Trader Stories

		BIO: Sean Porter has weathered storms both of the meteorological and market variety. Born in New Orleans, Louisiana in 1962, Sean survived Hurricane Katrina in August, 2005 only to be hit financially in December of the same year when the markets took a beating. He recovered well from the market crunch by drawing on his years of experience as a forex trader, a job he started in 2000 and has continued to do on a full-time basis since 2005. Sean served in the USAF for four years, travelling all over Western Europe, as well as to Japan and the Philippines. He was raised in Arizona and Southern California and graduated with a BA in Political Science from California State University at Northridge. Sean lived in Hawaii for eight years before moving to Louisiana in 1999, where he has lived ever since.
Name: Sean Porter Location: USA Trading Since: 2001

Note: This interview took place on August 22, 2007, one week after carry trade corrections.

It seems like the markets are coming back to normal this week. Sean: I thought they'd recover quickly. Everything seemed so hyper-speculative last week, in my opinion, but people are starting to act like mature adults again. The volatility has been insane. I still have to be very careful because things are still unpredictable.

I guess last week I could have gone over to the other side of the market, but I am not that kind of person. I like things for the long term and have goals for the pairs that I have. My trading method deals best with much calmer markets. Last week was a little hard for my carry trading style.

How did you get started in FX? Sean: As a kid I collected foreign coins. I found it fascinating how other countries had different names and values for their money. When Nixon took us off the gold standard and floated the currency, I started following the rates in the foreign exchange section of the paper while other kids were reading their comics. I guess I was just a weird kid, but I was always fascinated by FX. It tells me what's going on with the world economy.

Later on, my military service also gave me an appreciation for foreign currency trading, even though I wasn't trading at the time. I really felt the impact of currency changes when they sent me abroad and I had to pay for things with a USD paycheck.

I always wanted to do forex trading, but never had an outlet before the Internet. The Internet gave me the opportunity to see what forex was all about.

It was a childhood interest that grew into a full-time job? Sean: I don't like working for other people. I always wanted to be self-employed. Forex has let me do it, so I am very happy. Even with the bad market lately, I was still thinking to myself there is nothing I would rather be doing.

Do you check the market often? Sean: I do most of my checking in the morning, when the European and American markets are both going. That's usually my busy time. I start watching and trading at 7 A.M. Central time and usually go until noon, when I cut off for lunch. The market is not that liquid then and it gets quiet. I'll trade for a little bit in the afternoon when the Tokyo market starts, and then I shut my computer off for the night. The next morning I get back up again and do the same thing.

Every day is a surprise. You can go to bed at night thinking that everything is all well, but you don't know what's going to happen the next day. Or you can go to bed at night and say "Man, I had a bad day, I got drawn down left and right," and the next day not only do you come back, but you add even more. I don't like to stay up at night and try to follow the market, even after a bad day. I need to sleep. I need to live normally. I love currency trading with all my heart, but I don't let it rule my life.

Can you recall your worst trading day? Sean: When I first started out, it seemed like every day was bad. I was always shorting when I should have been going long, going long when I should have been going short, and I couldn't get it right. I was getting really frustrated. Then in early 2005, I discovered carry trading and I started getting good at it. This became my plan to make up for my other deficiencies.

I was doing really well in 2005, I was rocking and rolling. Even with what I went through with Hurricane Katrina, my spirits were lifted by the fact that I was doing so well with my currency trading. Then December 14, 2005 came along and the carry trades unwound. The GBP, the Euro, the USD, all dropped 3 or 4% against the Japanese Yen that one day and then kept going down. My account had a meltdown; it was the worst trading day in my life. Everything I'd saved, everything I'd built up that year, was just about gone. But it taught me a lesson and made me respect carry trading more. There are faults to it. Things can happen. As horrible as that experience was, I didn't give up on currency trading. I just had to pick up the pieces and move on.

The losses can teach you more than the wins. Sean: You have to set aside your ego and let your losses teach you a lesson. I learned that lesson again last week. I took a step back and asked, "What can I do? Maybe I can hedge out some pairs with a subaccount. Maybe I can put on some negative carry pairs, create a flight to safety. To pay for that I'll put in certain carry pairs that don't move violently to pay off the negative carry interest."

You adjust. You let it teach you. That's what makes me get up every day and keep on doing this. If you get vain or get angry and try to get even with the market or try to fight the market, then you'll be destroyed.

What was your best trading day? Sean: That was right before the 2005 carry meltdown. I made an obscene amount of money. It was money I shouldn't have been making. It was around two weeks before the carry meltdown, when carries were running full steam ahead. My NAV shot up 2500 in one day. That was my best trading day.

What was going through your head? Sean: Just arrogance. When you think you can make that kind of money, you're like, "Hey, I know how I get paid," or, "Look at me, I'm Hustler." It was teaching me the wrong lessons. For example, I started thinking the carry trade was going to be there for me every day. No, it's not. It gave me a false sense of security. There are happy days when I make 500, 600 dollars in one day. And I appreciate those days a lot more now because I know why I made the money.

Those were expected gains, right before the carry meltdown. With all those juicy carries—the Mexican Peso, Japanese Yen, Hungarian Krone, they made me big bucks. Even the ZAR rallied and started to pay big bucks again. I thought there was no end to it. I got good at it, but I got a little bit too good. Humility. You learn from it.

Other than arrogance, are there any other pitfalls of trading? Sean: Avoid over-leveraging. That gets you every time.

There are some people who get offended with margin calls. They say, "Oh my God, I got a margin call!" But it's not really that way with me. When I got a margin call last week, I really didn't lose a lot of money. It was just information telling me how screwed up the market was. I didn't feel I was over-leveraged, but the market was just so unstable.

I made the decision not to inject money into my account. A margin call can actually protect you, because at least you don't lose all your money—you get to keep some of your marbles. I am not saying a margin call is a good thing to have, but it's not as dreadful as people make it out to be. There are a lot of things you can read from it. Maybe it's telling you the market is a bit wild, maybe it's telling you that you're over-leveraged.

Would you rate yourself a disciplined trader? Sean: On a scale of 1 to 10, I'd rate myself an 8.5.

What is the most important part of that discipline? What is your golden rule? Sean: Keep your emotions in check when you execute a trade. No matter how you feel, don't get goofy. Don't try to martingale or trade out of it. It's work for me, but it's what keeps me out of trouble.

Any advice for new traders going into forex? Sean: You can't think you are better than the market. You can't outwit the market. You are dealing with 3 trillion dollars being exchanged every day. Respect that.

Do your due diligence; get as much information as you can. Get to know the currencies. Why the GBP does what it does, why the CHF does what it does, why the MXN does what it does. Don't just jump in and open up a position. What I love about OANDA is that you can trade any size amount. I can trade small amounts to just test it out, just kick the tires. That actually works better for me than the game. I personally think the game could give you the wrong impression, like it's too easy to make money. I am not saying OANDA shouldn't have the game. It's good to test out a strategy you're not sure about. But it gives you a false sense of security if you're leveraging a million dollars and it's only a game.

What do you consider are the characteristics of a successful trader? Sean: Traders will be successful if they are comfortable with the market, they are not emotional, they accept things as they are, and they adapt when things are not going right. Take what I went through last week. I didn't like it, but I am going to adapt and figure out how to shield myself the next time something like that happens. Just because you make the big bucks, it doesn't make you a good trader in itself; it makes you a good trader if you are able to accept the bad times. You are a success if you deal with the bad times and build on them.

Tell me more about Katrina. Sean: A tree fell and destroyed my bedroom. The material loss was a pain in the neck, but I'm lucky it wasn't my personal destruction. Stuff happens. In my suburban parish (we call our counties parishes over here) we've recovered really well, and in fact a lot of people are moving in. We got hit pretty bad with tree fall damage, but recovered really fast. We didn't get inundated by the floods.

How did you come out of that experience? Did it change you in any way? Sean: I don't know, they say that what doesn't kill you makes you stronger. You take things one day at a time. I was very fortunate to have good people around me. My relatives were beautiful to me during that time. What it taught me was that even though I went through this horrible time I was blessed in many ways. I had the help I needed and relatives who were there for me. It made me appreciate normalcy. Don't ever take normalcy for granted!

Just after Katrina, my stepsister invited me to join her in Niagara Falls and it was very therapeutic just to get out for a few days. Once I left New Orleans and started driving through the other states, I was struck by how normal things were. Everything was just business as usual. Everything was just great.

What are your thoughts on OANDA? Sean: It would have to be a five-star rating. I've dealt with other platforms and I've dealt with other companies, and OANDA has always been the best. They have everything I want, everything I need. If I've had problems, their customer service has always responded. I even had a margin call that was not my fault, an erroneous spike on the Chinese Yuan, and they restored my positions. That is what OANDA does—they make things right if they are wrong.

If there are any annoyances (like sometimes I can't get on the platform), they are nothing compared to the respect I have for OANDA. I'm glad they give people like me a chance. The other guys don't give me a chance. They will make me trade 10,000 blocks, or trade in lots.

OANDA has kept me in business for the last two years full time, and part time before that starting in 2002. Maybe I'll be flat broke and in debt, but at least OANDA gave me the chance. And that is all I ask.

I have to tell you a story about one of your competitors. A while back, I downloaded their demo platform and was trading some currencies that were carry positive. I was booking them for profit, but I noticed my balance going down and down. One of their guys called me up a few days later asking how I was doing with their platform. I asked why I was getting draw downs when I should be getting a profit. He started in with, "Well you should read the statements" and stuff like that. You have to have an accountant to translate their statements! I told him I was having serious issues with his platform and then he got really rude to me. He finally said, "Well I give up" and slammed the phone on me. At OANDA, I know the customer comes first. It's a totally different attitude. As far as your competition is concerned, you have nothing to be worried about there.

Don't you have anything bad to say about OANDA? Sean: Maybe there are a few things I would like to see, such as more currency pairs. I would love to have the Brazilian Real or the Icelandic Kroner. Their Central bank rate is like 14%. I would love to have that one. And maybe a couple of mixed carries like NZD/CHF, NZD/JPY, those would be pretty cool. And I wish I could trade over a cell phone.

Sometimes the platform can freeze up and sometimes a transaction will time out (maybe because many transactions are going through at once), but other than that I can't really think of any other suggestions or improvements. OANDA is definitely the best of the best.

Tell us more about your fascination with emerging markets. Sean: I really like the emerging markets. I've been hearing on Bloomberg that they are going to do really well for years to come. There will be hiccups along the way, but their outlook is better than the more established markets. They are my favorite currencies. I love trading MXN, ZAR, and HUF.

But they can be so volatile, don't they turn against you? Sean: Yeah, emerging markets tend to get hit pretty bad by volatility. They get hit worse than AUD and NZD. They pretty much bear the brunt of it, so you have to be careful. The one exception I've found is the Czech Koruna (CZK). Its interest rate is very low and it can be used as a carry for borrowing to buy high-yielding currencies like EUR. If you go long on the EUR/CZK then you can get the interest from it. That is the only exception. The other ones are high yielding, like MXN, ZAR.

Since these are the first markets to be hit, they tell you if something is coming. Sean: And those moves can be pretty violent, not only for the emerging markets, but also for Australia and New Zealand. Some of those pairs really moved last week. But I've never seen a meltdown. Even December 14, 2005 was not that bad in the grand scheme of things, even if I got hit badly that time. Last week I had pretty much protected myself. I saw the signs about a week or two before it happened. I had a couple of sub-accounts that had margin calls. They were itty bitty accounts, but were telling me that things were not looking good. I started getting out of my positions, winding down, and sending my money back home, because I have bills to pay. It wasn't anything heartbreaking for me.

Since you follow emerging markets, do you follow the news? Sean: I use geoinvestor.com. It's like a global financial and economic database. It doesn't report on every single country, but it has the ones I am interested in. It has good analysis on emerging markets like Hungary or Turkey.

Tell us more about your time in the military. Sean: I was in the air force for four years. I was first stationed in England in 1980 when I was about 18 years old. Carter was president, US interest rates were something like 21%, and we had the Iran hostage crisis going on. When I got there, the GBP/USD was about 2.48 and then it just kept going up. It was way more expensive for me to go off base, and I really felt the impact when I had to live off base and pay rent. I really had an appreciation for foreign currency trading then, even though I wasn't trading.

I remember one time I had to pay my rent and the GBP/USD was supposed to be 1.84 but the bank on the base was still using the previous day's rate of 1.80. I saved something like 11 dollars, which doesn't sound like much but in 1980 it was a lot of money for a military guy. It sounds like a small thing but I'll never forget it.

You were thinking like a trader even back then! Sean: I had to. Depending on the rate, things were either more expensive on the base or they were cheaper. It was the same in Japan. When I was stationed there in early 1982 it was 245 Yen to the dollar and by November '82 it went all the way up to 276. When I left in '84 it was back to 225. So I still remember when the dollar was over 200 Yen. The US was screaming back then about there being too many Yen to the Dollar. Now the US screams at China to make their rate go up. In the late 80's the USD sank dramatically against the Yen. Way, way down to levels that were shocking: 140 Yen, 130 Yen. If it was back up to that level now, I would be on cloud nine.

So you've been all over the world? Sean: I've been all over Western Europe. I visited Europe as a kid, when my grandpa lived in Germany. In the military I got to go to England, Holland, France, Belgium, Yugoslavia, and Austria. Then I went to Okinawa, Japan and to the Philippines. That was an eye opener. Okinawa was really nice. Half of it is like Hawaii with really nice beaches, and the other half is really urbanized. It's a very small island, but you don't get island fever because there is so much to do.

I also lived in Hawaii, but that was not with the military. I was there when the Asian crisis hit and I knew a lot of people from South East Asia. They were college students and they had to pay for their tuition and cost of living. In terms of their own currency they lost something like 50% of their purchasing power overnight. It was like a financial Katrina to them.

In the last decade, I've been to Holland several times, and to Germany. I went to London last year, and I was stunned at how expensive it was. It was 1.80 then (I'm not talking 2.00 like it is now) and it was freaking expensive.