This interview is based on a conversation with Robert Rother. Conducted by Owain Higham.

 

Could you introduce yourself and tell me about your background?

 

Well, I’m based in Germany. I was born here. I lived most of my life overseas, in China. I started trading in 1995. I was 13 years old at the time when I opened my first brokerage account. I inherited some money from my father since he died quite early.

 

I was always fascinated by the stock markets, so I started to investigate it myself and started actually trading. It was a different time; no computers, no internet. I just got information through books and television. Then 2 friends discovered me at the time, they were full-time traders. They offered me to join their company, so we set up an investment company in Germany, in Frankfurt.

 

I quit school, and at 17 years old I was a partner in an investment company. I learned trading from them at the Chicago Mercantile Exchange and the American stock markets. I started trading through the telephone from our office in Frankfurt, calling to Chicago and New York to place our orders. I did that for around 4 years, and then I sold my shares in the company. I had grown tired of trading and had sort of burnt out. I had made good money, so I went to China, because I always wanted to leave Germany. I met a Chinese partner there in 2004, when I was 21. It was a Chinese lady, she was also from the banking industry and a lawyer. We set up an investment company in Shenzhen, China, near Hong Kong. We had the license, we collected money, I had over 30 people in my company, and actually the biggest day was during the subprime crisis of 2008. I made over 800,000 dollars by exchanging money from China to overseas and from overseas to China, because my Chinese partners, or Guanxi—the network—needed money, and because of the crisis others wanted to get money out of China, and we got a commission out of that as middle men. So that was the breakthrough in China. After 1 year, I had over 100 million dollars under management, a team of 30 people, I educated my own traders, and I also had a Ferrari tuning center there for fun to build up my network. If you have the right network, then you get more information. If you know this CEO and that CEO, you can profit from that on the Chinese stock markets. I set up a Chinese financial website to translate Chinese stock information into English. I was the biggest one at the time. Finance China was the name. That was also something that the Chinese government didn’t like, because he who controls the news, controls the money flow.

 

 

 

 

I was 28 at the time and I was quite successful, but the Chinese government didn’t like it. One month before my arrest, they called me. I had a license to distribute and gather news information, but they told me, “Hey Robert, please quit your business. It’s not good, we don’t like that.” So I thought: “Why should I do that?” I had all the legal requirements, I bought all the licenses, I paid a lot of money, I had a staff of over 30 people… but nobody cared about that, and in May, 2011, they arrested me for contract fraud, as they called it. Then I went to a detention center for 3 and half years, and after that I got my sentence. It was 8 years and a 1.2 million RMB penalty. 

 

After 3 and a half years I went to prison in China, and spent another 4 and a half years there. After 7 years and 7 months I was released in December, 2018. After that I wrote down my story, and wrote a bestselling book in Germany. It was a top 10 book at that time. 

 

How was it coming out of prison back to regular life? 

 

It took time. I went to a small island in Germany, and I lived there with my mom for 2 months until I had my own place again. If you are in prison, in a communist prison especially, you don’t have to think, you just have to follow and act. You just have to go to the factory to work 9 hours a day, 7 days a week. After that you get “re-education” through labor. They tell you how good the communist party is and how nice China is. It’s always a drag when you have to sit there and obey. If you don’t obey, you get tortured. I saw that many times. So you have to act smartly to survive. 

 

When I was released, for the first time I saw how people all have their mobile phones and tablets. A completely new world opened up. Of course, we read about this in newspapers and magazines that we had in prison, but I never saw it in reality.  

 

The most important thing for me was to write the book, and that was a sort of therapy. It took like 1 year, and I did it with a ghost writer in Germany. I got flashbacks at night when I talked about it. I could not sleep. I still have PTSD, sometimes my heartbeat starts to get very fast. You can’t do anything against that, you just have to handle it and live with it. I think it’s similar to people who came from war. Terrible things, but you have to find a way to deal with it and to continue your life.

 

 

 

 

How did you get back into trading?

 

When I was in jail, I never had an iPhone, right? I only knew about iPhones after I got out of prison in December, 2018. So I got to know all these things, I started to do research, and I found Bookmap. I think that was 2019, and I said “Oh, that is great.” We never had that information, we only received the liquidity levels and such via other methods, if you talked to bankers, if you talked to your broker on your phone to get the hotspots in the market. 

 

So I was fascinated by this software, and from that day on I started to work with Bookmap. I continued trading, and then I met a partner who is also a Bookmap educator, Peter Pecker from Germany, so we started to trade together. Now we have built up an academy in Germany for students in day trading and stock investments. Finally we have a programming team, we have a few coders. Right now they are developing two tools for Bookmap. 

 

I was very fascinated by the market. I mean, the charts show that the market never changes: You have the price, you have time, you have volume, and you have liquidity. The basic structure didn’t change at all in the 20, 30 years since I started. The way I traded didn’t change, but the technology did make a big difference, yeah. Software like Bookmap, algorithmic trading, the fact that the computer powers the internet—everything became faster. That made a big change to the markets and makes them a lot more interesting on the one side, but also more complicated, I think. 20 to 25 years ago when you placed an order, it was a lot slower, you were thinking a lot more before you took a trade, and now you’re just one mouse click away, right? Place your order and you’re in the market. You can lose very fast, but you can also make very quick money. So that’s a new challenge and I think it’s very interesting, especially the way you can program algorithms and indicators to analyze markets. I think it’s a new way of trading compared to 20 years ago. If you stick to the old ways, it would be very difficult to succeed, so you had to adapt. The markets are changing from a technological point of view, and so you have to adapt and go with it.

 

 

 

 

It’s the same way with the floor traders who were in the pit in Chicago before electronic trading came. Actually, market functionality was the same, but then there was the internet and nobody needed them anymore, because everything went faster. I think it’s the same now with artificial intelligence algorithms. You need these tools to be competitive. 

 

Could you describe your current trading style? Is it more algorithmic? 

 

Right now I’m on the bridge from discretionary trading to algorithmic trading. We are developing it right now. To say that we are fully automated would be difficult, but we use a lot of analytics tools and indicators to confirm our market beliefs. We especially look very closely at the options market, where the big players are, we want to see their footprint and understand where the big options prices are. There is a lot of liquidity in that market, and that mostly drives the stock markets. They are congruent mostly with liquidity levels in Bookmap. If you have information that there are this amount of options calls, then there is a large amount of certainty that the market will move towards that level. 

 

We also analyze the volume on a second-by-second basis; what’s the average volume over the last 10 seconds, is there a breakout that is sweeping levels? We focus closely on that to see if there is a change, if there is momentum coming into the market, and then we try to understand other algorithms. 

 

We use a lot of Volume-Weighted Average Price (VWAP), it’s a very interesting tool for us. We use it every day because we can see if the market goes to that level, there is a reaction. We try to analyze these things on a millisecond basis which you cannot see with your eyes anymore. So then we get our signals and we can say: “Something changed”. Then we know you have support and resistance levels in that zone which we can use for short-term or mid-term trading. Short-term being day trading or scalping, and mid-term being maybe a couple of days.

 

Do you have any big mistakes that you tell your other traders to never repeat?

 

I think for me the biggest mistake was overtrading, especially with technology right now. The fact you are in charge of your finances, you can trade every asset immediately from your mobile phone. This means you don’t think about what you do, it’s like a casino to me. I try to completely switch off all the mobile apps. I only have my trading desk from which I trade, and I try to trade as little as possible, because the more you trade, the more risk you take. Basically; don’t lose. Try to avoid trades, even if it’s sometimes a good trade. You might think: “Hey, I missed that opportunity”, but there will always be another opportunity. 

 

I saw in my life so many traders who made a lot of money in a very short time, but I only know a few that are still there after 20 years. Most of them make huge amounts in a very short time, and then they’re gone suddenly. So think about your trading frequency. 

 

How would you describe the “perfect” trader?

 

I think the perfect trader is one that can adapt as quickly as possible to new market conditions. I met a lot of traders that can do very well in trend markets, but when the trend ends, then they start to fail and they don’t recognise this. As a trader, you must adapt as quickly as possible to new technology, to your own psychology. If you have private problems, don’t trade. If you take too much risk, stop trading. 

 

Be open to everything, start to learn. Every day I pay a lot of money for information, for education. Everything I get in my hand I have to buy, and I think: “Okay, maybe this is this one little thing that can take my skills to the next level”. So be open to everything. Don’t be stubborn, be open.

 

Everyone is welcome to join Robert's free trading community: https://www.skool.com/robert-rother