Speculative attacks on markets have been thwarted repeatedly by the various interventions of governm...
Trading Is Gambling, the Ultimate Therapist, & the Best Game in the World
09/12/2013 9:00 am EST
Host Rob Booker talks with Tim Hollingsworth, a motorcyclist from Australia who's been a trader since 2001. Tim says you don't have to know what's going to happen in the market in order to make money. Rob and Tim spend some time drawing parallels between motorcycling and trading and the real estate business and trading. In this show, you'll hear Tim talk about the reasons why he tries to avoid speaking to people about trading. And you'll also hear Tim offer a provocative opinion about how he thinks trading is gambling.
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Rob Booker: Tim, welcome to the podcast. Thank you for so quickly agreeing to do an episode together. I've been looking forward to this for a long time, but finally got around to asking you just the other day.
Tim Hollingsworth: It's a pleasure. When you are you coming over?
Rob Booker: Tonight, I'm ready. I'm ready for a holiday. Tell us a little bit about yourself. Where do you live and how long have you been trading?
Tim Hollingsworth: Okay. I've been trading since 2001. I think FX, good friends at FXCM came to Australia in 2001 and I had a real estate business, a couple of real estate businesses and I'd spent my entire life talking to people to make a living, and I thought I'm not going to play golf, I want a hobby, I need to do something when I get out of real estate, so I got into FX and did all the silly things that people do, made all the mistakes, stared at the screen for 20 hours on end and tried to make it move in my direction and so on and so forth, but I think for me I just enjoy it, I just love it. I'm profitable now after all these years.
I got-way back 10 years ago I got toward a system based on Richard Donchian's 20-day moving average and I still come back to that, I still, a lot of my trading is still based on that.
Rob Booker: It sounds like it's not simplistic or dumb, I mean, it just sounds like it's really straightforward, pretty much you're not into complexity or making it all fancy or whatever. I really appreciate that about you. I look at your charts on Twitter, by the way our guest is Tim from Australia, and you can see him on Twitter @GRToceanRD, I have no idea what that is but I can't wait to find out. You can see, Tim posts his charts like publicly on Twitter and he has a great line in his Twitter bio, it says, it's simply the best business in the world. You don't have to know what will happen to make money.
Tell me why you say that you don't know what is going to happen in order to make money, you don't have to know that.
Tim Hollingsworth: Well, I think it's just, I think you've just got to believe in risk/reward, and you've got to believe in the numbers, and I think you get into trouble if you think you know what's going to happen.
Rob Booker: Yeah, yeah, like if you start telling yourself a story about what's going to happen.
Tim Hollingsworth: Yeah.
Rob Booker: Why price has to go in a certain direction because these conditions in the news or in politics or even on the chart, like is that kind of what it is? You tried to avoid believing your own BS?
Tim Hollingsworth: Yeah, that's right, never, never believe your own publicity, you know, you'll always get into trouble. I think that the only thing we can control is our risk, so I think that you've got to, for me personally, I try and look at the market through the same prism. It's all about consistency and just making it easy, try to make it easy and smooth on yourself and not knock yourself around. It's like, I love motorbike riding and I think that if you ride within your limits; it's really safe. If you try and push too hard, you can kill yourself.
NEXT PAGE: Similarities Between Trading & Riding Motorcycles|pagebreak|
Rob Booker: So tell me how fast, what's the fastest you ever rode on a motorcycle?
Tim Hollingsworth: 260, 260 K. I'll tell you a funny story though, I did 260 at Philip Island which is, look I'm 60, say, and I just do it because I'm silly, but I was with a bunch of guys who rode through Texas and we were going along the border between Mexico and Texas, and we just happened to be doing, it was in the middle of nowhere, just happened to be doing 200 clicks an hour, we did for quite a long time, so they put patrol cars in front of us and when they pulled us over, when we took our helmets off and they found out we were Australian, they said you silly old buggers, don't you have speed limits in Australia, and we said no, not in the Outback, not in the middle of nowhere, you know.
Rob Booker: Yeah, right, why would there be any speed limits in the middle of nowhere?
Tim Hollingsworth: They just gave us a caution, they were good guys. They could have taken another...
Rob Booker: Well, you seem like a pretty happy guy, too. I think that it would be easy to just get a kick out of what you were doing instead of thinking that you had any malice or intention to hurt anybody. What are the similarities in your mind, either between trading and motorbike racing or riding, or real estate work that you did in the past successfully and trading? Are there similarities?
Tim Hollingsworth: Yeah, there is, there is. I think that you've got to have a plan, you've got to stay humble, you've got to stay balanced, and you have to concentrate on the activities and the process and not the money. I mean, what I'm not good at is saying I'm going to end so many pips today or make so much money, I tend to just for example take, I mean people used to sit down, when I would train people I had big staff and people used to come to me and say, Tim I'm not making enough money, I need to make $100,000 this year or something like that, and I'd say to them, well what have you done this week? What have you done? What's your plan, what have you done? How many people have you called, and you always find that if it's not working for them it's because they haven't done the activities.
Then with the motorbike riding, FX can really rip up, tear up your money and do damage to yourself, and on a bike you can do the same thing. I mean, if the gradation road, that's where that comes from. I was telling Jason it's one of the most beautiful rides in the world but people die on it every month because it's a dangerous ride. It's like, it's similar riding from Carmel up to Big Sur in California, a lot of twisty roads, a lot of bridges, a lot of blind corners, and I always just ride by myself. I'm never trying to impress anybody or be a cowboy, but I've got young guys come past me with one knee dragging on the bridge, and you know, they're the guys that get into trouble because they're using too much throttle or leverage. They're into things too fast and they lose control and they hurt themselves.
Rob Booker: Is this idea of risk of reward saving the day, does that apply to a lot of things in your life? I mean, I feel like everything that I know about you, which is not a lot, but I mean everything that I know about you leads me to believe that you're really comfortable with risk, and so I get the sense that maybe when you started trading you were a bit of a cowboy, like maybe your knee was to the ground when you were turning the corners in the trading account. Did you have a journey or a progression over time that taught you something about that?
NEXT PAGE: Paying His Dues as a Trader|pagebreak|
Tim Hollingsworth: Oh, going through so much pain because my ego, because in the early days my ego was involved and I always thought that if you threw enough money at something you could fix a problem, and it doesn't, that doesn't work in trading. I mean, trading is the ultimate therapist, you know, it brings out all the bad stuff and just throws it on the table in front of you and you're forced to deal with it, and because I was arrogant, egotistical then, so I paid the price, tens of thousands of dollars, and that's why now even my girlfriend as she says to me, you're getting too confident, so I tend not to talk about my trading. I tend to try and monitor how I'm thinking about it, and once I start thinking I'm too cool for school, I know that I'm heading for a hiding.
Rob Booker: You mentioned you don't talk, you try not to talk about your trading. Tell me about that. That fascinates me.
Tim Hollingsworth: I don't have anybody, none of my close friends trade, so I think when you first get into trading you tend to talk to people about it, and people have asked me to show me how it works. I don't even do that anymore because it takes me away from my basic thoughts about it in that you've got to just keep it stony, keep it quiet.
Rob Booker: You keep it inside, you keep it, I think about athletes, and Jason, I think about people who are accomplished in their professions. They don't sit at the bar and brag about their day at the office or their day on the track or their day. I don't think you go, I don't know where you go drinking at night Jason, but I suppose that at the neighborhood pub where you go drinking you're not there talking about your podcast conquests even though you're an accomplished podcaster. I mean, do you find that to be true, Jason, in people that you've met that have been successful, that they don't, I mean really successful. They're not sitting around bragging about their job. They don't even like talking about it, right?
Jason Pyles: Yeah, definitely. In fact, I found that if you talk about podcasting, you get beaten up, so I try not to mention that, but yeah, that's true. It just seems like if people are successful then they're sufficiently confident on their own. They don't need exterior or external validation from someone else.
Rob Booker: Yeah, they don't need external validation from someone else. Tim, do you have anything to say about that comment in particular?
Tim Hollingsworth: Yeah, I think you've got to be comfortable in your own skin. I mean, I go on Twitter for a bit of fun.
Rob Booker: You are really enjoyable on Twitter. Once again, GRToceanRD, that's Tim's Twitter account. Please follow Tim, it's an enjoyable experience, so keep going. What is it about Twitter? You're kind of cheeky on Twitter, I would say.
Tim Hollingsworth: Yeah, I'm Australian so we're all cheeky, but the thing is that it's a lonely game, it's a lonely game, and that's why what you do is great because you put some humor into it and you just crank out the content, which is great for people to listen to, and I think it is the best game in the world. I'm so glad that I've made the journey. I'm in a place now where I can throw a chat on Twitter that's reasonable and just, you know, for no particular reason, I just put it up there. I've met, I get to, I've seen Matt LeCoco and yourself, and I follow other people. I only follow about 20 people but you probably know them, but I think at the end of the day it's really, everyday is just, I just enjoy everyday. My dear old dad, he was a dry cleaner and his dry cleaning business was at the bottom of a hill, and on top of that hill was a hospital called the Marder Hospital, and in that hospital there was a children's ward, a cancer ward, and he used to always say, he said, listen, if you really, people who whine and whinge about how hard they're doing should go up and mop the floors in the children's cancer ward, that's where the real pain is, that's where people are in real difficulty, so that's my attitude, just hammer it.
NEXT PAGE: Similarities Between Trading & Gambling|pagebreak|
Rob Booker: You called it a game. You said it's the best game in the world. Do you refer to it as a game as for real, do you believe it's a game, or do you just, are you referring to it playfully, it's like a game, or do you think of this as a game where you're, and I think there's a distinction here because we often will talk about it. I hear a lot of people say oh, it's just a game, and what they're doing is they're repeating what someone else said. They don't really believe it, the words are coming out of their mouth, and they're just simply plagiarizing something they overhead somewhere else, but I get the feeling that when you talk about it being a game that you really do consider this a game, that you want to win but it's just a game.
Tim Hollingsworth: Well, I don't know about the USA but in Australia it's quite common for people to say, what game are you in, what game are you in, so I just say I'm in real estate, but I don't, when people say what game are you in now, I don't say I'm in foreign exchange, I say I was in real estate now I'm retired. I think it is a business, it is a business, so I think I use the word game a bit loosely, but look, I do believe it's gambling. I think it's -
Rob Booker: Now we're getting somewhere, that's a, whoa, drop the bomb on us in minute 15, thank you very much.
Tim Hollingsworth: Sorry, sorry, sorry about that, but I think it's full-on gambling. The only thing I get into an argument with people who try and tell me it's not gambling. I mean, everything in life is a gamble, but I think if you open a business you're gambling, but I think it's gambling. I think it's all about risk/reward and it's all about consistency and good players, good poker players. I don't gamble in casinos, but I like good blackjack, good poker players, they all know when to hold them and when to fold them, and I think if you don't admit to yourself and your family that you are gambling, I think that, in my opinion I just don't think you're being a hundred percent honest with yourself.
Rob Booker: I think it's, I'm just, I'm freaking out here, like you called it a game because I think that's a controversial topic. I think that's not something that people like to talk about. I think that they prefer not to discuss that subject. It's either too difficult or it is, it's maybe, why is it gambling?
Tim Hollingsworth: Why?
Rob Booker: Yeah, why? What's -
Tim Hollingsworth: Well, it's all based on mathematical outcomes. I mean, it's all based on, if you don't get your risk, I mean, the studies that my broker, you know, the broker, the studies that brokers have made, is the majority of traders are right a good percentage of the time.
Rob Booker: Right.
Tim Hollingsworth: The problem is that they don't hold their right trades long enough and they hold their losing trades longer than they hold their winning trades, therefore they come up negative, so you know, that all comes back down to risk/reward, and risk/reward, what's that sound like to you?
Rob Booker: Yeah, right.
NEXT PAGE: Tim's Trading Style & Strategy|pagebreak|
Tim Hollingsworth: What's it sound like? Risk/reward, for every dollar of risk I've got to maybe $2 or $3, and I mean, I really admire the guys and I can do it, and I can do it for long periods of time, but where you risk a dollar to make a dollar, but I just think it's a hard way to make a living in this business. I think that, I said, talking to Matt LeCoco on Twitter and I said time in this business is like free petrol, all you've got to do is you sit back and watch it happen, and I divide my trades up into four, like with the euro at the moment I've been short, I'm still short one quarter of a trade from about 133 and I've been in and out of it several times. I went long yesterday and made 20, 30 pips on the European open because on the platform in Australia I can go both ways. I can hedge.
But I'm still a little, my little short position, which I just hang on to because I find it satisfying, I wake up this morning and the euro has dropped, like that's great, and that's where time, if you get into a trend and you just have a little position there trundling away in the background that you're not worried about, it's great, it's good.
Rob Booker: How do you set things up? You mentioned Donchian stuff. I mean, we're going to get, I want to get specific if you're not uncomfortable. Are you using a full on desktop computer? Do you have a laptop? Are you mobile? Are you fixed at home?
Tim Hollingsworth: Well, at the moment I'm sitting in my car talking to you on Skype, and I'm quite comfortable putting on trades on my mobile, but essentially what I do, I just have a laptop, I have a couple of laptops, one for traveling and one just at home, and I have, I trade eight pairs because I can fit eight pairs, eight daily charts on the screen, you know, they fit nicely.
I just have the 20-day moving average and the five-day simple moving average on my daily charts, and I have, I only trade weekly, daily, four-hourly, and my stops, the Donchian method basically for the euro was you buy a break on the daily chart under the 20 SMA, the five-day crossing, and that's an end of day system but my intra-day stuff that I do, I just use pivots, I use the pivots and I just wait for rejection. I only trade the European open, which kicks in around 6:30 pm Australian time, and I just use IntelliCharts and I just have my pivot points up there. I don't use the M1s or the M2s, I just have the daily pivot and the R1, S1, whatever.
Yesterday at the European open the euro was sitting on the S1, smack on it, and it formed a little ping ball on the four hourly, so I just looked at that and I went straight in, stop under the four-hour, and my initial tag I think was 3230 but it stalled, and I had two full lots on there and I got 20 pips on both lots, and that was it, done. I'm not going to stare at stuff intra-day when it's against the trend, you know. I've done that I've sat hours, I've stayed awake, you know, in the early days you just do the most stupid things.
I made every mistake anybody, you ask me a mistake, I'll own up to it. I've torn up so much money, but for me it's been worth it.
Rob Booker: Have the longer-term chart been an element that you could attribute some of your success to?
Tim Hollingsworth: Yeah, because they keep me from overtrading. For me personally, if I've got a small amount of money in the market, maybe I'm risking, well I'm not risking anything on this trade at the moment because it's way past break even, but if I got, I risk about 0.25% on a long, like I'm long on the Australian/New Zealand dollar and I've got a little trade on there, and that satisfies me, you know. I've got a small long-term trade on the Aussie/New Zealand dollar, I've got a small long-term trade on the euro. Now, they're not going to make me a lot of money but they are making me money, but that, it's like, that sates my appetite.
NEXT PAGE: Focus on Where You Want to Go|pagebreak|
Tim Hollingsworth: For getting in there and trying to do business, when there's no business to be done, and I, the bike analogy here is that when guys get into trouble on a corner, they fixate on the thing they want to avoid, like if they get into trouble on a corner they see a guardrail, they stare at the guardrail or they stare at that tree -
Rob Booker: Yeah.
Tim Hollingsworth: Guess where they end up?
Rob Booker: Right.
Tim Hollingsworth: The thing is, if you're in a corner and you're in trouble, you got to look, you got to turn your head and look to where you want to go, not to where you don't want to go, and when you're trading, if you get mesmerized, I'm no good at saying, okay I'm going to do three trades today and turn off the computer, that just doesn't work for me.
Rob Booker: Yeah, sure, sure.
Tim Hollingsworth: Just doesn't work, so I'd rather be in the market in a small way, that makes me happy.
Rob Booker: Jason, what did you learn today?
Jason Pyles: First of all, I learned that you're cool if you're an Australian, just period, no matter what you do for a job or a living, it's just cool to be an Australian.
Rob Booker: Because it's a game.
Jason Pyles: Right, because it's a game, yeah, and I get this sense of, I guess, laid-backness, and I don't know if all, probably not all Australians are like this, but with Tim, he seems to be really relaxed in his approach to things. He doesn't get too stressed out or anything, and so that's something that I could definitely learn a lot from personally.
Rob Booker: I love what he said, he said, don't look at where you don't want to go, look at where you do want to go, and how often do we fixate on what we don't want. I think, that's why Facebook was invented so 16-year-olds could tell you what they don't want and what they're depressed about, and then he said, I try not to get mesmerized, I thought that was brilliant. Never get mesmerized by your own genius about trading. That's a great way to blow yourself up completely, and another thing was, think about looking at things from a longer-term perspective. Think about thinking of things in a more traditional perspective. We're often out to look for the newest and the greatest and the best and the most innovative, and some of the same old things that have been working for a long time like Donchian channels, which are essentially trend trading basis principles, can still work, and that maybe it's about something very basic and fundamental, and that going back to those principles can be a huge help.
Tim, I've learned a bunch and I have immensely enjoyed following you on Twitter and I want to recommend to everybody, find Tim on Twitter @GRToceanRD, that's on Twitter, and we'll post that in the show notes as well and I wish you the very best of Friday mornings, Tim, in Australia. Thanks so much for coming on the show.
Tim Hollingsworth: Thanks, Rob, it's been fun. Thank you. Thanks, Jason.
Jason Pyles: Yes, sir, thank you.
Rob Booker: Our guest has been Tim from Australia, and on behalf of the producer Jason Pyles, I'm Rob Booker and you're listening to the Traders Podcast.