Chris Weston is the Head Of Research at Pepperstone. He is a highly accomplished financial market professional who has worked with a number of top-tier global institutions. Weston has the ability to provide high net worth and institutional client’s first-class trade execution, in turn achieving excellent client retention and referral business.
Where did you grow up and what was your childhood like? Did you have any particular experiences/stories that shaped your adult life?
I was raised in Kent in South East England, in a fairly generic family environment. I guess one thing that resonated was that my parents empowered me and drove me to get out of my comfort zone. They installed great confidence in many aspects of my life and focused heavily on so-called ‘soft skills’ and the ability to forge genuine relationships. Being able to connect with clients and work colleagues alike can be incredibly advantageous and I don’t think they focus enough on this in the education system. I understand people may be more introverted, but for me, the confidence to forge genuine relationships was something that I have shaped my adult life.
What is something you wish you would’ve realized earlier in your life?
That the biggest risk over time is to take no risk, and that failing is part of an improvement process. Although one always needs to be cognisant that others involved are fully aware of the risk..I guess we can define that by our financial situation and circumstance and risk tolerance, but in so many examples, failing is absolutely essential is coming back with knowledge and a more effective and efficient process.
I guess the other consideration, given I’m in Melbourne (and my family is mostly in the UK), and has raised a family through the stresses of COVID, and about to have my third child, is the blessing of family and how a support network can really shape and benefit your life.
What are bad recommendations you hear in your profession or area of expertise?
In my trading process or framework, having an open mind and listening to all sides of the debate, and considering the constant changes in probability will serve you well. Generally, I welcome debate and people challenging my views and methods, it keeps me honest, sharp and gives me conviction if they cant offer a variable I hadn’t considered – however, people who are critical of another person’s methods or view of the world, especially if that person can back up their thesis with logic is not someone who I will engage with. An open mind is genuinely important.
I may have a view on a market or a thematic and will then look at how best to trade it (what is the best vehicle, how do I manage risk, achieve correct position sizing, etc), but by having my view challenged helps me identify the signs/signals (other than price) where I could be wrong. It sounds odd, but people fall in love with a view and refuse to be open to change – this creates bias, which can be devastating.
Tell me about one of the darker periods you’ve experienced in life. How you came out of it and what you learned from it?
No real insights to give here.
What is one thing that you do that you feel has been the biggest contributor to your success so far?
Like most traders who have spent time creating a framework and a process, I have experimented and tried many actions – for my sins, I still tweak various aspects, but the actions are less drastic, and I feel I have far more control. Initially, I looked at a diverse suite of fundamentals, technicals, quantitative or qualitative inputs, as I honed a process. Looking at the best strategy to enter positions, effective ways to understand and manage risk, achieve correct position size, and control the emotion of success and failure – creating a process that was reflective of my circumstance, lifestyle, and personality. This meant having to work hard, not just to learn the craft of trading, but to fully understand the financial markets themselves and the characteristic of the products I was trading. I wanted a 360-degree understanding of what I was doing, and this meant completely dedicating a sizeable amount of my life to learning.
In trading, we’re always learning and being schooled – it’s essential to keep an open mind and remove all ego, but doing the hard yards and learning from failure has certainly helped me. This process consumed me; I read and spoke regularly to fellow traders, started with small position limits, and as the control came the tradeable capital increased.
What is your morning routine?
I’m very much a morning person, so I like to wake at 04:50, check the markets and any open positions, and seeing the news flow. Once I feel settled and have managed anything that needs serious attention then I try and run 7km around a track close to home, which helps clear the head and is my time to help structure my day. Unless things are genuinely lively, the kids often dictate my involvement when it comes to working between 7 am and 0830am.
What habit or behavior that you have pursued for a few years has most improved your life?
Trying to process far earlier when I am wrong, removing any ego in that decision making, reflecting, and importantly learning from failure or being wrong.
I guess the idea of knowing when to walk away from the screens, get the head in the right frame again – exercise is usually a winner – and dealing with stress. This comes with having control and a deeper understanding of your edge. But my mental wellbeing is critical to decision-making – it’s no different from life.
What are your strategies for being productive and using your time most efficiently?
Organisation is essential and I can’t stress how this improves performance in so many aspects. As a trader and a strategist managing risk is a primary function, so this requires planning, analysis, and a level of organization – This requires looking at the schedule of economic data, calendars, and market expectations and trends around this that can lead to probabilities of an outcome. Having knowledge of volatility/statistics and econometrics has helped too.
One objective of being organised is it can be incredibly helpful to managing risk that’s inherent when assessing a position, but also when managing that going forward – what are the possible known catalysts that could adversely alter the flow of capital and cause an outcome that needs to be managed/dealt with. I subscribe to the view, that there isn’t anything just don’t stay wrong. This could include economic data, central bank speeches, political events, among others.
I need to consider how and where I’m sourcing news and how it is interpreted. So, looking ahead at the risks and looking at the probability of how it could affect pricing based on a range of considerations is key.
In many ways, life and financial markets are incredibly similar in that so many factors are outside of our control, and we have to deal with randomness. We need to find ways to skew the probabilities and do more of what works and less of what doesn’t. Being prepared, understand the probabilities, and form a positive expectancy is helpful. Indeed, from a psychological perspective having an understanding of what lies ahead, and a level of organization can do wonders for a healthy and efficient mindset in trading.
What book(s) have influenced your life the most? Why?
Reading books has certainly complimented the process of learning ‘on the job’ and the ongoing documentation of reviewing what works and what doesn’t. Various books have complimented conversations with fellow traders/strategists and even interactions on Twitter, where some of the brightest minds in markets will post views and aspects of their process. However, some of the books that have really stood out and which are must-reads for all traders are ‘Trading in Zone’ (Mark Douglas), ‘Trade like a casino’ (Richard Weissman), ‘Trend Following’ (Michael Covel), ‘Market Wizards (Jack Schwager) and ‘Option volatility and pricing’ (Sheldon Natenberg), which have all been influential to me.
Collectively, readings have steered me on a path to emphasize how I think about financial markets in terms of probabilities and having a statistical framework on realised and expected market movement and therefore obtaining a greater control on risk. The notion that it’s ok to be wrong, as it’s part of everyday trading, but to develop a process to deal with being wrong (and right) has helped me cultivate an edge and a positive expectancy.
Do you have any quotes you live by or think of often?
Paul Tudor Jones is one of the Market Wizards (covered in Jack Schwager’s book) and has come up with some of the greatest trading quotes ever. When cutting your craft as a trader or an investor, learning from Paul Tudor Jones will put you on the right path. One quote that always resonated was “I’m looking for 5:1 (risk /reward). Five to one means I’m risking one dollar to make five. What five to one does is allow you to have a hit ratio of 20%. I can actually be a complete imbecile. I can be wrong 80% of the time, and I’m still not going to lose.”
Personally speaking, 5:1 is optimistic for my strategies and time in the market, and it reinforces that you don’t have to be right all the time, but you do need to develop a process to ride the winners, fight the urge to take profits and extract the most out of a trade. It rams home the idea of cutting losses early and doing more of what is working. It also highlights to me that the well-versed notion that ‘no one ever lost money taking profits’ is one of the most misleading statements in trading, especially for new traders. I see so many taking small profits just to be proven correct, but then they run massive losses with the idea of holding until they can get to breakeven. So, even though they have a high win/loss ratio their max drawdown is huge, and they lose money over time, which seems such an incredibly bizarre concept to most traders.