Laurens Bensdorp is the founder and CEO of Trading Mastery School. Over the past 10 years, he’s made a risk-adjusted return of more than five times the S&P 500.
In this episode, you’re going to learn a better strategy for investing — whether you are an experienced trader, or just starting out.
What is the #1 take-away from your book?
The main take-away is that it’s possible to trade profitably, and have consistent annual double-digit returns, beating the benchmark, using a simple automated trading system, and only working 30 minutes a day.
It isn’t only for sophisticated investors. People do need to have, of course, some knowledge about the markets, but it’s not very hard to learn.
We use historical data, and on a daily basis, we have our decision-making process programmed into the computer. The computer is basically doing the work for us, and on a daily basis, tells us what to buy and what to sell.
Since we have more than 25 years of historical data, we have a very good view of how this strategy actually worked over the last 25 years. That part is documented in the book of when to buy stocks, when to sell them, how much to buy, and how much to sell.
Who is your book for, and who is it not for?
It’s not for people who want to predict market.
What you see many times is people who trade on fundamentals, where they basically see the values of a company, and then make a prediction of what the stock market price will be. Based on that prediction, they’re going to buy.
It is very difficult for people to trade like that. Warren Buffett, of course, trades like that. But we’re talking here about somebody who has 65 years of extremely well-developed skills.
We follow price action, and we measure price action through technical indicators. We’re basically making decisions based on what has happened. Those decisions have a certain expectancy.
Our strategy is for people who want to increase their returns on a consistent basis using a quantified trading approach.
What results do people get after reading your book or using your software?
People can trade in a way that suits their personality. Everybody is very different in their personality. Based on your personality, you have different strategies that you can trade. You have different lifestyle preferences, as well.
For example, in the book, there is one strategy which only trades on a weekly basis. Which means that during the week, you do not need to take a look at the market at all.
That part is very interesting for people who have a very high-paced job. They might travel a lot, or they just don’t have time to put in their trades every day. So they only need to do it once a week.
On the other hand, we have also strategies that are a lot more frequently trading on a daily basis. For those strategies, there’s a different personality. To give some more insight as far as the returns, the strategy in my book where we only trade once a week has got a tested compounded annual growth rate of 19% over the last 22 years.
To compare that a little bit the benchmark, as most people when they look at the news, they see the S&P 500 et cetera, and the S&P 500 only made about 7%. That’s the simplest strategy Then, we have other strategies as well where we combine different directions with a different risk management as well. Then, we get all the way up to the best one that has a 39% compounded annual growth rate.
What ultimately caused you to create this software and eventually write the book?
When I started to trade in 2000, I was very good at one thing: losing on a daily basis.
I did everything wrong that you could do wrong, as far as trading. Every day, my account was getting lower. I made rookie mistakes that all rookie traders make.
“The main mistake people make is trading without a plan.”
99% of new traders go into the market, they start investing and trading, but they’ve got no specific plan of when to enter and when to exit. Many people, they just buy some stocks and say, “Okay, let’s wait until they go up.”
Of course, they didn’t go up because the big bear market started in 2000. I saw the accounts going lower and lower and lower in every day. Because I didn’t have a plan for when to exit, I didn’t want to take a loss.
I said, “My goodness. I’d better wait this out. Wait until I can sell again, even if I break-even. I don’t care, but I don’t want to take a loss on these trades.”
That’s probably the biggest mistake that most investors make. You see that in life as well; people do not like to lose.
We are taught from a very young age that we need to be good at everything. With trading, having a losing trade — there’s nothing wrong with that. It’s better to have a plan where you buy at a certain price and when you see, “Okay, the stock is not working in my favor,” well, get out and buy something else.
For that specific process, there is automation. I didn’t know that at the time, so I bought expecting that it would eventually go up. It didn’t.
When I lost 30-40%, I couldn’t handle it anymore.
At that moment, I said, “I’m just going to sell everything.” That was, of course, at the worst possible time. So not having a plan is absolutely a main issue for many traders.
How much money did you lose?
Probably a couple hundred thousand dollars.
There are lots of things going on when you trade for a living, and you start to lose money. One thing is, of course, the money that you’re losing. I mean, that’s real. But there are a couple of things that are a lot worse than that. That is a psychological impact that it has on you when you start to lose money.
“I couldn’t sleep anymore. I was smoking about 60 cigarettes a day.”
There came issues with self-esteemm as well, because I had to admit to myself that I couldn’t make this work and that I was losing money. I was in pretty bad shape.
How did you turn things around, and start earning money?
There’s one thing that I never stopped doing: I never quit. I was extremely hard-working, and I really wanted to make this work. I was reading a couple of trading books per week to educate myself.
I think around 2006, I stumbled upon more approaches of trading where you automate your strategy.
Everything started to turn around when I decided to actually quantify my thought process. Quantifying means that we were programming my specific buy and sell decisions in a trading software, and then taking a look how this would have returned over the past.
I started to see scientific evidence of how my strategy would have performed. From that point on, I started to really map out more and more strategies, turning those strategies into specific buy and sell decisions, and coding those decisions into software.
After a couple of years of very hard work and lots of failures in software, I came up with a set of strategies with specific buy and sell rules. They really showed that they made consistent money over the last 15 years.
Every day, I followed the exact buy and sell rules and from that point on, I started to make money.
How did you come up with those buy and sell rules?
Through reading a lot of trading books. You’ve got good trading books out there. I started to learn different styles of how you could trade, when you could enter, when you could exit. A lot of them made very good sense.
A simple trend-following approach where we say, “We buy when the stock is trending up. As long as it keeps going up, we stay in the position, and we stay in until the trend bends and then we get out.” That is a very simplified trading approach, but you definitely have an edge in there.
I got that strategy through lots of different books and publications, and systems that I bought.
What is your software’s trading strategy?
When we know it’s in an uptrend, we only buy the 10 stocks that had the largest price increase over the sixth month. That is a very simplified way of a trend-following strategy.
“Just with those rules, you get up to a 19% compounded annual growth rate, versus a 7% of the index.”
But there’s something else, and that is what we call in the trading world “drawdowns.”
“Drawdowns” is basically when you had an equity high, and then the market starts to drop, and you start to lose money. If you see that on the S&P 500, the largest drawdown was in 2008 with the big financial crisis. The index lost 56%. Most mutual funds lost more.
Imagine yourself if you start to trade $100,000 and you just started at the beginning of that financial crisis. Now, suddenly you’re down to, let’s say, $45,000. That’s not a nice feeling, right?
And you do not know how long it can keep dropping. When it starts to drop, just get out. You don’t need to do anything. Wait until the market shows evidence again that it is in an uptrend.
With that specific strategy, you only would’ve had a 30% drawdown, instead of 56%.
We had also other crises, like in 1929 to 1932, where the Dow Jones lost about 86% of its value. Now, if something like that happens, and you say, “Well, I’m just going to stick with the position,” you’re going to lose a lot of money, of course.
What impact has your book created so far?
A lot of people said, “Finally, I read a book where nothing is left out, where really it is explained from A to Z how to trade, revealing the exact buy and sell rules, and showing what the results have been for that.”
People get a really clear picture of how they need to trade. As long as they apply it, then it will be successful for them. Many of them wrote me as well and said, “Wow, I’ve finally got a lot of clarity now of what to do in my trading. Now, I’m going to implement that.” That was a big part of my mission, to make sure it really impacts the reader and can help them a lot.
If you had to lay down a soundtrack for your book, what song would you pick?
That’s such a great question. The song is called Smooth Operator.
It really applies to my book, because if you read my book, you read the exact entry and exit rule. The only thing you need to do is operate it right, and then you’ll have a very smooth operation.
If you had to pick a drink to pair with your book, what would that be?
A glass of red Bordeaux wine.
What is your favorite online resource or app?
It’s Facebook actually, and I’ll explain to you why.
I’ve lived in 11 different countries over the last 20 years, so I’ve had the fortune to really know a lot of different people from different places. With Facebook, I have been able to get in contact with so many friends that I did not have contact with for 10 or 15 years already. You kind of lost contact with them, because there wasn’t such a thing as Facebook.
For me, if you use it right, it’s a phenomenal tool to really socialize with people.
Who is the one person you most want to read your book?
People who have invested in a lot of money in trading, who have invested a lot in education, but still lost a lot of money. That’s the people that I like to read the book, because they will be benefitting so much from it.
People who lost a lot of money in the 2008 crash. Mentioning one name? I don’t really have it.
What was the most challenging part about making your book?
Getting the trading systems done for the book. I needed to do all the testing and putting in all those details.
Because you’re actually exposing this to the whole world, you want it to be good, you want it to be correct, you want it to be accurate. That part took a lot more time that I expected. That was really challenging for me, to make it as good as possible.
Did anything hold you back from becoming an author?
Yeah, it was definitely overwhelm.
I’m not a native English speaker. I speak good English, but it’s by no means perfect, neither is my writing. Since I’m aiming here, of course, for an international audience, it needs to be in English.
There are so many things that you need to think about when writing a book. I’m just not a specialist in writing. I don’t like writing that much. Just thinking about publishing a book was like, “Oh my goodness! That’s just so much stuff to do.”
Tell us about a recent embarrassment, or personal failure, and how you dealt with it.
Entering into the perfectionism trap. I was focusing, with this book, so much on perfection. That focus to perfection actually caused me not to take any action at all, not finishing the stuff that I needed to do. I kind of froze, and that is, of course, by no means a desirable mental state.
It’s terrible, because it’s as unproductive as it can be. That really was something that was limiting me in many parts for this book.
If you were to write a follow up book, what would it be?
It’d probably be an extension of trading strategies, and go a lot deeper in what I have right now. What I wrote now is a basic, but very good A to Z plan. But there are many parts that we can address and go a lot deeper.
I’m actually thinking about it already.
What is a parting piece of advice you can give to aspiring authors?
If you’re going to work with guys like Scribe Writing, trust that the process is 100% perfect. Trust the process and just do what you need to do, and have 100% faith that the end results will be perfect.
Especially, if you do this for the first time, there are a lot of open questions. Will it be good? Will people like it?
“With Scribe Writing, you’ve got a group of committed professionals who really know their stuff so well.”
If I knew that before, I’d have no doubt whatsoever. You can trust this process 100%. I don’t think there’s anything better in the market available, and you’re going to know that you’re going to write an Amazon bestseller. You will know that the book is of such high quality that the readers will really like it a lot.
What is the best way for listeners to connect with you?
If you’re more interested in trading, the first thing is buy my book.
You can go to my website, as well, which is tradingmasteryschool.com.
You can get access to a free video course when you are a purchaser of this book. That’s for the traders, by far the best place to go. For people who have other things, you can always look me up on Facebook.
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