Interview with Jarrat Davis
Jarratt Davis has been trading professionally since 2008 and trades for his clients via a London-based company, authorised and regulated to manage client’s investments through the FCA in the UK.
In this exclusive interview, he sheds some light on how the industry works at an institutional level and how retail traders can ultimately trade in a similar way.
He believes that retail traders should focus more on fundamental analysis and learn how to trade fundamentals, which is a trading method that his hardly ever taught in Forex training courses.
How did you get into the world of currency trading?
I discovered Forex completely by chance after searching for a currency conversion website ahead of a trip I was planning. I saw an advert about trading online and decided to take a look.
After a couple of years of testing, I finally began to understand how the markets move and how to profit from them. My goal was to trade other people’s money and leverage my abilities.
I did not have any kind of formal training in banking or economics and never held any type of related employment. I am completely self-taught and began as a retail trader.
Why do you trade for clients?
When I started out I didn’t have a substantial amount of money with which to trade, as I was fairly young. I needed a way of leveraging my skills of trading without being distracted.
Trading for clients seemed like the obvious choice for me and the hardest part was building up a track record on fairly small accounts, while convincing my very first investors to place their trust in me.
After a couple of years I had my verified performance and finding clients became much easier. Over time my minimums went up and I am now one of the only FX traders offering managed accounts through a fully FCA regulated company in London.
Would you recommend this route for retail traders reading this?
Definitely! It can be difficult at first from a psychological perspective because you’re responsible for other people’s investments. But over time this gets easier and it all becomes part of the job.
Trading for clients is a very good way of leveraging your abilities and minimises the risk of wiping out your account funds needlessly.
How do your methods differ from other traders in the retail industry?
One thing that I remember from the early days is how much educational courses or products relied completely on technical analysis. Almost every course or system is based on concepts that can actually be learned for free online.
In my experience, focusing purely on technical analysis leads to a cycle of endless switching and changing of systems, which ultimately leads to losses and inconsistency. Almost every retail trader that I have worked with started out by swapping technical systems and lost money in the process.
In contrast to this, no successful institutional traders that I know of use technical analysis as the basis for their trading. Most use fundamental analysis exclusively and a very small percentage (including me) combine the two approaches. I prefer to focus on the fundamentals and sentiment driving the market price.
In fact, when I encounter a so called ‘guru’ in the retail space, the first thing I look for when deciding if they are genuinely successful is the focus they place on technical analysis!
Why do you think that most retail traders do not apply fundamentals?
This is a great question and one I have thought about a lot.
I think the main reason is that it simply isn’t taught all that much. If you search online for a ‘Forex training course’ the majority of what you will find is just one rehash after another of the same technical systems.
And I think the reason for this is that most of these course vendors are just failed retail traders. They couldn’t quite make a profit from trading, so they just sell information to new traders instead.
Leading on from this lack of information, I also believe that many new and experienced retail traders have the misconception that trading fundamentals is complicated and hard to understand. But this isn’t the case at all.
So what is your trading method?
My method or technique to trading the markets is actually pretty simple!
I just read the currency news each day and monitor what is moving the markets in a particular direction. I then look to place trades in that direction, using the technical skills I developed in my early years.
An example of a recent trade is the USD/JPY currency pair during 2013. It was announced at the start of last year that Japan would begin a process of quantitative easing, a process which devalues a currency. So it was pretty clear that the trade to take was to buy USD and sell JPY for as long as this policy was kept in place.
Each time the price of that pair dropped, I knew that it was simply profit taking or uncertainty within the market. I knew that sooner or later the market would resume its buying of the pair based on the strong fundamentals in play. In fact, the further it fell the better the opportunity was to get in a long position at a great price!
The USD/JPY consistently hit new highs throughout 2013, while giving plenty of pullbacks and opportunities to get into new long positions. This was actually one of my most profitable pairs for last year and is looking good as we go into 2014.
Once you understand the forces driving the market, it is a very simple case of trading with those forces each time the market moves against the anticipated direction.
These types of opportunities occur every day and provide plenty of profit making chances across the major currencies.
What is your biggest piece of advice for any retail traders reading this?
Get away from the charts and start paying attention to what is actually driving the price fundamentally. There is always a reason for large moves on a currency pair. If you understand the reason, this will let you make informed decisions on whether to buy or sell.
Another point to highlight is that fundamentals are not as complicated as many people think. In fact, this approach is very simple. The markets only focus on one or two fundamental factors at any given time, making it easy to identify and trade along with the focus of the market’s attention.