andrew-barnettFormer pro Water Skier, Andrew Barnett, has over a decade of trading experience, spanning Equities, Futures and Currencies. Hailing from the Sunshine Coast, Australia, Andrew is the Founding Partner of LTG GoldRock, one of Australia’s Leading Trading Education & Support Companies. With over 4000 clients throughout Australia and New Zealand, LTG GoldRock has won numerous awards for their Forex Trading Education since their inception in 2009. As one of the Senior Traders at LTG GoldRock, Andrew has a strong focus on Fundamentals and is often contacted by the media for his views on the immediate and longer term outlook on the Aussie Dollar.

In this week’s show Andrew reveals:

  • How one trade changed his life for the better
  • The important change he made to make 30-40% year in, year out
  • The tools he uses to follow the big money
  • An indicator every currency trader should follow

Today's Sponsor

Visit TradeDefender.com and receive $50 off with coupon code: 52TRADERS

9: Andrew Barnett on Mastering Forex Trading & One Magical Indicator
00:00:00 00:00:00

Recommended book

Trading in the Zone by Mark Douglas

Trading style

Fundamental Trading (with a focus on Interest Rates)

Trading platform & broker

Platform: Metatrader 4
Broker: Go Markets

Biggest retail trader mistake

They don’t know how to manage risk.

Interview links

[php snippet=1]

Transcript highlights

Cam Hawkins:

This is your chance to share more about you personally, and give the listeners more detail about your trading. What you’re trading, how you’re trading it and the kind of results you see?

Andrew Barnett:

“I started trading in my early 30’s. I’m 45 today. I use to be a professional athlete. I was in the water sports industry. I was on a water ski tour in the United States all through my teenage years and 20’s. I retired from that. I wanted a change in my life and a different career. I met a guy on a golf course that introduced me to trading. I had some equity in my home, quit my job, sold our house, moved to the Sunshine coast and embarked on a trading career which I highly recommend people don’t do when they first start trading because it put a lot of pressure on me at the time, to generate a full time income. It took me 3 years before I could realistically say that I knew how to trade the markets well. I was very fortunate at the time that the stock market was rising and rising from 2001 to 2008. I was first of all simply trading shares using break out strategies. Then I got introduced to the futures market and then currencies. So I’ve been trading essentially for about 14 years now predominantly focusing today on the currency markets. Simply because of the liquidity and the currency market is huge. Over $5 trillion dollars a day and it’s a 24 hour market. We’re not stuck between say 10 and 4pm buying and selling and the strategies by which I trade the markets are predominantly fundamentally based. So, for me it’s all about understanding what central banks are doing and what interest rate differentials are doing to position my money into the markets, a week or two, upwards of 2-3 months at a time depending on what particular setup I’m looking at.

“Today we have an education business here at LTG Goldrock as well as our own private trading where we look after about 3,500 clients around Australia and New Zealand who are actively currency traders.”

“For me personally I’m looking for between 30-40%. In Australia and NZ, for our clients, everyone who’s trading the markets for different reasons. Some people are trading the markets to generate a potential income. Other people are looking to compound money over a period of time. Some people are looking for better returns on investment because they’re not getting any interest in the bank at the moment or funds management of 6 or 7%. So everyone’s different. For me personally I’m looking for between 30-40%. With the amount of money that I’m trading and responsible for, that’s adequate for my style of trading. Other people are looking for a more aggressive return on investment will obviously be using higher risk. I’m not suggesting they can’t make higher returns but with any opportunity for a higher return there is a higher risk. So they need to manage that risk appropriately.”

Cam Hawkins:

Go back in time now and tell us what first attracted you to trading and talk us through that very first trade you took?

Andrew Barnett: 

“What attracted me to trading initially was the opportunity to be my own boss. Through my water sports career as a professional water skier I didn’t have a boss I was the boss. I didn’t have a ceiling on my income. When I retired and started working for somebody else I had that ceiling on my income and I had someone telling me what to do and I didn’t really like that. So when I first learned about the financial markets I saw it as an opportunity for me to have the same lifestyle as I had previously. I could live anywhere in the world. I live at Noosa Heads today, on the Sunshine Coast. I can trade from home. I can do it whenever I want and I don’t have a boss. That’s essentially what enticed me into trading.”

“The very first trade that I took. I quite frankly don’t remember the very first specific trade but I remember in the first 6 months taking too many trades. I remember getting involved emotionally in the markets and doing what a lot of people do an think they know where the markets going next when in reality they have no idea where the market’s going next. Having very poor risk management techniques which was a common trait when I started out and wasn’t conducive to profits in the first 6 months. So all the common things. Emotions, risk management, not being patient, disciplined. Those types of things. We’ve all been through it. Any professional trader that hasn’t is not telling the truth. Everyone’s been through it. It’s just a matter of over time you learn from those mistakes. You’re able to fail gracefully and eventually build your knowledge and experience to not repeat those mistakes and win bigger than you lose.”

Cam Hawkins:

Let’s go back to a dark time in your trading career, a point where you hit rock bottom, a trade that kept you awake for a week, an account that you blew in a matter of days or even minutes. We want to hear that story.

 

Andrew Barnett:

“I do remember one night. It was in the first 6 months trading the futures market. I was trading the S&P500 and it was about 1am. The market had been open for a little while. My plan was to take one trade and close the computer and go to bed. I remember I took that trade, it was a losing trade. I was not particularly comfortable going to bed on a losing trade so I thought I’d take another trade and get back to square. See if I could get myself back in front. Long story short, about 60 trades later and about $17,000 of trading losses had accumulated on my relatively small account over the period of about 4-5 hours. I was sitting there trading when the market had closed and not even understanding why the market had closed and picking up the phone and ringing the broker in Chicago and saying “Hey, I’ve got open positions exposed in the market. I want to exit them” and he turned around saying “Mr Barnett” the markets closed. I was so engrossed in the emotion of what the market was doing to me that I forgot the basics of what I needed to do. That was probably the rock bottom point for me. I realized at that stage, if I didn’t smarten up, if I didn’t apply the right risk management and discipline approach I may as well go back to the water sports industry that I was in.”

“It was around the 6 month mark and of course for me I’d quit my job, sold the family house. I was in the market to generate an income and there was a lot of pressure there. So I realized that that pressure was not conducive to successful trading. That emotional pressure of making money. That in actual fact got me out into a small part time job at the time, just to get my mind off trading and I would recommend anyone who is embarking on a professional trading career not to quit their job and sell their house to start trading because the reality is, it’s an apprenticeship that for some people can take years. For some people it can take 1-2 years, for others it can take 5-6 years, everyone’s different. Just like learning to play golf is different for one person to the next. Some people pick it up quicker. Not everybody is cut out for trading. But everyone can do it if you apply the right skill set over a period of time. So for me that was about 6 months in and I quickly sharpened up from that point onward.”

Cam Hawkins: 

Right, let’s flip this 180 now. Can you talk us through that specific time when everything fell into place. Your big “ah-ha” moment. That point in time you started to become a successful trader – What did you do differently? Who did you learn from? That sort of story…

Andrew Barnett:

“My trigger point was a guy by the name of Peter Elsworth, who happens to be the chairman of our company now. He was a lot older and wiser than myself and he said to me “Andrew, your problem is accountability. You need to be accountable to somebody every month”. So we made a pact together, that every month I would meet him and produce my trading statement and I’d show him specifically what I’d been doing for the month. I do that with every one of our traders now that joins our program and we give them the opportunity to follow this process because accountability for private traders on their own is one of the most important things that you can have because when you’re sitting at home trading on your own no one’s watching. People take sneaky trades, they take trades that just don’t meet their plan, they essentially gamble. Having to be accountable to somebody, to show up and show your trading statement to every month. Someone that was 30 years older than myself, very wealthy and successful, for me to have to do that was going to be sole destroying if I had been messing around because I wasn’t going to get his support and guidance any longer if I was messing about. So that was really the turning point for me.”

“There was nothing wrong with the strategy I was using. I was the problem and this is what the challenge is for most traders today. The systems that most people try to use whether it’s a fundamental based system or a technical based system. There’s really very few of them that don’t work. Most of them work reasonably well, some of them work exceptionally well and there are others that are plain average. But I wouldn’t say that there are a lot of dud ones out there. It’s the people that make them the duds because they can’t handle their emotions and they can’t handle the nature of the way the markets work.”

Cam Hawkins:

So did you come up with a system to trade yourself or were you able to learn one from somebody else?

Andrew Barnett:

“For myself and my partners here it was coming to the realization that if we wanted to generate significantly higher returns on investment on a consistent basis we needed to trade with institutional banking traders. So we went to a head hunting firm in George Street in Sydney. It was around GFC time and a lot of banks were putting off traders from their trading desks. The first guy we hired was a trader from Goldman Sacks. We brought him on board. We then hired some traders from Commonwealth Bank, NAB, Credit Swiss, BNP Paribas. Over the years we’ve traded with traders that have traded hundreds of millions, billions of dollars to share their techniques and the way they do it in the banks and institutions. That has set our personal trading and our clients trading apart because we understand the way big money works. Unfortunately, the average mum and dad trading at home, trying to trade technical analysis, sadly doesn’t understand that the markets are essentially a losing game for them. They don’t make money because they’re giving up money to the professionals that understand how the market works. People are sadly not exposed, as a general rule, to how the markets really do work.”

Cam Hawkins:

Do you think it’s an advantage or necessity to have a big financial institution or brokerage background to become a successful trader?

Andrew Barnett:

“Frankly, yes. The statistics show that 95% of mum and dad traders who try and make money on their own don’t make money. That’s not me being negative; it’s the simple facts of life. 95% of people are giving up their money to the 5% of people who make money. The markets are a zero sum game. For every winner there has to be a loser. If people want to make money as private traders they need to understand how institutions and banks move money around. And they move money around based off fundamental facts. Yes, they use technical analysis to a certain degree. Predominantly their decisions are based off… In the currency market its interest rate differentials. In stock markets, what are company earnings doing, what are interest rates doing, what’s the fed doing, what are central banks doing. Economic data is essentially what moves big money. Technical analysis can be a very important part of that in certain circumstances. So, it’s very important. In fact, I think it’s critical.”

Cam Hawkins:

“Ok. Here’s the last question in this round. What’s been your proudest “moment” since you became a successful trader?”

Andrew Barnett: 

“Personally, for me the most satisfying moment was when I had one particular trade a number of years ago. I was a stock market trade I had. A uranium stock in Australia called Urinex. I had brought quite a lot of stock in this company at 20c and within 48 hours it was $1.20. That, at the time, changed my financial position in a big way and I knew from that moment I didn’t want to be in another business, I wanted to be in the money making business for myself because I’d had super funds, I’d had managed funds, I’d had brokers trying to make me money and most of the time they were giving me very average returns or virtually nothing or losing positions. And here I was, I’d made enough money to essentially build my home at Noosa, in less than 48 hours. So from a selfish and private perspective, that’s the moment for me from a one off basis. Today I simply chip away and do what I do and that’s also very satisfying. But for me now I enjoy seeing our clients make money because when they invest in our knowledge and skill to help them and they get the results they’re looking for, that’s the most satisfying thing for us now.”

Cam Hawkins:

“How long did it take you to go from trading newbie to consistently profitable trader?”

Andrew Barnett:

“18 months”

Cam Hawkins: 

What’s your mental approach to trading and what special techniques do you use to keep your emotions in check?

Andrew Barnett:

“I have a simple philosophy that you have to keep things simple. And by keeping things simple you are then able to be in a frame of mind that gives you the right discipline and patience to wait for the market to deliver the system you’re looking for. So it’s simplicity and being disciplined and patient around what we do.”

Cam Hawkins: 

Do you have a success quote you can share; one that resonates with you personally?

Andrew Barnett:

“Risk management, risk management, risk management.”

Cam Hawkins: 

What’s your recommended “must read” trading book?

Andrew Barnett:

“The best trading book I’ve read is written by a guy named Mark Douglas called Trading in the Zone.”

Cam Hawkins: 

What are your views on automated trading systems, e.g. trading robots?

Andrew Barnett:

“Trading robots as a general rule may work for a very short period of time. Institutions and banks don’t tend to use trading robots. If they do use trading robots they’re programmed by human beings. Trading robots generally make brokers wealthy because most of the brokers are market makers and take the clients losses. Most trading robots are quite frankly a complete waste of money.”

Cam Hawkins: 

What trading related internet resource, like bloomberg.com, do you always use?

Andrew Barnett:

“I read a lot. The most important thing is to read what central banks are saying on a daily basis. So for me if there is a central bank announcement I’ll be reading that particular website. The Reserve Bank of New Zealand today for example published their inflation expectation report. Bloomberg is an important part of our understanding of what’s happening in the markets every day and cnbc.com and Reuters.”

Cam Hawkins: 

What your preferred trading strategy?

Andrew Barnett:

“For us being currency traders, predominantly now. The first thing we must understand is what direction we want to trade a currency and that direction is going to be based on interest rate differentials. So, if we look at the Ozzie dollar versus the US dollar. Interest rates in Australia have been falling and are likely to go further. Lower interest rates in the US, whilst they have been stable for a number of years, are likely to go higher. So we’re studying the fundamental aspects of interest rate differentials to choose a direction that we ultimately think a currency is going versus another currency. So, we’re trading currencies in pairs. So strength versus weakness is what we’re looking for and that’s going to come down to interest rate differentials. Once we’ve decided on that strength versus weakness we’re then going to look for somewhere on the chart where we think that may occur in a way in which there will be a lot of momentum and follow through in the market. Whenever we place a position we have to know that big money is likely to back us up. That’s the most important thing whenever anyone trades. Whenever they put a position in the market, where is big money going to back you up because unless big money is going to back you up you’re not going to make anything. You’re going to lose money. So our question is “What direction?” and then it is “When are we going to do it?”, “What price are we going to do it?”. Because if we get that right we’re likely to get big money to back us up after we enter the position. Because that’s going to see the trade be successful.”

Cam Hawkins: 

What’s your fundamental, technical split?

Andrew Barnett:

“For me I’m probably 80:20. So 80% fundamental and 20% technical. I enjoy watching to see where the market is on a big picture perspective. Daily breakouts of previous highs and lows are generally very, very significant in the currency markets. When you couple that together with the fundamentals behind those shifts. To give you an example, in the coming weeks if the Kiwi dollar was to trade down to the 2015 low, and then break below that it would be breaking below that because of a particular reason. It won’t be doing it because the chart says the market’s there. It’ll do it because something fundamental is happening. Graham Wheeler has said something or economic data. That’s when you tend to get a flush of money and where big money will come in behind you.”

Cam Hawkins: 

If you could leave our listeners with one piece of advice what would it be?

Andrew Barnett:

“Keep things simple. The financial markets are nowhere near as challenging and as difficult as what you might think. People try to make, making money in the financial markets sexy and they try and make it exciting and they try and come up with different technical systems and fundamental systems to make it enticing to look at and seem complicated. It’s actually not. The markets are very, very simple. It’s either going up or down. It’s a 50/50 equation. And to figure out which direction a market is going it generally comes down to interest rates. Whether it’s stocks, commodities, gold, oil whatever, everything boils back down to interest rates. So if you want to know how the financial markets work, if you want to really make a lot of money of the coming 5, 10, 15 years study interest rates.”

Cam Hawkins:

What’s the biggest mistake most retail traders make?

Andrew Barnett:

“They don’t know how to manage risk. They enter a trade with one thing in mind. How much money am I going to make. They’re not thinking about, what happens if this trade goes against me and where am I going to get out. And they don’t have a predetermined amount of money or a percentage of their capital that they’re willing to risk and immediately get out of that position. They’ll let it swing. The biggest mistake most retail traders make is they just don’t have a plan of where they are going to get out if things go wrong. They think they know when they are going to get out but in reality they don’t. One, they don’t know when they’re wrong. The market will tell you when you’re wrong fundamentally, if you know what to follow. But another thing, a lot of traders hate to realize a loss. So they’ll let it swing. Because if they exit the position they’ve realized the loss. That the money has gone. So long as they stay in the market and don’t exit out of that trade, they’re living in hope. The market hasn’t taken their money yet. So, they’ll let it swing and they’ll let it swing further and further and eventually they’ll capitulate.”

Cam Hawkins: 

What’s your preferred trading platform and why?

Andrew Barnett:

“We use Metatrader 4 through Go Markets in Melbourne. They are our preferred broker because of the regulatory requirements in Australia for currency brokers if very tight. In terms of the safety and security of our funds, it’s paramount. Most people that trade the currency market don’t understand where brokers put your money, how they can use your money, the security of your money. So for us that’s the most important thing. So, it’s not so much the trading platform, it’s where my money is. Where is my money, can I get access to my funds, do I know what bank account it’s sitting in. Is it in Australia, is it in Cyprus, is it in Malta, where is it? That’s more important than trading platform for me.”

Cam Hawkins: 

What does your typical trading day look like?

Andrew Barnett:

“I’m up at 6 most days. The first thing I’ll do is find out what’s been driving US markets and European markets overnight. So I’ll go to my news sources, Bloomberg, Reuters, CNBC to look and see what’s driven the markets. What economic data came out? Who said what? Any central bank reports. That usually takes me about half an hour, 45 minutes. Then I’ll have a look at the charts to see any open positions that I have. How those trades have been affected by last night’s data. What is coming to day that might impact those trades? Whether or not I need to adjust anything? Probably not. And any trade setups that may be about to happen. Execute those. Put those pending orders in the market. So most of my work as far as trading goes is done and finished by 8-8:30am. Then it’s a simple case of keeping in tune with what’s going on throughout the day which might take me another hour, looking at various bits and pieces but I would get my trading done in less than an hour a day as a general rule. I have a maximum risk exposure of 3%, so that 3% is usually made up of 3 trades of 1%. So usually I’ll only have 2-3 trades in the market. I have 2 trades in the market right now. Long Pound Yen and long Canadian dollar Yen. And I may have another position in the next 24 hours but I won’t exceed 3 at 1% risk per position.”

Cam Hawkins:

We’d like you to help us find a high probability entry point for our trading system. We already have a market to focus on (namely the S&P500), and we’re looking for specific standard indicators, candlestick formations, market events, those sorts of things… So Andrew, to help us pinpoint high probability setups for our trading system what “3 golden nuggets” can you share with us today?

Andrew Barnett:

“The first thing that I’d look for in relation to the S&P and the US market is to be extremely focused on what the US fed is saying about when they’re going to raise interest rates. Because the moment the market gets convinced the US fed is going to raise interest rates I think you’re going to see the S&P500 and the Dow Jones fall or correct between 10-15%. So you need to keep an eye on that.”

“You need to see where price has recently created a low in the last 60 trading days. And there is going to be a significant point at which the market has created a low in the last 60 trading days on a daily chart. And when you get a daily candle close below that low in the last 60 trading days you are highly likely to see big money back that up and push that market lower. So I guess, for me, understanding what the fed are doing, if you’re trading S&P. Understanding where that 60 day low is and when you get a daily candle close below or above in the case of the market rising, that is a significant event when it comes to institutional banking traders. They’re looking for that sort of break out.”

“You need to make sure you keep on top of a daily economic calendar. There are number of different economic calendars on websites such as dailyFX.com, you can simply Google economic calendar, so you might go to ForexFactory.com. Things like that and you can get specific details on when the fed is next meeting, when their minutes are released, etc.”

Cam Hawkins: 

Before we wrap up what’s the best way for traders to get hold of you?

Andrew Barnett:

“Simply go to our website LTGgoldrock.com. They can register and come and watch me trade live online every Monday evening at 8pm Sydney time, for 1 hour each week I’ll trade live in front of them and share my analysis of the markets.”


HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES, OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM, WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

At all times any and all information on, or product purchased from, this website, is for educational purposes only and is under no circumstance intended to provide financial advice. No guarantee is represented from any statements about profits or income, whether express or implied. As no trading system is guaranteed, your actual trading may result in losses. You will at all times accept the full responsibilities for all of your actions, including, but not limited to, trades, profit or loss. You agree to hold 52traders.com, Ziba Online Limited, the site's legal owners, AT and any authorized distributors of this information at all times harmless in any and all ways. By using our product(s) this constitutes your acceptance of our user agreement.

You agree by using this site, and related sites of ours and any of our material content you may receive either from such site or in any other form and that, accepting our terms and conditions of purchase that you agree that you, and you alone, must ensure that the use of any of the materials purchased from our site in any manner or form at all, is in compliance with your national, local, federal, state or county laws.

CFTC - U.S. Government Required Disclaimer:

Forex, futures and options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. Our website, product contents, and materials are neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our website or in any materials. The past performance of any trading system or methodology is not necessarily indicative of future results. Substantial risk is involved. Forex trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex markets.

Don't trade with money you can't afford to lose. Nothing in our course or any materials or website(s) shall be deemed a solicitation or an offer to Buy/sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of futures results. Trading involves high risks and you can lose a lot of money.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.