Interview with Erich Senft
Could you tell us a little about yourself?
There’s not a lot to tell. I was raised in a tiny city in central Alberta in the guts of the oil patch. In my early 20’s, I met my better half and we moved to the west coast where we’ve lived ever since then. I have done lots of different things over time, but trading has been my enthusiasm ever since I caught the bug about twenty years back.
How did you get started trading?
I was initially introduced to the world of trading in the mid-70’s and the Hunt brothers were making an attempt to corner the silver market sending silver costs skyward. My cousin, who’s always been more bold than me, horded quarters for their silver content and I helped. We must have picked up $300 worth of quarters before we learned the powers that be stopped putting silver in quarters in the mid-60’s! Fast forward fifteen years when, at a tough time in my life financially, I got a “Ken Roberts” flyer in the post and swiftly sent away for his commodity trading course. I poured over the info and 1 or 2 months later I opened a trading account only to blow it out around a year later, but I was hooked and determined to work out how to become a moneymaking trader .
What do you like best about trading?
Without question it is the liberty and suppleness, particularly these days with the Currency Futures, Global markets and liquid after hours markets. You can actually trade any time of the day ( or night ).
What markets do you trade?
I started with the grains and still favor them, but in recent times the margins have gone thru the roof. Now I have a tendency to spend some more time with the emini S&P, though I like to experiment with the Bonds and Forex.
What style of trading do you use?
I am predominantly a support and resistance trader. I look at a chart and work out where and how the orders are moving and then decide who’s in charge of the market!
What have been the biggest influences on your development as a trader?
2 things : Losses. It is actually amusing in some ways… you never appear to remember your winning trades to identical degrees that you remember the losers. Losing cash is a very unpleasant experience and I can agonize for days over a bad trade, researching what happened and trying to work out the way to not let it occur again. There are some losing trades that are still clear in my mind, although they occurred many years back.
What is the one largest lesson that you have learnt since beginning trading?
Largest lesson? I must select a single one? That is difficult, but I’d possibly say cash managing. If you do not understand how to get a grip on your losses, you may as well take the cash out of your account and go to Vegas where you can at least have a very good time spending it. Many years back there had been a trader who went by the cyber handle “Phantom of the Pits” who gave a great interview online. While some of his ideas were a little esoteric, 2 things struck me about his trading philosophy : one – Presume you are not right at the outset ( i.e. Be ready to take losses, keep losses in control ) and two – “Milk” the trade, if it is going your way. Sadly the interview never gave specifics how to do these things, but I continue to believe it to be sound info, particularly the information on keeping loss amounts down.
How did you get interested in coaching other traders?
About ten years back internet trading forums started springing up and I’d spend a lot of time at the forums posting and reading posts. I spotted that there were lots of folks asking trading questions, desperate for info, and either getting no answers, or worse, getting awful advice. I started posting more and subscribers liked my answers and information. A star was born!
Do you target training on one particular area of trading, e.g. risk management / psychology or finding trades?
No, not only 1 area. It depends a lot on what the individual wishes. There are some traders that are OK with some pieces of the trading puzzle but lost in some other aspect of trading. And then there are those who are simply lost or so overloaded with info that they have not got a clue the simplest way to proceed. Clients generally let me know what they want and if they do not, I’ll sometimes spot it pretty fast.
How do you work together best with your customers? E.g. phone / email / screen sharing?
All the above, but as the web becomes more advanced we are doing more trading rooms, with screen sharing software. It’s easy to have a one-to-one experience without the airplane ticket.
What sort of results do your clients get after coaching with you?
I guess you should be asking them, but I want to think that they are more assured with their trading capabilities. My students gain tremendous confidence when they get to trade with another person dedicated to “showing them the ropes”. There’s often 1 “ah-ha!” moment when things start to gel into place. It’s a little like trading with training wheels… you get the support till you can do it alone.
What is the most satisfying part of coaching traders?
Folk are always so thankful for helping them become better traders. When you consider it, there truly are no trading faculties, at least not in the conventional sense. If you are aiming to learn to trade you are restricted to 2 options : teach yourself or find somebody to teach you ; that is it.
What is the biggest but most easily fixed mistake that you see traders make?
I’d say hyper-trading. It’s a difficult problem, but simple fix. There are a large amount of traders who get hooked on the “trading buzz” and will get into another trade to get their fix, quite like an addict. Naturally the buzz wears off pretty fast after a gigantic loser and that leads to other issues, which also tends to end up in overtrading so you are stuck coming and going. But if you’d like to fix your trading, be a lot choosier about which trades you take. Unfortunately so many folks give up too fast on trading.
Do you recommend journals or other record keeping as an important part of trading?
Definitely! What an undervalued resource a trading journal is, regardless of whether it is simply a basic recording of where and when you entered into and out of a trade and the profit or loss. Better trading bookkeepers will make notes of why they took the trade and will review the trades and reasons later. Every major trader keeps a record of his trades. There are only a few definites in trading, but keeping a journal WILL make you a better trader. Guaranteed !
What are the most common issues that you see in your clients that prevent them from becoming better traders?
They are the same ones that get us all : greed and fear. Fear makes us doubt our technique and greediness just makes us do dumb things. One of the very best traders I ever knew was a pilot. He was systematic just about to the point of being vexing, but he managed to import his experiences as a pilot and transplant them into the trading arena. Pilots don’t question what their instruments are saying. They just read the info and act appropriately. As a consequence he managed to eliminate lots of the greed and fear… things that plague the bulk of traders.
What advice would you give traders who are just starting out?
Baby steps… do not rush it. Test your strategy and then test it some more. Get ok with the idea of trading multiple contracts or positions because that’s where the genuine money is at.
Should traders trade live while learning?
No, definitely not. At least I do not believe so. I know a few people will disagree that you cannot get the feelings going on a simulator the same as when there’s real money concerned, but I do not agree. The simulators they have now will let you piggyback on a live info feed so it is just as if you are trading real money but you are not. Besides, the feelings come into check with a bit of practice. You may still experience the disappointment of a loss, even though it is simply a Simulator ; similarly the satisfaction from knowing you seem to have a cash generating system and the confidence to trade it could also be learned thru a Simulator.
What 3 books do you recommend traders read?
I am presuming you are referring to trading books? There’s a large amount of rubbish out there but worse than that, there’s plenty of books that do not tell you anything! I am an enthusiastic fan of “how to” books, but there aren’t many out there in the field of trading worth looking at. If pushed, I’d doubtless say my 2 favorite trading books are : Technical Research into the Monetary Markets, by John Murphy and “Day Trade Online” by Christopher Farrell, which not by accident are the sole two trading books on my book shelf.
“Technical Analysis” is the Bible of trading books and covers almost every aspect of trading ; however like most textbooks it leaves the reader to draw their own conclusions as regards to what is valuable and what’s not, but as a reference it’s difficult to beat. Chris Farrell’s “Day Trade Online” is about stock trading and is a bit outdated; however I love to read it for the ideas and he is a pretty entertaining writer too.
The 3rd book I would like to suggest is “The Truth About Trading Support and Resistance”… Which is the trading book I wrote, a scandalous plug I know, but self-promotion apart, I consider it a trading manual more than a book as it is full of “how to” stuff. It’s been very well received over time, it too is due for an update.
Perhaps more than a book, I recommend a few movies?
“Enemy at the Gates” stars Jude Law and is a real story about a Russian sniper in WWII and while not immediately related to the field of trading there are fantastic parallels that may be made particularly in the opening scene where he’s a kid hunting wolves with his granddad, if that is not a simile for what makes an excellent trader I do not know what is!
Another good trading flick is “Rounders” with Matt Damon, which is about poker players and not trading, but again, there are a lot of parallels that may be made to the trading world. “21” with Kevin Spacey is another such betting / trading style flick.
To contact Erich, go to http://www.indicatorwarehouse.com/build-your-own.htm