Ron William: Trading Strategy and Opportunity in 2020

Here is the transcript of Ron William talking about Trading Strategy and Opportunity in 2020 on The First Followme Global Trader Conference on 21st December.

@ronwilliam

Hello everyone. It’s an honor and pleasure to be here. First of all, I would like to extend big congratulations to Followme for holding such an inspiring event.

I was frying from London and today I want to talk about trading strategy and opportunity in the forthcoming 2020. My analysis mainly focuses on manual trading, though of course, a few algorithmic trading as well.

Just a quick summary of my experience for about 20 years. I started quite young, with foreign exchange trading as the main focus of my market analysis. I worked for many leading banks and institutions in the west. During that time, behavior finance has been an important area of my focus. That’s to look at the behavioral side, or the psychology side of trading. Finally, education has been the key throughout the time I’ve been working in this field. More specifically, I worked for an organization called “IFTA”, which have been around for 30 years, whose main mission in education is ensuring that many people learn about trading and investing through professional education.

Everyone has a story about trading, maybe from Followme, for example, or through trading with friends who’s been helping you along the way. My story began a long time ago through these three mentors of mine. These three mentors that I would like to give credit to are Mr. David Fuller, Robin Griffiths, Dr. Van. All three of them have plenty of experience in trading and investing, but more importantly, they have their own methodology throughout their ways. David Fuller, who traded a long time ago in 1960s, acknowledged the effect of behavior analysis before it became a subject. He understood that psychology was at the heart of market movements. Robin Griffiths considered psychology creating trends, and those trends have turning points. And last, Dr. Van, a leading trained psychologist for many decades, believes that people don’t trade the market, whereas they actually trade their beliefs. Therefore, he spent a lot of his time monitoring people’s trading behavior. The above drew us a conclusion that if any of you see further than the most, it usually gets down to the message that you learn from people who moved far before you. It’s very important to learn from books, from mentors, and most importantly, from Followme platform.

Why does this behavioral analysis matter? The answer is--People drive the market. Computer is helpful for trading and analysis, but the reason why no one’s strategy wins all the time is because of the human factors. Please always remember--people drive market. What drives people? --Emotions.

As suggested, technology evolves over the years and into the future. Let’s also remind ourselves that people are driving the market, and emotions are driving us. I really must insist on this point because I worked with traders for many years, and I also represent myself for many years and work out how I can maintain my actions.

That’s the one true that’s not changed.

Now, this picture here shows you that when you are by yourself, you are a rational person. Everything is balanced. However, when you join a crowd and you combine your ration with emotions and money, things change and algorithm doesn’t work as well as it should.

It does identify the crowd psychology as trend fashion, but the turning point is the trend that you couldn’t predict, which is because of what happen when we are in a crowd, experiencing emotion change with money. When we actually reach an extreme is because of our cognitive bias. I have this picture here of what I call “a success iceberg”. The tip of the iceberg is what we know as a successful trader, the logical part in our trading, the strategy, the risk management, the money management, which are the logical part of our trading, but that’s only the tip of the iceberg, only 20-30% of the equation of success. The rest of the success is under water that we don’t see, which is the emotional part of trading psychology. Now a lot of scientists reported that this is your subconscious mind. If you are a computer, then this is the super computer. The supercomputer wakes you up in the morning and tells you what you are going to do and why, which is often based on our beliefs and values. The three questions that you should ask yourself as a trader are: What is your belief and values in trading? What’s your beliefs and values in risk? What’s your beliefs and values about money? Everyone has a different view on risk and money. Different people have different views on trading, which might lead to emotion extreme that reaches these tops of eupmoria and pessimism. This is why the trend is not always your friend. Trend analysis is the most highly successful strategy in the market, and one must always be aware of the turning points.

I would like to show practice with theory, otherwise it becomes too academic. This is a one-hundred-year chart of the US equity market that shows cycles are not theory. This picture shows you how cycles in roughly 16-20 years alternated from bullish to bearish. For the last 100 years, the US market and other markets in the world was in cycles, which were long-term cycles and very difficult to trade. However, this gives you an idea of the economic, social environment, and the environment for trading strategy.

During the green period--strong trends with low volatility, trend following works very successfully. During the red period--weak trends with high volatility, trend following works, but not as successfully. For that reason, market time becomes very important, breakout trading, for example. The risk management has become critical. During the green period, you could be wrong for a few times and you still make money. During the red period, if you get wrong a few times, you could lose a lot more. We come to a conclusion that things change, cycles change, strategies change, and most importantly, the trend psychology will change with each of these cycles.

You can see here the most important cycles we have right now, from 2000 to 2020, the next two-three year, is based on probabilities, not certainties. Probabilities suggest the next two to three years in global equity market is likely to rise, which is good news, meaning more opportunities for the active traders. Yet challenge goes to those who are not going to invest in education, to those who really need to focus on the best practice for trading. You will need 10,000 hours of practice, 100 trade samples, to make sure you look at all the winning scenarios and losing scenarios. You’ve seen the indicate of good times and bad times. And you really know how to handle your emotional balance. This really matters. Just keep in mind in general the probabilities predictions are good for trading and we have to become better in terms of knowledge trading, and market timing and risk management.

Here is an example of volatility returning to the market in 2018. This picture explains a period that trend was no longer anyone’s friend. This is a technical pattern that decreases in volatility, which tells you that people are going from fear to comfort. They’re feeling a lot more confident about low volatility and general status of economic environment. Since 2018, things changed. When you looked at a pattern of low volatility, it might suddenly change to a reversed direction.

Here is a humorous saying by Warren Buffett that only when the ride goes out do you discover who’s been swimming naked. The lesson behind it is during strong trending market with low volatility, most people can make money. During volatile time when the tide goes out, that becomes very difficult. Therefore, I suggest you make sure that you are focusing on really the best strategy of risk management.

Now let’s take a look at the trend of S&P500. Within the range of +1 and -1, we can conclude with this picture that the market key resistance will be about 3000, that’s the top of the channel.

We can see from this graph that for the past two years, the uptrend of US dollars was started weakening. According to my analysis, it’s about to show a self-reversal signal. We still need to hold below 97.70, but don’t leave until the chart is 95. Now remember 57.6% is made of the EUR, so EUR/USD is a narrow image of this chart.

Now we can see EUR/USD is a down trend and the key resistance is at 1.12.

The pound is a very important currency, especially after the UK election, and there were some big moves. However, even when there are big events, whether it is an election or economic indication, technical analysis is very helpful. 1.3420 is a very key level when you look at the GBP/USD. The major wave at the top actually suggested a long time ago, that the market is going to push up even before the election was actually announced. Pound is positive up to 1.40, although it’s likely to be a short-term crush before then. This is a core move not just for GBP/USD but also GBP against other currencies.

Gold’s trend is still very strong and uptrend is of course still going up. There’s a bullish pattern which has a minimum target of 17000. During the increase of volatility, gold becomes a very important safe haven.

And the last chart, oil. This is a long-term chart of oil, which doesn’t matter to short-term traders. As oil has fallen a few dollars now, you do need to know there’s a key historical support level between $48 and $40. That will be a very important make-or-break level for oil for the new year, so please watch this key level in trends as we start the new year.

That’s all from me. Thank you so much!

#TFGTC2019# #FX# #UKElection# #EUR/USD# #GBP/USD# #gold# #Brexit#