From the May 01, 2009 issue of Futures Magazine • Subscribe!

Floyd: Trading the game

Dave Floyd loves the game of trading.

“For me, trading is the ultimate game. It’s an intellectual stimulation each and every day,” he says.

Floyd’s first foray into trading was in 1994, when he worked as an institutional sales trader on the fixed income and foreign currency desk at Standard Chartered Bank. He was “not a typical trader in the risk-taking sense, but [it] certainly whet the appetite,” he says. After leaving this post, he started trading stocks on his own on the Pacific Stock Exchange. He migrated to electronic day-trading after about six months and was an upstairs day-trader for almost nine years.

He went back to trading forex in 2001, and that year he formed Aspen Trading Group, which provides forex research and analytics and managed accounts for forex.

In 2001, the electronic side of forex was starting to grow and Floyd wanted to take advantage of the opportunities there. “There was a new avenue opening up. It was a market that had so many facets to it. Equity markets had become a lot more difficult to trade on a short-term basis and I wanted to start a business that was not only scalable but go into something niche-oriented,” he says.

Aspen became a registered commodity trading advisor in 2007 and launched its managed account program in September 2007 with a minimum account size of $10,000.

Floyd’s trading decisions are technically based and all of his technical analysis is rooted in Elliott Wave and Fibonacci. Most of his trade entries are based on either direct Elliott Wave analysis or some derivative thereof though he uses discretion in how he executes his trades. “Buying support, selling into resistance, pretty standard stuff. I’m always picking my spots to enter the market as opposed to going in at the market when something looks interesting,” he says. And he says planning ahead is important. “If I look at the euro and decide it looks interesting and decide to nibble at it, it’s not a very objective decision. You need to plan your trades well in advance so it becomes completely objective. You place the order, you walk away, maybe you’re filled a few hours later and maybe you’re not filled at all. That’s a more disciplined way to approach it.”

Understanding how different markets relate to forex or relate to one another is a big part of Floyd’s trading philosophy. He considers a variety of factors in his trading decision-making. “Like any trader who’s been at this game for a long time, there’s no one go-to [strategy]. You’re usually synthesizing a lot of different techniques and you’re [using] your gut feeling because you’ve seen or done this before,” he says.

He concentrates on intermarket analysis as well. “You can’t approach [trading] one-dimensionally. It doesn’t matter what market you’re trading, you’ve got to be looking at everything that’s going on. There are so many moving parts and that’s what escapes a lot of traders.”

Floyd never risks more than 3% of his capital per trade. “If market conditions aren’t terribly good, I’ll ratchet that back to 2 or 1.5%. So if I’m wrong a few times in a row, which I’m going to be, [no] big deal. If [you’re] down 6%, you can recover from that. You can’t recover from 20 and 30% drawdowns.” This is where risk management comes into play as one of the most important aspects of Aspen Trading Group’s approach. “If you don’t properly manage risk or properly position size each trade, you’ll eventually go belly up. I could be the worst trader in the world, but if I’ve got decent money management skills, in the long run I’d end up beating out people with better trading skills but terrible risk management,” he says.

After all of these years, the ups and downs of trading still excite him. “No day is ever the same. Mentally you go through some tough periods when you have a drawdown, but that’s life. I love what I do – I haven’t considered it work since I started,” he says.

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