The wife and I just returned from a conference in Orlando. I will resume posting soon. I closed all of my Forex trades before leaving because I didn't want to have to watch the market and missed a pretty decent move in the direction of my trade (sigh). I did manage my option trading fairly well, although most of the naked puts I've sold in the last month are moving in the wrong direction. One must trust the research and believe in the system (though some sweating will no doubt be in order). Anyway, I will move forward either tomorrow or Monday.
Saturday, May 24, 2008
Monday, May 12, 2008
The Luxury of Purpose
One of the interesting, and unexpected things about having more money than you thought you would ever have is that you find that you have the luxury of trying to figure out what you really want to be. That might sound strange, but think about it. When you are working your assets off to improve your position, when your every waking thought is how to move forward, when you spend all of your energy to rise through the next barrier, and suddenly that level of effort is no longer required. What do you do then? Its a problem that I'm sure everyone would like to have (thus the term "luxury"). But its a problem that is not so easily solved. Everyone has heard of lottery winners who go off the deep end and become the type of person no one would have believed before they won. Its a real issue.
The issue for me is what to do with the rest of my life. I have created a trading system through which I can enjoy a very nice standard of living without working. However, I enjoy my job and am not ready to give it up, which is lucrative and adds depth to my resource pool. I use those funds to continue to increase my trading business, which, in turn, increases my income. I don't need more money, yet I pursue it. Why and for what? Is the pursuit of an ever increasing bank account an end unto itself? Or is there more, a reason to continue to grow my funds, a purpose, if you will, for the existence of the venture? I have puzzled over this for quite a while and I have no concrete answers. I think, in my case, I failed to see that this point would come and I was not prepared for it. Had I begun the search for purpose before I needed to, when the struggle was the purpose, then I might be doing something more meaningful than merely creating more wealth for myself and my family.
The search for purpose is a luxury affordable only to those who have satisfied the basic needs of themselves and those for whom they care. One cannot spend time and energy looking for fulfillment when food must be found and shelter is in question. Purpose at its most basic is finding the necessities of life. Only when one is secure from that need can he look for some deeper meaning. I will continue to try and puzzle this out. I hope to find the thing to devote myself to that will give me the satisfaction of a kind that has, up until now, eluded me. I advise you to start the soul searching early in your life, or if it is too late to start early, then don't put it off any longer. Know what you will do when you can do anything. You will be the better for it.
Good Trading!
The issue for me is what to do with the rest of my life. I have created a trading system through which I can enjoy a very nice standard of living without working. However, I enjoy my job and am not ready to give it up, which is lucrative and adds depth to my resource pool. I use those funds to continue to increase my trading business, which, in turn, increases my income. I don't need more money, yet I pursue it. Why and for what? Is the pursuit of an ever increasing bank account an end unto itself? Or is there more, a reason to continue to grow my funds, a purpose, if you will, for the existence of the venture? I have puzzled over this for quite a while and I have no concrete answers. I think, in my case, I failed to see that this point would come and I was not prepared for it. Had I begun the search for purpose before I needed to, when the struggle was the purpose, then I might be doing something more meaningful than merely creating more wealth for myself and my family.
The search for purpose is a luxury affordable only to those who have satisfied the basic needs of themselves and those for whom they care. One cannot spend time and energy looking for fulfillment when food must be found and shelter is in question. Purpose at its most basic is finding the necessities of life. Only when one is secure from that need can he look for some deeper meaning. I will continue to try and puzzle this out. I hope to find the thing to devote myself to that will give me the satisfaction of a kind that has, up until now, eluded me. I advise you to start the soul searching early in your life, or if it is too late to start early, then don't put it off any longer. Know what you will do when you can do anything. You will be the better for it.
Good Trading!
Saturday, May 10, 2008
The Pluses and Minuses of Wide Stops
If you've been reading this blog for the short time it has been up then you know that my trading is limited to mid to long term trades which don't require a lot of monitoring. This means that my trading systems use stops, both trailing and stop loss orders, and occasionally, limit orders. I've found that this type of trading really necessitates the use of wide stops. By wide stops I mean a larger stop than you would use if you were watching the market in real time. I generally place my orders before 7 a.m. or after 8 p.m. so there is not a lot of volatility when I'm looking at the charts. The use of wide stops allows the market to move back and forth without my constant watching. The danger, of course, is that when your stop is hit, you lose more than you would have if you'd used at tighter stop. I'm not saying that my way is for everyone, but I like to have a bit of room for my trade to move. Who has not felt the frustration of placing a trade which was moving in your direction, only to have it stop as soon as you hit the order button and go the other way. With a tight stop, such a common phenomenon would take you out (sometimes only to see the trade reverse it self and move in the direction you thought it would). The wide stop minimizes the whipsaw effect. I usually use a 2 ATR (14 day average) stop from my entry point. It takes a huge move in the wrong direction to hit the stop and leaves plenty of time for little moves against you to right themselves.
Now, the bad news. A few losing trades in a row can have a serious impact on your account. I've lost 300 pips in 3 or 4 trades before seeing a winner on more than one occasion. If your head can't take that, or if your account can't take it, then this style is not for you.
Good Trading!
Now, the bad news. A few losing trades in a row can have a serious impact on your account. I've lost 300 pips in 3 or 4 trades before seeing a winner on more than one occasion. If your head can't take that, or if your account can't take it, then this style is not for you.
Good Trading!
Wednesday, May 7, 2008
The Mistake that Could Have Cost a Fortune
Everyone makes mistakes. I’m not one of those lawyers who trumpets perfection, then blames everyone else when it doesn’t happen. I’m comfortable with allowing people to do their own thing, make their own mistakes and learn from them. I only really get angry when people refuse to learn hard won lessons, which is why I’m a bit peeved at myself today.
As I’ve indicated before on this blog, I usually work on my trading in the morning, and again in the evening (as I can) after the family goes to bed. Well, I saw a pattern developing with the EUR/USD pair and decided that buying if the pair rose a bit, would be a good move. I placed my order and went to bed. When I arose in the morning and fired up my computer to see what, if any trades were initiated during my slumber, I found, to my horror, that I had neglected to place a stop on the EUR/USD order. I can’t explain it, I’ve never done it before, but sure enough, there it was. Of course the trade had gone against me and I was down 90 pips. I examined my trade log, saw that I had, indeed, meant to place a stop and where I meant to place it, and put it where it would have been, which was about 15 pips from the then current price. As soon as the stop was in place, the price reversed itself and ended up going back up and hitting my profit target of 50 pips (I place wide stops and will explain why in the next post).
I’d like to say it was a “no harm, no foul” sort of thing, but now each time I place an entry order I am fanatical about making sure the stop is set, so apparently there was some harm done. The market chastised me, and I believe that I’ve learned my lesson. Only time will tell.
Good Trading!
As I’ve indicated before on this blog, I usually work on my trading in the morning, and again in the evening (as I can) after the family goes to bed. Well, I saw a pattern developing with the EUR/USD pair and decided that buying if the pair rose a bit, would be a good move. I placed my order and went to bed. When I arose in the morning and fired up my computer to see what, if any trades were initiated during my slumber, I found, to my horror, that I had neglected to place a stop on the EUR/USD order. I can’t explain it, I’ve never done it before, but sure enough, there it was. Of course the trade had gone against me and I was down 90 pips. I examined my trade log, saw that I had, indeed, meant to place a stop and where I meant to place it, and put it where it would have been, which was about 15 pips from the then current price. As soon as the stop was in place, the price reversed itself and ended up going back up and hitting my profit target of 50 pips (I place wide stops and will explain why in the next post).
I’d like to say it was a “no harm, no foul” sort of thing, but now each time I place an entry order I am fanatical about making sure the stop is set, so apparently there was some harm done. The market chastised me, and I believe that I’ve learned my lesson. Only time will tell.
Good Trading!
Sunday, May 4, 2008
The Importance of Redundant Systems
You never expect to lose power, have your hard drive crash, have your DSL service interrupted or any other technical glitch. All of us have experienced something like that before and its usually nothing more than an annoyance. In trading, however, such an event can be deadly. Scenario: You are trading S&P Index Futures and are watching as your position is inching toward where you are going to exit (for a profit or loss, it does not matter), when suddenly the power goes out. Fortunately you have a laptop ready and fire it up on battery power, but your cable modem needs power to run. What are you going to do now? If only you'd written down your broker's 800 number you could call and, even thought the commission is higher, use a broker assist to exit your position, but you never got around to it. You, my friend, are screwed.
Here is my promise to you. If you trade long enough, this type of thing will happen to you. Here is your recipe to save yourself, and your account. First, write down the broker assist numbers for all of your accounts and have them near where you trade. Second, always have a second computer available (preferably a laptop) which can access the internet by telephone line or wireless (cell phone) modem if need be. Third, (related to the second) have your high speed internet access backed up by either another high speed avenue, a dial-up line, or cell-phone access. In fact, have more than one back up. The last thing you need is for two power related access points to go down and have no back-up of last resort.
This type of planning is essential. Think of it as account insurance. It is the cost of doing business, and we are all about staying in the game.
Good Trading!
Here is my promise to you. If you trade long enough, this type of thing will happen to you. Here is your recipe to save yourself, and your account. First, write down the broker assist numbers for all of your accounts and have them near where you trade. Second, always have a second computer available (preferably a laptop) which can access the internet by telephone line or wireless (cell phone) modem if need be. Third, (related to the second) have your high speed internet access backed up by either another high speed avenue, a dial-up line, or cell-phone access. In fact, have more than one back up. The last thing you need is for two power related access points to go down and have no back-up of last resort.
This type of planning is essential. Think of it as account insurance. It is the cost of doing business, and we are all about staying in the game.
Good Trading!
Saturday, May 3, 2008
Why Sticking to your Trading Plan is Important
Ok, I'm not perfect. I've never claimed to be (except perhaps when drunk), and recent events have proved the fact of my imperfection. Now I've been trading for years, and after the usual newbie issues one has when learning to trade (like overtrading, trading too big, not monitoring trades enough, etc.) things have gone pretty smoothly. I've been consistently profitable for the last 12 years. Ever increasingly so, in fact. But sometimes, I still fall into the rookie mistake trap. Last week it happened in the Forex market. While doing my usual chart reviews early in the morning one day last week, I saw the AUD/USD pair looking like it was, right at that very moment, where I wanted it to be in order to get into a trade. Instead of thinking it over and looking at different time frames, I made a market order and went long 10 lots. Fortunately, I had not completely lost my mind and set a stop. I went to the bathroom, took a shower, came back, and had been stopped out at a 50 pip loss.
What is the lesson here? Its plan your trade and trade your plan. Other trades I made last week, where I did my homework and didn't just look at the chart and think "my that's pretty", went as expected (mostly). But this one burned my fingers. Lesson learned? Perhaps. Historically, I do this occasionally. I'd like to say otherwise, but its the truth. Thank God for stops. Learn from my experience: Don't rush into a trade without examining it from all angles. That is your edge and what sets you apart from the mass of losing traders out there.
Good Trading!
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