Interviewing Top Trader Stefan Risse: Profile HPMStefanRisse at Ayondo
Editor, Contracts-for-Difference.com: So how did you get started as a trader?
Stefan Risse (Top Trader at Ayondo): I first started dabbling into shares where I was just 17. The first stock I bought was IBM.
Editor: How did you get into the trading game?
Stefan Risse: My first experiences with leverage and trading was when I started trading options…
Editor: How has your approach to the markets changed and improved throughout your career?
Stefan Risse: I just learned to execute the trades that I strongly believed in.
Ayondo: Finding Top Traders to Follow
Editor: Can you provide us with an overview that helps us understand your focus and strategy to making money in the markets?
Stefan Risse: Sentiment indicators are a very good tool for me in order to get the timing right in the markets, particularly when used in combination with technical indicators. Whenever a market is overbought or oversold according to my sentiment indicators and a correction of the up- or downtrend starts then I jump into the market.
Editor: What methods do you use to analyze the market?
Stefan: The Sentiment indicators Bullish Consensus, Investors Intelligence or AAII and a lot of others mainly in combination with simple break out rules.
Editor: How do you use sentiment data to help you in your trading? Is sentiment a better indicator than value?
Stefan: It is a question of time periods. From a long term value perspective, trends or fundamentals are crucial factors. For short-term periods, sentiments are the indicators.
Editor: Is your trading method discretionary or mechanical?
Stefan: Both. My Top Trader profile at Ayondo is mechanical. But in asset management I make use of a discretionary method.
Editor: How do you find and select potential trades? How do you filter trades?
Stefan: With the discretionary method it should be in line with my fundamental view and for timing I use sentiments. With the mechanical method I utilise a breakout rule and utilise sentiments as a filter in markets with solid back-testing results.
Editor: What markets do you trade? And why have you chosen to trade these markets?
Stefan: I trade Forex, Commodities, Indices and Bonds. With my discretionary method my view is on global macro. So from time to time I see valuation ambiguities in the market and when sentiment is right I get into trades.
Editor: You trade the DAX. What can you tell us about the DAX – does it have any peculiarities? Does it tend to follow other markets?
Stefan: The DAX is very volatile with strong uptrends. That makes trading this index very interesting. Of course the Wall Street Dow influences it but particularly this year the DAX has shown its own trend.
Editor: How actively do you trade?
Stefan: Not so actively. Some trades I hold over a month.
Editor: What are your average hold times for positions? Do you consider yourself a day trader, swing trader or position trader?
Stefan: I have never calculated it exactly but generally around four weeks. I’m a swing trader not a day trader.
Editor: How do you determine trade targets? Do you have a profit target you try to hit every week, month or year?
Stefan: No, I consider this very dangerous as it influences your trading. If you have targets, you’ll inevitably place trades that you shouldn’t.
Editor: How do you currently keep up with the markets?
Stefan: Currently I’m experiencing a tougher phase as I missed the uptrend in stocks although I always said, it will move up. My timing wasn’t quite right.
Editor: What do you do now? Can you describe your typical day?
Stefan: I’m constantly informed about the market trends and news and execute trades when needed but I don’t stare at the trading screen the whole day.
Editor: Looking back was there any specific thing that you thought was a key turning point in your career?
Stefan: The point when I discovered that the big majority is always wrong when it reaches a very polarized level.
Editor: How do you manage risk?
Stefan: I’m not using stop losses the way it is recommended to all traders. I think that doesn’t work. I’m flexible and leave the market when I have the feeling that I’m wrong. With the algorithm I use as Top Trader of Ayondo we use trailing limits.
Editor: How much do you risk per trade?
Stefan: There is no specific size
Editor: Do you ever average down into a losing trade?
Stefan: Yes, in the algorithm we do this.
Editor: Can you explain the particulars concerning your stop loss method? How do you avoid getting ‘stopped out’ as it is known?
Stefan: We use trailing limits. So we can avoid to be stopped out on the high or low.
Editor: Have you got some examples of one or two losing trades, to explain how you are handle losses?
Stefan: We went long in the DAX but the market fell again. The take profit limit trailed down and in the end it was executed in loss territory, however the loss was smaller than it would have been had it been a normal stop loss.
Editor: Do you monitor open trades all the time?
Stefan: Yes, I do or the computer does.
Editor: How much is enough for you? When in a winning position how long will you go before taking profits?
Stefan: There no special sizes. But I try to make big profits with a small amount of trades rather than the other way round.
Editor: What are the main signals for you to exit?
Stefan: When the sentiments give the indication.
Editor: Do you add to winning long or short positions?
Editor: Do you favour any particular technical analysis system to guide you – bollinger bands, fibonacci, elliot wave or anything else? Or do you have your own rules?
Stefan: Simple break outs and my own rules beside the sentiments I mentioned above.
Editor: To give others some idea of overall performance, what is your historic % win / % loss ratio and your $ win / $ loss ratio?
Stefan: In algorithm is just 44% winning trades, discretionary it is 75 %.
Editor: What do you think your ‘edge’ or your difference actually is?
Stefan: It is the use of sentiments in an algorithm. That’s very innovative.
Editor: Managing emotions (fear, greed, and false-hope) is the primary challenge of a trader. What methods do you employ to address this challenge?
Stefan: The algorithm is perfect protection because just the computer is making the decisions. In discretionary trading it is permanent training. You need to be self-confident and honest to yourself.
Editor: Do you think that that trading automation is making it harder for individual traders?
Stefan: No, I think there is still a chance for all sorts of trading strategies.
Editor: What has been your biggest gain / biggest loss?
Stefan: Gold in the long uptrend until 2011.
Editor: Have you ever had an extreme (positive or negative) trade that you learned a great deal from?
Stefan: Yes, a short trade in the DAX where I made the mistake of not killing it. Although I knew my opinion was wrong.
Editor: What did you need to give up, in order to become successful? Did you have to pay a price?
Stefan: No price as such but I learned that the way to successful trading is a hard way. The dream of fast easy money I had to give up.
Editor: Why do you think your method of trading is best for you and what recommendations can you provide for aspiring traders who desire to find, figure out, and then employ a method that works for them?
Stefan: I’m a “rebel” so the contra cyclical fits to me. I think everyone needs to find a style that fits to his or her nature. I think beginners need to test it.
Editor: If day trading is not the right path for most, then what is the path you think is best for the majority of traders?
Stefan: There is no single way. It depends on the personality and nature of the trader, but day trading is very difficult, that’s for sure. Swing trading is something you can do beside a normal job.
Editor: What are the biggest mistakes made by novices and aspiring traders?
Stefan: Targets in the size of money they set themselves especially when they want to win back former losses.
Editor: How many years do you think it takes for a trader to learn the ropes?
Stefan: Minimum three years.
Editor: For the people viewing this interview who are just getting started in trading, how do you recommend them starting on the right foot?
Stefan: Determining the mistakes most frequently made, and equally understanding that these mistakes are produced by their own psychology. They need to understand themselves to avoid making mistakes that are done just from personal reasons.
Editor: While you have traded for over a decade, you are relatively new to the world of sharing your thoughts, opinions and analysis with the public. What have you learned?
Stefan: No. I’ve been doing that for a long time because I always analyzed the markets for the public. But I can say it influences your freedom and when you know people are following your forecasts. It makes it even harder.
Editor: Which traders do you personally respect/believe are the best in their sphere?
Stefan: George Soros is or was extremely good in analyzing the markets and turning this into profitable trading positions.
Editor: You are one of the most successful Ayondo ‘master trader’ of recent times. Is this nature or nurture, or both?
Stefan: It is the performance…
Editor: How did you get into having a day job which is both daunting and, at times, extremely pressured?
Stefan: I wanted that. It’s never boring and I don’t complain.
Editor: Tell us about Ayondo and your trading performance there.
Stefan: Since September we made more than 50 % profit. Currently, we are in a drawdown period what is normal and happened also in the past. This performance comes not just from a few lucky trades. It is the result of a sophisticated intelligent algorithm. Followers can expect that there won’t be a big crash in the strategy going forward but an ongoing uptrend with some drawdowns from time to time.
Editor: Why should people follow you?
Stefan: Quite simply my trading system is based on an innovative algorithm that combines technical analysis and sentiment and this coupled with very solid backtesting results gives me confidence in my trading.
Editor: Do you just trade your own money or do you also manage other people’s monies? Which is harder?
Stefan: I always traded my own money in bigger sizes. From there, I started managing money for others. It is even harder because you have not just your own criticism but also that of your investors.