Laurens Bensdorp: Episode 437

Transcript

[0:00:33] NVN: As luck would have it, today, I was scheduled to chat with author Laurens Bensdorp about his new book, Automated Stock Trading Systems. With all of the uncertainty about the market and what’s to come, it was fascinating to speak with Laurens who is an expert in trading based on history, statistics and logic, rather than emotion, which as we all know, it’s so easy to fall into right now. Especially when it comes to our financial wellbeing. Stay tuned for his thoughts, philosophy and insight about what to do or not to do next. I’m joined today by Laurens Bensdorp who is here to talk about his new book Automated Stock Trading Systems. Laurens, thank you so much for joining me today.

[0:01:19] Laurens Bensdorp: Hi Nikki, it’s a pleasure being here. How are you?

[0:01:22] NVN: I’m good and I’m so excited to talk to you. To let listeners know we are recording this on March 20th. Obviously, there’s a lot happening in the world right now and this feels like such an opportunity to get to talk to you in particular about this Laurens – case of great timing.

[0:01:42] Laurens Bensdorp: Yes, I think so, absolutely. I mean, it’s definitely a very unusual time with events that we have not really foreseen basically. That is something that is definitely special and very different so it’s my pleasure to be over here and talk to you with anything we can come up with.

[0:02:05] NVN: Awesome. Let’s start by just giving listeners an idea of who you are? Tell me a little bit about yourself and what brought you to this book?

[0:02:16] Laurens Bensdorp: Okay, my name is Laurens Bensdorp and I am 48 years old. I am originally from the Netherlands and I own a company called Trading Mastery School which is a small educational company where I teach people how to develop automated stock trading systems according to their personality and their risk tolerance. Besides that, I also trade personally for my own account and that is my biggest passion basically, the stock markets. A lot of the stock market is basically all about psychology, I’ve always have been very interested in that and that’s basically who I am, living in Spain. I speak six languages right now and have lived in 11 different countries and I think that’s one of the things which is really cool if you are a stock trader, that you can basically decide wherever you want to live because all you need to have is an online Internet connection.

[0:03:27] NVN: So cool, where are you right now? Are you in America at this moment?

[0:03:30] Laurens Bensdorp: I’m currently, I’m in Brazil.

[0:03:32] NVN: In Brazil, okay. How is it there?

[0:03:37] Laurens Bensdorp: Over here, it is very quiet, I am currently, while doing this interview, I have plain view of the Copacabana beach in Rio De Janeiro which is lovely but it is very quiet here as well, they’ve closed the beaches and there is basically, I mean, the restaurants are closed, there’s not that many people in the hotel anymore and I’m basically stuck over here because currently, my family is in Columbia and I am not allowed to enter Columbia until the 30th of April. The day I actually wanted to fly back, I got the notice like, “Okay, your teams are not allowed to enter the country anymore,” so I’m stuck over here and that’s kind of the situation how it is and I just tried to make the best out of it and I’m very grateful that we have tools like Whatsapp and Skype, so we can have a lot of communication by video and everything and just basically accepting the situation as it is.

[0:04:39] NVN: Yeah, absolutely. Technology is just so powerful right now, it’s always powerful but right now, it feels powerful in a different human sort of way than at least I’ve ever recognized before.

[0:04:55] Laurens Bensdorp: Absolutely, I totally agree. Yeah, especially in these times where there’s so many countries with lock ups and everything, then having the ability to communicate through different kinds of mediums, is so incredibly important and definitely very helpful.

[0:05:13] NVN: 100%. We, in the course of this interview – I absolutely want to talk specifically about your new book but the stock market and trading is such a rich topic generally speaking right now, I want to take advantage of your expertise while I have you and specifically, what I was really intrigued by is you’re giving us an idea of who you are and what you’re all about, is you’re fascination with the psychology of the market. Talk to me a little bit about that and how you see that as playing into where we’re at right now and also, how we move forward from this point?

[0:05:53] Laurens Bensdorp: Yeah, the current situation is, of course, that there is a huge mass panic. I mean, there is a real situation, there is a real health issue, that is clear but there’s also a lot of over reaction, people panicking, totally freaking out, buying toilet paper everywhere, fighting around to get the last piece of toilet paper, et cetera, and basically, all that craziness and panic is to my opinion all caused by the media. It’s basically, people are very used to watching TV and people have a TV on and everything you see, the whole day is about the things that the media wants us to see, the things where the media gets the most viewers, which is generally not what is exactly real but that’s what those companies are for, they are there to make money, and the more viewers they have, the happier they are. That kind of causes a catapult effect that there comes even more and more panic. We’ve seen that in the stock market of course, a lot over the last five weeks or so and to trading this so much because when there is panic like this, people panic as well with their finances when they see the market starting to really fold and there comes a point where they just psychologically can’t handle the pain anymore. They haven’t prepared for this so they sell it every price no matter what, they just want to get out of that thing. Now, the way I trade and the way my students trade is we basically have automated trading systems where we have developed over the course of six months, a complete trading plan with indicators which then the computer says what to buy and what to sell. And then, basically, the whole system runs on autopilot. That takes the emotion out of the complete trading process. That is a very comfortable way. I think another thing that currently is incredibly important is, with my trading, I don’t need to watch the news at all, I don’t care. As far as my finances, what people are telling in the news because I trade both sides at the same time. With that, I mean, I trade both long and short at the same time. That again, gives that emotional piece that regardless of what the market does, one can make money when the market goes down and when the market goes up. I think that’s incredibly important and for people who actually still wants to be informed about everything – which I do. I mean, I don’t watch TV but I read newspapers of course because I want to be informed a lot but there’s a very crucial thing that we need to take into consideration, as far as the media. When we read newspapers or watch the news, we need to make a distinction between facts and opinion. Opinions are basically there for people who have probably another agenda and not necessarily their opinion is true. It is basically a biased opinion according to what that person is most interested in or is his or her most benefit basically. If we are able to filter those opinions out and just focus on the facts, then we can keep our heads clear and we can actually have a rational thought about everything that is going on right now, not panicking but keeping your head calm and say, “Okay, this is true, these are the facts, and these are the ways how I can act with that.”

[0:10:42] NVN: Yeah, we actually – full disclosure for listeners, we were chatting a little bit before we started recording and you made that point about opinions versus facts and it really struck me, especially right now, I think you can lose sight of that when you’re watching the media and you’re right, there’s such a big difference between opinions versus facts and if you can frame your media consumption that way, really changes things.

[0:11:09] Laurens Bensdorp: Totally, completely. I see it with so many people, they have the TV on the whole day and they see all those images of people panicking, et cetera and that changes one’s opinion as well if you’re not trained to actually being able to filter out that, “Okay, this is not truth,” but it’s basically the whole media shows this because that’s what gets them viewers.

[0:11:39] NVN: Absolutely. I would take it even further than that; I personally love the op eds in the New York Times, I think that there are some really insightful writers. I’m interested in different view points, but, particularly, in the case of really great writers, I can forget, even though opinion is baked into the title, that I am reading someone’s opinion and that’s what it is and sort of run with that. It’s sort of everywhere. I think it is an interesting thing to just think about generally as you consume.

[0:12:09] Laurens Bensdorp: Yep, exactly and it keeps your head so much clearer when you are able to just have your own conclusions because you only need to look for the facts and it is very good for your quietness, for your mental space, etcetera.

[0:12:28] NVN: Let’s talk about the automated stock trading systems that you are discussing in the book. This seems to me, as someone who does not know a lot about the market outside of a very casual level. It seems to me rationally like this is probably a great time to be buying and also a very difficult time to completely separate emotion from that even if you know that is what you are supposed to do. So how can these systems help both generally and in particular right now?

[0:13:05] Laurens Bensdorp: Well we don’t know if it is a great time to buy because we are feeling here within the events that is so different than anything else that we have seen and we have automated trading systems. We do not make any predictions what is going to happen. We base ourselves on historical price action basically. So we look at the past and see what has happened and how certain trading systems react to that but if we go back further, back in history, a good example for example is the 1929 crash in the market. Which was really an incredible tough time and it wasn’t only the 1929 crash where the markets dropped 20 or 30%. It was the subsequent three years after that that the markets kept going down with resulted totally into a loss of the Dow Jones of about 85%. So we can’t predict now to say, “Okay, it has sold off so much, the market, it should be a great time to buy,” but again, we don’t know that. There is nobody who can predict where the market goes. If anybody says, “I can predict where it goes,” he’s lying.

[0:14:31] NVN: It’s good to know.

[0:14:32] Laurens Bensdorp: It is, that’s probably that simple. There will be people that’s right about it and say, “This is the time” and eventually a few of them will be right and they then can claim like, “Okay, I predicted this” etcetera but can they consistently predict where the market goes? No, not really and it could be indeed that the market goes up right now but we are still in a time as we speak, March 20th, where there is so much uncertainty not only in the financial markets, but also the health issues that we don’t know yet when this is going to stop, how far does it go and when will it end basically. We don’t know that yet. So it is very hard to make any kind of prediction at all.

[0:15:29] NVN: That makes perfect sense, so what is the smart thing to do right now in your opinion ironically since we talked about opinions versus facts but I am nonetheless curious.

[0:15:40] Laurens Bensdorp: Yeah, so let’s put my personal situation. I trade a combination of 50 different strategies at the same time and it is all run by computer and every system is designed to make money in a different market type. So some systems are making money in bull markets, some systems are making money in bear markets, some systems are designed for the recovery, etcetera but it is the combination of all of those systems that really gives you the edge in the market. So for myself, I just let my thing run. I just let my systems trade as they are and it has treated me very well during these last five weeks or so. It’s been up about eight and a half percent, which is nice, but I think what is more important is that the mental state keeps very quiet because it was developed to deal with situations like this. Of course this is not an advice, this is just my own personal situation. For other people an advice I think it’s very dangerous right now to give advice. The only thing I think, which is incredibly important is that first of all people need to be very careful and understand that if they see the market as a good buying moment right now but they have no rationale to actually back that up or what they do is making a gamble. There is no statistical evidence then that what they do that it actually is going to turn out correct over the long run. The other thing is, if we compare the volatility of the markets right now versus a month and a half ago, it’s about eight times higher right now. So the daily market swings are huge and it is my experience that most people cannot handle those market swings with their full equity. So if people decide to either buy or sell and I don’t recommend any of that right now if you do not have a system in place for all of those market types but if people still want to do it, be careful with your – as we call it in the trading world – position sizing and that means that do not put all your money in right now because the market movements are incredibly fast. And incredibly strong, I mean we’ve seen days after days where the markets were locked down and 7% drops, 10% drops, oil is down 60% for the year. The Russell 2000 is close to 40% down for the year, S&P 500 30% but we don’t know if this is the end. We just don’t know and if you do not have systems in place that can handle both the up and the downside – so if it goes up now or if it goes down – but if you don’t have both system in place for that, I just think that the stock markets if you go in right now it is just a big gamble.

[0:19:12] NVN: Obviously correct me if I am wrong but what I am taking away from this is that this is very much the time to sit tight and in terms of setting up an automated trading system, now is a good time to educate yourself on that and then just hold tight until we reach a point where things become more even and get in. Am I understanding that right?

[0:19:37] Laurens Bensdorp: I think that is exactly a good way of how to see it. Right now, preservation of capital is the most important thing because there is so much uncertainty. There will come a lot of opportunities but it can take a while. It really can take a while and currently saying, “Okay I just maintain cash and meanwhile, I work on educating myself in the stock market, I need to actually have a suite of trading systems that can work combined very well in any kind of market condition.” Then once you have done that you can trade that and you have that mental quietness. For me this whole drop down in the markets I didn’t lose an hour of sleep because of that because my systems were designed for that to handle it but also my positions, the sizes of my positions were adjusted according to the volatility. So my sizes were getting smaller once the volatility is getting bigger. So my account swings were not so incredibly huge that you lose your mind about it and that is incredibly important I think.

[0:20:58] NVN: Yeah, what an amazing position to be in right now and I really love the honestly of what you just said that we don’t know, we have never seen this before, so there is no statistical information. I think that that is the most important thing I’ve heard since this has all started I think because everyone wants to get in there and give advice and it is just great to hear from an expert that all the standard advice just does not apply right now. We are just waiting and seeing.

[0:21:28] Laurens Bensdorp: Exactly that is the only thing we can do and I guess – I mean the last month or so the WhatsApp messages from friends and other people in emails asking me, “Laurens where is the market going? What do you think that I should do?” I don’t have the answers. I just know that for myself and for students of mine who have developed their systems that they could trade it with a lot of real relaxed mental state but people who do not have anything in place right now, nobody knows what’s going on. It could be a couple of scenarios, it could be that there suddenly will be a vaccine within a week or so and that could cause that the stock market rebounds hugely. On the other hand it can also be that it takes another three or four months or so until there is a vaccine or a cure or that it just kind of blows over and there is so many predictions right now. People using graphs and saying like, “Okay the peak will be there and there,” yes it could be, but we still do not know how the stock market would react to that. There is no way to actually knowing that.

[0:22:47] NVN: Got it. Laurens such a pleasure speaking with you today. Again, I am just tickled by the way that this timing worked out. So again, the book is automated stock trading systems. Laurens where else can listeners find you?

[0:23:06] Laurens Bensdorp: They can find me on my website, tradingmasteryschool.com and I have written another book as well three years ago, The 30-minute Stock Trader as well, which is in Amazon of course but mainly best is just to go to tradingmasteryschool.com.

[0:23:25] NVN: Excellent, such a pleasure talking to you. Enjoy your unanticipated vacation in Rio de Janeiro and best of luck with the book.

[0:23:34] Laurens Bensdorp: Thank you very much Nikki. This was really great talking to you.

[0:23:39] NVN: Thanks for joining us for this episode of Author Hour. You can find Automated Stock Trading Systems, on Amazon. For more Author Hour, hit the subscribe button on your favorite podcast service. Thanks for joining us, we’ll see you next time. Same place, different author.