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Thursday, 26 July 2012
HOOSAIN HARNEKER ABOUT FINANCE MARKETS
Hoosain Harneker about Finance Markets
Imagine losing your life savings in a partnership gone wrong and having to pick yourself up from such a calamity. Hoosain Harneker took seven months to save up $1000—an amount that most college students can easily earn working for a few weeks at local restaurant—and started to trade foreign exchange on the finance markets. Hoosain is as conservative as it gets. He refuses to trade a strategy until he has tripled his demo account three times in a row. He goes for 10-pip trades once a day, which may seem miniscule to most, but in the last three years he has turned that approach into an average profit of $500 a day. With his systems engineering background, he has been able to design his own automated trading system, which makes sure that he never turns a winner into a loser. His cardinal rule is to never trade his system during news. Having been broke before, making money on a consistent basis is far more important to him than becoming rich overnight so he locks in profits as often as he can.
From his office in South Africa, Hoosain Harneker sat with us to share his story of how he managed to go from rags to riches.
Q: Hoosain how did you get started in the funance markets? (equity swaps)
A : As a South African, back in the 1980s our education system did not include any subjects related to finance or investing. We had a subject called accountancy, which is basically like bookkeeping. But we did not cover anything to do with investments. The curriculum of those previously disadvantaged did not include these subjects at all. So, with little or no experience, these opportunities were virtually nonexistent to disadvantaged communities and people in those communities, including myself.
Q: Hoosain Harneker do you live in South Africa right now?
A : Yes. I'm currently an information technology (IT) systems engineer. I originally studied mechanical engineering and then switched to IT. I was quite successful as an IT engineer and I have worked for two companies. Both ofthem were liquidated, and after the last liquidation, I decided that was it, I've had enough. I'll start a company on my own, and I went into a partnership with five other guys. After a year or so that partnership went horribly wrong, and I ended up losing significantly both financially and in terms of self- esteem. At that point of my life, I was at an absolute low. I don't think I've ever sunk any lower than that. I was truly down and out. I was obviously unemployed. I remained unemployed for almost a year and honestly, having been brought up to believe that a man is the only breadwinner in the family, one of the most humiliating things was lying in bed sleeping while my wife had to get up and go to work. Looking back now, I learned some very valuable lessons during that period, which has still stood with me for the past few years ( including lessons about finance markets ).
Q: Like what?
A : Lessons about planning, being careful, about managing money, about trust, and having trust in other people. Documenting things, signing them, making sure you have witnesses to absolutel everything that you do when it comes to business. I think those are some very, very valuable lessons that I learned that have stood with me since then. It also taught me about compassion, basically feeling for other people as well because up until that point I was, I would say, fairly successful. Being in that situation, you never really think too much about other people and what their situation is until you end up in it yourself. After the partnership blew up, I had huge debts to pay, and I was not getting anywhere close to settling them. At the time, I had a friend in the United States, whom I had met a while back, who used to trade currencies. For no apparent reason one afternoon, he suddenly just popped into my head, and I thought of contacting him to see if he can assist me in anyway. So I got a hold of him. He asked me for $1,000, which he said he would invest for me to help me improve my financial situation. The only problem was that I did not have $1,000. I wrote back to him and I told him, "Listen Steven, let me save up for it, and once I've got a thousand, I'll give it to you and then you can trade it." He actually wrote back to me and he said, "I will loan you the money and I'll help you out." I told him that I was in so much debt already that I would not take another loan from anybody—I had reached the bottom line. I said give me a chance, let me save up for it, and it eventually took me I think seven or eight months to save up $1,000. When I finally did, I e-mailed him again and told him that I had the money. He then turned around and told me, "Listen, instead of me trading for you, I would rather teach you how to trade." This was something that, I must say, I truly appreciated because it gave me a skill that I would have for the rest of my life, and one that I would be able to share as well. So that is basically how I started trading currencies.
Q: It must have been frightening for you in the beginning because you had spent so much time saving up that money. How were you able to trust this friend given all that you had gone through in the past? Did he show you a track record?
A : Yes, he did show me what he what he was doing. He basically sent me the printouts of his trading records and his account statements, etc. As far as I was concerned, this guy was making huge money on finance markets.
Q: Was he doing it for other people as well?
A : No way, strictly for himself. Generally, he would not touch other people's money, I suppose in my case he was going to make the exception to the rule. But then, on second thought, he decided to teach me his skills instead. Effectively, it was technical analysis with an emphasis on moving averages. At the beginning, I first demo traded it. I did very well on the demo, then went live, and that was when the rude awakening came.
Q: How did you learn from him when he was in the United States and you were in South Africa?
A : He used to take print screens of charts and put them into PowerPoint. He would then illustrate the images and write on top of them and basically give me slides of the graphics. When I received them, I would replicate what he told me on the demo account. For example, I would plot a moving average of 5 and a moving average of 13 to look for a moving average cross. I was such a novice that I had no idea what this guy was talking about at the time.
Q: I'm sure there was a very steep learning curve. Did he explain to you what moving averages were or did he just say okay these are moving averages and I recommend that you use them?
A : He basically advised me on what they were. I would then figure out for myself how to apply them. If you're basically looking at crossovers, then you want the faster line to cross the slower line from the bottom up, creating a buy opportunity. If it crossed from the top down, that's a sell. I actually battled with it in the beginning, but I somehow slowly but surely and through perseverance managed to get the hang of it.
Q: Did you read any books about technical analysis to get a better grasp on finance market?
A : At that point, nothing at all. I became quite successful at demo trading and that was when I went live, which was when I got the shock of my life. The first day, I'll never forget it, it was a Friday. I placed my first trade on a mini-account, and it was a nerve-wracking experience, but I walked away with six dollars on my first trade. On my second one, I made five, and at the end of the day, I had made 18 dollars in total.
Q: So mr. Hoosain Harneker your friend was basically a mentor to you. How often then would you talk to him in the beginning?
A : Yes, that's right. In the beginning, I spoke to him about once or twice over the telephone and then the rest of our communication was all done via e-mail.
Q: Would you correspond over e-mail every single day or every few days?
A : Initially almost on a daily basis. I estimate that it lasted for just over a month or so.
Q: So it sounds like you traded exclusively on technicals in the beginning. Did you ever incorporate fundamentals into your trading?
A : It was probably five to six months down the line before I discovered the importance of fundamentals. Although Steve was very good at teaching me technical analysis, he did not explain the importance of news. I only learned this by knocking my head several times. To give you a simple example, if I was in a buy trade, which I'd opened at 9 a.m. and suddenly, at 10:30 a.m., my time, that trade would turn against me horribly, and I could never figure out why this was happening. At one point I actually
stopped trading because I had lost three times in a row and that petrified me. I became so scared that I could not trade anymore and I would only look at charts on a daily basis. Every single day in the afternoon, I would call up charts, and I would study them. That was when I realized that roughly 10:30 a.m. and 2:30 p.m. something would happen in the market. I didn't know what, but I would suddenly see a big spike either going upwards or another spike going downwards, etc. I asked the question on one the forums about why it was happening and I never got an answer until about two weeks later, when somebody mentioned one word: "News." That's all they said and I thought to myself how on earth can it be news. When I saw the word "news," I was thinking about a bomb explosion somewhere or a terrorist attack, which obviously is not what this person meant. It was only through further research did I discover the actual news release indicators and learned that they came out on a daily basis. I went out and tried to find as much information about them as I could, such as GDP, NFP and so on, and what I would then do is avoid trading during those times. Even if my signals came up and if I saw that it was close to let's say 10:30 a.m. or 2:30 p.m., I would not enter the trade. I would normally wait about an hour or half an hour after that period and only then I would enter my trades. After doing that, I found slowly but surely, my trading started to improve again.
Q: How long did you demo trade for before you actually went live on finance markets?
A : About four months.
Q : Mr. Hoosain Harneker what gave you the confidence to go live, was it a series of winners?
A : No. I first asked myself the question when I go live, how much money would I start with? The answer was only, $1,000 because at that point, that was all that I have saved up and all that I could afford. I even told myself mentally that if I'm going to start with $1,000, I need to be able to turn $1,000 into $2,000. Irrespective
of how long it's going to take me, whether it's going to take one month or two months, or three months, that is what I needed to do. My line of thinking was that if I could make $2,000, I would withdraw $1,000, and at that point, I have recouped my entire capital. Whatever I lose afterwards is not as important because I've got my capital back. So my goal was to double my capital three times in a row back to back in my demo account. Eventually I actually managed to do it and, in fact I, doubled it four times in row.
Q: In four months?
A : No, no, not in four months. It was six or seven months and that was where I got the confidence to go live, but the transition from going from demo to live was not something that I had prepared for. Psychologically, there was a massive difference between trading demo and trading live. The reality is that when it's your own money on the line, it has a huge effect on you psychologically whether you are aware of it or not. I became hesitant. I would see the signals but I would be too scared to enter the trade, and only later did I find out that if I entered I would have made a large amount of profit. When I did get into a trade, I was completely spaced out. I would be so scared of things going against me. One of the main things is that my wife was very anxious about taking risks. She is not a risk taker, not even a calculated one. I never realized just how much of a role she actually played in my life when I first started trading.
Q: Did she support or encourage you in the beginning?
A : I wouldn't say she encouraged me because, in the beginning, she felt it was money that would go down the drain and that I was basically wasting it. I had to work with her and work with her until one day she said to me, "Fine, if that's what you want to do, go ahead and do it." My reasoning to her was, "Look, just give me a chance. If I blow the $1,000 that's it. I'll turn around and I'll walk away and I'll never mention trading ever again."
Q : Did you show her your results on your demo?
A : Yes, and I think that is where she probably got the motivation and started to think that if he's doing that successful in the demo trading, maybe he can do the same with live. So, eventually, she said, "Listen, if that's what you want to do go for it." But my agreement with her was that if I lost the $1,000 that would be it. I would turn around, walk away, and never look back. My belief was that I wouldn't want to turn around in, let's say, a couple years and ask myself what if I had tried it? I am the type of person who would rather give it shot, win or fail.
Q: So did your wife keep a tight noose on you after you started trading on the finance markets?
A : No, the first couple were small successful trades. But there was one day that I had entered into a trade at work and, when I came home, I logged on to my trading station and I was $187 in the profit and my wife was ecstatic. Honestly, I can tell you. she was jumping up and down. Now $187 to an American citizen might be peanuts, but to me, as a South African, that was a small, fortune that I had just earned. She was ecstatic and from there on, I grew stronger and more confident in my trading. Her excitement made me more determined to trade successfully. I mean we've had our ups and downs, but she's always stood with me. In fact she's thinking of becoming a trader herself. The key to my trading strategy is small but consistent daily wins.
Q: Lets talk about your trading. First of all, what hours do you typically trade?
A : In GMT, from about 7 a.m. until, I would say, roughly about 6 P.M.
Q: What is your typical holding period mr. Hoosain Harneker ? Are you conservative, aggressive?
A : I'm fairly short term.
Q: Did you have some sort of daily, weekly, or monthly pip target or dollar target?
A : Yes, originally when I started out, my target was simply 10 pips a day. If I achieved that, I would not trade again.
Q: So you would be disciplined enough to close your position?
A : Yes, I would take the 10 pips and stop. If I made it at 10 a.m. in morning or whenever, that would be it, I would be finished trading for the day and I'll wait for next day. The reason I'm mentioning this is because I reached a point, early on in my trading career, where I was starting to overtrade.
Q: That' s a problem a lot of people face.
A : Yes, I would make the 10 pips and the trade was over, but then later on I would see another signal and I end up getting into a new trade that would become a loser. This went on until I realized that I was really just a 10-pip trader, so I would take that profit, stop and wait to trade again the following day.
Q : How long did it take you to discover that?
A : It was probably another two months or so into my trading before I discovered it. I was not looking at the dollar amount, I was only looking at the pips because I told myself that I needed to
become consistent and focus on the pips because I could obviously increase my lot size and make the dollar amount something I would be satisfied with. Now believe it or not, it's been three and half years since I started trading and my pip target is still the same.
Q: So you aim to make 10 pips a day, but what you would do if you had a losing trade? Would you try to make 20 pips over that 10 or stick to the 10-per-day goal.
A : No, I would still just go with my 10. The aim is that your total number of wins exceeds the occasional loss. I would always have a fixed stop-loss. I used to trade with a stop-loss of 20 pips. If I lost that 20, then I would stop trading, wait for the next day, and would follow exactly the same plan that I had before, which is to only go for 10 pips a day. I wouldn't try to trade two or three or four times a day just to make up that money. What I realized nowadays is that the anger seems to drive you to trade again. You become so angry with yourself about losing the 20 that all you want to do is get it all back and you think that you're going to teach the market a lesson and unfortunately it doesn't work out that way. It's more likely that the market is going to give you a beating instead [laughter].
Q: Do you like to focus on one currency pair at a time or will you trade multiple currency pairs?
A : No. Only one.
Q: So then what are your favorite currency pairs to trade? A : Euro/U.S. dollar and British pound/U.S. dollar.
Q: Which ones would you avoid? A : Probably U.S. dollar/Japanese yen.
Q: Is there a reason for that?
A : Yes, I've burnt my hands on it a couple times. I think it is because the price action can be a bit too wild for me on occasion.
Q: Do you ever trade the crosses ?
A : No, not at all. About a month ago, I created a system for trading the British pound/U.S. dollar currency pair and that system is working phenomenally well for me. So I'm actually at the moment only trading the pound. I also have a system that trades silver as well. So I focus on those two exclusively right now.