Keeping perspective in the markets.

Like many of you out there, I get several emails from different forex "gurus" and commentaries. Most, if not all, are complete rubbish. However, I am going to call one out right now.

BK Trader. As in Boris Schlossberg and Kathy Lien. I would like to point out the four middle letters in the main player's last name....."L-O-S-S". I do not say this with any malice, nor do I have anything against the man. He could be a world-class guy. I do however, have issues with the style of trading I see from him. (Which is why I don't trade that way.)

I know that there are always going to be different styles, and I am for anything that works for you. However, someone that is connected with a broker that lives off the spread, should be taken with a grain of salt.

If you ever look at the videos, (you can look them up on their page, or YouTube) you will notice something odd. 10 minute candles. Who in the hell trades on a 10 minute chart? He also is always talking about trading the "IFO report" or some other such nonsense. By the way, these two people work for FXCM, who of course have an interest in you making short term trades......gotta get that spread baby!

None-the-less, let's pretend that he's honestly trying to help you out. (Like I said - he may be....I have no information that makes me think there is any malice in his advice.) I can tell you one major thing I have learned in my time as a trader: Short time frame trades get KILLED by short term fluctuations.

I want you to think about this for a second: if you have a stop of 40 pips in a pair like GBP/USD, how much of a stop is that actually? As I write this, the exchange rate is something along the lines of 1.9975 GBP for every USD. A 40 pip move is roughly a move of 0.2 percent! This is why currency pairs tend to be choppy. It's because they are decimal pointed out 4 places. (In the case of cable.) It takes 199.75 pips to make 1% in that scenario. And seriously....if you heard that the British Pound lost 1% of it's value against the U.S. Dollar, would you be thinking a collapse? I didn't think so. Odd how just changing the phrasing makes a huge difference in the psychology, huh?

I only picked on BKT because I just got an email from them....trust me, there are plenty of people willing to take you down the road of high leverage, short term trading. By the way, high leveraged trading is a major factor in today's financial mess. If major banks are getting whacked by it, I can guarantee that your little account will too.

Slow and steady. Someone, I believe Einstein actually, said that "Compound interest is the 8th Wonder Of The World." Maybe it wasn't him....it was someone you should listen to though, I promise.

So the next time the Euro drops 50 pips, think about what you are really looking at. The other day, I had a short in the pair that got me 250 pips. (See the previous post.) Sounds like a lot huh? It wasn't a huge drop, and you can bet the big money was waiting for things to calm down a bit, so they could buy more Euros at a cheaper price. Truth be told, I did as well. However, like an ass, I went to bed with my stops too tight. I got stopped out at +50. I am still a little pissed about that one, as I should still be in this trade. But, we live and learn.

Unless of course, we are trading 10 minute charts. We won't be around long enough to learn.