About Richard Cohen

Interview with the author Richard Cohen

Note: This interview is a summary of a live conversation. The questions came from another trader or from the Daytradingakademie community.

How did you get into trading and what fascinates you about it?

For me, it was clearly my family environment. My father ran a hedge fund managing many millions and my mother is a professor of economics at a private university. When you grow up in such an environment, the whole subject is present, it becomes part of your blood. From an early age, our everyday conversations were focused more on shares, company valuations, economic policy and such topics instead of the usual neighbourhood gossip or what happens on TV.

So you had no choice?

I wouldn’t say so. I believe you always have a choice. I also had my rebellious phase as a teenager as most of us had. I concentrated almost exclusively on music and art. Of course, I still got value through the conversations and a basic interest in finance was still there. But it was somehow too abstract for me. I could touch the guitar, and hear the music, but all the shares were just abstract numbers on a computer.

When was the time when that changed for you?

When I told my father that I was going to move out and do something with art and music, he surprisingly just said ok. That took all the wind out of my act of rebellion. He had set up a small deposit for me when I was born, which had grown to a considerable amount.

He transferred it to me and just said, good luck my son.

I am still very grateful for his support and trust today.

So I went to college and studied art. But I quickly realised that it was not my world. Neither the environment nor the subjects.

I don’t believe you should make art too much of a theory and analyse. Dissect and interpret it down to the smallest detail. At college, they make a science out of something beautiful that is supposed to be emotional.

So I decided to keep art as a hobby and study financial mathematics. If there's going to be so much analysis and numbers at college anyway, then let's do it properly.

Again my father just said "good luck, my son". He always gave me a choice and never pushed me into something, as he probably knew that wouldn’t work out. The majority of people accept what others tell them to do for their whole life. But I did not.

I was always a rebel and if someone told me that I must do something or follow some nonsense orders like back in school, I didn't do it on principle.

But after dropping out of art college it was my own decision to dive into the world of finance and trading.

And when I placed my first trade and earned my first money it was just amazing. I realised immediately that I was on the trail of something very special here.

What do you mean by something very special?

It's hard to describe, but I would call it ultimate freedom. I started actively trading at that time and nobody told me when, where, or how to proceed. It was just me, my computer and the market.

When I was younger, I watched my father working 80 hours a week and wearing a suit all the time. I think that kind of scared me.

But at that moment I realised that I don't have to be that way. I can just trade and make money on my own wherever and whenever I want.

I also love this competitive idea. Many private traders lose money, I wanted to know if I could manage to be one of the winners.

For me, that was the ultimate challenge combined with freedom and that's what excites me about trading and the stock markets to this day.

How long ago was that now?

More than 20 years ago and the fascination continues to this day, although I'm usually a person who loses interest quickly.

Do you think it was easier to start trading back then?

That depends on when this interview is read/heard. but generally speaking, I would say the opposite is the case.

Gerade die vielen neuen Retailinvestoren die wenig Börsenerfahrung haben und sehr emotional handeln, bieten viele spannende Chancen.

I mean look, my father started trading on a phone line. He printed out charts. That's crazy.

Nowadays you pull out your smartphone and have access to all the information in the world. You can do technical analysis right now on this small screen. I can do so right now on my phone with a few clicks and order stocks worth millions of dollars within seconds. Everything has become so fast and easy to access.

I think that's amazing and makes life for new traders much easier.

Do you think your college background helped you become a successful trader?

In hindsight, clearly no. The great thing about trading is that at the end of the day, it's your results that count, not your degree.

And as with any degree, you probably just learn a lot of theory.

You will never be able to apply most of it in practice.

But I had a great time at college. I think knowing methods of learning are helpful, and the people I got to know were also very valuable for me eventually.

To this day, I have some good friends from that time, some of whom are also very successful on the stock market.

But for private trading, I don't see any advantages in having a degree. Most of the successful traders I know are career changers from all kinds of industries. It depends on other things in trading.

What are those things? Do you believe that everyone is suitable as a trader or, put another way, what character requirements do you see for a good trader?

I would say discipline, patience, and willingness to learn. Being able to manage your emotions and willingness to take risks. But I guess it doesn't matter the area of life you want to become successful in. You will need them, or at least they will help you.

But I have seen the most diverse trader personalities who have become successful in entirely different ways.

I think everyone should listen to their gut feeling. There are people who are happy in their jobs, who have great colleagues, and who need a boss to tell them what to do. They find it difficult to motivate themselves, and they have no need for status symbols, fast cars or anything else. I mean, why not? It's a wonderful thing when someone is happy.

But then there are the freedom-loving rebels who prefer to go their own way and need this independence like the air they breathe. They like to live a little more luxuriously, and travel a lot, but are also prepared to get up in the morning when the stock market opens and can motivate themselves to keep going.

It's not my place to judge in any way, both are absolutely valuable and substantial. That's why I believe everyone should listen to themselves. Look in depth at what they want from life, what type of person they are, and then just try it out.

That's the great thing about trading, it doesn't take much. You just try it and afterwards you are wiser. Just make sure you don't risk more than you can afford to lose. That's a general rule for all kinds of investments.

That's a fascinating tip, just listen to your gut feeling. Surprisingly, from a person who has only dealt with facts and figures all his life.

*laughs* Yes, but we humans are complex beings full of potential that we are usually not even aware of. I believe that there is something in us, let's call it the subconscious, which can deal with all these facts and figures much better than we can with our conscious minds sometimes.

And this subconscious talks to us through this gut feeling. I think there are enough facts and figures that play a role.

OK, let's assume that gut feeling says "Yes!" I want to trade. What advice would you give to beginners on how best to start trading?

I think as a beginner in the stock market, you should first learn the basics, then work out a trading plan for yourself and venture into the markets with a smaller amount of real money.

To be precise, on a single market and not too much at the same time. And don’t risk anything you cannot afford to lose.

For example, CFDs / mini futures on a stock index like the S&P 500 or the FTSE. Or CFDs on shares within a sector you are interested in. I love technology and like to stay up to date within that sector anyway. So why just read the news when I could also profit from them?

I would also always start with a simple strategy like the one explained in the book "The Trading Code".

Unfortunately, I often see the extremes with many beginners.

On the one hand, there are beginners who don't bother with trading at all and just gamble. Sometimes this goes well for a while, they earn a few thousand and have a good time, but sooner or later, almost all of them go broke or catch up on the theoretical basics over time.

On the other hand, I see those who read many books, and study many indicators, tools, courses, etc. But end up being overwhelmed by all the information.

I don't think either makes sense. My approach with the trading code is therefore to convey only the really necessary information in such a way that everyone understands it. No unnecessary ballast. Concrete, simple strategies that everyone can implement.

And if that's not enough for you because you want to trade more or optimise further, you can look at other content later.

But everyone should first master these basics and very importantly, everyone should be able to follow a strategy consistently for 50 or 100 trades.

Most people fail at this because they become greedy or afraid and trade their emotions instead of strategy.

If the basics, a strategy, a suitable market and the above-mentioned character traits are in place, you’re well-prepared for successful trading. Then it's a matter of trying things out, learning, gaining experience and constantly developing. Well, and have a little patience.

How much money do you recommend for beginners or readers of your book?

The concrete value depends, of course, on the individual life situation and the chosen financial products. But if you want to start with CFDs on the S&P 500 or CFDs on shares, 500–1,000 euros or a similar amount in any other currency is sufficient.

What is your most important tip for beginning traders?

My most important tip is to have proper risk management. Always set a stop loss. No matter how sure you are. The market can always do exactly the opposite of what you expect.

And the market is always right.

That may sound unusual, but that's the way it is. You can either lose your opinion if the trade goes against you, or lose money.

I would prefer the first...

Too many beginners focus only on entries and when to finally buy a stock. But you make money when you exit a position. When you sell your stocks with a profit.

And you only keep your money, when you have proper risk management in place.

The good thing is that it's not that complicated.

Another tip would be to just close the trading software after you have placed the trade. Far too many traders sabotage their own trading success, close winners too early, let losing trades run too long, impulsively enter new trades and generally trade too much.

All of this can be easily avoided through good planning.

And one more tip, even when I explained the basic strategies in my book, you still have to find your own trading style eventually. Your very own method, your markets and position sizes, your timings, a way of trading you feel comfortable with.

In The Trading Code, I give you all the necessary basics to build on, but becoming a successful trader is a process. It will take a while, but I can also guarantee you that it will be worth it once you have mastered the challenges.

Where do you see the greatest challenge for aspiring traders?

Clearly it’s in the trading psychology. The Trading Code describes a clear strategy. But so often in life, we don't do what we are supposed to do, even when we know better.

We smoke, even though it harms us. That’s not really a secret, is it? I spent 15 years smoking until I finally stopped. I always knew what I should have done to do to be more healthy. But I didn't do it. We drink too much alcohol, eat unhealthily and exercise too little. We usually know the secret to a healthier lifestyle. But it is not only a matter of knowledge but of emotions.

Getting these habits under control is the key to success.

I, therefore, think that every aspiring trader should deal with his trading psychology.

However, I only dealt with this topic briefly in the Trading Code, as there are already a few good books written about trading psychology and therefore the focus on the strategy and analysis of the markets was more important to me. But that might be my next one.

How long did it take you to become a profitable trader?

I get that question so often, and yet it says nothing about others or how long it will take for you as a trader. These days, everybody wants to be somebody, but nobody wants to grow. But that's the way it works. You put the effort in, you get your results. And loving this process is often the key to success.

Because of my environment, I had excellent conditions and that's why I had good results pretty early. But I don't advise anyone to compare themselves with others.

If you're new to the stock market, stick to your strategy and forgive yourself for mistakes... Mistakes happen, so try to improve step by step every day. Try to become a little bit more disciplined, a little less anxious or angry, a little bit more confident. Set the stop a few points better and so on. It's these small steps that will make you more successful.

Focus on taking small steps, and you will make progress and improve day by day, step by step, until you eventually reach your big goal of becoming a successful trader.

Just never give up. And try not to lose all your money. That's why the psychology behind this and risk management is so important.

Can you give a tip on trading psychology? How to avoid fear or greed, maybe?

Sure, I'd love to. A slightly unusual tip perhaps, but one that has helped me, is to set profit on points rather than currency in the Metatrader trading software.

I advise most beginners to start with 500–1000 euros initial capital. I don't like the common advice of starting with a demo account (except for testing) because they don't help with the real challenges in trading.

Now, if you trade, let's say, with a 1,000 euro account and stick to your risk management, your losses will be a maximum of 10-20 euros per trade and your profits in the range of 40-100 euros.

After you made like 60 euros profit, your greed kicks in. This little thought in your head, “what if I had risked more?” “Then I would now have 200 or 300 euros” This real challenge is to keep that under control.

It’s the same with small losses. Some get restless and nervous.

Trading with real money promotes many negative emotions that we want to avoid at all costs when trading.

If we don't even see the profit in a real currency, but only in points, then it becomes much easier.

It is simply a game in which we want to win as many points as possible.

Today 1 point, tomorrow a point and so on. If you have made 30 points at the end of a month, then you have had a good month.

With your 1,000 euro trading account, that might only be 200-300 euros or so, but trading is scalable. When your trading account grows, it automatically becomes 3,000 or 30,000 euros a month. Everything is possible, even without putting more time and effort into it.

I've used small, beginner-friendly numbers here, but the same applies to advanced traders with considerable accounts.

It made me very nervous in the beginning when I bet $100,000 or more in a trade. By focusing on the points and not the money, I found it much easier.

I think that's brilliant. Thank you for that, in any case, I will try it out. So what was your greatest challenge on the way to becoming a successful trader?

To really grasp the concept of probability. You can do everything right, the right strategy, proper entries and stops, executed cleanly and still lose.

There is no immediate feedback or correlation between what you are doing and your short-term result. It's not like you did everything right and won, you made a mistake and lost. Sometimes you lose with a well-planned trade, and sometimes people win by making mistakes or risking far too much.

It's like a game of poker. You can win with the worst hand and lose even with two aces. But eventually, over a few hundred hands, the aces will win. That's for sure.

In such situations, it was very difficult at the beginning to accept the losses and make the next trade just as good.

Meanwhile, I know that the outcome of a trade is always subject to chance. That two trades are always two independent events, so no matter whether I have just lost or won, a new trade, a new opportunity. And I know that eventually, over 10 or 20 or 100 trades, I will win. No matter how the current trade turns out.

A good trade for me today is one that I can understand. If I look at the same chart again in a year's time, I would trade the situation the same way.

I, therefore, advise every beginner to make sure that their own trading is comprehensible. Take one of the strategies from the Trading Code book and stick to it. Don't experiment too much in the beginning or change the strategy, indicators or whatever every few trades.

Give yourself and your strategy time.

Was there a situation where you were about to give up?

I have to admit, there were many highs and lows in my trading, just like in any chart, but, no! Giving up was never an option for me. I would say that I am generally not the person to give up quickly. Once you have felt this, almost magic, of trading, you will not give up.

Many private traders lose money. I know and have always known the numbers. But I also always knew that there are some who win. So I just had to figure out how. What does it take to win?

Nowadays, there is good literature, courses and also a lot of freely available information. So much that it's almost too much, especially since some of it is unfortunately wrong.

Back then when I started trading it was different. For me, I learned a lot through mentors and also costly mistakes. That works, of course, but it's expensive, you need a proper mentor and it takes a long time.

That was one of the reasons why I wrote the book. Of course, readers still have to bring along discipline and motivation, but at least they save themselves the most expensive mistakes I ended up making.

As I said previously, giving up was never an option for me, and that applies to all areas of life. The saddest thing is that most people give up before they have even really started.

They may read or listen to us now, knowing it could change their lives forever, but they don't implement it. They say to themselves, "maybe tomorrow", "it won't work anyway", "it's too complicated", etc. They give up without ever taking that leap of faith.

It’s a pity, but I hope that with this interview we will be able to inspire at least a few people and help them to have the courage to just try it.

You say you made plenty of mistakes, was there a trade you particularly regret or remember negatively?

Some (laughing) but none of that matters today and no, I don't regret any of them because each one was an important lesson that made me exactly the successful trader I am today.

This way of dealing with mistakes is a critical characteristic of successful traders.

You can't be afraid to make a mistake. Fear paralyses you and sure, mistakes in the stock market can be costly, but it's just money. So you're not risking your own or anyone else's life here.

Also, it is critical to take responsibility. It wasn't the market that was at fault or did something wrong. Finally, it is always you alone.

This realisation is essential because it gives you options for action. Only when you admit that it was your mistake, can you do something to avoid it next time.

And finally, don't ever give up after making a mistake.

I mean, let's take an example of learning to walk. How much time would you give a child to learn to walk? One Month? Two? Three? How many times can a child fall down before you give up? Ten times? Twenty?

And that's what I mean. You won't give up until the child walks. That's it. And most children won't ever consider giving up. They won't cry over making mistakes. Ok, when they fall hard, maybe sometimes. But it would never stop them from trying.

We're losing this mentality in our schooling system and in a society where we get punished for making mistakes, which is wrong in my opinion. Mistakes are just a lesson.

If you keep these three things in mind, it should help you enormously. In my opinion, this is not only true for trading, but for life as a whole.

I think trading is an excellent education for your character, where you learn many important qualities for living a successful life.

Well, if there was no negative one, was there a trade that you remember as particularly positive?

There were certainly some positive and negative records, but one trade that changed my trading style forever was in October 2011. The weather was getting more autumnal and unpleasant, and I decided to go on holiday with my girlfriend at the time.

Well, actually, it was her wish that I finally put the computer aside and do something. She enforced it quite drastically with the words - the computer or me. Well, that's what I did anyway.

At that time, I had an excellent run on the markets, and it was very difficult for me to just stop. Including all the preparation, trading and post-trading, I spend around 10-12 hours a day just in front of my computer. I monitored all kinds of markets, read all available information and reports, analysed, exchanged information with other traders, etc. I even read about the latest market news, technical books, biographies of stock market legends or analyse potential trading opportunities before going to sleep.

My usual trading style back then looked like this: I simply placed various orders on the market in advance and then only "managed" these trades during the day or already scanned the market for new trading opportunities.

So that's how I placed all my orders before I went on holiday to Mauritius. No trading for 4 weeks, no computer, even on my mobile phone I had uninstalled everything that had to do with the stock market.

Again, somewhat involuntarily.

At first, it wasn't easy to switch my head off, even the most beautiful dream beaches didn't help, but after a while, it got better and better. I became calmer and present with my girlfriend. We enjoyed ourselves at the pool, and on the beach, and had incredible food. As the scales at the end of the holiday could confirm, it was one of the best times of my life.

In retrospect, I have to say that it was also because I consciously turned everything off for a while.

But what I really wanted to get at was not the holiday at all, but what happened when I came back after 28 days.

I opened my laptop and couldn't believe what I saw on my trading account.

I had opened a long trade in the S&P 500 based on the strategies described in the book (The Trading Code) and was up almost $200,000 in my private account.

This was not only my best trade by far up to that point, but also my absolute record month thanks to various much smaller successful trades that were also executed.

That was the trade that changed my life forever and probably saved my relationship with my now-wife.

I had experienced for myself what trading is all about. The scalability. And what I mean by that is, that the amount of my income does not depend on my invested time.

While I was "managing" my trades, I was watching the prices rise and fall, this led me to take actions that were simply unnecessary. And if I don't take action, why even bother watching the markets?

But I also saw that I didn't need all the news because in the end, most of the information is shown in the chart anyway.

And that, above all, I didn’t need to trade around the clock.

The most important changes that resulted in my trading style were:

• I traded significantly less since that day
• I always placed my orders in advance
• I stopped "correcting" my current trades.
• I traded longer-term on the H1, H4 and daily charts. I no longer looked at smaller time units at all

And much more, which I share in the book.

Oh, and of course, I spent more time with my girlfriend, who is now my wife. We spent more time on holiday and have travelled around half of the world by now. After these results, I simply had no more arguments against her travel plans.

But that's precisely what it's all about. Money is more or less just a utility to create the life of your dreams. A significant number on a bank account doesn't change that much at first, but when you can travel, have more time for your loved ones, and can afford some nice things in life without having to look at the prices, that's what really makes the difference in the quality of life.

That's precisely what I want the readers of my book to be able to do.

That's a great, inspiring story. Is there anything else you would like listeners/readers to take away?

Just try it out. In the stock market, we always look at the risk/reward ratio of a trade. I can lose 1% but gain 100% or more. That is a good risk/reward ratio.

To get into trading, the requirements are pretty low. Grab a copy of the book (The Trading Code) for less than 20 euros on amazon. Take a few hundred euros in capital and try it out for yourself.

The risk is relatively low compared to the chance to build up a profitable side income completely free and scalable.

And regardless of the money, trading is simply fun. So have fun.

A nice closing word. I really enjoyed you answering the listeners and readers here.

Thank you again for that and I look forward to hearing more from you in the future. I wish you continue to succeed on the stock market and with your new book.