "Okay, I have to stick to my system. The system is long. I have discipline, so I'll stay long". I couldn't do anything else. And the second thing I thought was, "Oh yes, but I am aware that there is a long story of studies about the long on holiday techniques, where entering a long position just before a period of holidays normally turns out to lead to a gain."
So, I said, "Okay, that's the right place to be. I am wrong because I'm an idiot! Because the market opened low on the first trading day of the new year and I lost a lot of money. I lost over I think €46,000 that day, the first trading day of the year. And that was just because I didn't stick to my plan. I had a plan. My plan was to shut down everything.
And because I had been too lazy to check when and how to do that, I wasn't able to stick to my plan, and I paid in the worst way possible. But this is not the only mistake, of course. I remember this just because it was my fault. Of course, you could say that the system was still along, the system was stopped out, and that was a trade of that system. That's correct.
But actually, knowing that the markets behave that way during the holidays, it would not have been a wrong idea to place a specific exit even in the system, in the code, just to plan to close the positions after a certain trading day of the month, during the month of December, for example.
But also, other mistakes I made are normally driven by my real laziness in staying in the markets, I mean, in paying attention to what I do, in under evaluating my plans, and, in the end, in sometimes taking too much risk. Just thinking, "Okay, but this will never happen, alright?" No, it can happen. And when it happens, it's very painful and expensive, normally.
Of course, I'll never make that mistake again. So I learned something. And I hope that telling our friends here would help even for their trading. We never have to under evaluate the potential outcome of a situation in the market because that's the most dangerous thing we can do. Because when we think that this will never happen, that is not a statement. It's a statement, but it's a wrong statement because it can happen.
Also, imagine the cap on the Euro Swiss Francs. Everybody strongly believed it would never move down below 120. It did, and it did during a trading day, and it did it based on the decision of the bank of Switzerland. So actually, everything was clean and clear, but it led to some disastrous outcomes for many traders.
I was personally hit, but it was not a mistake. I was hit on another instrument. But I should have considered the possibility of something like that in any case. So again, we have to consider everything. We have to consider, like maniacs, whatever can happen to be sure we do something, we put something in place to avoid that kind of happenings.
Very interesting, Andrea. We can also leave the link to that video in the description, of course.
Yes, maybe if you find it.
Yes, we will. So let's continue our discussion with the second question I'd like to ask you. I'd say it's a typical question for people who approach the markets with algorithms. So with specific rules. The question is about rules, but not the specific rules of our trading systems, but rather all those rules that each of us gives ourselves to better manage our job. So the question is, what are the rules that systematic traders must give themselves, and how can they follow them in the best way possible?
Well, basically, being systematic traders and relying on machines to do what we have to do, we have to be aware that we have to choose not the very best, but at least not the very worst. So we have to invest in our infrastructure.
We duly invest so that we have a product that we can rely on, and we don't have to, for example, rely on a cheap cloud server just because it's cheaper when we don't know how stable it is. If it's cheaper, there must be a reason. So let's check out. Let's verify that the technical specifications of what we choose are in line with our technical needs.
Same thing about the trading platform. Also in this case, we have to make sure that what we get in our developing activity is sticking to reality. So we have to make sure that everything we do is duly tested and leads to a real result of what happened in the past.
Because if we cheat, we are cheating ourselves. We have to be honest with ourselves in whatever we do. This is another important rule. There is no reason to create an illusion of wealthiness if we base that on a real illusion of something that is not true.
So we have to possibly invest in software and hardware so that we are sure that the machine will work duly, and we have also to put in place whatever possible to get an alert when things go wrong. I know you, Davide, for example, are a fan of any kind of alert telling you that something is wrong.
Okay, of course, we have to be careful, and we have to try to be careful about the important things. So to get an alert when data feed stops, for some reason. It happened to me, and I had no alert at the time. So... mistakes.
Mistakes we made before.
We have to get an alert if, for some reason, the cloud server or the server where we work on reboots for unknown reasons. That can happen, it happened to me, and I had no alert at the time.
So that's another important thing because if the server reboots, the server is still on, but most probably, all your working software will not work. So you are there in the middle of nowhere. And we don't have to try to save money on this kind of investment. I mean, we don't have to buy products directly from NASA, of course, but we have to find a good compromise and not plan on saving money there.
Also, the broker. The broker is important because we have to put our money where we are confident nobody is taking the money and run. And the broker has not to be chosen just among the cheapest in terms of the offer. But among those who offer the best technical features that we need, and who have good reviews on the Internet and many, many good reviews because you know, there are many people there.
So these are all important things, all rules that sometimes we forget, and we focus too much on the technical rules which you specified are not the ones we are talking about here. But there are rules to follow.
It's not a hard job to become a systematic trader. It's just a matter of being disciplined with a plan, again. I mentioned before the plan. I mentioned it again. And this plan has to include everything possible, so starting from the technical part, in terms of development, of course, in terms of a developing routine and check-out routine, but also in terms of providing all the necessary checks, in terms of building up your infrastructure. Because in the end, it will be your infrastructure playing with the market, you have to be sure that that thing works as properly as possible.
Yeah. Find the rules and stick to them.
Absolutely, yes. Because if you don't stick to the rules, there is no reason to build the rules.
Yeah. So I'm coming to the third question, Andrea. And I consider it perhaps the most sensitive, but also one of the most important. We said earlier that a trader's life has ups and downs, and in our case, the downs have a name. That name is drawdown. So speaking of drawdown, how do you deal with a particularly negative period?
Nice to see that you wrote "particularly" negative period. Because actually, I am in drawdown most of the time. Drawdown comes whenever you retrace from a new high of the equity. And I've never seen an ever-increasing equity line, unfortunately. So actually, whenever we have a new high, normally just right after, we have some losses that pull the equity down. What's important is that the new coming high will be higher than the previous ones.
But actually, if anybody, any trader looks at his or her equity, they will notice that most of the time they are in the drawdown. The problem is when this drawdown is longer than planned and longer than desired. Of course, "desired"... Nobody desires to have a long drawdown. So everybody would like to have new highs every day.
But there is also a plan where we can estimate what can happen, an equity line based on the past results. And if we do that in a pessimistic way, which is better, we have something that we can think, "Okay, this is sort of a worst-case scenario. So what happens if it becomes worse than better?"
The point is, in my personal life as a trader, I had bad drawdowns and prolonged drawdowns. I can't tell you exactly how long they are. I must be honest because I've not measured the length of the drawdowns, but they were long. And they didn't directly affect the outcome of a single year. I mean, they were longer than one month, they were months and months long, but they were across years, and they came after a great run-up.
The problem was, getting back to my first question, that that run-up was an outcome of overexposure. I wasn't skilled enough. I had not enough experience to understand that too much is always too much. And when it is fine, you are happy, you dream about your yacht at Hawaii. But when it goes wrong, you suffer twice as much.
I remember a funny joke about that. It was in 2011, I believe, and I was doing well, and Larry Williams, the legend of trading, asked me to take a test prepared by his son, who is a doctor, a psychiatrist doctor somewhere in the States. I don't remember. And he prepared this psychological test to identify the profile of the winning trader. So I got a number of questions, mixed questions, and everything complicated, to be sure I was telling the truth. And I got the answer from his son, Doctor Jason Williams.
And the answer was, of course, positive. I mean, the only thing was that I should probably take more risk because I was a bit too conservative, which was the outcome of this psychological test. And I said, okay, if he is telling this, that must be right. I'm probably too conservative. So let's put more gas into this. I did so, and I probably did too much. And so the outcome was at first a good run-up and then a disaster drawdown, which was prolonged. Because after a while, I didn't understand what was going on. The only thing that helped to answer how I dealt with that period was the confidence that in the end, I was doing the right things. I mean, I had good strategies, I had good systems, I had sufficiently good knowledge of the market, and I still knew that I could afford even more losses, which was not nice to think, but I was ready for that.
So actually, I was sure that what I was doing could turn out into something that changed the bad scenario I was facing. I worked on that. I studied the situation. I developed new systems. I changed a little bit my approach in terms of diversification, and I came out of it. It took time because I had to invest a lot of my time into this.
But the origin of that was, again, a fault in underestimating risk. Was not Dr. Jason's fault. It was my fault for misunderstanding his message, which was different. It was "too conservative," but that would not turn out to become too "kamikaze," which I became, and which led me to suffer that period.
So also today, when I got in a drawdown, I don't like that. Of course, nobody likes drawdown. But I know, I know perfectly that it is part of the game, it's part of my job, the cost of my job. And I know that by doing the right things, that period will pass, and I will see new highs.
Well, you could think that I'm a bit arrogant in saying, "I know that it will happen", but I passed through this many times, and I saw the evidence of getting good results when you do a good job. So I know in terms of putting the right efforts into this thing will lead to a successful result in the long run.
Yeah, that's very very interesting. That's the most important part, I think, because trusting someone, in this case, you and the Unger Academy, maybe it's important to understand that there are people that dealt with drawdown in the past, and trying to understand how they managed the situation is also important and gives you new experience, even if you weren't there.
Yes. And the point is this is a psychological reaction to drawdown, which also helps the practical reaction to drawdown because on one side, you can say, this is normal, I stick to my strategies, but you might even need to put something in place to change things.
I'm not sticking to the plan. The plan is also to react. So in the plan, there must be a reaction to eventually change the plan if the plan goes nuts. It is complicated maybe, but of course, we have to consider inputting changes. Imagine the Formula One drivers. They change things sometimes.
And the psychological reaction helps in getting all the psychological strengths in making the right choices when you face the technical changes. Because if you react with emotions, you probably will make mistakes. But if you react in a clean mindset, you will just put your mind at work and produce some good stuff.
Okay. Now, Andrea, I'd like to move on to a slightly more "relaxed question," let's say. Let's change the subject and focus more on what we can call the "daily routine" of a trader and, in our case, of a systematic trader. So the question we hear very often is, but if the systems run automatically and everything works automatically, what's the need to keep studying, keep working, and have a research development team?
Sometimes I wonder the same. Actually, I'm probably too stupid because I'm sitting in front of the monitor in a sort of hypnosis, looking at the charts, and so on. But there are two reasons. The first reason, the important reason, is that we have to stay up to date. I mean, we identify the markets with systems, and diversification is also a key to staying alive in the markets. So whatever we discover, we test, and we put to work, we have to be there to find new stuff and to be alerted for new ideas because it's an ongoing process.
Things that work today might stop working tomorrow or the day after tomorrow. We have to be ready to identify the dying systems and be able to understand what should come next. This is not a nine-to-five job that we do every day, but it's something that we normally do.
Why? Why we should, I've told you. But why are we doing that? Actually, this is the second reason, and it's passion. I mean, I love this job. I love to figure out what markets do. I really enjoy sitting and studying the markets, the trading system, the trading strategies, and the approach. The money that comes from the market is just a consequence of my passion. So I'm actually working on my hobby to make money, which is wonderful.
But I believe that if I hadn't this passion, I wouldn't probably sit here today talking to you because when you don't have a passion for what you do, especially in this field, you risk failing when things go wrong for some time. Getting back to my drawdown thing, which we discussed before because when you are passionate, you are happy to go and dig into the numbers to understand if you can change something. If you are not, and you do it only for money, you get bored, and when things go wrong, you prefer to quit maybe.
So you have to have this especially in discovering the markets just because you must enjoy yourself. I want you to enjoy yourself. But because this is what is keeping you in the game, really. But this is something that, if you imagine the great sportsmen out there, of course, they earn a lot of money, but I'm sure they all enjoy what they do. Imagine athletes in their late thirties who still continue training in spite of the pain in their neck or whatever. They do it, and they don't do it for the money. They do it because they love what they do. And loving what they do, they get to the very top.
So this is the same with trading. I'm not telling you that if you don't love this, you should just quit, but I tell you: be careful because if the money you could make is your ultimate goal, you are in a weak position. This is very important. I mean, obviously, we are doing this for money. It's our job, it's what we do for a living. Of course, I'm not telling you to leave the money in the markets. But think about the way you get to that money and enjoy the way. It's like when you go on a trip. Enjoy the road, don't just think about the hotel, you will be sitting in the pool when you arrive.
Yes exactly. Let's move on to the last question that I want to ask you. Maybe for those who are new to this world and are getting to see and deal with this world for the very first time. The question is: what's the correct attitude to have to pursue a career as a trader?
Well, starting from the passion I've just mentioned, you should, first of all, wipe your mind from all the ideas that somehow you'll get in private jet and great villas with swimming pools and so on. It can be something that comes too. I don't say that it's impossible, but it's not what this is all about.
This is a profession like any other else. And in anything you do, you have to approach things by studying what you do, learning carefully about what you have to do, and becoming an expert about what you do. Because there is no secret, there is no secret formula that you can use to make money out there. It's just applying knowledge that you have to get to the market. So if you want to become a trader, go out there and look for a proper and right education to know what to do. Look to get an education from somebody who has proven to be successful and has also proven to be able to transmit that knowledge to you. Look among his or her students, if there are successful students, and so on.
But don't think about getting a shorter way just by cutting this part of the learning path. The learning path is necessary for everything. If you play chess, you have to study and learn the rules but also to practice and to learn how to do it. The same is in trading. So this is something that you have to learn and put in place as a profession. So there are costs, which are the costs of putting you in the right place, education, and infrastructure, as I said before. There are costs in the trading activity itself, losses, drawdown, which are part of everything. But this is a real job, and as a real job, it has to take with it all the learning path to get to the right place, in the right time.
Thanks, Andrea. Thank you for your answers. I know for sure that they will be very useful to our listeners.
So before we say goodbye, I'd like to leave you with a piece of advice. If you are interested in learning more about how systematic trading works, in the description of this video, you will find a link. And that link will take you to a page from where you can access a free presentation by Andrea Unger. You will also be able to order a free copy of our best-selling book, "The Unger Method," or even book a free call with a member of our team.
If you liked this video, please don't forget to leave us a like and subscribe to our channel, and go and click on the bell to stay updated on the release of all our new videos.
So thank you again so much for watching us and watching this video. We will see you in the next video—bye guys.
Need More Help? Book Your FREE Strategy Session With Our Team Today!
We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.BOOK YOUR FREE STRATEGY SESSION NOW >>
Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.