LeapRate Exclusive Interview… LeapRate has learned that Stuart McPhee has joined Copenhagen-based algo trading tools developer Tradeworks, which we earlier reported has just completed a $500,000 capital raise.
McPhee is a fairly well known and recognized celebrity in the FX trading world.
The trading expert and author of Trading in a Nutshell has spent most of the last four years working for OANDA doing intensive trading coaching with high net worth clients in North America and South East Asia, as well as representing OANDA at major trading events around the world and in countless TV spots.
However McPhee is taking on a new kind of challenge now, joining algo trading tools provider Tradeworks as a senior adviser to help shape the company’s next generation of products.
What it is like to leave ‘big corporate’ and jump head first into the fintech startup world?
And how (and why) did McPhee decide to hook up with Tradeworks?
LeapRate was very pleased to be the first to speak with Stuart McPhee about his latest challenge. Here is what he had to say.
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LR: Hi Stuart, and thanks for joining us today. Please let our audience know a little more about you and what you do.
Stuart: First and foremost I am an online trader with more than 20 years experience in trading foreign exchange and stocks. I am also a best-selling author of Trading in a Nutshell, a book now in its 4th edition, and I have consulted to numerous financial services companies in Australia and throughout South East Asia. My professional activities are fairly broad including market commentary to clients, 1 on 1 personal coaching, speaking at large scale trading events, intimate educational sessions with VIP clients and appearing regularly on TV providing commentary.
During the course of my career I have coached hundreds of traders, met thousands more and I have spoken live in front of tens of thousands of fellow traders from Mumbai to New York, Melbourne to Beijing and many places in between.
My trading style is predominantly technical and whilst I acknowledge the foreign exchange market can be a very news driven market, I very rarely use any form of fundamental analysis in my own decision making. Hence when I coach traders, my bias is definitely towards conducting technical analysis, as well as covering critical components like managing risk and developing the trader’s mindset. At the end of the day trading is not easy and traders who go through the trouble of educating themselves are much more likely to survive and do well in the market.
I could keep going but I don’t want to bore you too much.
LR: How did the hook-up happen with the Tradeworks team?
Stuart: It was quite simple really and rather by chance.
After spending four years with OANDA, I decided it was time to move on. I was in no rush whatsoever to find any other work.
I was in Singapore and about to meet up with a friend for lunch, who runs a large online forum for currency traders. About 1 hour before we were scheduled to meet, my friend sends me a message urging me to come earlier as he wanted to introduce me to what he thought would be an interesting contact for me.
That someone was Thomas Nyegaard who runs the Asian operation of Tradeworks out of Singapore. We all met for a cup of coffee before long we were talking about trading and what unique offering Tradeworks has for retail FX traders.
Thomas demonstrated the Tradeworks platform to me and we quickly started speaking about the difficulties traders have and how Tradeworks and automated trading in general could help overcome these.
It was one of those funny coincidences in life…I was only thinking about joining my friend for lunch and before I knew it, a lot of the things Thomas and I discussed resonated with me and we quickly agreed that with all the trading coaching I have done previously I would be able to contribute massively to the Tradeworks team.
LR: How in the end did you choose to join Tradeworks? What do you see as the main opportunity there?
Stuart: This is a really good question. As I said, I had no real plans to find another challenge but Tradeworks ended up in front of me by chance.
Being part of a startup company with a small group of very focused and highly intelligent people was very appealing to me. As this was something completely different to anything I had done previously, I felt it was a great opportunity to step outside a comfort zone and challenge myself.
More than that, I saw the opportunity to make a difference, which I find to be incredibly exciting. In my view, automated trading for the retail FX market is really only in the very early stage and therefore the potential here for growth is enormous.
When I was first introduced to Tradeworks, I was impressed with its relatively straightforward system which the average retail trader could use quite easily. I know from experience that traders are very attracted to the idea of automated trading as they know it removes the weakest link from the whole equation, being themselves…the idea of ‘set and forget’ trading is almost trading nirvana. However, automated trading suggests complex coding and formulas and this can be daunting. The simple and intuitive Tradeworks interface removes the need for programming or coding your own strategies and this was something I found particularly interesting.
But the greatest opportunity that I see is to have a small part in shaping what happens in the retail FX trading space in the years to come. Having taught trading to retail traders for many years, I know and understand the needs of the typical retail trader and I am excited to already be working closely with the product development team at Tradeworks and helping them make the platform better every day. It’s great to have a wide mandate and to help the management and development teams to shape what Tradeworks will look like in the future.
There are several exciting product releases in the pipeline and some of the current changes being worked on will definitely make a significant impact on the level of customization that our users will have.
LR: What do you see as the main downside of leaving ‘big corporate’ and joining a startup?
Stuart: This is also a very good question. I guess when I left OANDA, I definitely wasn’t thinking about joining a startup. I was thinking about spending the next four to six months focusing a little more on my own trading as well as traveling with the family.
Both of these are still happening but now I am going to squeeze in my new role too.
Many others would be able to comment better than I on the disadvantages of working for a startup, but the most obvious to me is the risk of it not working out. Large companies in the financial industry generally do OK and are relatively stable whereas a startup is obviously taking far greater risk and trying to introduce something new into a well established market.
Working for a large broker, I was often in the spotlight. I appeared regularly on TV and was often quoted on websites with my market commentary. I traveled around the world from London to Toronto to Las Vegas speaking at major trading events as well as countless sessions with clients where I was the headline act. This was very humbling yet a very enjoyable experience.
Comparing that to my new role in a startup, there is likely to be less spotlight (at least initially) and my efforts will be more focused on being in front of Tradeworks’ clients through webinars and developing educational material, videos and others types of activities to help sales, marketing and conversion.
LR: How do you see the online trading world changing in the coming months and years. Where do you see Tradeworks’ role in that change?
Stuart: The majority of retail FX traders have neither the time or experience to trade well consistently. This is a humbling realization for many traders but it is the harsh reality.
Retail traders around the world face similar challenges: there is an abundance of data which creates information overload, emotions driving poor trading decisions, and the 24-hour FX market doesn’t lend itself to efficiency with human trading.
The obvious answer to all of these is automated trading systems. Surprisingly, while about 75% of the institutional FX trading volume is automated, automation only accounts for about 25% of the retail volume. This is a staggering misalignment.
Automated trading also removes the weakest link from the whole trading process i.e. the individual being faced with decisions that need to be made. It allows for unemotional trade execution for trading around the clock.
On the back of the uptick in automated trading generally, I also expect to see a marked increase in the auxiliary markets where traders can rent or buy good trading strategies.
One of the greatest changes will be the leaning towards embracing automated trading and I obviously hope that Tradeworks will play a major role in that change.