Veteran trader explains best time to cash out of Bitcoin | Interview with Charlie Burton

Veteran trader explains best time to cash out of Bitcoin | Interview with Charlie Burton

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All right, folks, we have Charlie Burton, who was a professional trader with 22 years experience, has been trading full time since 2002. He only got into trading by chance, when a friend invited him to a trading seminar, which he found fascinating. After that, most of what he has learned has been self-taught. He shot to fame when he was featured on BBC's Million by the Minute programme back in 2014. Charlie believes there are no such things as natural traders. Everyone has to learn somehow.

Charlie, how are we doing today? Thank you for joining us. Good afternoon. Yeah, thanks for having me on again. So it's been a few months, but yeah, hi guys.

I've seen a few of you before. So yeah, thanks so much for having me on. Well, you're obviously a really accomplished trader. How do you like, incorporate the news and like the more randomness of news numbers, like we saw the announcement with Litecoin, the fake announcement with Litecoin. It really took the market for like a roller coaster. How do you incorporate that into trading? Well, let me just make this very, very clear.

I'm predominantly a Forex trader. When I'm invested, I have investments in Bitcoin and Ethereum as well. But I don't, I'm not short-term trading those. So as far as news is concerned for me in my trading that it's more about the economic type news releases that come out, that come out of the US predominantly, because I'm predominantly trading the dollar. And so that's what's more important to me. So yeah, like most people just have the economic news calendar.

I consult that at the beginning of the week and each day just to remind myself what main use might be coming out. And but in the main, again, if you... I don't day trade as much as I once did. So I more swing trade.

I'm in front of my, I'm in my office every day, but I'm more likely to be putting on positions that I'm going to be trying to hold for quite a bit longer. So news becomes less important, the higher the timeframe that you're trading over. If you're an absolute intraday trader and you're trading with leverage, then news becomes really important. And but if you're looking to hold positions over a longer timeframe, then all the squiggles that go on and the bits of news that are released, which might create all those squiggles in a market, which are really important to a day trader, because they might get stopped out of their positions if they've got stop-loss levels and stuff, become less important to a swing trader who's going to have wider stop-losses in the market.

So those sorts of things have let carry less impact for me, but they used to. Charlie, I want to use your more extensive background, especially on FX markets, so I want your take on the Bart Simpson formation that happens a lot on Bitcoin and Ethereum. So, Bitcoin is trading at that price and there's a bump. It stays for a couple of days, then it runs down again, forming the Bart Simpson. Have you seen that on other markets and why do you think that happens so much? I think traditionally you've always seen consolidation periods anyway, and I quite like that sort of pattern actually in cryptocurrencies and in Bitcoin, like you've just said.

And when I've been on before, I've been talking about that very pattern. I think it was just the last time I was on, that I think that part of the reason is that in the cryptocurrencies, it's a younger, younger man's game, younger than me, probably for a lot of people. So there's a lot of people who are younger, maybe, you know, younger generation than me. I'm 48, so we're probably looking at, you know, don't get me wrong, I'm invested in the stuff and I've got plenty of friends who do. But I still think there's a lot of younger people involved in that. And what comes with youth is emotion. And so one of the things that we all

know as experts, that markets constantly do is markets by their very mechanism pry on people's emotions. It doesn't matter what the market is, that's just natural behavior of the market. It's a living, breathing thing, and a lot of the time the market's job is to try, and I always say, to try and shake off as many participants as it can. Even if the market's trying to go high, it will still manage to shake off people one way or another, either through fear of them just getting to a point and they just have to bank their profits. Or, as we know, in flushes and things like that. And again, prying on that

emotion and coming back to the types of consolidations you're talking about where you just get these periods, where it just goes flat for a while. I think that one other thing, and an emotion that younger people are more susceptible is boredom. And so you get people, they get bored out of their trades. I was talking about this when I was last on. And so they're like: "Oh, I'd better go and find something else, Bitcoin's going sideways for the last two months".

Whereas for me, I love that type of consolidation, because, yeah, I'll just use that to get in, and that's what the pros do. Get it and then sit there, because they're not necessarily having to use the same leverage. They're not, they've not got the same sort of time horizon who someone's younger saying: "Come on, make me some money today or this week."

Whereas us older guys and the pros can sit there and ride that out and accumulate, when others are getting bored and effectively getting flushed out of their positions that way. So I love those consolidations. So does having a lower win rate mean lower profits ? What are your thoughts on that? Ok, so yeah, I mean, win rates, I love them, because the younger, when I say younger now, I mean, the newer the trader out there.

Whether you're a trader in Forex stocks, cryptos - doesn't really matter. I find, over the years I've been training traders now for about, well, 15, 16 years, and what I find is that newer traders want high win rates, because we want to be right as much as possible. We go through life. We go to school. We are taught.

We're educated to be right as much as possible. Pass through exams, get the highest pass mark you can. You go into the working world and, you know, being wrong is seen to be bad. And yet then we come to trading, this whole trading universe, and we have to rewire in a way, because we have to appreciate that being right isn't as important. And yet that is still important to people who are newer, so they prefer to be right more often. But what I find is that the more mature a trader becomes, their win rate actually slightly comes down, and yet they become more profitable.

There's a really interesting survey that was done here in the UK, a big broker. I think it was done with IG Markets, one of the biggest CFD brokers here in the UK, and they looked across of something like 40 million trades. And they found that across these 40 million trades, their clients had something like a 60% win rate. And yet those clients were losing money, because their losses were so much bigger than their gains. So even though they were right 60% of the

time, they were still losing money. So win rate isn't that important. So for me, coming back to your question there, no, having a low win rate can actually be highly profitable. My biggest risk to reward ratio trade in recent years was a 1 to 56. I have had a few, in the recent past, of well above 1 to 20 risk to reward. So for every 1 dollar you risk making 20 to 30 dollars. You can afford to have a number of

losing trades if you have risk reward ratios like that, and that's what I quite like looking for. So risk reward is more important to me, or overall profitability to me is more important than just being right or having a high win rate. In fact, my win rate is probably less than 40%. Do you think that if you mention the maturity you get over time, do you think that like diversification is something that comes along with the people as you mature as a trader, you get more likely to diversify into different assets? And what's your opinion on just diversification? Yeah. Well, like you've just said, I think from an

investment perspective, as you get older, you diversify more. So for investments, yes, I diversify. Ironically, from a trading perspective, I actually focus more now than I ever have done on smaller and narrow range of markets for my day to day, week to week trading. Then I'm more focused on just trading the dollar than looking and chasing the next big move, like oil had a great big move yesterday, sort of thing. I'm not jumping on that just, because oil has gone up. That's not on my horizon. So I've found that focusing on a few markets has been better for me over the years than trying to spread myself too thinly.

But that's from a trading perspective. That's very different to investing. Investing, yes, diversification, I think, is a good thing across cryptos. I think it's a good thing to do. But from a trading perspective, then actually, I think focusing on a few markets is better than trying to look at too much.

So, Charlie, I've seen that you practiced martial arts in the past, don't know if you currently do it, but do you think that this discipline, this mind focus is important for the trader and how can people, regular people improve it? Yeah, I well, I did karate for 20 years and I used to compete for England. I fought overseas and stuff. So yeah, I did it from, I think I took it up when I was 15 years old and I had to quit by the time was about 35 because of back trouble. So I was plagued with back trouble for many years. But I did get to a reasonable level in martial arts. But did it teach me discipline for trading? I would say actually, controversially, no. Even though it gives you a lot of discipline

within martial arts and maybe within other aspects of life, I would say no. But one thing it did give me, I would say the number one thing that martial arts gave me, was tenacity and that ability to just pick yourself up after someone's just kicked you around on the floor. And we, you know, I'd go to training sessions with world champions and we'd all just end up in a big scrap like a bit of a, back in those days, a bit like modern day MMA.

We'd all be scrapping on the floor by the end of the class, and I'd walk out with black eyes every week and scratched up, and all that sort of stuff, and a few breaks here and there. But you were taught to get up. You couldn't stay on the floor.

If you could get up, you got up, and they would beat you to see how you reacted. Did you give up and just lay up stay on the floor? Did you get up and try and carry on fighting? And I think it was that sort of mindset that carried me through into trading, because I could have very quickly, easily quit trading. In my first year, I took a $40,000 account up to a quarter of a million, and then gave it all back again in my very first year of trading, and I could have so easily quit back then. But again, it was just that DNA in me that: well, you've got to dust yourself off, get up and and carry on with the fight. So for me, the martial

arts taught me that 'never quit' attitude, really. So that was the main thing. Discipline in trading, as it turns out, I had to learn. So it was just, as a result I've got, I'm a natural, I'm a natural greed-based trader, so you've got greed- and fear-based traders, and I definitely on the greed-based scale. So I'm always, I was always going to be that person who would take a bigger trade, oversized positions, all that sort of stuff. And so I had to learn the hard way to build discipline.

And it was as a result actually of that greed that I did it, because in that first sort of 18 months or so, once I'd got over that initial loss, making the money and then losing it, then I went through this phase where I'd make money for a few months and then give it back very, very quickly within a space of a week or two, and then make money for a few months, give it back again very quickly. And what I was doing is going through this cycle of being disciplined and trading quite well and adhering to my trading rules, then getting, after a few months, getting a bit overconfident and then thinking: "Oh, I think I'll trade that or trade this", and you get overconfident, and then you give your money back, you give your gains back. And I went through that for, probably, the best part of a year. And it was, by going through that cycle, that I realized what was going on. It was just that lack of discipline. So that was a big wake up call for me, and I realized that if I could get on top of my discipline, then I stood a much better chance of breaking out of that pattern of just being, you know, basically having an account balance, which was...

No need for me to get in karate. I just need to keep my rules simple and keep them on track. Don't change them every time. Is that it? Sorry, what? So what a trader needs to do to improve is keep the rules simple and obey them? Don't change the rules? Yeah, yeah, absolutely.

But I mean, I also say, look, we are all fallible. We are human beings. We are absolutely flawed. All of us are, and especially in the front of the markets - we are. We are naturally influenced by greed and fear to one propensity or another. So absolutely, we need to have some simple rules.

But I would also say that a lot of visualization is good, and in order, because you can have some rules written down. And I, because I've done that, I've had rules written down, and then you sort of discard them and put them to the side, or just this one time I'm going to take this trade, you know? So I think what's important is a lot of self-talk. And if I do this now, if I take this action now, if I take this trade now and it doesn't work out, will I kick myself? That's a great, I've used that for years.

It's a great line to just sort of act as an arresting mechanism to stop yourself. If for me, being a natural greed-based trader to stop myself from just jumping into trades, which I shouldn't be in, and stop myself from going off of my rules, so away from my rules. So if I take this trade now and it doesn't work out, will I be upset with myself? And if the answer is yes, you can't take the trade and it's a case of just a lot more talking to yourself, a bit like if you had a mentor.

So if you, Marcel, if you were sat next to a, you know, a relatively youngish novice-based trader and they were about to take trades, they would probably, because of you, because you're sat there, they probably would have much, much better discipline than if they were sat there by themselves. So what you need to recreate is that environment as if someone was a mentor or sat next to you. And the only way to do that is to ask yourself questions, because that's exactly what you would be doing. You'd be saying to someone: "Why are you doing that right now? What's the consequences of you doing that right now?" And if people can create that environment for themselves psychologically, then that really helps them with their discipline. And so you've touched on the mental part about trading, but I'm also kind of curious to learn more about the technical aspects. So what are some strategies that you like to deploy when you're trading? Yeah, can I share charts or my screen? Yeah, definitely. Yeah, definitely.

We have a share screen button there. Okay. Let's see if I can do it.

All right. So I want this one. Ok, so you should be able to see my screen. Got a screen up. Yeah, I can see that, yeah.

So I use a lot of, I'm just going to talk technical analysis here, and I use a lot of multiple timeframe analysis as well. I'm a big believer in not just looking at, let's say, a daily chart. I've got a daily chart of Bitcoin up here, but not just looking at a daily chart, I'm going to be looking at the weekly and the monthly as well. So I have that sort of top down approach. I want to get some alignment within what I'm looking at. But so for example, at the moment, I just use a few moving averages and an MACD indicator down the bottom. And price action.

But so, as we can see, on my chart here, Bitcoin came down when it had that flush last week or so ago, down to the 50-day moving average. It's my black moving average down here, and we can see it starting to move off of that right now. As far as strategies are concerned, I have so many, but like I said, multiple timeframe analysis is important, but for me, a first retest of a key moving average like a 50-day moving average is always going to be something I'm interested in. So if I was bullish on this market, and when it's pulled back on that El Salvador day there, then that's going to be a level that I'm going to be looking to buy at. So, a first retest of a key moving averages like a 50-day moving average, but I wouldn't do that by itself. Like I said, there would have to be

multiple timeframe analysis going on as well, but that would be something very, very simple that I look at. If I'm bullish on a market, wait for the retrace. It's not rocket science, and you can either use Fibonacci if you're looking at, if you're a Fibonacci person, for looking for retracements. I like using moving averages, because I find... One thing I always say about moving averages is that people, just always a moving average.

Yes, it's an average of price. And people forget that, it is prices average and price likes to retrace to its average price. Because it's a naturally, a natural mechanism of prices. It likes to mean revert. It likes to revert to the main. And what better mean is there than an average of price and therefore a moving average. And something like the 50-period moving average is one of my, always been one of my favorites.

So I think moving averages are a very graceful way of, if you're looking at charts of doing some analysis, but it's not moving average crossovers are not interested in that. I'm using moving averages as support and resistance, the angle of them, the number of tests that they may be having. So I do a lot of stuff like that. But the other thing that I will look at, you ask me some ideas. If you look at the MACD here as well, I do like divergences. I use MACD indicator for divergences. Bitcoin was diverging over those few

weeks, as you can see, look at the blue line here. You see that was in decline, as price was making new highs. That's always going to give me a little bit of a warning. The price obviously could soften, if you see marginal new highs in price, so we've got a high price here, a high price here.

Then it pulls back and then only makes another marginal new high before pulling back again. And then the same thing again before it ended up retracing it all in one day there. But there's an even better example earlier this year, when I was banking some of my Bitcoin profits from last year. Again, you can see this very clear divergence here, where price was making marginal new highs here in February through to April.

I can see this divergence is coming in on the chart there. So there's just a couple of examples , we can't go into too much detail in the space of an interview, but certainly divergences are quite like provided, it's coupled with maybe some resistance. But what for me, what was absolutely fantastic with Bitcoin back in the early, in the spring of this year, when it was making going and doing those divergences is, oh my God, the sentiment was so euphoric and that I had friends, who are not traders, phoning me up, saying: "Charlie, I want to get into trading. Can you, you know, I want to buy Bitcoin. What do you think? I want to buy Ethereum." And when you've got your tree surgeon phoning you up saying: "I was in the pub last night, and my friends telling me I should be buying Bitcoin," you're like: "Right, I see it, I'm out." Yeah,

yeah. And I was joking with him when he phoned me up. He was just one person. And you think 'that's it', they always said in the 1920s, where they said: "When you shoeshine boys giving you stock tip advices, you need to get out of the market." And that was a classic from, you know, Reminiscences of a Stock Operator, the famous book.

And these days, it's when your mate has been down the pub and they're asking about buying a Ethereum, then you might want to be worried about, you know. So if the average guy who's got no interest at all in the markets and starts hearing about it, that's when I get concerned. So back in the spring of this year, it just felt so euphoric. I'm sure you guys felt the same way, that that gave me that sort of warning sign.

I thought, I've got to banks and profit because at that time, so sentiment is a big thing for me. Sentiment. The return of sentiment towards bitcoin or outlook on Bitcoin in the market? Yeah, absolutely, yeah, I mean, I try and tap into it, just using like Twitter feeds and, you know, picking up on general news. So I, you know, use various financial sites.

So yeah, I'll try and tap in. You know, a great one is when Goldman Sachs starts talking about, you know, any market and they start getting really bullish on something, then again, I use that as a warning sign. If the big banks are starting to talk about a market going much higher or much lower then, I'll usually look for reasons why it might do the opposite. So yeah, absolutely, sentiment is key for me, because I think that it's that old adage that if everybody's in, who's left to buy. But if you've got a bull market whereby you know, people are pessimistic, a bit like the stock market's over this past year, quite a lot of pessimism actually, because everyone's looking for that, that stock market crash, when's the S&P and the Dow going to crash? And yet they don't. They have a short pullback and then up they go again. And of course, at some point they will

crash. But when the masses are still pessimistic, at least the fuel is there that they might at some point throw the towel in and say: "Right, I better get on board, because this thing's still going higher." There's still at least pent up potential demand, but if everybody's in and everybody's euphoric, that's the recipe as we know for a crash. And so, and I felt that that was the case in Bitcoin earlier this year. But funnily enough, I don't feel that right now.

I'm not, I don't know what you guys are picking up on, but from a sentiment perspective, you guys are much more tapped into the crypto community. But certainly I'm not, my tree surgeon hasn't phoned me up for a while, so I think we're safe for a while. Excellent points and we appreciate your insights today. This is Charlie Burton, a professional trader. He was giving us some of the great

strategies to look at when we're looking at charts. Some of those simple tips, and we appreciate you jumping on today's show and walking us through your story and what you like to do when you're looking at markets and charts in particular. So thank you for joining us today, Charlie. Thanks for having me on.

2021-09-19 20:41

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