Serge Berger started his journey as a trader back in the 90’s where he traded a small pool of money for his golf buddies. With early success, Serge was hooked and went on to work in financial institutions and launch The Steady Trader. Serge is now followed extensively on Stocktwits.com where others look to emulate his trading success.
In the show, Serge reveals the big secret behind his success – a key trait that enabled him to make the step change to bring consistency to his trading, and at the same time bring an element of peace to his life by reducing trading related stress. He also talks us through what candle sticks he looks for when picking entry points along with the timeframes he looks to capitalize within.
Finally, Serge reveals how he approaches trading on one of the biggest markets in the world, giving away valuable insights to pick the highest probability entry points.
High Probability Trading by Marcel Link
Biggest Retail Trader Mistake
Thinking you need to do something every day, whenever you have time to trade and not waiting for the market to setup correctly or according to your trading plan.
Cam Hawkins: What’s up traders! Welcome to another episode of MetaTrader Mentors and today we’re lucky enough to have Serge Berger on the show. Serge hails from Florida and New York, and has been trading US and European equities as well as fixed income since the late 1990s. Serge has worked in the fixed income at JP Morgan and is now head Portfolio Manager at Blue Oak Advisors and the editor of the Steady Trader Research in Trade Newsletter. Serge also offers trading education to traders regardless of their experience to help them get on the path of consistent profitability. Welcome Serge! And thanks for coming on the show.
Serge Berger: Thank you Cam. Thanks for having me.
Cam Hawkins: Brilliant! So Serge, I have mentioned some of your highlights already and I know it’s only a small part of your story. Now this is your chance to share more about you personally. Give the listeners more details about your trading, what you’re trading and how you’re trading it and the kind of results you see, so over to you Serge.
Serge Berger: Sure, so my approach is really based on what I call a Top-down and Bottom-up Approach. It’s mostly focused around US equities and some European Equities. I do some macro stuff as well nowadays. You can trade just about anything with ETF’s that are liquid enough. So my approach has evolved over the years as I’ve worked on both the sell side and the buy side. You can kinda see how things really are as opposed to what some technical analysis book is trying to tell you how things go or worse some TV stations. So I’ve learned to minimize the volatility and try to make between 10 and 30 or so percent per annum, regardless of what the market does. So very much an absolute return strategy versus one that relies on the ups and downs of basically what the central banks are telling us to do. So that’s, in a nutshell, how I approach the markets and it’s very much an approach that fits a lot of folks in terms of the time allocation they have. You know a lot of people have jobs, full time jobs, part time jobs, or other hobbies or whatever they wanna do. And so I find that most people don’t really want to sit in front of a computer all day long. They prefer to just make a trade or two here and there without having to watch the flickering ticks all day long. So it’s an approach that fits a lot of personalities well, from that perspective.
Cam Hawkins: Yeah. I think most of the people, including myself started off or are in the current situation where they are working a full time job and looking for that 1 or 2 hours at beginning or end of the day, to try fit in some trading. I suppose in this day and age it’s a little bit more accessible with the Internet, Ipad’s, and Wi-Fi in offices so that people can check the market and enter trades during work days. But, yeah, definitely outside of work hours is a key time for those that are looking to trade and get in to trading.
So for those listening for the first time, we’re about to enter a round I like to call “The Fundamentals”. This is where I’ll be asking Serge to tell us stories that will help you understand what makes him a successful trader.
So, Serge go back in time now and tell us what first attracted you to trading and talk us through that very first trade you took.
Serge Berger: Sure. It’s been a long time. I’ve traded for, let’s see, a little more than 15 years professionally. Overall, basically, a lot of it started with me essentially managing some money for some of the guys that I was playing golf with in high school. I was a good golfer and some of those guys enjoyed playing golf with me. So I started doing some trades for them. The very first trade I remember it was shares of Yahoo or shares of something called Pets.com at the time, but I remember I just kinda went to it fairly, actually, totally blind into what was supposed to happen and of course at the time I did this, it was like the late 90’s. So really nothing equity wise, at least in the US, could go down. Whatever stock I bought there pretty much went up, went straight up and so I got, very quickly, as false sense of how things really are. But of course at the time I actually made it a winning trade, so that worked out well. And then you know you start to get a little bit cocky and basically turn any profits you had and lever them up, and just the classic mistakes that we as traders make. Over time you’ll learn that this business is all about risk management and not so much about reward chasing because volatile year over year PNL curves tend to not be good for anyone’s sole.
Cam Hawkins: So what was the thing that got you hooked?
Serge Berger: Yeah sure. So what I did then, I majored in Business at the university’s I went to and you know ultimately got a job on the Wall Street. And sort of worked my way through the ranks there for a while from hedge funds and family office and things like that and ultimately started my own company. I always just kind of saw an interest in the capital markets more interesting than some of the other parts of the investment banking business. Just because I’ve always felt being involved in the markets on day to day basis was really my thing. Being able to manage risk as opposed to some of the more sales type of things that you do in Wall Street which is really most of the business, I’ve found. The thing with trading is a lot of people start because they feel like it’s something exciting, and of course it was the same thing for me. The reality is, it shouldn’t be exciting since it’s a very serious undertaking. Right? But that was the initial attraction – the excitement of it all. The arrogance of the young mind kept me in it but ultimately you realize that it is a much more serious business than you think it is.
Cam Hawkins: The guys that are there I’ve spoken to in the past, successful traders, have often said how much boring it is to trade, and once they get pass that excitement and actually start making money consistently it becomes a boring activity. You may attest to that as well.
Serge Berger: Yeah, absolutely. If you go to any good hedge fund. Not like a day trading shop. If you go to a serious hedge fund it’s very quiet. You walk in there and they’re doing their research and they’re doing whatever they’re doing, but it’s not hectic loud screaming and that’s the part Hollywood likes you to believe. Right?
Cam Hawkins: It’s not the Wolf of Wall Street, put it that way.
Serge Berger: Well. No, it’s not. And again what a lot of these movies portray is the sell side. So the investment banks, the brokers. I can tell you it’s hectic there, it’s ridiculously hectic. When I was in the trading floor at JP Morgan for example. But that’s a different business. Typically people think of that as the business where it’s hectic and you’ve got to scream around all time. That’s the sell side. That’s not the buy side and the buy site is where the trading happens.
Cam Hawkins: Right now Serge Let’s go back to a dark time in your trading career. So that point in time where you hit rock bottom, like a trade that kept you awake for like a week, or an account you blew in a matter of days or even minutes. So can you tell us that story?
Serge Berger: Yeah, for sure. I trade one main strategy and that one has been working well for many years. But in 2011 I got heavy into day trading some of the S&P500 futures. And that went very well for quite some time. But then at some point, in 2012 that particular strategy really, really took a beating and I just couldn’t get my risk management process, that I have so nicely in place with equities. I couldn’t get my head around it because essentially what I started doing is mixing up time frames. And I think that’s really one of the worst things. It’s probably the biggest mistakes that people make aside from some of the mental aspects because they take a time frame that they initially laid for out for a certain trade which in the case of an S&P 500 futures strategy, that I was applying, is basically a day trading time frame, right? Inter-day so you’re not holding stuff overnight. But of course what I started to doing with the market, I started holding and turning it basically in to an investment and with futures you’ve got a lot going against you, including leverage, and all that stuff and it’s just crazy and I just kept riding and riding it and pulled up huge losses, percentage wise, that I just literally couldn’t get mentally out of it because I had simply taken an inter-day strategy and let it slide and slip into almost an investment type of strategy of multiple months. And there is a massive lesson I learned from that. Just stick to the time frame that you initially applied in the analysis of any given trade.
Cam Hawkins: Yes, sticking to that strategy, the initial strategy is probably one of the key lessons isn’t it? So if your strategy was inter-day, then if the trade’s gonna against you then it stays on inter-day and you exit when you plan to exit. But let’s flip this 180 degrees now. Can you talk us through a specific time when everything fell into place. So your big “ah-ha” moment. That point in time when you started to become a successful trader. So what did you do differently? Who did you learn from? We wanna hear that sort of story.
Serge Berger: Yeah, sure. I can’t really point to like one single day or week that some people kinda seem to assign. I don’t actually believe that you get your “ah-ha” moment in like a day or week. It usually takes a year or so, maybe a couple of years, to start to understand and things fall to place. I’ve been running this strategy successfully for many years now, but I have to tell you, to be honest with you, the real “ah-ha” moment probably wasn’t until later in 2012. After that big mistake I had with the futures strategy because what I started realizing is that this business is all about patience and I actually knew that but I didn’t know that. Because if you trade money at a company, at an asset management company or whatever the shop is at, where you’re getting assets to trade. You don’t really have the personal relationship with the money being allocated to you.
Once you have your own company, like I do, you have your own direct clients and even your own money invested. You start to have a whole different way of looking at it. But the real “ah-ha” moment was really that it’s all about patience. I have gotten to the point now for the past few years where I’m much less active in trading, and my returns are a lot better, I sleep a lot better. I don’t have to work nearly as hard. I’m not stressed out [Laughs]. Part of it’s probably a maturing process as human being as well, but in many respects it’s really just realization that you don’t have to chase anything up and down. You can give things time. You have to let the trade or investment, or whatever the time frame is you’re working, you have to let it come to you as opposed to chasing it, right? You gotta set certain parameters whether those are price related or some sort of parameter around the fundamental analysis or whatever. Let that come to you and then make the trade because, again, I’ve seen it in all the big hedge funds and any I’ve ever worked at with any rate of success, that’s what they do. They don’t freak out because Facebook stock is up one and a half percent inter-day breaking some little menial, technical resistance area. They wait patiently and wait for the stock to actually turn in to a viable and buyable setup.
Cam Hawkins: And that’s a valid point. I was looking at another trader just recently, who had taken a trade which had gone (using fundamental analysis) had taken a trade which is gone in the wrong direction but he knew from the fundamentals that it was gonna come back up. And he had to wait a good two weeks, sitting on what look like, you know a few thousand dollars down but he was confident. So confident that he in fact put another trade on top of that one because he knew it was gonna come up because the fundamentals are so strong, and I saw the chart and yes it did and whether not it was a henpecked trade or not, I’m not too sure but I think it’s a valid point there, patience is key.
Okay right, let’s move on to the last question of this round what’s your proudest “moment” since you became a successful trader?
Serge Berger: I think the proudest moment really very much ties in to what I’ve just said. I think it’s just the realization that I have to be more patient and I have really done a good job over the past few years being more patient and really minimizing the volatility in the portfolio. The draw downs, peak to trough movements within my profit and loss curve on an annual basis, and within the year it has dramatically come down. So when I have a bad month or a bad quarter it’s nowhere near as volatile as it use to be. If I have a bad quarter or a bad draw down, I’m rarely down more than say 3 percent which I found, not just for my personality – because I have a bit more of a risk version personality than some of the, maybe, newer traders out – just because I’ve done this for a long time now. I’ve found a lot of folks will tell you they’re “down 10 percent” or they’re “up 20 percent year to date” but these wild swings are not good for anyone’s mind and I think that my proudest moment really, revolves around having been able to minimize the volatility which is really been a direct result of becoming more patient as a trader.
Cam Hawkins: Right, now for the part of the show I like to call the “The Technical’s”. So I’ll run through 12 quick fire questions to help the listeners understand what it takes to become a successful trader. So are you ready Serge?
Serge Berger: I am.
Cam Hawkins: Right! So first question is, how long did it take you to go from trading newbie to consistently profitable trader?
Serge Berger: Consistently profitable? Probably at least 6-7 years.
Cam Hawkins: What’s your mental approach to trading and what specific techniques do you use to keep your emotions in check.
Serge Berger: The mental approach for me is a major part. It’s like, you know I always say it’s probably 90 percent of trading cause if you can’t get your mental stuff you know under your belt, it doesn’t really matter what plan you have because you may end up not being able to stick to it. But to me the mental approach is very much one of keeping an eye out on the bigger picture but sticking to my trade – my initially laid out plan for any trade, as I said before. So if I have a stop loss set at wherever the level is I will always adhere to that. And the way I think about it psychologically is that I know that, at the end of the day, trading is a game of probabilities. So if I do 10 trades I know on an average I’m gonna get at least 5, maybe 7 or 8 to be profitable. So then if you sort of take that thought process a little bit further, you realize that if you don’t stick to your initial laid out stop loss. You’re just simply not working the probability game.
Cam Hawkins: Do you have a success quote you can share, one that resonates with you personally?
Serge Berger: One of my first. One of the best bosses I ever had. This was at JP Morgan. The guy used to be the Managing Director. He would leave the trading floor even just you had to go to quickly grab a bite of lunch or something. He would jokingly look over his right shoulder and say “You know, remember guys. Buy low and sell high”. And that’s sort of an overused term but at the end of the day it really resonates with you. Once you’ve done this for a long time, it helps you understand that at the end of the day buying low and selling high is the only thing that matters. A lot of times and unfortunately still on Wall Street the research process is being rewarded more than the actual results, which of course is total bogus. At the end of the day we’re only in this business to make money. So if your only focus isn’t to buy low and sell high then you’ve got to refocus, because you’re probably treating it more as a hobby than a profession.
Cam Hawkins: And what’s your recommended must read trading book?
Serge Berger: There’s a book called “High Probability Trading” by Marcel Link. That’s a good book. Otherwise quite frankly Cam, I think most people should just focus on reading sort of the mental approach to trading. There’s so much stuff out there on that. There’s not a specific book. I don’t want to recommend one because like there are so many good ones out there. But just focus your reading on that because it will help you. Like I said before I think trading is 90 percent mental.
Cam Hawkins: Yeah, and I read one from Alexander Elder, I think. Back in the day, I can’t remember the name of the book, I’ll find it and chuck it in the show notes. What are your views on Automated Trading Systems, so trading robots?
Serge Berger: I think obviously. I could sit here on my pedestal and say “Listen, it is what it is and it’s not gonna stick around” or whatever. At the end of the day reality is that it’s here and it’s not going away, and I think. I think there’s plenty reasons why that will work for certain things. The problem is there’s a lot of discussions right now about artificial intelligence and all these things, where already the algorithms are driving a lot of the movements inter-day, in any market. I think at the end of the day it’s very difficult to get a machine to risk manage a holistic trading approach for you, because there’s so much stuff involved in that. Information that you may take from news flow to relay the reaction of price and I think at the end of the day, that’s very difficult to program in the greater scheme of things. If you have an inter-day trading strategy based on the New Zealand dollar against whatever cross then that might work, but I think as a holistic approach it’s very difficult to have an entire hedge fund that’s diversified in a strategy sort of program like that.
Cam Hawkins: And what trading related internet resource like Bloomberg.com, do you always use?
Serge Berger: [Laughs] I was actually gonna say Bloomberg.com
You know, I use a bunch of things. Bloomberg.com is a good one. I use things like Finviz. F-I-N-V-I-Z, dot com is a good one for giving you perspective on a lot of things like: what are the leading assets classes over the past day, week and month so on and so forth. I like to use those kinds of things. Gives you perspective, otherwise, I’m a heavy user of Stock twits, that’s for equity guides. So S – stock then T-W-I-T-S. I’m one of the main users over there. So if you’re interested you can follow me. My handle is “Steady Trader”
Cam Hawkins: is it dot com?
Serge Berger: It’s Stocktwits.com. If you’re more of an FX person you probably wouldn’t have heard of it, but it’s a big thing. It’s a very big thing in the US and actually also in Europe now.
Cam Hawkins: Okay. What’s your preferred trading strategy.
Serge Berger: My preferred trading strategy is what I’m doing and it’s really more based around a swing trading strategy where my time frames are between two days and multiple weeks. And I say two days at the minimum because you never know if you get into a trade the very next day it might wack up or down 5 or 10 percent, you just don’t know, right? So it can be two days but I like to have a time frame of multiple weeks. The strategy is sort of a confluence of looking at news flow, economic data, and really understanding the structure of the broader market and then of course as a trigger to any trade, I have a heavy reliance on technical analysis, as the ultimate arbiter which is to say that price, at the end of the day, can be the ultimate arbiter. It’s the only thing gets us paid. So I have a very focused, very specific focus on candle sticks and so called confluence support or resistance areas that I then use to base a trade on. Based on the top-down bottom-up approach as described.
Cam Hawkins: And do you have a specific Candle Stick pattern that you prefer, or one that you find that works better than others?
Serge Berger: It depends on the environment. I’m a very big fan of the most visually obvious candle sticks. So for example let say I’ve had a trend down for a few weeks or few months in any given assets. And you get a big wash out inter-day and you end up leaving some big hammer candle, right? I think that’s a pretty lucrative area to start looking to go long. So hammer candles are interesting on the down side. Any big visually obvious bullish or bearish reversals, like outside candles, outside days or engulfing candles those are very interesting as well.
Cam Hawkins: And if you could leave out our listeners with one piece of advice what would it be?
Serge Berger: Be patient and understand that returns in trading are not linear. Linear returns don’t exist. It existed for Madoff but that was about it, and Madoff, it was a Ponzi scheme. If you look at any good hedge fund return they are not. They don’t make two or five or ten percent every single month. They’ll make a bit of money here then they’ll do nothing for few weeks, probably for a few months. Then they’ll make another 5 or so percent and so on and so forth. So it’s again, it goes back to being patient.
Cam Hawkins: What’s the biggest mistake most retail traders make?
Serge Berger: The biggest mistake most retailers make is thinking that they need to do something every single day. They feel like they need to get up in the morning and basically trade whenever they have time. The market’s not here to wait for you. The market will give you a signal to trade when it’s, whenever that is. That’s not gonna depend on your daily routine of going to the gym and picking up your kids, that very much is just the market doing its own thing.
Cam Hawkins: Okay. And if you’re not a MetaTrader Fan, what’s your preferred trading platform and why?
Serge Berger: You know, I use a lot of stuff but E-signals is a good one to use from a software perspective.
Cam Hawkins: And question 11. What does your typical trading day look like?
Serge Berger: Very rigid, very much same routine every single day which I think is big part of what’s allowed me to have consistent profitability. I get up in the morning, I get very early around 5 o’ clock or 5:30. Almost regardless of where I am in the world. I start doing some research, write some stuff down. I do a lot of research analysis of posts around the web. Go through the markets that way, and sort of have breakfast. And maybe I may do a quick gym thing before work, before the market opens. Once the market opens it’s very much just execution. Because all my research will happen in the afternoon and mostly execution will happen in the morning. So you know that’s kinda how I go throughout the week.
I don’t trade Friday afternoon. I take Friday afternoon off. Friday afternoons, at least for me in the US, are very low probability trading environments because the rest of the worlds are closed for the weekend.
Cam Hawkins: Very good. And finally what broker do you use?
Serge Berger: We use a lot of brokers. We use things like Interactive Brokers and some of the big investment banks, prime brokers.
Cam Hawkins: Now we’re into the part of the show where myself and my members “The Mastermind” put your knowledge and experience to the test. So Serge, are you ready to take on the challenge?
Serge Berger: Sure.
Cam Hawkins: Perfect! Right, for those not in the know my Mastermind community are working towards creating a profitable trading system. If you’re not in the Mastermind yet, just jump on 52Traders.com and join today while it’s free. So Serge today your task is this. We’d like you to help us find a high probability entry point for our trading system. We already have the market to focus on so namely the S&P500, and we’re looking for specific standard indicators, candle stick formations, market events, those sort of things. So Serge to help us pinpoint high probabilities set-ups for our trading system, what 3 Golden Nuggets do you have for us today?
Serge Berger: So the S&P500 now we have to get a little bit of context of what it is, and it’s basically a very globally diversified index that also has a lot of economic read through and it’s an index being traded by 10,000 – 15,000 hedge funds. Some of them don’t even know what the instrument actually is. So that creates an issue but nonetheless the S&P actually does react very well technically. So that’s the upside. The thing with the S&P is that we have to give a little bit more lee way than some of the other indicies, just because everyone’s chasing an up and down. So using, basic 50, 100, 200 day moving averages, is basically a sure way to lose money. So the best way I have found to trade the S&P500 is really using trend channels, so you can take trend channels on a weekly, monthly, yearly multi-year basis. And on the upper end trade of the trend, the S&P almost always will give you some sort of bearish reversals from a candle stick perspective but even better when the S&P’s ready to bounce it’ll give you very clearly visually obvious candle sticks, bullish reversal candle sticks. And you can go back in time, almost always it did that and so those are two extremely interesting areas to look for, just use a channel. You can even use Bollinger Bands and when you see a major bullish reversal taking place, when the bears have basically capitulated in the S&P you can definitely get in and make a quick 3-4-5 percent on the S&P index itself, which is a good return on a big index like that.
Cam Hawkins: Thanks Surge, that’s a great answer and I’ll look to introduce it to the Mastermind community for discussion and potential inclusion into our system. Right, before we wrap up what’s the best way for traders to get hold of you?
Serge Berger: You can go to my website. It’s WWW.THESTEADYTRADER.COM so that’s S-T-E-A-D-Y Trader dot com. Otherwise, twitter, my twitter handler is @Steadytrader. My E-mail is Serge at thesteadytrader.com. We offer anything from, real swing trading and just general trading education. Things we look for are all reality based, not based on some programmer having made up things, so there’s also my full real time trade alert and analysis service where you see, literally, every single thing I do in real time throughout the day with videos and blog posts and the whole portfolio and trade alerts hitting your inbox in real time. So that’s all there on the Steadytrader.com. There’s an E-mail opt in at the top right there by my face and if you put your email in there what you’re going to get is, I think it’s about 3 or 4 videos every single day sent to you. Educational videos so it’s all free. You’re also going to get a copy of my E-book which is an ebook on swing trading. That’s a lot of value right there. Those videos get a lot of hits. People love watching them, they’re very educational on tips such as what we just talked about. Also sometimes, very specific trade setups as well.