Richard Micallef: A disciplined approach
Despite his 23 years of trading experience, Rich Micallef describes himself as a basketball coach. You have to dig a little deeper to find out that he played guard for Brooklyn College back in the early 1980s, when the Division 3 school was elevated to Division 1, that he is the school’s all-time leading scorer and that the school retired his number and later hired him as an assistant coach.
Micallef’s first job off the court was in the back office at Solomon Brothers. Shortly after that, a friend introduced him to a banker at Crédit Commercial de France, where he was hired as an assistant trader. Nine months later, they gave him a book of business and he was the dollar/deutschmark dealer; he traded for them for three and a half years.
“Back then it was Telexes and phone calls and voice brokers,” Micallef laughs. “I used to keep hand-drawn point and figure charts, it’d be like a map going all along the wall. It was fun. Back then, spreads were a lot better and you could arbitrage a little bit in the crosses. Today it’s so different with electronic trading. You are trying to squeeze out half a pip,” he says. Now he considers himself a position trader. “I am not going in and out all day long like I used to. Just picking a level and averaging into it, and take what the market gives you.”
He says his trading is 80% driven by technicals, and the rest is fundamentals. “Technicals are the bread and butter. I try to keep it simple: relative strength, stochastics and some moving averages. I look for divergences and fill backs and that kind of stuff,” he says, adding that he is watching five-minute, 60-minute and daily charts. He keeps his eye on Fibonacci retracement levels, but doesn’t use them for decision making.
Micallef is currently focusing attention on the euro and the British pound, which typically track with the stock market. “The dollar weakness has driven a higher stock market and that’s going to continue,” he says, allowing for fluctuations driven by forced liquidations caused by the Bernie Madoff scandal and the Fed’s cutting of the Fed funds rate to 0.25%, which could open the door to higher levels in the equity index market.
At this point, he is long the equity markets and actively trading exchange traded funds (ETFs), including the DDMs (ProShares Ultra Dow30) and QLDs (ProShares Ultra QQQ), rather than individual stocks. “They are a great tools, but they are also exaggerating the up and down as people pile into these things.”
As for the U.S. dollar, he expects a short-term pop and further declines. “Technically, we are over done. If you look at U.S. dollar/Swiss, we were at 122 only a week and a half ago. We are at 107 today. We might pop three big figures on a short-term basis and head back down to par.”
The Japanese yen, on the other hand, is still getting bought against the crosses, and the British pound is floundering compared with the euro. “You could see the sterling/yen (GBP/JPY) take a beating. Today it was around 136, that thing could easily go to 125. I am looking for yen to touch all-time lows, where we were back in the early ‘80s, maybe 78 and change.”
Micallef never studied finance or economics and describes himself a seat of the pants guy and credits his athleticism and discipline for his success. “I am a doer. They wanted athletes to come in and trade. We can make decisions quickly,” he says. “To me it’s like a video game. It’s very interesting to think someone could sit down at a desk in your home and trade the currency markets. That’s mind boggling.”
In his free time, Micallef plays Irish music on his guitar and piano. “Other than my children and my wife, those are my three loves: I play music, I play basketball and I get to trade on a computer. That’s all I need.”
