A few thoughts about trading, and what matters.

Hi guys,

For those of you that don't have kids, the above picture really is a baby. I swear. I know it doesn't really look like one yet....but give him/her time.

The point of this picture is to reiterate the point of the last post. I think that for those of us that are "driven", sometimes we can be "driven to distraction". Trading takes a lot of patience, study, and discipline. It also can take a lot of time. This is especially true during the "formative years", which is the time period I am in right now. I shutter to think of all the screen time I have put in watching charts.

However, I have started to get a grasp on this trading thing. Because of this, I should be spending less time on it. However, it is hard to not try to better our results. This in and of itself is not a bad thing. Regardless, there are more important things.

If you are profitable, is it really necessary to bust your ass "optimizing" a system? I think that the solution lies somewhere between trading as usual, and paper trading your "new ideas".

This way, you have the continued growth that you have come to expect, as well as the possibility of discovery....all without the added stress of your new ideas busting.

As new traders, we are lured into the game with the possibilities of astronomical returns. We get a few trades that reinforce this possibility, and begin to think of "What could be". But, as we finally learn to track our performance, we see that these high-yielding trades are not making up for the bad ones. This is where we either wash out, or begin to truly learn to trade. Expectations start to become more realistic. We no longer expect to double our money every month, etc. We also begin to accept the fact that it is true that the "Big Boys" are making 20-30% a year. We start to see the wisdom of compounding interest. Compounding Interest is where the keys to the Kingdom are.

A perfect example of how far I have come is that EUR/CHF trade. I could have loaded up on the daily hammer, maybe playing 5 times the size I normally do. (As I have found this to be a highly reliable signal.) But, could I have psychologically handled that same trade when I was 70 pips down? It is easy to look back and say, "I should have played large, as I am up 120 pips now." It is entirely different to actually do it. And ask yourself this: What would you do if that hammer failed? It does happen. You can never look back and fret all of the "could have, should have" moments. I know it's hard, and there will always be a part of me that sees that. But this is a marathon, not a sprint.

It never ceases to amaze me how many of the old pearls of wisdom prove themselves true. Some of the best points about trading I have ever read were from 90+ years ago. The "new systems" out there are mainly gimmicks. If it is a system that is being sold, it's not worth it. In fact, I would submit that if you aren't willing to work out a system for you, then you won't ever make it. You are just wanting the easy money, which in the end is neither.

Let's take my 4% last month. I am rounding down I guess, but 4% is a nice, solid, and more importantly - round number. It sounds paltry. I looks paltry. But as I posted last night, it adds up. Take this example:

Starting balance: $500 USD
Monthly gain (%): 4%
Yearly gain (%): 60%
After ten years, what do you get? A balance of $54,831.28 - and an increase of 10,966.26%. All this for a measly $500.

Of course, that is a ridiculous expectation, but it does illustrate how this works. Our problem as traders is learning patience. After all, in the above example, it does take ten years. But, if I told you to give me $500, and in 2017, I would give you back $54,813.28, I am sure you would consider that a good use of the initial deposit.

So, if you are profitable, don't necessarily feel the need to push it harder. Go ahead, look around for a few things that will make it better, but not in live trading. And take your time. Even just 1% a month can do wonders with time. Remember, the faster you gain, the faster you lose. Besides, this will leave more time for other things. Like that kid in the picture above.

At the end of the day, he/she doesn't care about my account. Kids have a wonderful way of cutting to what really matters. Spongebob, a full bottle, and playing. Somewhere along the way, we adults forget that.

Calling it a month. (Knowing when to walk.)

Hi all...

Well, this isn't a bad post like you would think.

I am happy to report that I am up 4.08% for November. This really isn't bad when you consider that this has been a turbulent month in the Foreign Exchange. I mean REALLY TURBULENT. (For at least as long as I have been watching it.)

Plus, add the fact I am quitting smoking, getting married December 1st, and found out recently there is a baby on the way.....it's been a full month. I truly feel fortunate to have the 4.08%. Not to mention that compounded over the year - it's a 60% return. Nothing to sneeze at.

*** Don't listen to the morons out there claiming that 60% isn't much, most professional managers are considered good if they get 20-30%. ***

Seriously, sometimes there is a lot going on that can distract you from making good trades. This is one of those times.

However, come Monday.....I'm coming for my next 4%.

In the meantime, I am too worried about other things. Not to mention I am "excited" about trading at the moment. This can be as dangerous as being "afraid", or probably even worse. Trading with a sense of invincibility probably isn't a good thing.

I am sure I will be much, much, calmer come next week. And calm nerves are what makes great traders.


Have a great weekend everyone.....there won't be anything for me to post until end of next week.

Some breakthroughs. And something to watch.

Hi all -

Again, for those of you bored enough to read this blog, thank you. ;-)

I believe that I made some relatively important breakthroughs this past two or three weeks. I have learned two important things:

#1 - Just because you got stopped out, doesn't necessarily mean that you were wrong. Sometimes you just were in early. I have made back some losers this past few weeks doing this. For example, you could be wrong on a long EUR/USD position. However, I would submit that it is possible to still be correct, if only you wait it out long enough. (I AM NOT ADVOCATING TAKING A 600 PIP LOSS.) The point is that if you get stopped out, it is alright, because the trend has been up for a very long time. It is just that you got into it at the wrong time. Look for a bottom formation in the correction, and get back on the horse. It works, I swear. (Assuming you are good with technical patterns.)

#2 - This will sound stupid, but going with the overall trend will at the very least, soften your landing. Plus, it is easier to scale in a bigger position if you are going the same way as the chart. A lot of times there are good reversal candles on a chart that are counter-trend, and there IS money there. However, as things tend to go, there are fewer pips to be had on a 4 hour shooting star in the EUR/USD chart. I do take these trades, but never look for 700 pip moves from them. A lot of the time it's closer to 50.

Try this scenario: Go with the major trend on a reversal candle. As it goes up, sooner or later it will retrace. More often than not, you will see another reversal candle. Add there. I have not yet had the pleasure of doing this, (On a daily chart as I would like to.) but have ran some tests on "paper", and it is VERY profitable. This is in effect, trend trading. I think trend trading gets bad press because most of those guys are into moving average crossover systems. (I think they suck too.) However, the premise behind it IS the key to the kingdom I believe.

Also, as you may be wrong on a long in this scenario - it's not exactly like those 75 pips you lost are going to change the trend that has been in place for 4 years. I don't have charts in front of me, but a 2,000 pip run-up does NOT get taken out by a 100 pip correction. In fact, it is quite natural.

When you zoom out and look at things, FOREX really doesn't have to be that hard. It is US that make it hard. Never risk too much, go with the trend, and the rest should take care of itself.

It is funny, because a lot of people who don't trade have no idea that it could be hard. This is because they A) - Don't know much, if anything about it. And B) - Tend to think of it like the stock market. (i.e. NO LEVERAGE)

This brings up a HUGE point. What would happen if you didn't use too much leverage on a EUR/USD trade? What if you decided to make it a series of long term trades? What if you could take a 500 pip loss without taking out too much of your account? You could probably breathe a lot easier.

I can just hear this being said..."If you do that, then how are you ever going to get rich?". The answer is simple: Compounding Interest. I know many new traders don't believe this, but you are not going to turn $300 into $1,000,000 this year. If you tend to think of the currency market more like the stock market, and expect more reasonable returns, you are clearing a major hurdle in my opinion.

Remember, the best fund managers are getting 20-30% returns a year. They have millions, and sometimes even billions to trade with. They also have better access to news, better trading computers.....oh, and that little advantage called experience. DO NOT listen to the bullshit advertisments and worse yet, morons on the forums claiming that 500% should be your goal. I would love it too, but it just doesn't work like that.

For an example of what I was talking about earlier, check this chart out:

Asses getting handed daily to traders.

Hi all -

It's been a while, and I can tell you from what I am hearing....it's been a rough month for a lot of you out there.

I recently was thinking of my returns this month, and how abysmal they have been. ONE PERCENT SO FAR. That's a lot of stress for so little. But then, as I was reading emails, I realized that most people are losing heavily this month. (Or so it seems.)

I believe we are definitely at a crossroads in the Forex right now. USD/JPY, as well as the other carry trade pairs are putting up that one last fight. The next few weeks could be really tough, as a lot of traders don't want to give up on that swap rate. However, I believe the writing is on the wall.

USD/JPY will be at 106, and sooner than most people think. But, this is not to say that it's going to be next Tuesday. It is going to fight like hell in the mean time. All I can really say at this moment is that you don't want to arbitrarily short the pair. Look for a nice bounce, and reversal candle. I would move out to the daily charts for this, as I think we will have a lot of noise in the mean time.

One strategy: Just stay the hell away from it for now.

There is no point in getting whipped to death in this pair. However, I will say that 109 or better yet.....110 (if we get that lucky again.) are shorts. Just be prepared to hang on to this trade for a while.

The other carry trades, and specifically Yen pairs, are going the same way. (Oh yeah......you DID know that there are other carry trade pairs out there, right? It's not all Japan. Take a look at the Franc, or Swedish Krone.)

Anyways, keep you head down, and your powder dry on these stupid things if you are not in them already. Trust me, the obvious sign will come.

I see support at 108, the bottom of a trend line on the monthly. If that's broken, look for possible BoJ intervention around 105-105.50. (As they did last time it was down here......Sony DOES NOT WANT this to go down too much farther.)

Perhaps when the BoJ makes it's presence known, I might even go long term buy on this. We will see. (As for the Bank Of Japan intervening, it's already been mentioned in passing by a governor. However, as long as it is orderly, they will leave well enough alone.) This will be interesting, and the bane of existence for a lot of traders.

Which is exactly why I am happy with my paltry 1%.

October, and it's lessons.

Hi all -

I have just finished going over my spreadsheets from last month, and what I found was truly surprising.

For starters, do yourself a favor and keep track of results per pair. It will really open your eyes to a lot of things. Not all pairs are a good match for you as a trader, I believe.

For example, I have always liked the NZD/USD pair. The Kiwi Dollar had been good to me. (So I thought.) After evaluating the last two months, it turns out that it's a loser for me. I know that the pair has been choppy lately, but I find that interesting to say the least. It has accounted for a total of 15% of losses in the last two months.

On the other hand, 35% of my profits have come from GBP/JPY. The Pound-Yen cross always made me extrememly nervous in the past. It can move at the speed of light, and the spread is high. However, you cannot argue with results. And the results say that it matches my personality. (I believe it is because you know if you are right or wrong fairly quick on this pair. The longest part of a trade for me is that "dead time" you get before you know if it is going to work or not.)

Something like 48% of my profits have come from the EUR/USD. I typically don't like this pair, if nothing else, because I keep thinking "It's too high, can it go higher?" Needless to say, I am trying not to ask that question anymore. (And I should know better.)

I also have learned I tend to try to be "different". That doesn't mean that I am shorting the Euro, it means that I am jacking around with the Kiwi. As I ponder these things, I learn that it is all a reflection on me as a person. I am an individual. Anyone who knows me will say that as well. Unfortunately, being individualistic isn't always an asset. Definitely not in trading at least!

The markets can teach you a lot about life. And yourself. All you have to do is listen.

Oh well, I lost 1% over the course of the month. Cheap damn lesson if you ask me.