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FOREX TRADERS

Interview with Tim Rea

Winner of the 28th World Cup Championship of Futures and Forex Trading


forex traders futures and forex champioinship Tim ReaTim Rea took first place in the 28th World Cup Championship of Futures and Forex Trading with a 104.12% return, proving that trading U.S. Futures and Forex products can be done from anywhere in the world. By placing in the top three in both the 2010 and 2011 World Cup Championships – with a 156% return in 2010 - he has proven to be a world-class trader.

In this exclusive interview, Tim tells FX Trader Magazine how he established himself in the forex, futures and commodities industry by turning his passion for the markets into a business. He explains how he created a variety of algorithmic trading programs derived from his proprietary trading methods. 

Living on the opposite side of the world from the markets he trades gives Mr. Rea a different perspective, which he considers an edge over the herd of US-based traders. His methods often factor in moves that occur around the clock in various time zones and his full-time staff monitors the markets around the clock.

Mr. Rea is a registered Commodity Trading Advisor, who invests his own capital in the programs he offers. In a time where people are highly skeptical of money managers and trading advisors, Tim has taken a non-traditional approach of “putting his money where his mouth is.” 

FXTM

Please tell us about your background and how you became a professional trader?

TR

Before I became a professional trader I had been involved in a number of areas of business here in New Zealand such as motor vehicle importing, commercial property development and farming.

I had always had a fascination with the markets from when I was a child and did trade discretionally at some level from the late 90’s. About 10 years ago I sold some of my business interests down and decided what I would like to do next. I then had time and the financial resources to pursue trading. 

It took me a number of years of trading and learning through the school of hard knocks as they say. While I did take some courses and read books etc. it was when I got into working with systems I made better progress but again was over several years as of course there is so much to learn.

FXTM

How did you come to trading Forex?

TR

I had some exposure to Forex with the importing business I had done in the past so was aware of the potential to trade it but at the time I started trading Forex I think I was attracted to the 24 hour nature of it being down here in New Zealand as well as the leverage available that made relatively smaller moves have good trading potential in them. I also trade a wide range of Commodity Futures about as actively as I trade Spot Forex.

FXTM

You achieved a remarkable result taking 1st place in the last PGF World Cup Championship of Futures & Forex Trading competition with a 104.12% return. You also achieved excellent results in the previous competitions.  What is your main objective when participating to trading competitions?

TR

I went in the Championship as a personal challenge really and to benchmark against other self-traders but it also can raise your profile a bit if you do well and I do have a CTA business, Transworld Capital Management in which we have a Forex program so thought that might help that to get some exposure. It is also good place to try to find that balance where you can set your leverage to give you a shot at a placing with good returns but at the same time not destroy your account when you have a drawdown.

FXTM

I understand you mainly work with automated trading systems. How did you move from discretionary trading to automated trading, and why did you decide to take this strategic step?

TR

I moved from pure discretionary to using broad technical strategies when I did trading courses but they still required some judgment and I felt I was not consistent as to how I applied these methods and thought there must be a better way, one that was absolute about what it would do and not influenced by my own opinions or judgments or even feelings on the day. Eventually I started experimenting with computer based systems and could see quickly that was the way I wanted to go.

In terms of the automation side initially I was attracted to it as a self-trader as I could trade times I could not be there at the screen but found it also helped with consistency and some discipline in actually taking all the trades. Now I have staff to help me monitor trading and my systems are trading hundreds of trades round trip every month and so I simply could not trade manually the way I do now as sometimes when things are moving we are often firing off a lot of trades in a very short time in different markets and over more hours than I can be at the screen for personally.

FXTM

How did you build the automated trading systems you work with? Are they based on technical analysis techniques?

TR

The systems I work with use a variety of methodologies but in terms of how you would describe them they are all using various numbers from time and price in calculating what to do so in that respect are technical. Sometimes they may use some rules that refer to technical indicators and other times they would be using a formula to detect and set up a trade on a chart pattern for example.

FXTM

Do you monitor and adapt your systems over time?

TR

If for example I have tested something over 10 years of historical data and say a 1,000 trades and if that system worked well over a wide variety of market conditions over that much time and that many trades I would be not want to be too hasty about making significant changes to the system. I have quite a few systems I have used for a few years unchanged however nothing is set in concrete and I have at times made small changes to some systems that I think may improve them. I tend to keep working on more ways to further diversify my trading and add those in to trade alongside rather than keep changing the existing systems.

FXTM

What was your strategy during the contest, and was it any different from your usual trading strategy?

TR

I used a number of different short term systems to trade the EUR/USD and money management to decide our trading size both up and down with the account size. Also over time I was able to add in some additional systems. This is what I do in my own trading anyway just I might set the leverage ratio a bit different and in my general trading would be using Commodity Futures also to further spread the risk and opportunities and have more of a portfolio effect than just what I do with Forex alone.

FXTM

Do you have any “favourite” instruments you like to trade? and especially currency pairs?

TR

In Forex I like the EUR/USD as it has very good depth, has low spreads and seems to frequently have some good sized short term moves that provide a lot of trading opportunities. I trade a wide range of Commodity Futures also and I guess my favorite ones also tend to have strong short term moves such as Gold and of course I especially like the ones that provide me with more a lot more profits than losses!

FXTM

Do you have a favourite time frame?

TR

Most of my trading is relatively short term as in a few hours to the next day round trip regardless of what time bars I use although most of my charts are using intraday data rather than daily bars say. While I am also using methods that can be in trades a week or two, I would probably do over 50% of my trades within the day and say 90% of all my trades are completed within 1-3 days. 

FXTM

You’re based in New Zealand. How does living on the opposite side of the world from the markets you trade influences the way you trade?

TR

I think being from New Zealand I see things more as from a World Market perspective. I am surprised at how many US based firms have little or no staff on during the other sessions. Things that happen in Europe for example are impacting the US traded products and a lot of these are traded almost around the clock now so if Europe is moving so are the US delivered ones. For my own accounts I trade things like Gold, Oil, Grains and of course Forex in the European sessions and sometimes even the Asian session not just the US ones. From a personal perspective the hours can be pretty unusual but I also have staff to help with that now.

FXTM

Have you had tough times in trading, and how do you deal with negative moments?

TR

I would be surprised if anyone who has traded for long has not faced some tough times!  It has been a long road but I have learned to accept the ups and downs in trading fairly well most of the time now and while it can still sometimes get to me I am consistent and put my emotions to the side and stick to the plan which does include money management for trade sizing of course. Sometimes I have a look at my trading over a longer period, for example look at the last 12 or 24 months that can help with seeing the bigger picture when the short term one is negative.

FXTM

Would you like to give any advice to our readers on how to deal with ups and downs in trading?

TR

I think making sure you are not trading too large for your account size and your personal situation would be a big help. It is a tall order to be able to make a profit overall long term in trading and if you are to be one of the ones that do you need to be able to handle it both emotionally and financially along the way. Many think finding the systems or methods to trade is the most important thing and while it is of course important if you do not have the money management, discipline and the emotional side in order then I would not like your chances of doing well even with a decent system.

FXTM

What do you believe are the main reasons for your success as a trader?

TR

Sometimes I think maybe God took pity on me as he could see I wasn’t going to give up and threw me a bone to chew on! I would say pig headed determination was why I stuck with it through the difficult years to eventually get any good at this business but I also have a longer term vision for my trading business so my outlook is long term for the business even though its short term for actual trading.

The fact that I trade with say 50 systems for a wide range and instruments which creates a portfolio effect  I think is a big factor in how I do financially overall now but also that I have learned to use discipline and money management and not let the emotions along the way affect my trading plans.