Introduction from Chris
My latest guest in my ‘Trader Interview’ series is Shonn Campbell (@FX_Operator), author of ‘Inventory Trading’. I was excited to see Shonn reply and agree to be part of this series, he was more than happy to answer some questions and has provided some great insights into how he tackles the markets.
Shonn had been trading six years before deciding to make the leap and trade full time, which he has now been doing successfully for the past two or so years. He has been trading with a unique approach, something he has coined ‘Inventory Trading’, based off the retail business model, a very interesting way to think about trading. And having read his book, this concept made a lot of sense to me.
Shonn believes trading is a craft and like any craft you want to master, you have to spend your time studying, practicing and understanding your chosen market and trading approach. He thinks people put too much confidence and therefore risk onto systems and indicators without fully comprehending how the ‘model’ of the market works, trading isn’t simple a box ticking exercise.
So let’s get into it:
- How did you first discover trading? Can you remember when you placed your first trade?
I first discovered trading about 10 years ago. My Dad had spent some time in the markets but I never really paid attention to it. I guess I had also done one of those stock picking exercises in school but again, didn’t pay much attention to it. So I guess I didn’t actually start paying attention to trading until I read the book “Rich Dad Poor Dad”. I was about to become a father for the first time and decided to read it and it was the foundation basically for me wanting to change the way I used and viewed money.
It lead me down a rabbit trail of knowledge and discovery about economics and what money actually is and how it’s made that I enjoyed very much. Trading, or I guess the idea of trading, just naturally fit into that. It’s all about compounding money. I started with stocks and an E*Trade account and tried to play that market but had absolutely no idea what I was doing. I sucked at it actually but I knew I liked this game and wanted to become a great player. I don’t remember exactly how I got into FX. It seriously may have just been a banner ad somewhere and I opened a practice account and bam. Here we are. I was very impulsive in those days. I didn’t give risk very much attention and while it may have been helpful to get me into things, I should have been more cautious looking back.
I very much remember the first FX trade I took. I lost $110 in like seven seconds and I puckered pretty hard because it wasn’t a huge account. But again, we all pay tuition to some school, I just choose to pay it the FX market.
- You primarily trade Forex, was there a time where you deployed your strategies to the stock market, do you trade stocks now even?
I do not currently trade any other instruments other than Forex. I have put so much time and effort into understanding the business model of the traders who play in this market that for me to switch would be pretty hard. I am not a guy who just trades an indicator system. I trade the business of the markets and the big participants. There are many many repeatable occurrences with the way price behaves on a daily basis that I take advantage of so to switch and try to learn the behaviour of another market and another set of traders would be difficult for me. I cut my teeth in FX and probably will never leave. There is PLENTY of money to be made here. To think otherwise would just be useless distraction.
- Over your time trading, have you ever taken any courses or was it all self-learning?
It’s a very delicate dance of both. I never went to a seminar or sat through an actual “trading course”. I paid to learn a few systems and I paid to be a part of a room once but the overriding theme across everything I’ve done is that I questioned everything everyone was doing. I would take a whole trade system and walk away with one little idea that stuck. One detail and I would put it in my pocket. Well, if you do that long enough, you end up with a lot of individual pieces. The fun part is then putting them together and figuring out who you are as a trader. No one can ever tell you that. You have to walk the path and get the pieces.
I also think I never took anyone else’s trading at face value and always thought I could make it better by making it my own. It led me down a long path but I can pretty much without a doubt say that where I am today is because of a combination partly of learning about FX but mostly about changing the way I think.
- As you now trade full time, what was it you did before you made that transition?
I was a service business owner for about 10 years and then worked in business development for a mergers and acquisitions firm for three years. I think that both situations contributed in the long run to my ability to be successful as a trader. Every step along the road provides a little piece of the puzzle. It’s only when you get to the end that you can actually figure out how it all goes together.
- How long had you been trading before you went full time?
I spent about six years learning and losing before I could be profitable enough to do this. I paid a lot of tuition… haha. Even when my wife and I decided to commit to this as our “thing”, I was nowhere near where I needed to be. A trader is always progressing or regressing. There is no standing still. I am constantly looking to get better. But I was not very good at looking back, when I decided to go full time.
- Was trading full time something of a goal for you when you first started? Or was it a natural progression?
I guess so, yes. I actually think I just have a drive to be the best I can be at this game. Full time is just an extension of wanting to be the best. I want to master the markets. I want to master my emotions. I want to be a peak performer. That all lead to full time trading I suppose.
- It seems like every successful trader has had the hiccup of trading their account to zero. Have you blown any accounts? If so what were your thoughts in terms of carrying on and getting past it?
Oh yeah. I blew a couple accounts. Not a lot of money in the big scheme of things but I would trade like a madman then withdraw the remainder because I needed it to run my business or whatever the case was. So yes. I sucked in the beginning. Pure inexperienced catastrophe. What kept me going was the desire not to quit. Sometimes I simply just didn’t want to give up. I would rather totally fail than quit in this. I wanted to conquer this and be the best. See I believe losing money isn’t a real consequence. We will find more money. I could shut this all down today and go run any other successful business but I don’t. I deliberately choose to be in the trading game because it’s the only thing I have ever really wanted to be good at. That’s what kept me going.
- I first discovered you after listening to Rob Booker’s ‘Traders Podcast’, how do you know Rob and how did you get involved with the Traders Podcast? As you’ve been on a few times now.
I can really say I started my FX journey with Rob. I reached out to him in the very beginning when I started thinking about doing this. That was 2012. I took some training from him and we have remained friends all the way through. In fact as I write this, I’m on a plane headed to speak at his Houston traders conference. He is a great guy and a great friend.
- On the podcast you talk about Inventory Trading. Something you’ve written a book about, but could you briefly explain what you mean by Inventory Trading and how you apply it to your trading?
It’s funny because I just went on a little rant on my daily webinar a couple days ago about this. Not exactly this question but one that was about my inventory trading “system”. It’s not a system. Let’s be clear about that. I have some very specific lenses with which I look at the market but I don’t have systems. I think people transfer their risk to systems and it keeps them from doing the hard work of learning this craft. Inventory trading is a mindset. It’s a business model. Picture it like this. I run a warehouse. Every day when I come in my shelves are empty. I need products to move. I look at the market in a very specific way to determine what’s cheap and what’s expensive that day. At those points, I put some inventory on my shelves. I let it sit for five minutes or five hours and then find someone to sell it to for a better price. It’s that simple. I want to get something cheap from somewhere, put it in my warehouse, then sell it back at a better price later. That’s it. Like I said, I have specific ways to accomplish this but that’s the overview.
- Because of the concept of Inventory Trading, does this mean you generally hold onto trades longer? What’s your average trade time?
Before I traded full time, I used to hold a lot of small trades for a long time. I would build big positions and try to manage them. Once I started trading for a living though, that really wasn’t an option. I don’t need my bread money tied up in a crappy position that I am trying to be right about. It’s too stressful and requires too much unnecessary effort. I’m high volume, low hold time kind of guy now.
Crazy, I know. If I had 500 million dollars to work I would go back to big trades with no set time frame but until then, I had to adapt. You could call me a scalper I guess now. I never hold an inventory position overnight. If the customer doesn’t come along by the end of the day, the product is bad. See ya. I have other types of trades that I will hold over night but Inventory is very specific now. I don’t hold very long.
- How do you control the risk on your Inventory or ‘stock’?
I always calculate the full move of three or four levels of support or resistance and then work my way back into three or four positions calculating pips and risk. Most of the time I can tag my trades pretty well now to the point where risk isn’t really even an issue any more.
- What motivated you write a book about Inventory Trading?
Selfish stupidity. Honestly that’s what it was. Self indulgent mess. I think people have enjoyed it but I was not ready to write a book and that one is lacking some substance. I may make a second edition some day and add what I have learned. It would be a pretty complete work now. I guess looking back I have never been ready to do anything I have done but I get through it.
- I understand you trade more with technical analysis and market structure. Do you involve fundamental analysis in your strategies?
I pay enough attention to the news events to know where the volatility will come in and that’s about it. Rate decisions are the only thing that actually turns a market so I pay attention to those very closely.
- Do you think a good grip on fundamentals is important even if you are a solely technical trader?
Unfortunately no. I can trade all day long with no need for fundamental analysis. I know the business model. News is mostly used to elicit trading and search out liquidity.
- You’ve recently written a short article about ‘Four Simple Trading Goals’, what did you want from trading when you first started and has this changed since?
It’s changed so much. I wanted to use trading to prove myself and find validation. It may sound so dumb but it’s true. I wanted to be good at trading and have people think I was good at trading. Lots of “attaboys” were needed in the beginning. Now, I just want to be the best. I don’t care if anyone ever knows about it. I just want to be the best. I could disappear tomorrow and be super happy and content because I feel like I’ve made it. I may not have the millions to show for it yet but that will come. I’ve changed my mind and learned a craft. The impossible is possible now.
- What you are trying to get at is that trading is as much about mental discipline and the right attitude as it is strategies and knowledge. Do you believe then that trading is a skill that can be learned rather than a natural ability?
Natural ability has nothing to do with it in my opinion. It’s not a sport. It doesn’t require anything other than your mind. Now, emotional maturity will make the journey less painful but there is no such thing as trading “talent”. There is just price moving up and down and people who either study the movements of the market and control their emotions or they don’t. That’s simply the only difference in traders. I fully believe trading is taught and learned. I believe it’s just like the old days of apprenticeship. You will NEVER go buy a course or a system or an indicator and learn trading on your own. You need a guide. You need a Mic from Rocky, a trainer. An Ip Man, a sifu. Trading is a craft that’s learned and there are very few teachers out there anymore.
- If you taught your strategy to someone and all they had to do was be disciplined and follow the rules, do you think it is possible for them to be successful?
This goes along with my previous answer. Not a chance. That’s not how the game works. If all you want to do is get a boxed system learn some rules, you will find that a 50/50 win rate is about as good as you can ever do and money management is all that will save you. It’s no different than blackjack at that point. You have to develop your craft. You have to spend hours and hours and hours sparing with the markets and getting bloodied and getting back up. And at the same time, when you’re not getting bloody from actually being in the ring, you’re in your room studying your opponent. What’s the business model. That’s the most important thread I could ever tell someone to pull. What’s the business model. Study it. Learn it.
- Do you or have you ever automated your trading strategy to help with that discipline and expel any emotions from the trading decision?
I’ve automated four or five and will never do it again. I have spent hours, days, weeks, and months trying to make an EA work. My mind is the best trader I have and I want to be the best. The myth is that you don’t deal with emotional control with an EA. “Set it and forget it” right? False. Everyone, including myself who has run an EA has dealt with emotional issues. Running a bot is probably harder than just being in control of your own destiny. Sounds crazy but most people who have done it would agree with that.
- What are your thoughts on the Random Walk theory, do you think the markets are predictable?
I think price action is largely generic and understandable. I don’t study Random Walk.
- What do you like to do to relax and take your mind off the market?
I like to spend a ton of time with my family. I love my wife and kids and we do so many fun things together. I also coach high school football. It’s not very relaxing but it works my competitive itch in a different way and I enjoy helping the young men navigate life a little bit. I grow a garden. I play ice hockey. I like to stay active.
- Lastly what advice would you give to beginner traders looking to get into trading?
Take it slow. Be as successful as you can be right where you are right now and then go study the market in your off time. If you cut corners where you are right now, you will be setting yourself up for disaster in the markets because cutting corners is a character issue and that follows you to trading. Trading doesn’t solve it. Also, while you are studying, don’t study indicators. Study the business model of trading. That will lead to the gold.
Quick Fire Questions:
Number of Screens you use to trade
Most unusual place you’ve placed a trade
On the top of Music pass, a backpacking trail in the Colorado Mountains
“Be not conformed to this world but be transformed by the renewing of your mind” Rom 12:2
Favourite Financial Themed Movie
Wall Street 2
One book that everyone must read (trading or non-trading related)
Turning Pro by Steven Pressfield
One financial / trading themed book that everyone must read
Inventory Trading… haha. There’s a Jim Cramer book that he talks about his experience as a fund manager and the life that went along with that. One of my favorites.
Favourite currency pair at the moment
Favourite holiday destination
The Beach… anywhere with a beach
Favourite beverage to wind down with
Beehive (honey wheat beer from a local brewery)
Conclusion from Chris
I would like to thank Shonn for agreeing to answer my questions, I think he’s done a great job and has provided useful insights in the way he approaches the market. I’ve linked below where you can find out more and follow Shonn through his Twitter and websites. Keep an eye out for my next interview with Aaron Fifield from Chat With Traders!
Christoper Johnston is a Littlefish FX course-user and long-time reader. You can keep up to date with his weekly blogs at http://enigmaforex.co.uk or contact him on Twitter at @enigma_fx. If you’re interested in seeing your Forex blogs and content published on LittlefishFX.com, read more here.