Colm O’ Shea is an Irish macro trader and hedge fund manager.Colm O’ Shea is an Irish macro trader and hedge fund manager. His time horizon is usually one to three months, and he trades Forex currencies, equities, commodities, and interest rate products. He appears in the book "Hedge Fund Wizards" by Jack Schwager’s. At that time (2011), from 2005 to 2011, he returned an annual 11.3%, on average. These returns came with a maximum drawdown of 10.2%, a maximum monthly loss of 3.7%, and a volatility of only 8.1%.


Colm O’ Shea Trading Tips


Price movements only have a meaning in the context of the fundamental landscape

People get all excited about the price movements, but they completely misunderstand that there is a bigger picture in which those price movements happen. To use a sailing analogy, the wind matters, but the tide matters, too. If you don’ t know what the tide is, and you plan everything just based on the wind, you are going to end up crashing into the rocks. That is how I see fundamentals and technicals. You need to pay attention to both to make sense of the picture.


Always knowing the odds

If you play roulette, you are in the world of risk. If you are dealing with possible economic events, you are in a world of uncertainty. If you don’ t know the odds, putting a number on something makes no sense.



■ Markets matter more than policy

I learned that markets matter more than policy. You have to look at real fundamentals, not at what policymakers want to happen. The willing disbelief of people can carry on for a long time, but eventually, it is overwhelmed by the market.


■ The great trades don’ t require predictions

Fundamentals are not about forecasting the weather for tomorrow, but rather noticing that it is raining today.


Equity Trading

People love stable earnings, isn’t that great? I hate stable earnings. It just tells me the company is not being truthful.


■ Liquidity is not the same as solvency

The big mistake people make is to confuse liquidity with solvency.


■ All markets look liquid during the bubble

In a bubble, the true believers will always win. You just need to make decent returns and wait until the market turns. Then you can make great returns. What I believe in is compounding and not losing money. The main thing about bubbles is that you need to be early. The worst thing you can do in a bubble is to be stubborn and then late to convert. All markets look liquid during the bubble, but it’ s the liquidity after the bubble ends that matters.


Markets don’ t think, just like mobs don’ t think.

Why did the mob decide to attack that building? Well, the mob didn’t actually think that. The market simply provides a price that comes about through a collection of human beings.


Most good macro traders will be right only about half the time or even less.

Having a positive skew is very important. It is not about being right all the time. Most good macro traders will be right only about half the time or even less.


■ Limiting losses

You need to implement a trade in a way that limits your losses when you are wrong, and you also need to be able to recognize when a trade is wrong. First, you decide where you are wrong. That determines where the stop level should be. Then you work out how much you are willing to lose on the idea. Last, you divide the amount you’re willing to lose by the per-contract loss to the stop point, and that determines your position size. The most common error I see is that people do it backward. They start with position size. Then they know their pain threshold, and that determines where they place their stop.



Colm O’Shea Trading Tips (c)

Source: Dialogues from the New Market Wizards {Jack D. Schwager}




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