Robbie Burns interview - Lunch with the Naked Trader

Wednesday, Jan 27 2016 by
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Robbie Burns interview  Lunch with the Naked Trader

Ahead of taking him to lunch at his favourite restaurant, I’d agreed to meet Robbie Burns at his office (a second home) on the banks of the Thames in west London. It later transpires that the place has been be a pretty smart speculation in London’s booming property market. But after a couple of hours with him it’s clear that like a lot of things, Robbie’s relationship with wealth is at times both serious and fairly easy going.

He’s a man content and appreciative of his own success and the comfort that it’s given his family. But there are no flashy cars or expensive hobbies. In fact, material details don’t always matter to him. You start to see that as soon as you reach the front door…

“The doorbell isn’t working at the moment so call me when you get there!”

Robbie Burns is the Naked Trader. A decade after writing his eponymous guide to ‘how anyone can make money trading shares’, it’s now in its fourth edition. Over the years his loyal readers have followed him through booms, crashes, bubbles, successes and failures. He’s won a place in their hearts for his no-nonsense, down-to-earth prose that literally laughs in the face of complicated investment speak. By keeping things simple, wearing mistakes on his sleeve and encouraging individual investment he’s built a very successful brand around himself.

Later this year there’ll be three more books from him. Among them will be an update to The Naked Trader’s Guide to Spread Betting, a second on trading psychology and the third will be Robbie’s debut novel.

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While the original book is cheeky, laddish and readable, there are some hard-hitting messages in it. For a start, it’s clear he’s very sensitive to the risks of behavioural mistakes. He frequently warns about the perils of making decisions driven by emotion. Deep down, the book is about taking a checklist approach to trading. He suggests looking for profitable, growing companies that aren’t debt laden. Dividends are important (mainly to cover trading costs), the shares have to be reasonably priced and they need positive price momentum behind them. He also take a ruthless view on losing positions, cutting early, often with a stop loss. It’s a strategy that makes a great deal of sense, but it needs discipline too.…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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35 Comments on this Article show/hide all

clarea 31st Jan '16 16 of 35

Would that be net profit on stockopeida company stats then ?

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clarea 31st Jan '16 17 of 35

Sorry meant to say would that be operating profit ?

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Bearbull 31st Jan '16 18 of 35

@Velo
Meaning? INMO? = Internal Monolog? TA indicators? = Technical Indicators? , which ones?

Stop-Loss:
Of course you are wright; every share has its own "implied volatility" or "beta". If you want to trade single shares in a William O'Neil or Kevin Marder (Market Watch) breakout system / concept, read Brian June / Van K. Tharp about money management and how to calculate stop-loss based on your loss tolerance.

But at the heart of Stockopedias concept lies the PORTFOLIO of 20-25 shares and NOT SEVERAL BETS on single shares (= gambling approach)!
The holding-period is 3 to 12 month (quarterly or yearly rescanning and rebalancing)
For investors* who follow the Stockopedia approach the portfolio itself is the primary stop-loss in a secular** bull market. That means the portfolio as a whole does counterbalance the "beta***" of the individual liquid traded**** shares in the portfolio. The selection of the 20-25 liquid shares based on their Stockrank(TM) *****should basically help to avoid bad surprises (certain events are not detectable / trackable neither in price-events nor with fundamental ratios)

In the context of a 20-25 liquid shares portfolio activated stop-loss orders at your broker on all 20-25 shares have only the function of an emergency stop-loss. Therefore in a healthy market they basically should be put in place only when you are on a vacation or have no time for a monthly check (and only monthly and not daily ! ) of the 20-25 positions.
The distance should be wide > 14% (read Stop losses: Help or Hindrance? Dr. Bruce Vanstone)
"If you can't sleep at night then the risk is not right" (Ed Seykota) and you should reduce the amount of money you have in the stock-market as a whole.
"If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks" John Bogle (Vanguard)
By the way Farrell's (USA) eight "lazy portfolios" were (minus!) -28.3 % till - 43.5% over 12 month at the beginning of 2009. But: "to win you have to be in" Tweedy Browne (= vicious circle of stock-investors ).

The importance of the quality of the Stockrank (and the many other ratios) for Stockopedia subscribers is the reason why I think the Stockopedia team should give more information about (= make more transparent) how the data from Reuters is used to calculate the different fundamental ratios (especially for banks-, insurance-, property- and specific companies, where things are not always obvious). Further the most important numbers in the income-, balance- and cash flow statements (especially sales and operating cash flow = least manipulated) should be accessible in the "Table Editor" in the "folios" for at least the last three years. Users can then "adjust" the Stockopedia Rank system to their stock-univers (US, UK, FR ....) from which they equip their portfolio. This would also help to avoid crowded trades and frontrunning by market maker (in case of non electronically executed trades) if too many subscribers uniquely use the StockRank as selection criteria.

(*investors go long only and holding period >= 3 month, traders go long + short in shorter time frame)
(**secular bull market = a market driven by forces that could be in place for many years, causing the price of a particular asset class to rise over a long period of time (Investopia))
(*** beta describes the relation of a single share to its market as a whole)
(**** liquid means daily trading volume of 10-20 times your single position size and no micro caps were prices can be manipulated by one single agent)
(***** or your individual fork of a base screen)


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snickers 2nd Feb '16 19 of 35
8

Readers might like this graph of the Naked one's trades, made from the table on his website. Lines link buy and sell points. The vertical scale is logarithmic so the lines aren't all bunched up.

56b09fc3183fenakedt.png

The paler blue colours are higher value trades. & the accuracy depends on whether his website is updated correctly of course. Nudists are notoriously bad at that.

I'd say this confirms that he runs his winners, cuts his losers. He also seems to get out of a trade quite fast, quite often. I don't know what I'd infer from the pattern of trades in 2009: skittish, guessing the bottom? 

I believe he watches for dips, and nips in and out again on a resumption of the normal trading level. So he must have software which flags these situations up? 

& lastly, he says above that he never averages down any more: you can see, bottom right, him doing that (4 lines converging) but he escapes with his dignity intact.

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PhilH 2nd Feb '16 20 of 35

Hi snickers,

I love the graphs you put up from time to time.
What is the vertical axis? Is it price rescaled in some way?

Thanks in advance
Phil

Professional Services: Sunflower Counselling
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snickers 2nd Feb '16 21 of 35
1

In reply to post #120284

2.0 is 100p, 3.0 is £10
so most of his current buys are £1 to £4 or so. No more penny shares..

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Toyin 3rd Feb '16 22 of 35
3

In reply to post #119903

Frop

I think you will find in "The Art of Execution" the most successful traders were the hunters who doubled up on stocks when down 20-25% (subject to the story not changing). I agree that in some cases cutting quick is the right thing to do but in others it is not, especially when the markets are as crazy as they are now. It just proves the point of find your own way and follow it. One size does not fit all.

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Noodle Hat 4th Feb '16 23 of 35

In reply to post #120401

thats true, although you have to have high conviction and knowledge of your shares to justify doing so! If for instance your applying more of a "NAPS" type portfolio then by design you probably don't have an indepth knowledge of each stock and therefore can't make that educated call.

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andrewchat 13th Feb '16 24 of 35

I wonder what his 'get out quick' threshold is? I assume <5%? Anyone know?

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ajlo 4th Mar '16 25 of 35

In reply to post #120122

Pre tax profit Clarea and taken directly from the company accounts. He says not to trust third party figures.

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RichardEllis 11th Oct '17 26 of 35

That was inspirational. This is a man I have admired for quite a few years & I even read his (first) book. If one thing in the interview stood out - for me - it was his scary warnings about "confirmational bias". I am aware of this but fighting it is so hard. His approach to combating it is very practical, I like it!

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pedtrader 13th Oct '17 27 of 35
1

Thanks for posting this article. I too would like to know the nitty gritty on how the Naked Trader screen matches up with Robbie's thinking. Also, get out fast? what is that threshold? Surely the trading costs will rack up quickly if he is getting in and out on a trade multiple times?

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iwright7 13th Oct '17 28 of 35
1

Could I suggest that you go on his course(s) down at Heathrow. They run most months and you can get the information from the horses mouth. I have been and highly recommend. Ian

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thomaspam 19th Apr '18 29 of 35
1

In reply to post #120011

Read Robbie Burns books in which he explains the strategies mentioned or even better go to his seminars.

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Terry the Trader 23rd Jul 30 of 35

In reply to post #120011

Well said Bearbull, this is now over two years old has anybody take up the request of long term Stockpedia in giving there thought and how they use the screens. As a newbie, I think it would be most helpful.

 

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jwebster 23rd Jul 31 of 35
8

Interesting, I just had a look at his web site where he lists his trades. Ran through his recent trades for 2019. Using current prices, I gathered the following stats. Keep in mind he doesn't update the site real time so it's directional only.

Numbers of new trades = 55 (about nine a month so a fairly active style)

Average trade size = £4,552 so quite small given the sums in his account. This doesn't take into account adding further to positions, it's the average size per trade. Makes the point about small entries, easy to exit quick if the price doesn't behave itself.

Of the 55 trades 40 were either closed in profit or still open in profit at today's closing price and 15 were closed as losses or still open and losing. So a 73% win rate, which is high.

Average P&L per trade is £488 profit keeping in mind many are still open so will have further to run on profits.

Current capital employed of £180k. A simplistic gross return of 15% in six months, excluding dividends. So that figure could easily annualise into 30% which is high.

Of more interest than the numbers, I had a look at the charts of the shares traded to see his entry points.

The vast majority of entry points were at dips. Mostly where the price had dropped a fair bit and was due a reversal back up. Also a few entry points in rising uptrends, but again tended to buy at a small dip in the trend, not at local highs.

Robbie has been trading shares for many years. Clearly he has developed a real talent for spotting good shares which are due to rise, as well as money management with the quick exits when it goes wrong.

I think if you want to replicate his style, you would need to understand all the pieces. If you study the charts, his entry points are very good.





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clarea 24th Jul 32 of 35

In reply to post #496356


Very good points.

I would agree the most knowledge I have spotted recently with regards to Robbies style is to look at the charts on the date purchased the logic behind the buy price and his profit target price as you more often than not he will by back on a pull back so long as plenty of support at that area,

He will normally aim for a recent resistance point to see if the price can get through it with a tight stop if it doesn't follow through,

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jared007 25th Jul 33 of 35

He has a new updated book coming out very soon. I have read all he published this year (ie, caught up). I like his style and approach. Very interested to see what new things he has to share at this point in time.

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ambrosia 26th Jul 34 of 35

In reply to post #119846

how much are his seminars? its doest say on his website, just the date of the next one and to email him

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Robbie Burns 26th Jul 35 of 35
6

Hi Ambrosia (love the name, you must be a fan of rice pudding too?)

Currently charging an early bird of £490 plus vat. Includes three course lunch, drinks, snacks,
parking and net access. Hope it doesn't sound too much but at that price it might be
surprising but I don't make much per seat after tax, heavy costs and a whack to charity.
But it gets me out of the house and I found most of my best trades come directly from them.

Mail me at robbiethetrader@aol.com if you want to discuss the agenda, what we do
on the day etc.

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Ben Hobson

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