Monthly Archives: December 2011

Time to bring the ‘A’ game. Seriously.

Welcome to 2012 where the western economy is basically screwed. Chinese workers will soon start to militate for more of the fruits of their labours and the Russians have finally begun to get fed up about a select few robbing them blind.

Ladies and gentlemen I bring you the decade of discontent… and I’m not even factoring the middle east into my thinking. Heralded by denial in 2011 the pidgeons of discord will really come home to roost in 2012 and beyond. Does anyone remember conversations in the first half of 2010 about the FTSE reaching 7000 and gold getting above 2000? Yep, we were all driving with our eyes shut 😉

If I had the personal choice or the skill-set I’d be looking to move to Australia or Canada in the near future but sadly I have neither of these options. I wasn’t paying attention to anything outside my little ‘bubble’ until maybe the last couple of years so haven’t got to the point where I can bugger off and trade from the beach just yet 😉

So the option is to step up within my current personal framework and completely excel as the world essentially goes to s**te in a handcart. What does this mean? Well, since everything is connected (and we all know this to be true, right?) this involves everything from diet, fitness, sleep, time-management, my job and of course trading. It’s time to bring the ‘A’ game as there is no other option.

If you’re currently working and want to keep doing so then you need to become even more damn indispensable than you already are. If you’re trading then you need to trade even more like a BOSS than you already do. The aim is to get to an un-assailable position of security as quickly as possible ’cause there’s little slack time remaining at this point.

Now, people will have two or three different reactions to this post…

1. Don’t be alarmist, we’ll be ok and it will all be fine. Sorry to disappoint you there but it’s not looking likely from where I’m sitting. If you feel good about the future outside of yourself then I’m happy for you. Smarter people than you or I are preparing for meltdown

2. You’re wasting you time worrying. Yes, this may be true and if I happen to be wrong then great. I’ll have moved farther forwards faster than I would have done otherwise so I’ve essentially got closer to my goal quicker. Sweet 😉

3. What are you talking about? I don’t want to hear this and I think you’re some sort of dangerous conspiracy theorist… I’m sorry, I can’t help you. Please stop reading and go back to watching Eastenders

Now I’ll be honest and say that my whole intention with trading really revolves around achieving a level of independence from the usual ‘working for someone else’ route. I guess what I’m trying to say is that the reasons to do this have become even more compelling in the last 6 months as I’ve (obviously) been paying more attention to what’s happening in the financial arena.

I have no idea whether Cameron will be proved right or wrong in the long term with his latest decision on Europe but it shouldn’t have got to this anyway. So here we sit, an island within Europe, afloat on a wounded financial services industry with scant comfort other than the fact we’re not Greece, Portugal or the other wounded…

So what’s my plan? Make sure I’m bloody indispensable, add value to whatever I’m doing or with whoever as much as possible, get this work recognised and make sure to bring the ‘A’ game at all times. Oh, and learn to trade like a BOSS, of course 😀

Personal responsibility just got a whole heap more compelling…

Trading can be fun!

So as a newbie trader (relatively) the work is in sorting all the internal obstacles to actually enjoy the process of trading. I’ve posted previously about some negative aspects (fear) which I’m now pleased to report I’ve overcome.

If you’re new to trading and feel like you’re putting your life in the hands of your enemy or you get extremely nervous when in a position then you really need to pay attention to the following.

The bit which isn’t exciting (not so much) is that I’ve beaten this in an extremely boring way… rather than transforming into some sort of warrior trader ninja/samurai 😉 I’ve done the following: –

1. Decreased my trade size. Yes, this is extremely un-sexy but if you’re new to trading and feel under pressure immediately when placing a trade it’s likely to be ’cause you’re risking too much in a single trade. Risk less, decrease your position size and you’ll be able to manage the whole process out WAY better than you would previously.

2. Gotten to a point where I’ve at least have half a clue what I’m doing. This is the bit that takes some time and (IMHO) involves learning from real people as to what to do. When I’ve made some consistent progress I’ll be more than happy to recommend various people and explain what component of my trading approach I learned from where.

For me the main task is now practising trading and really getting my head around using what I’ve been taught. This is setting up to be my mission for 2012. Trading as much as possible given that I work full time. I’m looking at changing back up to 1Hr/4Hr timeframes to do this.

3. Learn patience. Really this is invaluable (and I’m still learning this). Once you understand even a little (as I now do) about how prices move and where professional traders enter positions then you’ll be more than happy to wait for the price to get to where you want it to before getting in.

There is no reason to rush into a trade where you’re likely to lose money or get panicked into bailing out of a trade early. Decide in advance where you want to get in and then wait. If you miss an opportunity to get into a move then wait for a pull-back and then get it in if the reason for the trade is still valid.

Now of course you can go look at my actual trading results and notice that they’re less than stellar. So why should I be dispensing advice? Well, I guess what I’m trying to do with this blog is highlight what is actually really involved in going from not having a clue to having consistent trading success.

Jan 2010
Started thinking about trading, opened a small account and blew it up as I was utterly clueless

Oct 2010
Signed up for some very over-priced training, this didn’t help, re-committed

Jan 2011
Started this blog while still trading and consistently losing money

Oct 2011
Got the first bit of proper training, stopped losing money and started really studying

I know how far I’ve come since I started looking at this topic…

Looking back even 3 months I’ve learnt more about what it takes to really succeed at this than I did in the entire 12 months of 2010 and most of 2011 too. Scary huh?! 😉

So I’m now, as I mentioned above, at the practice, practice, practice stage and concentrating on executing good, well thought out, risk managed trades.

It’s not exciting or sexy or like it is in the movies but it’s at least becoming much more fun 😉

Eating the elephant logically

Question: How do you eat an elephant?
Answer: One bite at a time…

I’ve been taking apart the problem of learning to trade because it finally hit me that my trading practice has totally lacked any sort of structure. All the books etc. talk about finding your own trading ‘style’.

BUT if you just launch into trading it will take you a LONG time to find this because you’re hoping to get lucky and find what works for you by accident

I’m not explaining this very well… OK, let’s try again. As a newbie trader you look at a chart. If you’ve got half a clue you’re also attempting to figure out what the market is doing and why. For FX you might look at other pairs to see which currency might be stronger/weaker versus the dollar. You place a trade based on a setup (1) and it may/may not work… What did you learn? Possibly precisely nothing.

You look at another chart/timeframe and decide you’re seeing another setup (2) that could be a low risk idea. You enter the trade, it does/doesn’t work and go on to use setup (3) but hey you’re trading so this means you’re focussed very much on the result (cash) and not the process of learning anything… By now you’ve forgotten about your experience with setup number 1 or any lessons learned from it. Probably.

Another challenge I have with teaching myself (which is effectively what I’m doing) is that I cannot sit in front of a price chart all day. Why? I’m actually employed full time. So… what is the plan?

Eat the elephant a bite at a time and do 20(+) trades based purely on bounces off support and resistance.

No, it’s not going to be exciting or ‘svexeh’ (see, I’m down with the youff)  but it will mean I will learn all there is (you know what I mean) about one way of entering a trade. When that’s fully internalised I will pick another setup.

I KNOW someone out there will think ‘BORING’ and yes, we’re back at the stage where pre-conceived ideas of what trading is are getting killed. Good. All pre-conceived ideas of what trading is/traders are are wrong anyway… That’s another post title in the making right there.

So here we go… breakdown as follows for learning to trade Setup 1

1. Set an alert for price breaking up/down to a previous level (free SMS price alerts on IG!)
2. IF get an alert go look at the chart.
3. Check that the spike isn’t completely parabolic due to some freak news event i.e. Germany has bought Greece or France has decided to leave the euro 😉 There was at least one of those last week, remember?
4. Enter with a sensible stop (and take a screenshot)
5. THE MOST IMPORTANT BIT… wait at least 25 minutes (my own rule) and manage the trade out
6. Concentrate on picking up as much information from trades that go right as ones that don’t
7. Repeat 20 times – record them all then review how I traded these.
8. Make improvements – do another 20 trades JUST ON THIS etc. etc. etc.

Now, I’m not going to be taking a lot of trades based on this but I sure am going to learn a lot about how price moves in these areas AND how to manage myself in relation to these circumstances.

Some pretty pictures to illustrate what I mean.

I appreciate this probably isn’t a revelation to anyone who’s currently trading profitably and consistently. However it should mean that this high probability, low (?) risk setup becomes properly part of how I trade. Forty of these later without getting distracted and learning from each one, being able to compare them and what happened in/around these trades seems like a logical approach.

Didn’t do this today though due to NFP 😉