For this sixth addition of Trader Interviews, I speak with Simon Cotterill, a prop trader at LT93 wealth management, a company he set up together with some friends this year (2016).
When I first read through Simon’s responses, I was excited to get this interview out there. It gives a great insight into a boutique prop firm, as well as read yet another unique journey of a successful trader.
After having some beginners luck but then blowing an account, Simon approached trading very much like a business from then on. He even had the fortunate positon of taking a year off to dedicate entirely to learning the craft. In this interview we talk about what he learnt as well as the key concepts important to Simon’s trading.
What to look forward to:
> Simon’s introduction to the trading world
> Capital Preservation through strict Risk Management
> Key to trading, a correct Mind Set
> Simon’s role in LT93
> How LT93 returned 310% in 2016!
> Advice to someone looking to join a prop firm
[CJ – Chris Johnston | SC – Simon Cotterill]
CJ: Where did your trading journey begin? Did you discover trading at a young age? How long have you been trading?
SC: In the early 2000s I was offered a job within the trading industry, however I didn’t accept it. The timing wasn’t right.
Looking for a career change in 2010, a university friend introduced me to currency trading. Beginners luck, so crucial to many day traders, allowed me to make significant profits early on. As you can probably guess, lady luck ran out after a short spell and losing all my profits, I faced the reality of the need to study and educate myself if I was to become a consistently profitable trader.
Taking a year sabbatical, I studied various fields within the industry to gain an overall understanding of currency trading. From this, I discovered technical analysis and charting and found this to be a good fit for me.
Isolating myself for almost a year, I traded a live account, putting into practice what I had learnt. The reality of trading real money, ensured I traded with a prudent and disciplined approach.
CJ: Did trading start out as a hobby before turning into something you wanted to pursue seriously?
SC: Trading started as something I was curious about, as at the time I had sold my printing firm and was looking to do something else to make a living. I viewed it as a new career so took it very seriously. I approached it like a business, but was unsure I would be able to make a living from it as I began. It was always more than a hobby and something that I wanted to make a career out of as I had an interest in trading and of course the lifestyle of working from home or anywhere in the world was appealing.
CJ: How did you learn your craft? Have you taken any trading courses or was it all your own research?
SC: I had knowledge of trading and aspired to be a currency trader. I was in a very fortunate position where I was able to take a gap-year and learn as much as possible by reading everything I could lay my hands on including articles or opinion pieces. I soon found that trading is very personal and is based on psychology. With that knowledge, I found that I understood Technical Analysis and was able to recognise patterns within the charts. I studied how the successful professional prop trader worked and took the best practices that suited me and applied them to my trading. I took one course at the start of my venture but it was mostly my own research and studies that I gained my knowledge from.
CJ: Which markets do you trade?
SC: I trade the major currencies and some crosses but no exotics, also some gold and silver. I find these to be the best for my technical approach and I find that I can make consistent profits.
CJ: You base your trades off technical analysis, is this on a discretionary basis, mechanical or a combination of both?
SC: It is 100% discretionary trading. Technical analysis, pattern recognition, candlestick formations and a mathematical based method, all based on looking at a chart, studying it and understanding it. It is building a picture and formulating the idea. This is only half of the picture however, as I then have to be disciplined and follow my rules and principles as I’m trading.
CJ: What drew your attention to Technical Analysis specifically instead of fundamental analysis?
SC: For me personally, technical analysis is more reliable. I can quantify it and I find there are less variables than with fundamentals. I can build a picture with technical analysis and form a picture of the currency pair. Guessing the outcome of news does not suit me and is not good for my anxiety levels!
CJ: Do you consider fundamentals in your analysis? Or is it generally just avoiding news heavy days?
SC: I obviously keep an eye on the news (a little bit of a politico) but I am not clever enough to understand the economics/political relationship with the markets so I trade what I see from the charts but will avoid heavy news days and my progressive approach to a steady gain of pips does not do well with a guess (on my part) on news.
CJ: I understand you day trade (correct me if I’m wrong). Was there a reason you decided to go down this route instead of say longer term swing trades? Would you ever hold positions for longer or do you close out all positons at the end of the day?
SC: I wouldn’t classify myself as either actually. I trade based on the 4 hour chart mainly so I look for the pattern/idea to complete or get out when I feel is the right time. So in principle I try not to hold over night; sometimes I do but as a rule, I never hold over the weekend unless I see a pattern on a higher time frame. I will in this case, with the appropriate trade size for the weekend risk taken into account.
CJ: When you back test strategies, do you do this manually or on an automatic basis?
SC: I do not have a strategy to speak of but every day, I research new Patterns/Candle Stick Formations to add to my arsenal, so when I am scanning the markets I can recognise more opportunities. Each trade is unique and different, so back testing is not feasible.
CJ: You see a lot of people talk about systems with high percentage win rates. This doesn’t necessarily need to be the case to make consistent profits. Is this something you focus on?
SC: Again, I don’t have a system as such but keep to my disciple, routine, principles, rules, control and patience within the psychology of trading. My percentage win rate is approximately 70% but I don’t focus on this, I focus on each trade individually, complete the trade, and then move on with a clear mind set for the next.
CJ: You mentioned to me previously that your main aim is capital preservation. What steps do you take to preserve your capital, is it strict risk management? I.e.Taking higher probability trades or knowing that you have an edge in the market?
SC: Strict risk management mainly and thorough research from knowing the technicals, all the way through to applying this to the charts. I have my rules and principles which I do not break under any circumstances.
CJ: Do you think Risk Management is a simple or complex concept?
SC: I feel the concept is complex and very personal. It took me time to create my rules and principles, unfortunately through the pain of losing money. I found that by making mistakes and losing money, this is the only way to really learn and protect yourself from repeating in future.
CJ: Talking about risk management, do you use a certain risk per trade (i.e. 1%)? Is there a certain amount of trades you allow yourself to be exposed to at any one time?
SC: I feel my discipline and routine are the base for the Risk Management. The procedures I have in place to stick to my rules makes it work.
> I only execute trades which have a minimum Risk:Reward ratio of 1:1.5. I may take profit once we are within 85% of our desired target level.
> My Stop Loss is calculated with a maximum loss of 50 pips per trade or 100 pips per day overall on the entire account.
> My daily Stop Loss is no more than 2-3% of the whole account traded.
> I always place a stop when I open a position.
> I never move the stop and therefore increase potential losses.
> I stop trading if my stop losses are hit.
CJ: You also mentioned you concentrate on the accumulation of pips, presuming instead of focusing on the monetary amount for each trade, do you do this to help your mindset?
SC: Absolutely, yes. I do not look at the £ value of any of my trades, only the number of pips. The accounts that I’m trading are now hundreds of thousands of pounds, so to see the money per pip is off putting. Concentrating only on the pips is less stressful and easier mathematically. It is less emotional dealing in pips rather than pounds.
CJ: How important do you think having the correct mind set when trading is? Do you think it’s a make or break asset as to whether someone makes it at trading or not?
SC: Mindset is everything. Controlling your fear and greed is key to trading. Thinking clearly and staying calm and keeping stress levels down will determine if you are a successful trader. I have a routine and meditation that I religiously follow each morning that helps to keep my mindset calm.
CJ: Do you keep a journal of your trading activity? If so do you think it helps with your trading?
SC: Yes I keep a trading journal. It keeps me disciplined as I’m able to review my trading history and the history of my technical analysis, such as which patterns worked, how they worked and what gains they produced. It helps me with my trading psychology as it adds to my research and confidence for future trading.
CJ: In your opinion, do you think trading is a teachable skill or do you think someone has to have the knack for it to become successful?
SC: Trading itself is a teachable skill however character and personality play a massive role. In my opinion you must be disciplined and able to control your emotions. Without this, being a successful trader will be much harder. This aspect I think would be difficult to teach.
CJ: Do you remember when you started to become a consistently profitable trader?
SC: Thankfully, I have been pretty much consistently profitable since I started to trade full time, as my career. This is actually down to my rules and principles and the discipline I have had to learn to stick to them.
CJ: Have you blown any trading accounts before getting it right? If so how did you move on from it?
SC: I blew my account when I very first started which was a hard lesson. Trading £3,000 up to £17,000, I thought “This is easy, I’ve made it!”. Then when you lose it much more quickly than you made it, it’s a shock and you realise it was all beginners luck! I thought I was the best trader and had outsmarted the market but losing your account is a very humbling thing. I decided to take a business approach to trading at that point and work out what was best for me as a trading style and how to put that in a framework to be consistent and successful in the long term.
CJ: Let’s move onto your current role at LT93 Wealth Management – Could you provide a brief overview of your role at LT93?
SC: I am the senior currency trader for LT93. We are a boutique wealth management firm offering spot FX investment opportunities. My day to day is trading clients money.
CJ: How did you get involved with the company?
SC: In January 2016, after being consistently profitable for two years, myself and two friends, pooled funds together, simply to earn an extra monthly income. As time progressed, word spread of the monthly returns which attracted more investment from friends and family. By the summer of 2016, LT93 was born and was trading over £250,000. At the end of 2016, the fund had grown to over £1,000,000 and returned 310% on the year.
I founded LT93 to be different from the usual banking investment funds. Our offering is simple, transparent and honest. Clients open trading accounts in their own name, funding their account themselves, which is held in a segregated tier one, FCA regulated brokerage account. LT93 is a regulated wealth management company that never has access to our clients’ money assuring them of complete transparency and honesty.
CJ: As a prop trader, do you have the freedom to work from home or any other location, or are you required to be present in the office? / does it help being in the office?
SC: I have the freedom to work remotely which is a huge benefit and upside to the job. I have a business partner in Spain so regularly pop over and can work from there. The change of scenery is refreshing. I’ve actually just joined JetSmarter (www.jetsmarter.com), which is a company that offers travel by private jets for a yearly membership fee. This allows me to jump on a flight and quickly get to my destination without having to deal with the usual air travel hassles and stay focussed on trading.
That said, I do like to be at my own place most of the year, with my home office set like a trading desk environment as this is always my comfort zone.
CJ: LT93 provides clients with two main strategies. One Swing Trade strategy and one intraday strategy that aims to collect 25pips a day. Are you able to provide a high level view of these in terms of what they aim to achieve?
SC: We have a quarterly investment where I will trade daily and hopefully our accounts will profit each quarter. For 2016, we made an overall gain of approximately 310%.
We also have a longer term strategy of one year, using the principle of compounding interest.
We aim to generate a profit of 2.6% per day, targeting this figure 15 trading days per month or 180 days of the year.
We do this by placing one trade per day, each day of the trading year, that aims to profit by 25 pips. If the trade triggers and is profitable, the trade size is increased by 2.6% the next day and is repeated every trading day.
A simple hypothetical example and illustration below shows the mathematics and potential return with this strategy:
£500 investment x 2.6% per day x 180 days per year = £50,765.88
First Year Result
After our first year trading this strategy we managed to achieve from September 2015 to October 2016 a return of 2.5% per day for 180 trading days of the entire trading year.
We achieved a return of £42,585.89 on a £500 investment, an 8,400% simple interest rate.
I feel that my analytical approach helps with an overview and long term goals. As Trading can be very focused, I make sure I take time out to review (Journaling Helps) and have long term consistent goals.
CJ: What’s your trading day typically consist of? Have you got a routine you stick to?
SC: So from previous answers, you can see my routine is very important to me. I have a strict process throughout the day. I will not go into minute detail but I am at my desk for 5am. I will set up, do some meditation and affirmations to start the day and I will be analysing until the UK open and maybe a bit beyond, then managing trades, I will try to get to the gym for 30 minutes and then ready for the US open. I will try to finish for about 6pm. The overall routine helps my disciple and in affect the trading, but it is flexible enough within the trading to adapt to changes quickly to stay successful.
CJ: What do you do to relax and take your mind off the market?
SC: I get out of my house, meet with friends for drinks, grab some food, watch a film or two and talk about anything but trading.
CJ: Have you got any advice to someone who would like to make a career in a prop firm?
SC: Read, study, educate yourself as much as you can. Pick the trading discipline and desk that suits your personality. Learn to be disciplined. Don’t be forced into a trading style that doesn’t suit you.
QUICK FIRE QUESTIONS
Number of Screens you use to trade
Preferred Trading Platform(s)
I use a Money Manager Platform but chart from Pro Real Time
Most unusual place you’ve placed a trade
Roof Top Pool in Barcelona
“If you greatly desire something, have the guts to stake everything on obtaining it!”
“I have never let failure stop me from going on to achieve even greater failure!”
Favourite Financial Themed Movie
The Big Short
One book that everyone must read (trading or non-trading related)
The Great Gatsby
One financial / trading themed book that everyone must read
Favourite holiday destination
London but abroad, Barcelona
Favourite beverage to wind down with
Thanks to Simon for taking the time to answer my questions. Hope you guys have found his responses as interesting as I have.
After reading this and thinking about previous interviews and other articles I’ve seen elsewhere, a few things keep cropping up about trading success. Yes you need a strategy that is consistently profitable, but every successful trader mentions that consistency in the discipline of applying that strategy to the markets and having the correct psychology / mind set are both pretty much a necessity to becoming successful at trading. These two are clearly very important to Simon in his trading, he has a set routine (getting to his desk for 5am!), a set approach, strict risk management rules and approaches each trade individually and no matter what the outcome moves onto the next with no regrets or influences about the impact of that last trade………In which case trading should be easy:
Create a Plan > Trade the Plan > Rinse & Repeat 🙂