How I Lost My Dream Job as a Hedge Fund Trader

Are you ready to hear a really embarrassing story about a massive mistake I made when I was starting out that actually cost me a job offer as a junior trader at a hedge fund? Well, listen up, because over the last 15 years, it's fair to say that I've made some mistakes, but in the end, they somehow led me to managing 8-figure funds as well as growing my own portfolio to over £2 million. I'm James Helliwell, I'm a former professional trader and in this video I'll share with you that mistake I made when I was starting out, what I learned from working with hedge funds and my mentor Lex, and how the tools I've built that I'll also be showing you here are helping me to not only spot opportunities but avoid making new mistakes to this day. So let me explain where it all began, because I was bloody lucky to even get a foot in the door with these guys, never mind realizing my dream of becoming a pro and managing millions, because I didn't go to Oxford or have a rich uncle who could get me into JP Morgan or Goldman Sachs as a grad. And I was trying to land my first job right in the middle of the bloody GFC, which in many ways was this watershed moment for the market because although stock prices eventually recovered despite the odds, it was pretty much the end of prop trading within the banks, which meant that these guys were no longer able to take risk as we'd known it for years, and that meant that it wasn't a place for me to try and become a discretionary trader. So after sending my CV off to basically any fund manager that would listen, which wasn't many of them, I finally got lucky and a hedge fund guy named Lex gave me a shot. So the reason I'd heard about him was he'd filmed this TV show called Million Dollar Traders around the time of the crisis when I was graduating. He not only ran prop trading at Goldman back when it was actually cool in the '90s, but he'd gone on to work for Europe's biggest hedge fund back at the time and then set up his own around the time that the show came out. So I couldn't believe my luck. I was barely out of uni and this guy was showing me inside the hedge fund world and how all these guys traded and made money, and it was absolutely amazing. And with what I learned, I went on to become a fund manager in my own right, and a few years ago I quit the game to manage my money full-time, whatever you want to call it. I'm not calling it bloody trading, so 'cause it sounds like Lamborghinis and all that nonsense. So here's the thing that I've learned that has changed how I invest today. That big mistake when I started out, it's pretty embarrassing, so buckle up. Perhaps like a lot of you, I started out by obsessing over charts. So I'd be looking at things like RSIs, moving averages, even Ichimoku clouds, which we'll get onto a little bit later. And I was reading all of the trading books that claimed to have a system, whether it was things like The Zulu Principle, The Naked Trader by Robbie Burns, Everything, and I just thought that if I can figure out the right one that works, then of course I'm gonna be rich, I get a job in a fund and live the dream. I even remember, this is how crazy, how deluded it got at one point, that when this all came together, I will start a foundation to basically feed the world and move to Mauritius as I made my millions offshore. Well, in reality, I was 22, with £500 in a bloody IG Index account, pissing around punting on the FTSE on work's time. But working at Bloomberg, I also had access to the terminal, so I wasn't just reading the trading books and taking their word for it. I was also backtesting all of these strategies, seeing if it was all just bullshit. And I reckon that by process of elimination, I'd eventually find something that worked, because there must be a reason, after all, why traders have all of these screens They're always looking at charts and have alerts and things going off right, left, and center. And to me, I thought, why would you bother with boring fundamentals if you can just program a system to do it for you? Now, after months of testing this stuff, literally day and night, I remember even being in a remote village in Brazil meeting my girlfriend's family for the first time, tethering on 3G— it's not an innuendo— and what I found is that nothing worked. But to be exact, nothing worked all of the time. And I needed something because it was my only way into the industry, given that the banks didn't care about my degree, so the uni that I went to. But I knew deep down that unlike, say, M&A, investment banking, hedge funds cared only about money and whether you could make it. So I went back to the drawing board and I had this idea to try and combine the best bits of everything that I tested and try and make the ultimate all-weather system that could work in any market. Now, this detail will make sense in a minute, but I was using something called Ichimoku Clouds, which I touched on a minute ago, and all of a sudden I had built what looked like the perfect strategy. I genuinely thought I'd cracked it. All of the backtests held up, and I was sending trade ideas off right, left, and center to guys all throughout the industry who had Bloomberg terminals, and I could kind of DM back then. Here are some of the actual messages I sent, which do make me cringe looking back on it. And Lex van Damme was actually one of the people watching what I was building, which makes me cringe even more now having got to know him. Because what I was actually doing, without realizing at the time, was curve fitting. And that wasn't even the embarrassing part, because I later found that one of the models that I'd built, my magnum opus, had a bug in it. It was a quirk in how Bloomberg calculated that Ichimoku study. So what happened is they introduced look-ahead bias that I genuinely hadn't spotted at the time, which meant that the results looked way better than they should have. And I had to go and admit my mistake to Lex, who was about to offer me a job at the fund as his junior trader. So that's how I learned my first big lesson. Besides owning up to your mistakes and not doing a Nick Leeson, technical indicators don't work, guys. Even when I was convinced that I'd found the one, it ended up being a mirage. But to Lex's credit, instead of writing me off, which he was well entitled to do, he stood by me. And as my mentor, he started showing me everything he knew, beginning with fundamentals but probably not in the way you'd expect, because when most people hear the word, they think of value investing— low P/E, low price-to-book, all of that stuff that Ben Graham made famous with the book The Intelligent Investor. Problem is, it hasn't worked for decades. So let me show you how I was taught to look at the fundamentals completely differently, and the strategy that many of the big funds still use to beat the market relying on them. Value is underperforming the general market.— and it's been that way now for 20 years. Over the long run, quality has beaten pretty much everything else. A good example of this might be a company like Costco. I'll go through the profile and things a little bit later, but basically it has solid fundamentals according to the factors that I look at— 7 factors to assess quality. And if we pull up the chart here of Costco, this is an even more assured 45-degree line up and to the right. It's much less volatile. 70,000% since the IPO. It's not a bad return, is it? But that's the point here— how smooth and consistent the trend is. And this is the part that most people actually get wrong about Buffett, because they think of him as a value guy. But really, it's this approach that made him most of the returns over the years. Not buying cheap stocks that are forgotten about, but buying quality companies like this, big brands that he could let run. So that's the second lesson I learned. What's cheap is cheap for a reason, and quality will always come at a premium because it compounds over the long run consistently. But here's the thing, in the last couple of years a new problem's shown up, and if you don't know how to spot it, even investing in the quality universe like this, you might end up buying a company that you think is bulletproof only to see the share price do the opposite and continue to move against you. So let me show you what I mean and how you can avoid this trap because it's becoming all the more risky. So returning to the screener, what you can see is all of the other companies ranked in the universe with the best ones up at the top, but there's a column here that says AI risk, and you can see that a number of them have this red flag. And we'll run through some examples of these that force me to change how I'm investing in a minute, but let's take a look at the so-called SaaS-pocalypse that happened earlier in the year. Nearly a trillion dollars in market cap was wiped off this group of companies alone because what the market has suddenly woken up to is that AI, Claude Code, what have you, and more sophisticated versions of LLMs could essentially replace service and platform businesses almost overnight. Let's take Intuit, for example, the maker of QuickBooks, the accounting software that you've probably heard of. It's the 6th highest ranking company within my quality model. But all of these metrics are based on historical fundamentals. In other words, the company's long-standing track record. You need this AI lens on top of it so that a great track record like we've just seen with Intuit, for example, doesn't end up becoming a trap as more and more businesses inevitably get disrupted by this technology. So you might be wondering, is there a simpler way to invest? One that doesn't hang on the fundamentals or judging the AI risk of every stock you're looking at? Well, funny you should feel that way because there is, and it's actually the other thing that Lex taught me, and almost every fund I worked with was watching this. They weren't just looking at stocks, doing the fundamental analysis on individual companies, they were looking at the rotation between different sectors and entire asset classes. But most people miss this because they're still obsessing over the wrong charts and ratios that we looked at earlier. So let me show you a simpler way to follow the money using a tool that caught a 40% move for me last month. So think of it like a clock. It basically cycles round from leading to weakening through lagging and eventually back round to improving. I want to actually start within commodities because this is where that big trade appeared for me last month. In the top right you can see natural gas, and then down at the bottom you've got crude oil. So these were in opposite quadrants. Each one of these markers is one week apart. So to pull up the chart here, you can see how the two have diverged. At one point it was up over 40%, the difference between long natural gas and short crude oil. But let's bring this back to equities and equity sectors. So we'll apply the same principle. We're looking for stuff in the top right-hand corner, which is leading, and stuff in the bottom left, which is lagging. That's the stuff we want to avoid. And what we can see here is healthcare, for example, making a big move up and to the right, whilst things like comms, energy, which we've touched on, and consumer discretionary are the sectors closest to lagging. Looking at the trail is really useful though, because something that I've been watching and talking about with members for a while now is the move in industrials, which has also been sustained, and it's tech that the money is rotating away from. So we'll say healthcare and industrials against tech and comms. So we'll do XLV for healthcare plus XLI for industrials against XLC for comms and XLK for technology. And this is the ratio that I'm watching and the rotation that's represented in that chart. Now again, because of the tech dominance, which lasted for so long, anything against that has been trending in the wrong direction, lower. But now with very clear signals that investors are trying to get away from tech, this is a really interesting setup. And again, it's one that I'm tracking with members on the inside of my community. So that's the final lesson, guys, and I think this is the big one because it's the strategy that's endured. It doesn't care about AI or any fundamental track record that might be disrupted, and I think it's the closest thing to a strategy I've found after all the bloody backtesting that anyone can copy. Now there's a link in the description once again if you want to try it free for 7 days along with all of the other tools inside of the community, and if you've enjoyed this video Then watch this one next, which YouTube thinks you're going to love. I'm off to reflect on Ichimoku clouds because it still haunts me to this day. Never again.