Andrea Unger, an Italian trader, is best known for being four time winner of the futures World Cup Trading Championships®. Andrea is from the same ilk as other automated traders I’ve had on the show, namely Tim Rea and Kevin Davey. Their approach to trading is very different from a manual trader. Their time is spent inventing, testing and trialing new strategies, working with the technology that allows them to do this and monitoring active trades remotely. They’ll often be trading over 80 strategies at the same time.
In the show Andrea reveals:
- A complete strategy to trade the DAX
- What his trading day consists of
- The variety of trading strategies he applies
- How you should approach a price chart
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Long Term Secrets To Short Term Trading by Larry Williams
Tell us a bit about you personally and what first attracted you to trading?
I’m a mechanical engineer and I always loved numbers. Also I always have been looking for of an environment where personal skills were important to succeed. Trading is something where skills count, I’ve always dreamt of a job where the better you were the more you received, that’s not true in the industry, I’d been working for over 9 years in multinational companies and saw so many frustrating things that a complete change was necessary for me to be really motivated, and trading was the answer.
Can you give the listeners some insight into your trading? Your trading style, strategy, time frames, ave. trade duration, % winner’s, typical risk reward ratio, typical yearly/monthly return, number of instruments you trade, maximum/average number of active trades, typical drawdowns you experience… those sorts of things.
My trading has been evolving throughout the years and is still evolving hopefully together with the markets. I don’t trade on the long term as I consider this closer to pure investment, my trades can last for some hours or some days but very seldom more than 2 weeks. In the early times I was mostly trading classical trend following approaches such as channel breakout techniques, I was applying those principles on intraday trading closing the positions at the end of the day. Obviously those trades were placed on instruments capable of trending enough during a day in terms of dollar move, I can mention DAX future or Crude Oil as classical examples. Year after year I noticed anyway that a single approach was not enough and was showing increasing weakness as markets were gaining efficiency, so I started studying new ways to ride the moves markets were offering and I ended up trading a broad mix of strategies mixing trend following, countertrend, swing trading, bias and much more. I split my trading experience between my personal trading and championships (well the last I participated to was back in 2012 then I stopped to limit stress…). Personal trading is very careful about risk while contests obviously require a much more aggressive approach. This is praised when volatility in the markets helps, my victory in 2008 showed a 672% return while in 2009 I won with “only” 115%. As you probably already know I won in 2010 with around 240 % and again in 2012 a quarterly edition with 82%.
What does your typical trading day look like?
I get up and switch my computers on, then I check the cloud server to see if the automated strategies are running properly, in the meantime I download data on my software to study setups for the discretionary part of my trading. The rest of the day may be employed in studying new trading systems or in evaluating my results to see if there is something to be careful about. After all a trading day is not that exciting, nothing similar to what some people imagine with an ear on the phone, a cigar in a corner of the mouth and a gin tonic in the free hand…
In the beginning, what differentiated you from the average “man on the street” trader out there? What traits did you have, what actions did you take? We want to hear your secrets to success.
For sure a strong will helped; but I think that having always been humble is the greatest help. In this job whenever you feel strong you are close to big hit from the markets. Being humble does not mean to stay weak in front of the markets but to accept what the markets decide and to try to understand them considering that the whole truth will never be revealed.
If you were a retail trader working a day job, what 3 steps would you take to start earning an income?
The first step regardless of the type of activity you have to cope with is to build a plan, the plan itself should tell you how to merge trading into your life. If you have a day job you are obliged to study an approach that allows you to place trades when you are free, you must avoid to try to handle things during your main activity, it would drive you crazy! This is possible trading on daily time frames or even weekly. The plans must be realistic and trading must be done limiting risk. If a low risk profile does not allow to take position on some markets those have to be avoided, FOREX has many pros and cons but for sure allows to size the positions small enough to match any exposure, that could be considered if a small capital is what you intend to employ. I’m not saying to use Forex to take advantage of the leverage, I’m saying it allows to trade small (it is almost the opposite concept!)
Can you explain to the listeners your preferred trading strategy, the ins and outs of how it works and why you choose this type of strategy over others?
As I said I use so many strategies that it is hard to pick a favorite one. Let’s say that the intraday trend following I used mostly at the beginning is still there. It enters the markets at breakout of high or low of the day, it starts trading after a couple of hours from market open so high and low of that day are obviously already formed, positions are either stopped out or closed at the end of the day. The key of such a strategy is not when and how it enters but IF it trades or not, so trading days are filtered based on chart patterns built on daily bars. This kind of filters is actually effective also on a variety of other kinds of entries and I developed a huge library of these patterns to help my trading decisions.
Diving a little deeper, thinking about any price chart, what 3 things would you recommend a novice or intermediate trader educate themselves on when reading a chart
First of all don’t use a time frame that’s too fast. I think that markets are not fractal and what happens on a 3 minutes chart cannot be compared to moves on a 60 minutes one. This obviously depends on the approach and cannot be used as a unique truth but people using indicators on a 1 minute bar chart are wasting their time (and money) probably. Then I would suggest to keep the charts as clean as possible, it’s ok to draw support and resistance and maybe trendlines but the less the better, when too much is on a chart only confusion is what you get in exchange.
How long did it take you to go from trading newbie to consistently profitable trader?
My start was not the classical one, I worked first on inefficiencies of some particular markets, only once I became aware that it could not last forever I started studying but I had already a good advantage having been there for a while, I could say anyway that it took a couple of years.
What’s your mental approach to trading and what special techniques do you use to keep your emotions in check?
Trading is a business, losses are costs and must be reduced but accepted, all the rest are numbers, don’t think about it as money.
What’s your favorite entry setup?
Still preferring trend following breakout after volatility contraction.
What strategies do you use to exit and manage active trades?
I do use stops even though I don’t really like them, other exits are rarely profit targets or, most often, time exits, I don’t use trailing stops but on discretionary trading where sometimes I move my exits to follow the trend
What’s your recommended “must read” trading book?
“Long Term Secrets To Short Term Trading” by Larry Williams and, why not “Trattato di Money Management” by Andrea Unger LOL (available only in Italian and Chinese so far anyway)
Why does automating your trading work for you?
Most of my trading is automated running 24/24 on a dedicated server, I trade plenty of strategies and to place all trades manually would be excessive for any human being and leads to many mistakes (I had trouble back in 2010 when I was following a basket of 5 strategies manually).
If there was one thing you would recommend any retail trader spend the next month mastering, what would it be, why and how could they go about mastering it?
I would recommend Position Sizing to be understood and properly digested, risk control has to be a starting point for this activity, our purpose is to be here tomorrow and trade in spite of today’s losses.
What’s the biggest mistake most retail traders make?
The biggest mistake is to trade to become rich quickly.
If there was one mantra or saying our listeners should reminded themselves of each day, to help improve their trading, what would it be?
Stay humble, trade small.
If you could leave our listeners with one piece of advice what would it be?
Learn the mantra here above! Always remember that it is true that great traders normally started with huge losses but also people who went bankruptcy started the same way…
We’d like you to give us the “bones” of a full trading strategy – the entry setup, stop loss, take profit targets, market, timeframe… we want to know as much as we can. So, what do you have as our “Strategy of the week” Andrea?
Well, considering what I said I suggest to evaluate the first hour breakout! This is an “old” approach to buy or sell the breakout of the range of the first hour.
In today’s markets it’s not easy to find where it still works but I built a strategy on the DAX future which is still producing results. The setup is valid all days except Fridays and enters levels calculated from high or low of the first hour range bar with a displacement of 75% of the range itself. An additional filter is not to trade if the body of daily range of yesterday was larger than 75% of the total range.
Exit is at the end of the day or, if prices retrace, at high (for longs) or low (for shorts) of the first hour.
Written here the strategy may appear a bit confusing but it is pretty easy in reality, in case you have doubts I invite you to join me to my FREE webinar on November 4 where I will discuss this setup in a more exhaustive way.
Have a question for Andrea?
Leave a comment below… I’ll make sure it gets to him.