My background is chequered. I've got a degree in engineering. I've got an MSc in metallurgy. I've got a PhD in mathematics.

All of which, I assure you, is largely useless in taking money out of markets regularly and consistently.

What I want to try and get across in a few minutes is how to go about putting together a mental framework to be able to take money out of markets consistently and get yourself to a point where you can rely on that income in the same way as you can rely on your salary or the income that you draw from your business.

That's the objective. Now, when I do this seminar at the banks, and I've done it for all the local banks here and I've done it for most of the banks in London, it takes three days and I'm going to try and do it in the next 40 minutes.

I've got a lot of slides and I probably won't get through all of the slides, but I'm sure that the guys at Funport will send you the presentation if you wish.

My association with the company is that the founder, Vusi, I don't know where he is, but the founder of Vusi and I have been doing business together since he was 30 minutes old.

It doesn't seem that long since he was shouting at me when I was actually going to my office in Rivonia.

He used to shout at me and say, Kit-Kat, because he wanted me to bring a Kit-Kat home that evening.

So any of the Funport people listening, if you want to bribe the boss, just buy him a Kit-Kat.

The thing that stood me in best stand in markets is that in my youth I was an officer in the Royal Marines, and that's given me a level of confidence and discipline that I've drawn upon for a very long time, and 42 years later I can still fit into a uniform.

Anybody who feels like having a go can have a go.

I've only got one regret in life, and that one regret is that if I was 35 years younger I'd be a professional rugby player today.

Because I came to South Africa to play rugby, that's why I came here in the first place, and got an injury from it, but I think if I was 35 years younger I'd be a professional rugby player.

So I'm not that good with contraptions, so I'll do my best to make the slides work.

So, Barry talked about an edge. I'm going to try and talk about an edge.

My edge is very similar to what these gentlemen have just presented.

I like to put the fundamentals and the technicals together in the stock market.

My definition of fundamental analysis is the search for the true value of a share.

My definition of technical analysis is the study of trends and turning points.

Ladies and gentlemen, I want to try and find a share that's undervalued, a share that's growing its earnings aggressively, reasonably, safely, that's rising, that's in the throes of a strong trend, and ladies and gentlemen, I want to buy that when the general market is rising.

And that's what I've been doing for a very long time. I do my best to stick to that.

Those of you that have been trading for a while will know that sticking to a simple set of trading rules is an awful lot easier to talk about than to do. Am I correct?

Yeah.

Okay?

As if there's little devils on your shoulders shouting at you to do the wrong thing.

So, to make some money in markets, folks, we need some form of a method, yes?

We need to manage our money really well, and we need to manage ourselves really well.

The three M's.

So, I'm going to talk about a methodology.

So, I'm going to ask you a question. Did they put that chart in?

There we go. There's the Aussie 40, I think I asked them to put in.

And my question to you, that's a MACD.

I know the guy who put the MACD together, a good friend of mine, a guy called Jerry Appel, and he said that when he designed the MACD, an axiom of investment education is the more complicated it sounds, the more you can sell it for.

And he thought that MACD was suitably complicated.

That's why it's called the moving average, converging, diverging.

Jerry Appel and his two sons have got more money under management than Investec.

Just the three of them.

And a little room in a place called Derry, Maine.

Stephen King writes his books just across the room.

Is the JSC going to go up or down on Monday?

My question to you.

What do you think?

Down? Young man says down.

Any other?

Bradley, what do you think? You're the expert.

Up?

Well, folks, in my pocket, I have the secret.

I can find it.

I have the secret.

It's a five-ran coin.

Now, on one side, there's a furry little animal.

You see that?

And on the other side, we've got a coat of arms.

Clearly, the coat of arms is going up, and the furry little animal is going down.

Let's see if I can get this right.

You were right.

The head, it's going up.

Okay?

The head, it's going up.

Okay?

Would you trade like that?

No? Okay.

But I assure you, most of you are trading like that already.

There's a great deal of randomness out there, I assure you.

But I wouldn't like to trade like that either.

So, my next question to you.

Here we go.

Let's play and think about a special game.

So, here's the game.

If you can successfully predict heads or tails, and you're correct, if you bet five rand, and you're correct,

I'll give you ten back.

Clearly, if you're incorrect in your prognosis, I'm going to take the five.

Now, you've already said that you wouldn't trade with a coin, but would you play that game?

Ladies and gentlemen, that's my question to you.

Would you play that game?

Yes or no?

Well, folks, I haven't got a lot of time to play this.

It's a cracking game to play.

And it's the basis of how you can become consistent and take money from somebody else, because that's what you're doing.

Because in ten chucks of the coin, would you agree that you should be right 50% of the time?

Yeah?

Now, when you're right,

I'm going to pay you twice as much as when you're wrong.

So, in ten throws of the coin, when you're right,

I'm going to pay you five times two, which is ten.

Yes?

And when you're wrong,

I'm going to remove five times one, which is five.

Thus, you make ten, you make five profit.

If you bet a round on every time you chuck the coin in the air, on average, you're going to make 50 cents.

You have now designed a positive expectancy system.

So, if you can find somebody to underwrite that, then Barry, that's your edge.

Okay.

And that is the objective, folks.

Now, with the Finport guys, with GT, you should be able to get your hit rate above 50%.

But if you can be right 50% of the time, and you can make twice as much when you're right as you lose when you're wrong, then you've got a method of making money for the rest of your days.

And that is the challenge, to learn how to play the game over and over and over again without fear or hesitation.

Okay.

So, it's a cracking game to play.

Would you play the game?

Now, in trading, the number of times that you're right is called the hit rate.

And Lord only knows we're all paranoid about the hit rate.

We want to be right at all costs.

There are four trading fears.

One is being wrong.

Two is losing money.

Three is missing out.

And four is leaving money on the table.

Those of you that are under 50 are probably in a safe place because I know for a fact that most men over 50 are more scared of being wrong and losing money than they are of death.

Okay.

Am I correct?

We've got the death thing all sorted out.

Well, it's not the end of the world, okay?

But to be wrong or lose money is an issue.

So, that other thing that's important in trading is the risk to reward ratio.

So the money that you make is a function of both the hit rate and the risk to reward.

And most of us just think about the hit rate.

So, three things.

Now, if you do a search on the internet and that's a margin call, don't take it, okay?

Don't take it.

Just ignore it completely.

A margin call is what happens, folks, when you run out of loot.

Lads from GT are going to phone you here and say, more money or we close the whole bloody lot.

Okay.

So, if you get a call, just don't take it.

So, if you do a search on the internet, you're going to find lots and lots of systems where the vendor says that he, you're right, 92% of the time.

And they all sound wonderful.

But the problem with those systems is that they've got to open up their stop losses so wide in relation to their targets that they don't make any money.

This was brought home to me a few weeks ago.

This is a chap in London who was advertising a Forex system.

Somebody spoke about Forex and he said he's right 90% of the time.

Sounds wonderful, doesn't it?

But when he was right, in his own literature he said this, when he was right he makes 10 ticks and when he's wrong he loses 90.

What's the expectancy of that system?

9 times 10 when he's right minus 1 times 90 when he's wrong and that means the system actually loses money.

Sounds wonderful 90% of the time but he loses money.

So, folks, just remember that that edge, that edge is a mixture of three things.

It's a mixture of one, the hit rate, it's a mixture of the risk to reward and the commissions.

And there's no doubt that if you're trying to scalp a one-minute chart you need to be really, really good because those commissions mount up.

Every time you press the wee button there's three or four ticks to be paid.

And that's hit rate, risk to reward and commissions.

So, folks, somebody mentioned the Forex market.

If you buy the pound against the dollar with a 50 point stop and the target's 100 points if you can get that right 50% of the time you've got it made.

And the only thing remaining is to learn how to play the game.

And it is a game that we play with ourselves.

And playing the game is the tough bit.

Now, I want you to use your wonderful imagination because in this vessel we have 100 one-ran coins.

Yeah?

You see them?

Right?

Now, on every decision, on every trade, there's two decisions.

One, is the darn thing going to go up or is the darn thing going to go down?

Now, Barry alluded to the concept of going short which might be new to some of you but you can take a bet that the market's going to fall.

And if it does fall, you're going to make some money.

Some money.

So...

That's the first decision.

So, the man in the green.

Heads or tails?

Tails.

The market's going to fall.

The bear in the green.

We've got 100 coins.

The second decision, ladies and gentlemen is how much do you want to bet?

You can bet one coin.

You can bet five coins.

Or in the parlance of the commodity futures market you can bet the farm, the whole bloody lot.

Farmers love betting the farm.

Okay.

So, the man in the green says the market's going to fall.

Tails.

How many would you like to bet, madam?

One?

Five?

Twenty?

Seventy-five?

Twenty.

Okay.

So, let's trade.

What we're doing is we're simulating a trading system that's right 50% of the time that makes us twice as much when it's right as it loses when it's wrong.

I assure you that if you were a day trader in the forex market you would sell your granny for that system.

Okay.

Your granny.

Because most intraday systems will risk 30 to make 50.

And if the vendor is honest it's not right that much more than 50% of the time.

So, the man in the green, are you feeling lucky, lad?

Okay.

Don't take it too personally.

That's not a great throw.

A pound coin is much easier.

Sorry, mate.

It's going up.

You lost.

Sorry.

No, no, he bet.

He bet it was going to go down.

So, 20 go on and we've got 80 left.

The man in the red.

Heads or tails?

You, sir.

You'll never wear that red pullover again.

Heads or tails?