Adam Taylor (Linkedin) is a Director of Alphates London. Adam has a brilliant ability to see patterns, whether it’s playing Chess, or using Point & Figure Analysis to better understand the sentiment in the market. This chat was a great insight into what makes a Alphates London Director tick, plus how things are looking within the UK.

This episode covers numerous topics, including:

1. The game of Chess
2. Moving from Scotland to Australia
3. His progression within Alphates
4. The UK market, Brexit
5. Risk management
6. Fundamental & technical analysis

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Transcript:

Disclaimer: Alphates is a derivatives broker and Jordan Michaelides is the managing director of Neuralle Media. All opinions expressed by Jordan and podcast guests are solely their own and do not reflect the opinions of Alphates, an AFSL license holder. This podcast is for informational purposes only and should not be relied upon as a basis for financial decisions nor as an indication of future performance. Clients of Alphates may hold positions in the derivatives mentioned. A financial services guide and product disclosure statement for our products are available at the www.gomarkets.com website.

Jordan Michaelides: In this episode we spoke with Adam Taylor. Adam is a director of Alphates and head of Alphates UK. What I like about Adam is that he has a brilliant ability to see patterns, whether it’s playing chess or using a point and figure analysis to better understand the sentiment in the market. During my own time at Alphates, Adam was always the cool cucumber you look to when you wanted an opinion or topic settled, with a very, very useful skill set for someone previously tasked with the majority of risk management in the business.

This chat with Adam was a great insight into what makes a Alphates director tick, plus how things are looking within the UK, particularly with Brexit happening at the same time. We covered numerous topics including chess, moving from Scotland to Australia, his progression within Alphates, the UK market itself and what’s happening with Brexit, or what should happen happen over the next few months, risk management, fundamental and technical analysis as well. If you enjoy this episode, do consider subscribing on your podcast app share with your friends. Let’s get into the episode with Adam.

Adam, thanks for joining us. What’s the time over there, about 8am? How’s the weather in good old London town?

Adam Taylor: About 9am, and it is absolutely freezing. Everyone’s huddled together at the stations.

Jordan Michaelides: I love London personally. I know my partner absolutely hates it, but, there’s something a bit kooky about London. I’ve always been a big fan of Sherlock Holmes, whenever I watch the Sherlock series from the BBC and I hear that introduction music, I just think of London and get that cool, spooky feeling. I don’t know why. But, enough of me rambling on about that

First question for you, how good are you at chess?

Adam Taylor: How good am I at chess. I have been able to navigate my way around the chessboard. There is a danger of me telling you how good I am though Jordan, and the danger is either yourself or anyone listening probably wont want to play me.

Jordan Michaelides: *laughs*

Adam Taylor: It happens all the time. It’s very frustrating.

Jordan Michaelides: That was the thing that I noticed what I was looking at your profile, I’ve worked for you for a few years and knew you liked chess and we spoke about it a few times, but I had no idea that you were a coach. How did you get into that space?

Adam Taylor: When I was at university in Brisbane, as any student knows you just try to try to make money where you can. I had several jobs at the time working behind a bar at a resort, those sort of things. I was lucky enough to notice a job advertisement for a chess coach on the gold coast and it basically involved traveling around schools and teaching groups of children how to improve the game and take them to tournaments and things. It was fantastic because, I got a lot out of it.

Jordan Michaelides: What a brilliant job to have at uni. Another interesting thing when I was looking at your profile, like you moved from Scotland, and you’ll have to fill us in at what age, but you moved out to the Gold Coast and I was just thinking what a shock in terms of the weather, right?

Adam Taylor: It was huge. This was back in 2000, I was about 15, 16 at the time. Coming from dreary, cold Scotland to the harsh summer of Queensland was a big shock.

Jordan Michaelides: Definitely. Why you guys came out here?

Adam Taylor: My mother is a teacher and she always wanted to live in Australia, She got an opportunity to teach in Australia, so I moved with my mother and my two younger sisters. It was very exciting times.

Jordan Michaelides: We obviously get a lot of ponds that move out but I never hear… you obviously would see a lot of Scottish types that will move out because of the nicer weather, but it’s one of those funny things where you moved from Scotland to the gold coast and that weather differential is huge. Which part of Scotland are you from?

Adam Taylor: I’m originally from Fife, which is on the east coast of Scotland.

Jordan Michaelides: I’ve not been there. I know I’ve been to in Inverness, Edingurgh, Stirling, it’s a great place. I do love Scotland. Do you get up there much now that you’re living out of London?

Adam Taylor: Not as much as I’d like to, but it’s close enough. There are plans to do a lot more trips in the future.

Jordan Michaelides: Now, thinking about that time during your childhood, I was curious with what you’ve done now, what did you think you’re going to be when you were a kid?

Adam Taylor: When I was a kid, I wanted to be a geologist. I was very passionate about being a geologist. I was one of those kids that had a rock collection and my idea of a top day out was heading to the beach searching for fossils. I was such a nerd. I think my saving grace was the fact that I was a half decent footballer, so my street cred was still intact.

Jordan Michaelides: Where did this come from, do you think? What was the archetype that you had in your head? Was it like the cliche David Attenborough, or did you have some other ideas in your head, do you remember reading a sort of geography books? I remember reading books, I was a real bookworm, and seeing how they’d show the layers of where the dinosaurs sit in the Earth’s core and all that sort of stuff and I’d love looking at that, but I never sort of saw myself as someone who’d go find a few rocks. Do you know what I mean?

Adam Taylor: I know exactly what you mean. I think it all stemmed from my father. He sort of had an interest it in, a sort of a hobby, obviously when you’re a young age you’re very impressionable and that’s how I got interested into it.

Jordan Michaelides: Speaking of your father, one thing we ask a lot of our guests, because I think it sort of illuminates a little bit about who they are, is what lessons they’ve learned from either of their parents. You may see that through your own personality or something that you use as a way to make decisions on a daily or weekly basis. Growing up and knowing who you are today, are there any particular principles that you’ve learned from your parents directly or indirectly?

Adam Taylor: That’s a difficult question to answer. I think probably more so my grandfather, I think I learned a lot of life lessons through him. I remember him being very patient. He was very doting on everyone, he was always interested in making sure everyone else was okay, keeping everyone connected and communicating. I think I get a lot from him. Parents, I think as a kid you learn by example and, I hope my parents aren’t listening to this *laughs*, because I think indirectly I’ve learned what not to do. Certain things growing up, I used to think, why did they make that decision? Why didn’t they do this? And, you know, in fairness to them you can only work with the information you have the time.

Jordan Michaelides: You’re a parent now as well, a very fresh parent, so you know how tough it can be and how it can be into the future as well.

Adam Taylor: Exactly, but that’s what excites me the most about being a new parent. I’m looking forward to trying to do those things for my own children going forward.

Jordan Michaelides: Will you teach your child chess, do you think?

Adam Taylor: Of course, yeah.

Jordan Michaelides: That was one of the things I loved to do with my dad when I was a kid, he would come home quite late and maybe once a week, me and my brother, one at a time would play my dad. We had a lot of enjoyment with that because it was a real, real challenge because dad’s so good, how do you beat dad? I think there was a turning point where we were 14 or something like that. That stuff is really enjoyable.

Adam Taylor: It’s funny you should say that because that’s something my father taught me indirectly as well, playing chess, he was always a really good chess player. I would play him for several years as a kid growing up, like yourself in the evenings, on the weekends, and I would lose every single time. Every single time. It taught me persistence, every time I’m learning something new, I’m refining the process, until I got to about the age of 16 and I started beating him.

Jordan Michaelides: I was talking to my partner about this today. In an age where a lot of kids are given participation awards, I think having real competitive support, whether it’s chess, whether it’s martial arts or soccer or whatever, I think that stuff is really, really useful. As you said, it teaches you persistence, it teaches you to be competitive as well as patient.

Adam Taylor: For a kid it’s very hard to play something while losing constantly and keep motivated, so yeah, it’s a good lesson.

Jordan Michaelides: I was looking at your early career; you were initially a chess coach then had a few different jobs before you eventually fell into the word of Forex and CFDs. How did you get into this?

Adam Taylor: I was studying architecture in Brisbane at the time but I was a bit directionless. I was doing architecture, but not really knowing why. I guess I’d always had an interest in historical buildings and had some skills that were useful for that career. It just so happened that at the time I stumbled across a book by Robert Kiyosaki called Rich Dad Poor Dad, and basically I’d always avoided finance, I’d never been interested in numbers or mathematics, it was just an area that I wasn’t interested in. What ended up happening was I was going to the library for architecture books and I’d come out with 20 business finance books and became a sponge.

Jordan Michaelides: And those books, were they just personal finance books, like Rich Dad Poor Dad, or were they varied, investing, business management etc? Do you remember some of the names of those books at all?

Adam Taylor: Not off the top of my head but it was it was a quite a range of finance books. I just couldn’t believe that I’d ignored this space for so long. I guess no one in my family was financially literate. N one had taught me any of these areas of knowledge. I felt like I missed out and I just wanted to catch up. I got really interested after seeing a couple of stock charts and thought ‘what’s this’, the more I found out it just became like a giant chess board. I saw the markets as a place with strengths and weaknesses and combinations, you know, playing out moves and that’s what got me hooked.

Jordan Michaelides: You’re very technical, you like looking for patterns and it’s always been sort of a feather in your cap, if that makes sense. It’s one of those areas that you’re really good at. I know you’ve studied to become, I don’t know if you’re still doing it now, if you finished it, but certified financial technician, and we’ll get into more about technical analysis but that has been a really interesting observation from my perspective, how maybe that excitement for chess and looking for patterns and pattern recognition is what piqued your interest in this area as well. Now, I know you worked your way up in Alphates in the business from technical analysts all the way up to doing a bit of risk management and now running the UK business as director. How have you seen your progression over that period of time?

Adam Taylor: I’ve actually seen it as quite a natural progression. Chris Gore, our CEO, pointed out in the previous podcast Alphates is quite a unique place for employment. A lot of employees are encouraged to try different things in play to the individual strengths. And I’ve been fortunate enough to move between the different departments get a real good grounding of how everything works, but I always had an eye on the trading desk, obviously. I started off in sales, moved to support, new accounts, and as a director now I’m able to understand each department’s role much more.

Jordan Michaelides: I think you’re definitely right. They’ll allow you to float through two different teams, I definitely think that that skill set of sort of a Jack of all trades but specialists in that technical aspect has definitely helped you. Now, on the UK, obviously you’re based there in London as we discussed, the UK market is super fascinating, particularly because of Brexit, which I think is coming up in March this year, but also since the GFC, the arrival of FinTech companies or tech companies that really pushing the finance system over there has been huge. I’m curious as to your time now, you’ve had about two years since 2016 in London, what have you learned so far? What have been the most interesting observations being based in the city?

Adam Taylor: For starters is totally different from Melbourne and Australia obviously. There’s so much more going on this side of the world. Something that I’ve learned, is you’ve got to try and remain flexible to potential changes and just take the time to do things properly. Avoid looking for shortcuts, especially when it comes to sort of regulatory guidelines, it’s just a constant state of refinement. You know, as technology progresses, all these different systems have to be monitored and a lot of due diligence codes into the process. It’s constantly evolving, you’ve just got to take your time.

Jordan Michaelides: Were you there during the Brexit vote as well?

Adam Taylor: Ah, Brexit, my favorite word. We have a running joke in the office that when I was in Australia I didn’t vote during the Brexit referendum rather, and that I have no right to complain, basically, but my response every time is that, well, look, I’ve come back to face some music, I’m here *laughs*. I think Brexit is a positive thing longer term. It might take several years but once we establish more deals in different countries like the US, China, Canada and things, I think things will largely improve.

Jordan Michaelides: I remember the day of the vote thinking, Jesus, what have they done? But now I think that migration element through the Syrian refugees really brought all of this to a head. People have been focused on that, I think if you look at it from a different perspective and, you know, here in Australia being involved in the FinTech space, we’ve had the mayor of the city of London came out with other dignitaries from the UK and it’s very rare that he would make a visit to Australia, and you get this sense that… there’s always a funny bit about the UKs foreign policy for the EU being totally focused on making it disconnected and breaking it up and all that sort of stuff to keep everyone fighting in between each other and not worried about the UK itself.
There’s that funny element where people think that Brexit is just a way to bring down the European union and make everyone squabble amongst each other, but honestly I can see the pivot towards Asia and I think that’s the big thing for me, the number one free trade deal that they’ve highlighted these dignitaries that came out last year is the Australian free trade deal and it’s basically already there. As soon as Brexit is done in March, then both governments will sign a free trade deal, which basically allows the UK to backdoor into Asia. That’s been the most interesting thing from my perspective. Obviously there’s the short term ramifications, but I think in the long-term when the EU is, well, what is the EU growing at each year? Not even 1% as a block? You know, birth rates are down, relying on immigration which causes political angst, I can totally see why it’s a smart deal now in the long term, but we’re saying that we need hindsight. Five years from now we’ll see what happens.

One of the other elements of your job or has been part of your job is this sort of trading risk management. I know when I left the business you were extensively managing the risk for the firm, I remember the days of us in a very basic way looking at our exposure and you turned that into a bit of an art form where the business was managing it a lot more closely. Based on your experience, whether it’s profiling, client trading, managing liquidity provider positions or exposures, what lessons you could impart to novices about how you view risk and exposure.

Adam Taylor: I’m sure you’d agree, seeing how everything operates on the back end of these platforms, it’s kind of like peeking behind the curtain, the wizard of Oz, there’s so much going on, so many layers to this in terms of technology, liquidity providers and everything, which makes the trading side work. I think that when it comes to novice traders, I think we have to dispel this notion of when you’re sitting in front of the platform there’s someone on the other side who’s pitted against you because it’s just not true.

If a trade goes wrong for a novice, it’s quite common for someone to get frustrated and think that it’s the broker or it’s technology or these sorts of scenarios. I think if the novice understood that most brokers, more particularly us, were interested in longevity of a client. You know, we want to have a relationship for several years, we want to do everything to help you to continue trading for a long period of time. In terms of risk management, everything’s set up so that clients can get the best possible price and just make everything as smooth as possible. I think it’s just getting it into the consciousness that is, it’s a bigger picture.

Jordan Michaelides: Also a lot of this stuff is on the individual, it sounds like you’re saying that a lot of this is on the individual in a way. You mentioned before about the longevity of a client. In this sort of business, in the retail Forex business, you want the client to stay around for a long time because the only money you’re making off their trade is either a commission or a spread, generally in this business model. Some people will try and make money off their book, but by and large, most retail brokers seem to just net that exposure off with a liquidity provider as you said. So that’s ne of the major elements of running this business is dealing with liquidity providers. I think that’s a good point, that it’s getting out of this mindset that there’s someone there trying to make you do bad and maybe it’s more on you, your own processes and also how you think about trading. That’s a good point.

Adam Taylor: Yeah. You’re part of a bigger picture and, it’s taken responsibility for your trade, seeing how you can improve yourself, asking certain questions, you know, am I trading at illiquid times or do I trade during a major announcements Basically building your own plan.

Jordan Michaelides: Now, we’re getting to the end, so I need to ask one more key question around your career. And that to me is this analysis element, this fundamental versus technical analysis. I know analysis has been a core element of your career. We know speaking before about chess and its impact and maybe, I believe, that impacted your interest in looking for patterns. From your perspective, one, what is the differences between fundamental and technical analysis and two, why do you think you were so drawn into technical analysis over fundamental?

Adam Taylor: Well firstly, obviously fundamental is more news driven. You’re analyzing the business, the core, elements of that business and what makes it tick. Whereas technical analysis is more price driven, price action, on the charts and that sort of thing. In terms of where the analytical insight came from, I’ve always been a very visual person and it’s just seeing patterns and pattern recognition, That’s what drew me to a technical analysis.

Jordan Michaelides: It’s such a fascinating area. I remember for years I didn’t really think much of technical analysis, I was always more of a fundamentals person cause I liked hearing about the story. It’s funny how both you and I have these different traits and therefore that impacted the area of preference. I remember reading a really interesting peace called ‘Support For Resistance’ by Carol Ostler when she was working at the federal reserve bank of New York. She was speaking about how technical analysis is applicable or where it is applicable and particularly in foreign exchange, Sort of like a peer reviewed piece of research, which is super interesting. I know you’ve become well known, I saw this on a few comments and blog posts here and there when I was searching your name that people had commented on your point and figure analysis. It’s like you’re the point and figure guy. Where did that come from? Specifically point and figure analysis.

Adam Taylor: I think every technical analysts, and people within the trading industry, you’re drawn towards some things. What I like about point and figure is, well, first off it was one of the original areas of technical analysis that was developed back in the trading pits, , in the early 1920s, if not before then. You’ve got these people without any technology whatsoever scribbling down on bits of paper and trying to come up with a system that they could work with. And this was one which developed over the years. What I like about it is it’s simplicity. You’re removing the time element for starters, it’s purely based on supply and demand, which as we know that’s what the markets are all about. You’re seeing psychological levels of where price is looking to go.

Jordan Michaelides: I’m just looking on Wikipedia now… the technique is over a hundred years old, 1898.

Adam Taylor: It’s become like a lost art in a sense. It’s not something that’s developed with the technology. I think it’s kind of been forgotten about, I’m trying to get a bit of a resurgence in the area.

Jordan Michaelides: This reminds me of making a certain type of steel that was made somewhere in Iran back in the day, and every now and then these sort of artifacts pop up but they don’t know how to forge this steel anymore, which is super interesting. I totally agree. I think things sometimes get lost.

Warren Buffet and Charlie Munger have spoken a lot about how in this day and age with computers, people are often looking for these crazy, machine learning driven ways of mathematically calculating things when oftentimes there’s just a simple process involved that takes patience.

We’ve got to jump into some short, fast questions to finish off. I know you’ve had a new bub, maybe give us an idea of what your current morning and evening routine looks like.

Adam Taylor: I’m not even sure what it looks like at the moment to be honest. I’m literally changing nappies and trying to fit in a bit of sleep here and there, give my wife a bit of a break. Ask me again in about six months and we’ll see.

Jordan Michaelides: If you had to gift a book to the audience, what would be the one book that’s had the most impact on you that you’d give to them?

Adam Taylor: I would have to see ‘Think And Grow Rich’ by Napoleon Hill.

Jordan Michaelides: I think that’s a bit of a classic, right? Napoleon Hill. Good choice.
Now, best purchase and under $200. Can you think of one?

Adam Taylor: That’s easy, because it’s been very recent. It’s basically this device which makes bottles for babies, does the right milk temperature and everything, takes the thought right out of it. At 2am in the morning it’s a godsend.

Jordan Michaelides: Last question for you before we finish, if you could have a billboard anywhere in the world, where would it be, first of all, location’s important what do you think it would say? What do you think you would have on it?

Adam Taylor: I think I would have a billboard which says ‘keys, phone and wallet’ and I’d put it right outside my house just near the front door. That’s what I do. I’m always terrible, I’m always missing one of them, now and again. I’m sure my wife would agree with that.

Jordan Michaelides: Adam, we’ve just passed 31 minutes. Thanks for doing this with us. I know you’ve had an exciting few months. Thank you so much for joining us.

Adam Taylor: Thank you Jordan. Cheers.