McGaw: Building a forex business

Nicholas McGaw was still studying economics at York University in Toronto Canada when a friend introduced him to the possibilities involved in forex trading. McGaw learned of a manager who was earning 10% per month trading forex and was impressed. “To trade anywhere in the world 24 hours a day to me is the best job ever,” McGaw says.

It turned out that trader’s performance wasn’t real but the interest McGaw developed in the forex markets certainly was, and he would dedicate the next several years to building his expertise to the point of launching his own forex-based commodity trading advisor, Mansa Wealth Management, in 2008.

“I went to Traders Expos in New York, Las Vegas and Chicago. I went to seminars, online webinars, collected books, blogs, articles; anything I could get my hands on involving forex,” McGaw says.

This was around 2004 and McGaw also began to trade demo accounts and, eventually, real money. “Like any beginning trader [I was] not too focused on money management so [I would] be up, [I would] be down. I had a live account that I blew in two weeks. I realized it is not as easy and cut and dried as I first thought,” McGaw says. “I realized that 10% a month, 20% a month is unachievable without killing your account. I decided from then to be more conservative.”

He also realized that reading a few books and attending seminars did not qualify him as an expert, so he sought to learn more about the markets and managing money. A friend introduced him to a hedge fund manager in Atlanta where he would end up working. He began as a clerk and gained valuable experience working with managed accounts. “I was exposed to futures and equities markets. I picked up many ideas that helped to build a foundation for my trading system,” McGaw says.

After a couple of years at Maven Funds, McGaw moved back to Canada to start his own money management business, Mansa. At first he sought to hire expert traders to staff his new venture but that did not work out well. “My knowledge was limited; I was a rookie so I tried to look for a seasoned veteran to work for Mansa, however, most of the traders we found were not what they seemed. Being disappointed and being let down so many times, I realized that my fate and my company’s fate [was]being held in the hands of somebody else, which I didn’t like.”

He went back to researching his own methods. “I submerged myself for the next two years just staring at the computer and developing theories and strategies to trade the market.”

This was from 2006 to 2008 and what emerged was the Skyline Managed Accounts Program. A system with three models; two systematic and one discretionary, though they all rely on technical inputs.

All three models are short term, with trades averaging a couple of days in the Canadian dollar, Aussie dollar, New Zealand dollar, Japanese yen and GBP/JPY cross.

All three programs look for breakouts but one systematic program focuses on time frame and the other on price. His discretionary model looks at several technical tools: flags, pennants, trendlines etc. and then makes a discretionary call based on his analysis of those technical tools. “The more filters I have in my system the less chance of me being whipsawed,” McGaw says.

All three models work independently and all trades limit risk to 1% of the entire portfolio.

He looks at the opening of the equity markets of the country whose currency he is trading as a technical marker. “We are using the open and closing times of London, New York and Asia as inputs because there is more volatility at those times,” McGaw says. “I am trading the Australian dollar, the Canadian dollar the pound/yen, all different markets so I have to keep abreast of all those countries’ markets.

McGaw has systematically built up his expertise in trading and his CTA, now based in Florida, is close to a breakthrough. He began trading the Skyline Program at the end of 2008 with proprietary money and earned 27.66% in 2009 with a 0.92 Sharpe ratio. That is a more solid performance than the urban legend trader he initially heard about, but because of his educational journey, he realizes to continue to be successful, he can’t rest on first year laurels.

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