Phillip Swaine


How did you get into trading?

When I was young I was always interested in numbers, number patterns and probability. I guess it was almost inevitable I would end up in some sort of trading role.
I studied economics at university and was hired by an investment bank. As part of my trading, I worked in the trading room. This time coincided with the 1987 crash and so I learnt about a lot of products very quickly.

So what happened next?

My main love had always been equities and so I managed to get a position on the trading floor on the ASX. Those were the days when all the trading was done on the floor. You can’t help but miss it. I moved to Tokyo after that and I was in Japan between 1992 and 1994.
Trading equities in Japan during the 1990s must have been tough work. The market fell 50% over the course of their ‘lost decade’.

Yeah, it wasn’t easy. I mainly had responsibility for the Nikkei futures in addition to other responsibilities.
One time in 1994, I was trading in Tokyo and we were buying Japanese Nikkei futures. We knew Barings Back was selling heavily into the market, but we thought they were selling on the behalf of hedge funds.
But the Nikkei wasn’t really going our way and it was because Nick Leeson selling options was on the other side buying it for the infamous “five eights” fund. We were about to cut the position, but we just held on long enough for it to start to go against Leeson.

So what would you call your ‘world view’?

I don’t use fundamental analysis. I find it too subjective. That’s not to say that other people can’t be successful using fundamental analysis. I prefer systems that are more easily systemised or quantifiable.

So you use technical analysis?

Well, I look at charts, but I don’t look for the traditional chart patterns. I try and look at the numbers behind the charts and apply principles like autocorrelation.
For example, if I am looking at a market, and that traditionally has a high positive autocorrelation, and that market has been making gains for a few days, then you might reasonably expect that to continue.

What are the differences between trading for a company and trading for yourself?

You trade more conservatively when you trade your own money. The other important difference is that when you are a sole trader, it gets that much more difficult to maintain discipline.
When you’re working as a team, that discipline becomes self-regulatory. As a sole trader, you don’t have that luxury, so you have to try and impose it on yourself.

What’s trading all about?

Trading is all about making decisions when faced with uncertainty.
I tend to look at trading as a mean reversion strategy. I think that markets will often overreact to events and that is what creates the most opportunity.

What core to a trader’s success?

The most important factor is to ensure you have a well-thought methodology that provides you with an edge.
Then, once you can assume that, your profitability depends on your edge and how often you get to apply that edge.
You need to spend the time developing your methodology, and that includes working out which asset classes and instruments suit you best.

Anything to add?

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