Quote from a Pit Bull – Losing Streak

I have been reading the book Pit Bull – Lesson from Wall Street” Champion Trader, and I wanted to insert an interesting, long quote from the book. The chapter title is Never Short a Republican. I think the quote is appropriate to describe the current political climate here in California where the Democrats have a super majority.

The year was 1982 and Ronald Reagan is President and the Republicans have control of the Senate, and Marty Schwartz was a Democrat because of family tradition. The midterm elections are happening. He writes, “Living in New York City meant that I was giving 57 percent of every dollar I made to the government in income taxes. To me, governments had become gluttons who just couldn’t seem to get enough of my money, and for what? The streets were full of potholes, the subways were covered with graffiti, somebody was always getting mugged, city workers were always going on strike. I wouldn’t have minded paying the taxes if I though that they were doing some good, but when I saw how my tax money was being wasted and mismanaged, I’d decided to vote with my wallet not with my heart. God, I was even sounding like a Republican, but that’s what happens when you start making big money, and thanks to the S&P 500 futures, I was making big money.”

What happens later in the chapter, is he tries to short a bull move in the stock market. He keeps adding and adding to his short position and ends up losing $800,000 (1982 dollars)!

He ends the chapter by talking about breaking a losing streak in your trading. The solution? STOP TRADING. Stop the losses, stop the bleeding by closing your losing trades and take a break. “The market will be there when you return.” “You can never shift from reverse to first gear without going through neutral. “

Chat With Traders Podcast

One of things I like to do on the way home from work, in heavy Southern California traffic, is listen to podcasts in my car.

If you haven’t listened to the Chat With Trader podcast, you are missing some good interviews with all sorts of traders.

Australian, Aaron Fifield is the host and he ask each trader he interviews some great questions that will help beginning and advanced traders refine their craft.

I have two favorite episodes. One is with Brannigan Barrett episode 114. The other is a speech Aaron gave that is episode 145. I am going to summarize the episode and I highly recommend you listen to it.

Aaron’s speech was a summary of great advice he learned from successful traders.

His first point was have grit and don’t give up. Trading is not any easy task. You need to be tough if you plan on becoming successful at it. Trading is a job/business so you always need to be working on and improving your strategy.

Point two, you need to have the mindset that trading is a lifetime endeavor. You will not get rich quickly, and you will always be learning. You will never “arrive” as a trader. There is always something you can be doing to become a better trader.

Point three, you should know everything you possibly can know about your strategy. You should know when to place a trade and when to get out. To add to this, I think you should apply the KISS principle, keep it simple stupid. You should know why your strategy makes money and understand that there is no best trading strategy.

Point four, trade with an edge. If you place 100 trades and you are not profitable, you will not be successful.

Point five, understand and apply money management to your working capital. I believe you should never place a trade that is higher than 1% to 2% of your account balance. The market can take your money very quickly and it will take you along time to get it back. This should be apart of your trading plan. Your plan should be written out.

Point six, stick to your trading plan. Don’t always give up on your strategy when it is not working. The markets are always fluctuating and you need to be patient. Create and stick to your well thought out processes. You should judge your trading based on whether you followed your processes and not on your winning record.

Aaron finishes his speech with a quote from trader Tim Walker, “Amateurs never win in the game of life.”  You have to be a professional because you are trading against professionals.

Fixed Profit Objective – How To Keep Your Profits

Have you ever placed a trade, gain some pips, then watch all your pips disappear losing even more pips? Sound like you?

How do you fix this problem? Fixed profit objective.

When you enter a trade, have an amount of pips you are willing to accept, then get out of the trade.

You are probably thinking, WHAT!!! and leave money on the table? What I have found, with my experience, is take the pips and then look away. The Forex market is so volatile and things could be going your way and looking great, but then the market spikes against you and stops you out. Then the market keeps going in the direction you planned.

To trade, you have to know the currency pair you are trading, how and when to get in and out based on your trading setups, and how much is the pair going to move (you need to know this so you can decide how many pips will be you fixed profit objective).

For me, I look at 10 minute candles, and based on past experience, have a good idea of when a trade will stall out, stop or reverse. I also know that 7 to 10 pips per trade on GBP/USD is doable.

If the market is hot and volatile, going my direction, I will consider staying in the trade to get up to 20 to 30 pips. These trades are not as common.

Watch as I explain how I applied this important part of my trading style in the video below.

Here We Go Again, Not Another Broker!

I have been trading since October, 2007, and now I am faced with finding a new broker…again!

What is it with forex brokers? I guess they are like traders, they come and go.

I started out with GFT, Global Forex Trading. At the time, they were recommended by my forex instructor as a viable broker because of their financials. Eventually, in 2012 they had to pull out of the United States market because they didn’t have enough capital requirements to continue business.

Try doing a Google search for them now. I spent a minute and could not find their website. I guess they are gone.

Today, I closed my FXCM account. As I am writing this post, they are publically traded on the Nasdaq stock market. When I chose them, I thought this was a big plus, never thinking that they would cease business in the US.

But in February 2017, they announced that they are stopping business in the US, because of CFTC violations including under-capitalization and concealing close ties to a market maker who received favored treatment.

The company also lost about $200 million on 1/15/2015 when the Swiss National Bank lifted the cap on the Swiss franc’s value against the euro dollar. They had to borrow $300 million to stay in business.

Their stock has been declining and lost 50% of it’s value since the announcement. Today I read an article about how they are going to save money by not being in the US market. That’s probably true for now, but if I were an overseas trader, I would start looking for a new broker. Look what happened to GFT.

Because FXCM is selling their US business to Gain Capital, Forex.com, I decided to not give FXCM the $500 transfer fee that Gain Capital is going to give them for my account, by closing it.

But wanting to get back into the game right away, I opened a demo and real account with Forex.com. They are traded on the NYSE stock market and actually made money on the 2015 franc / euro dollar drop. Their charting platform has 10 minute candles, my most important requirement. I demo traded for an hour or so then opened a real account.

But I didn’t demo trade and observe close enough. Everything looked good on their charts, but I didn’t notice how long their candles lag when a new one opens. I timed one of them, it was almost 3 minutes after the previous 10 minute candled closed. How are you supposed to trade off of candles with that much lag?

I chatted with one of their representatives, and he said that is normal. What?!! That’s normal?

I am the ignorant one for wanting to get back in the game so soon without closer inspection.

So now I have to close my account with Forex.com and open one with Oanda. I downloaded fxTrader, their trading platform, and it has everything I need for trading. I’m using the advanced charting.

Oanda’s demo charting is spot on with FXCM. My FXCM account is zeroed out but is still working, so I compared charts side by side.

Will Oanda eventually fail? Who knows. They have been around since 2001, and are registered with the CFTC, FDM, and NFA. This requires them to have a certain amount of capital on hand to be a broker. I guess time will tell.

Trading and Gambling Compared

As a trader, has anyone ever commented to you that it sounds like gambling? I’ve had a few people ask me what the difference is, so let me summarize what I think about it.

Let’s start with gambling.

When you partake in any of the games of gambling, you are dealing with FIXED odds, and the odds are always against you. That means that no matter how many times you win, in the end, you will lose your money.

In contrast, any other decision you make in life, the odds VARIABLY change. For example, the odds of getting into a car accident change depending on what time of day or night you drive. Even with all the traffic, your chance of dying in a car crash is lower in California than Montana.

The odds of getting a divorce after 5 years for a couple who don’t live together before marriage is 20%, jumping to 49% if they do live together. With both of these examples, notice the odds change based on variable circumstances.

You can figure odds and probabilities on any decision, big or small, each and every day of your life.

Let’s look at trading now.

If you don’t have a strategy and you are not planning, but jumping into a GBP/USD trade for any reason like gut instinct, you are gambling.

If you have a strategy, i.e., if price on my chart is here, breaking resistance at a double zero, then I enter with a 10 pip stop, then that’s planning and taking a trade. Is there a chance that the trade will not work? Yes. But here is the beauty of trading, if I don’t like what I see, I can get out of the trade with a small gain or loss, or at break-even where I don’t lose any money. You can’t do that once you place your money on a roulette table.

For every trading vehicle, the odds change based on what you are trading, when you are trading it, what’s going on in the world at the time of the trade, and sentiment of the crowd of people trading it, just to list a few of the variables.

If you start a business, there are odds that it will be a success or failure. Once again, the odds are not fixed, and there are all kinds of variables that can make or break that business.

Let’s stop thinking that trading is gambling, and put it in the same category of any life decision with odds that variably change based on all kinds of different circumstances.

Expensive Chat Rooms Run By Successful Traders?

Why does it seem like everybody involved with trading wants to take your money?

No, I’m not talking about the person on the other side of your trade or your dealer with their spreads and commissions.

I’m talking about the trade educators who have moved on from selling their books or trading strategies to charging $145 a month to join them in their chat rooms.

If they are so successful at trading, why be so greedy and take inexperienced traders’ money? Why not offer some help for free?  

I’m asking these questions because of some emails I have been receiving trying to sell me time in a $145 per month chat room, so I don’t have to face the markets alone.

After taking a class in trading years ago, and listening to traders via podcast and YouTube videos, I don’t think they are that successful if they have to sell trading room access that leads to becoming a profitable trader.

It’s hard for me to not mention the names of these advisers who give the impression that trading is an easy and quick task to master.

I feel bad for the beginning traders who are not being told that it is going to take years to be successful, and many hours of hard work and practice. That you will have to buy or develop a trading strategy, and make it fit your trading style. Also, that you should be committed to trade the rest of your life.

I think I was fortunate to only pay about $2200 to learn how to trade the Forex market. The cost for the class was actually more, but a friend and I talked the teacher into lowering his price if we both joined. He even allowed us to make payments.

I think the price was reasonable and close to what you would pay for a college class. He offered unlimited access to all his live and recorded sessions. He was a good trainer who covered very important concepts in trading, but I don’t believe he ever traded. He never offered any statements showing his trades.

He has since closed shop. He went on to sell real estate.

I don’t have a problem with my experience with him because as I indicated, I did learn a lot from him and I have his classes saved so I can review them if I need to.

Most of my 33 books on trading were worth what I paid for them. I have gleaned much help from each one.

Trading for 10 years now, I have seen the evolution of these trading educators; first they sell books, then their their strategies, and now they are trying to sell chat room access for $145 per month.

I guess to end my thoughts, ask yourself, do you really think paying $145 per month is going to make you a better trader? Why do they need your $145 if they are profitable traders?

FYI. I do sell my journal software, but at less than $10. I have yet to become rich from the traders who purchase it.

The Randomness of Trading

As traders observing the Forex currency market, we look for patterns to trade that will net us profits. The problem is that market is so random. Yes, there are patterns that occur over and over again, but the market is always changing or going through cycles. I have been rereading Fooled By Randomness by Nassim Nicholas Taleb and found a good trading quote.

The book is not an easy read, and if you are looking for a lot of trading wisdom, you may be disappointed. I think there are a lot of good points he makes though. I was thinking about my trading when I read this quote: “At a given time in the market, the most successful traders are likely to be those that are best fit to the latest cycle.”

I think this is why traders come and go. When I first started trading, I signed up for unlimited training with a market “expert” who had years of experience. I appreciate what I learned from him, but he closed shop overnight without a warning, basically dropping off the radar. His methodologies / strategies still show up in the market, but don’t happen as often as in the past. The cycle for his trading strategy has come and gone basically.

Is it possible to make money at trading with all the variables and change? I think the best traders are the ones with years of experience who have committed their lives to doing it full time day after day, and who recognize the market cycles and make the needed adjustments because of their experience. I think if we are not committed to put the time, effort, and commitment (years), we are doomed to fail and cycle out with the market.

Characteristics Of A Losing Trader

Wow! I can’t believe it’s been this long since my last post. I have been so busy with my job change and living life. There have been a few times I wanted to write about my trading, just no time to do it. Even today I have to work on my grades for my classes and paint a bathroom in my house.

I bought the first Market Wizards by Jack D. Schwager for $1 at a used book store about a year and half ago, I have been trying to finish it so I can move on to another trade book. I’m at the chapter about The Psychology of Trading, which is an interview with Dr. Van K. Tharp. I’d like to summarize a paragraph.

After studying the subject of psychology and trading, here are his characteristics of a losing trader.

Someone who:

  • Is highly stressed and has little protection from stress.
  • Has a negative outlook on life and expects the worst.
  • Has a lot of conflict in his/her personality and blames other when things go wrong. (Would probably not have a set of rules and would be a crowd follower.)
  • Are disorganized and impatient. They want action now. (Not willing to wait for the trade)

Now think these points over. Can you relate to any of them? I know I can.

The good news is behavior can be changed; it takes lot of work though.

Trading Is A Marathon Not The 100 Meter Race

The other day at church while reading along in my Bible with the pastor, I was reminded of something related to trading. As a Christian, the passage has to do with the fact that we will never be perfect here on earth, but make an attempt to be, forgetting the past and look forward to what lies ahead. The Christian walk is a race and we press on to receive the prize. Philippians 3:12-14. It is a lifetime endeavor that Paul was talking about, a marathon race not sprint.

I was reminded how as a currency trader, my trading will never be perfect. I need to forget the past trades, profitable or non-profitable, and press on to continue to be the best trader possible. I also was reminded that trading is a lifetime endeavor, or until you retire, and that I need to continue to run and finish strong.

Trading is not a sprint where you risk it all and become rich overnight. It is winning and small losing trades where you build up your equity, one day at a time.

Lots Of Trades

So many trades, it’s time I start recording my trades. I took 5 trades so close together, that it is hard to remember what happen with each one. For evaluation purposes, that is not good. I ended up with 9 trade total: +1.6, -5.1, +13.3, -4.4, +9.6, -3, -3.4, -2.9, + 16.8 for a total of 22.5 pips.

Good day for practice but I think I over-traded. One thing throughout the trades is I wasn’t trading to get my money back, but because the setup was there. This is a big accomplishment for me.

10 minute 05-01-2015 blog