Lord Tedders Futures and Forex Trading

New Blog

2010-12-02T07:56:00.000-08:00

I know there are still quite a few of you who pop in from time to time to see if I'll write anything new here.

I've decided to begin blogging again; however, it will be at a new home called Face This World.

The writing I do there is going to be a little different. I won't be discussing specific charts or setups. However, I will be sharing my story, talking about the mental hurdles every trader faces, collaborating and sharing stories of other inspiring bloggers and traders, and showing how I'm trying to take my trading to the next level.

You can expect I'm going to get a lot more personal, as part of that I'm giving up the LT persona. It was fun while it lasted. Lord Tedders signing off...

Sincerely,

Edward Heming

Blog on hold

2010-07-06T14:06:00.000-07:00

For those of you who still poke around here occasionally, as you've probably noticed I am not actively blogging. I didn't want to put together an elaborate going away post since I've done that before only to change my mind. I am still trading and reaching out to other traders locally at meetups; however, I don't intend to blog for the foreseeable future. Best of luck to all those still moving through their trading journey.

7-7-09

2009-07-07T05:15:00.001-07:00

Here was a USDCHF trade initiated yesterday. +52 pips on 10k.

LT

Changing things up

2009-07-01T08:17:00.000-07:00

As some of you may have noticed I've been posting sporadically recently. Honestly I haven't been satisfied with my short term trading results and have been skipping trading some mornings.

I'm going to take a break from scalping for a bit. As such I won't be posting results every day (at least for the near future), however, I will post some of my swing trades as they come along.

LT

6-24-09 Sticking to one thing

2009-06-24T07:01:00.000-07:00

Well its pretty obvious, but the currencies as well as other markets have been pretty choppy recently (must be the low volatility).

As such I'm not seeing much bang for my buck when it comes to trend continuation and breakout moves. For now I'm gonna stick to fading the chop. And for those who are worried yes the first position on a couple EURUSD trades was averaged. But I had a hard stop in (just decided since we are in a noisy place in the markets right now it wouldn't hurt to avoid the noise).

-4 pips on 50K

LT

6-23-09 Fighting the chop

2009-06-23T07:11:00.000-07:00

I didn't seem to get the picture this morning - we are in a chop zone still. Had several attempted trend continuation trades on both the EURUSD and USDJPY that didn't pan out. Finally got the "news" and started scalping some solid reversals.

-7 pips on 50k

LT

6-22-09 Slow day

2009-06-22T06:52:00.000-07:00

Not a whole lot going on this morning. +8 pips on 50 k.

LT

Not feeling great

2009-06-16T07:48:00.000-07:00

Haven't posted here in the past couple days cause I haven't been trading. Been feeling sick and since I am making a trip to LA this upcoming weekend I'm trying to get better. I may trade later this week or not depending.

LT

6-12-09

2009-06-12T07:14:00.000-07:00

A very quiet Friday morning that was pretty choppy. Should have picked up on this earlier and not gone for the breakout trades, but otherwise not much to say.

-6 pips on 50k.

LT

6-11-09 Taking trades in all the wrong places

2009-06-11T07:08:00.000-07:00

Well I won't be buying the wife any jewelry today, but I definitely managed to do everything else wrong.

The biggest problem was missing out on the run in trade number 3, although I exited based the correct price action at the time. This would have been worth +20 if I'd been able to hold it.

Otherwise just a tough day for my setups. -24 pips on 50k.

LT

6-10-09 TheTrading Idiot

2009-06-10T07:11:00.000-07:00

The average loser strikes again! How many times do I have to average to realize it's not helping my trading?

Second trade on the EURUSD was averaged. Entry wasn't valid (why did I take it again)? Also missed two winning trades while managing this one.

Like Mark Douglas says I haven't accepted the risk of my losers. Ironically this is causing me to lose.

So after reviewing the morning trades I'm doing something I haven't had to do in a few years. I am reinstating the trading idiot mode. As apparently I no longer have the ability to protect myself from myself. So idiot mode goes like this. For the next 60 trades if I fail to follow my trading rules (such as no averaging) and purposefully pull a stop, take a trade I shouldn't or even not take a trade I should my wife gets a new $1,000 piece of jewelry. The wife will be checking the account statements every morning to ensure that I follow the rules. Eventually I will learn to trade by my rules or the wife takes my trading account piece by piece.

+2 pips instead of +15

6-9-09 Failure to Focus

2009-06-09T07:12:00.000-07:00

Well this morning definitely proved that I didn't have my brain turned on.

First trade was taken prematurely and incorrectly.

Oh boy. Second trade should have been a short on the USDJPY instead of the EURUSD. Got myself in a bit of a spot there and missed out on a 20 pip move on the USDJPY. REMEMBER KIDS ALWAYS CHECK WHICH MARKET YOU ARE ACTUALLY SHORTING!

I'm not going to mention the other trades as they were fairly inconsequential and were taken as they should have been.

Overall -7.0 pips on 50K

LT

6-8-09

2009-06-08T06:55:00.000-07:00

Overall this morning there is a lot less volatility than Friday (no surprises there), however, the pace and tendency for the majors to range are well suited to my scalping setups.

Basically easy trading this morning which is why I don't have a lot to say about it. If only everyday were as easy.

+16 pips on 50k

LT

Ok FX this chart is for you.

6-4-09 Changing up my posts

2009-06-04T06:43:00.000-07:00

I've decided to post less pics and more description of what I did. Still will post blotter, but not sure if there is much value in posting a chart (since it only shows the last 30 min on the timeframe I trade - 1 min bars).

Had problems with Oanda for first 45 minutes. No trading.

Spotted one valid breakout trade during this time that would have been -6 pips

Second trade was a #6 on the USDJPY for +5.6. Trade taken correctly within the rules.

Third trade sequence on the EURUSD was a valid reversal signal. Oanda froze up on me so I added to get out at scratch. Got lucky and the market tanked and let me out with a nice profit.

Fourth trade - gah. Not even a valid setup by the rules, compounded error by adding. Should have just gotten out. Yeah it didn't cost me much. But I am pissed at trades like this. Need to stop averaging...

Of course as part of this fourth trade sequence a valid signal was missed - was a winner - of course.

Fifth trade, scratch as I didn't like how much we had retraced.

Sixth trade, taken correctly, winner.

Conclusion - 1 breakout - would have been a loss but missed
3 #6 reversals - 3 winners - took 1
3 reversals - 2 taken. 2 winner 1 loser (missed
a winner)

Net pips should have been +15, was actually +29.

However, I'm not pleased. Averaging is what produced those numbers. And while that may work fine on a day like today you can quickly get burned when the market gets into a steady trend.

6-3-09

2009-06-03T07:07:00.001-07:00

Funky slippage this morning on the last trade. Not too pleased with how I gave back earlier wins.

-3 pips on 50K

LT

6-2-09

2009-06-02T07:38:00.001-07:00

Not much to say this morning. The EU and UJ varied between chop and stair step most of the morning.

+14 pips on 100k.

LT

6-1-09 Back to work

2009-06-01T07:12:00.000-07:00

So as you may notice from today's charts I've changed things up a bit. Still using basically my system but have added some "new" indicators and decided to add the USDJPY to my lineup. The new indicators don't really tell me anything different, but give me an idea of the intensity of the trend. Made a few good pips last week in Cabo, and hope to keep up the pace.

+27 pips on 100k this morning.

LT

Just Another Day in Paradise

2009-05-27T20:02:00.000-07:00

Made my taco money this morning and just hanging at the pool.

Avery and a few other folks are here in Cabo to trade and have fun.

LT

5-26-09 Trading from Cabo

2009-05-26T08:48:00.001-07:00

Enjoying the sun and the sand here in Cabo. This is a view from Avery's unit (I'll post mine later once I get my camera setup).

A very relaxing day for +10 pips on 40k.

LT

5-22-09 Slow and steady

2009-05-22T18:36:00.000-07:00

As the Euro slugglishly moved up this morning was able to grab 13 pips on 40k

LT

5-21-09 Back in the chopper

2009-05-21T07:06:00.001-07:00

Sideways from London on. No trades.

LT

5-20-09

2009-05-20T07:07:00.000-07:00

Just one solid trade here this morning on a very strong Euro. +15 on 40k.

LT

5-19-09

2009-05-19T07:09:00.001-07:00

Caught the end of a retracement on the Euro this morning for +4 pips on 40k.

LT

5-18-09 No trades

2009-05-18T07:12:00.001-07:00

No trades this morning.

5-14-09 No Trades

2009-05-14T07:29:00.001-07:00

Pretty slow this morning, no trades.

LT

5-13-09

2009-05-13T18:33:00.000-07:00

Well as some of you may have noticed this has not been the best week or two for me. This is pretty typical whenever I up my trading size :P

Tomorrow I will go back down to 40k lots until I get back in line with the market pace. This isn't October after all.

-25 pips on 50k.

LT

5-12-09

2009-05-12T07:00:00.000-07:00

Had a nice Mother's Day with the folks, and didn't do any trading on Friday or yesterday.

Not much to report this morning. Despite some tepid news events, the overall pace and volatility of the market is way down even from a few weeks ago.

-15 pips on 50k.

LT

5-7-09 So much news so little happening

2009-05-07T07:17:00.001-07:00

This morning was a classic example of a day where there was lots of news but little conviction. At least early on.

First trade went back to breakeven as the spread widened me out of my stop. Second trade never had a chance to go anywhere. Took some profits on my third trade and still holding for the next value area. We'll see where it gets to.

Closed positions -5 pips on 60k. Still have 1 20k trade open short.

LT

5-6-09

2009-05-06T07:09:00.000-07:00

Sometimes the patience pays off and sometimes it doesn't. First trade cracked through resistance on the 15 min chart and just hung out for about 45 minutes. That should have been telling me something. Funny thing was it missed my first target (which would have scratched the trade overall) by 1 pip. Yep now that's luck :)

Second trade was no waiting around and a nice reversal play. Unfortunately it moved so fast there was nowhere to add to my position.

Overall +9.5 pips on 50k

LT

5-5-09

2009-05-05T07:10:00.000-07:00

As mentioned yesterday, I will be taking more retracements in moves that have broken their range on the 15 minute bar. I've also increased my size to 50k lots.

Net on the day -14 pips on 50k.

LT

5-4-09 Late post

2009-05-04T12:15:00.000-07:00

Forgot to post this morning's trade. Fading the extreme of the downtrend. Watched the trend reverse and move up from there. Thinking more and more about how I might be able to capture this trend moves more effectively in some fashion. I guess I can't just be a countertrend trader :P

+15 on 37k

LT

5-1-09 Mr. Newb trades the bank holiday

2009-05-01T06:15:00.000-07:00

Yep. What's even funnier is that I had looked at Forex Factory's calendar earlier in the day. Says bank holiday right on it!

On the plus side I got great service from my Oanda rep in live chat. I couldn't figure out why my positions weren't updating in real time! The outrage :P

Still managed to squeak out of the holiday with +6 pips in 37k hehe.

Overall end of the week is +53 pips on 37k or about $200. Planning on upping my size soon so I can hit the dollar targets in my weekly goals. For such a slow week I'm pleased with these results.

LT

4-30-09 Solid green for profit, solid red for position sizing

2009-04-30T06:55:00.000-07:00

The p/l statement definitely doesn't reflect the mistakes made today. As those of you who follow the blog know, I control my losses with intelligent position sizing. Except today - not so smart.

The most important thing to recognize about emotions is that they are illogical. Thus when the market is at extremes it is the least logical. That is when we must be our most logical to profit. Simple, but definitely not easy. So can you spot today's mistake trade? That's right kids - the 2nd long entry.

I'm very forgiving of my first position in any trade (also the lightest), but my 2nd position shows (or should show) that the market has blown through all expectations and that emotions have shown themselves clearly. I did not wait for that confirmation. I knew that this was a mistake as soon as I entered! Duh.

No excuses.

P/l wise this was a +35 day on 37k.

LT

4-29-09 All was quiet before the Fed Meeting

2009-04-29T06:52:00.000-07:00

Yep it's a ghost town this morning. No surprise since we've got a Fed Meeting this afternoon. No trades.

LT

4-28-09 Slugging along

2009-04-28T07:14:00.000-07:00

This morning was just another one of these grinding slow trend days. Emotions were brief and the grind was long.

First trade went fine, however, the 2nd trade was really a patience tester and so disappointing to have gotten the relative entry correct and made so little money. Third trade was just too late in the day to hold.

Overall +15 pips on 37k.

LT

4-27-09

2009-04-27T07:04:00.000-07:00

1. Sun Tzu said: The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy.

2. To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the
enemy is provided by the enemy himself.

3. Thus the good fighter is able to secure himself against defeat, but cannot make certain of defeating the enemy.

4. Hence the saying: One may know how to conquer without being able to do it.

Chapter 4 of the Art of War by Sun Tzu definitely describes my morning. I knew myself but I did not know my enemy. Most importantly I could not identify the emotions in a market that kept blowing off far earlier than I anticipated.

Overall -4 pips on 37k

LT

4-24-09

2009-04-24T07:13:00.000-07:00

Well got back out of my funk of yesterday as best as reasonably could be expected considering the continued market ambivalence.

Most importantly managed to keep myself in a positive mental place and focused on trading well. Didn't catch everything I would have liked, but considering the pace of the market I felt I did reasonably well.

+22 pips on 37k for a +42 pip week.

Looking forward to a more active week next week. No change in trade size.

LT

4-23-07 Avoiding tilt

2009-04-23T07:22:00.000-07:00

As some of you can probably tell this hasn't been my strongest week. The pace and conviction have been really lacking any emotion from which to base my trades.

This morning I got off to a poor start with a misread trading sequence that had me -35 pips in the whole (faded the break, exited, got faded on the break, exited).

From there it was aggressive recovery mode to keep me out of a slump. Managed to recover most of the damages for a total of -10 pips on 37k for the day.

LT

4-22-09 Trades

2009-04-22T07:00:00.000-07:00

The EU continues its sleeper week this morning with lots of tight ranging movement. We finally made a play to the outside of the 15 min range just before 7:00 a.m. local time.

Managed to add a couple of pips to the pile. +20 pips on 37k.

LT

4-21-09 No Trades

2009-04-21T07:15:00.001-07:00

Pretty quiet morning that never pushed the edge of the range. No trades.

LT

4-20-09

2009-04-20T07:13:00.000-07:00

Pretty slow morning for the most part until about 7:00 a.m. PST when the markets broke down again. Managed to catch a piece of the break.

+10 pips on 37k

LT

4-18-09 Saturday Videos

2009-04-18T10:56:00.001-07:00

I've just uploaded 2 new videos describing some of my trading ideas and thoughts based on Tuesday 4-14-09 trading.

Let me know what you think!

LT

4-17-09 No trades

2009-04-17T07:11:00.000-07:00

We definitely had a sleeper morning here with the Euro just cycling in a very tight chop. No trades this morning.

+76 pips ($192) for the week on 25k. Next week will be stepping up size to 37k lots.

LT

4-16-09

2009-04-16T07:11:00.000-07:00

The pace this morning was not highly favorable to the way that I trade. As you can see we were in a very slow but steady uptrend (on the 89 tick) corresponding to a retracement in the hourly downtrend. My timing here wasn't spot on as it usually is, simply because the market emotions seemed very dampened.

Total was +4 pips on 25k.

LT

4-15-09 Failure to Maximize Gains

2009-04-15T06:46:00.000-07:00

That's what they will write on my tombstone, "Failure to Maximize Gains". Same damn mistakes as Monday. Too complacent! You can't eat like a bird in this business. You gotta be a pig when you got the market on the rails like I did today. You gotta go for the #$!& jugular and tear it's throat out. Instead I rationalized my weak will with thoughts like, "oh I don't want to wait for it turn against me", "I don't want to have to add to another position today, it's too stressful". NO!

I KNOW that eventually I will need to take my lumps in this game. It is inevitable. If I don't take advantage of when the market is favorable to my trading, I won't SURVIVE the bad times.

This should have been a +38 pip day, was actually +25 on 25k.

Yeah, pissed at myself. Need more focus. Need to get back to thinking that I am -50 pips in the hole and I GOTTA make it back.

LT

4-14-09

2009-04-14T07:05:00.000-07:00

I seemed to have a lot better focus this morning, and a very good idea of what the market was likely to do. If you look on the hourly chart you'll see where I've drawn in a long standing support area 1.3229. Based on the hourly it seemed very likely that we would test this support. On the 89 tick chart you can see where I've drawn in what I consider the current range. Once we broke to the downside I was able to catch a few retracements before we tested support, as well as the eventual reversal (it became clear after 5:30 a.m. that reaction to various news items was half-hearted).

Overall a solid gain of +37 pips on 25k.

LT

4-13-09

2009-04-13T07:07:00.000-07:00

Well couple things this morning. First, I am now trading my live account again; however, I am keeping my size down for the first couple of weeks just to convince myself that nothing has changed with real money on the line (mostly true).

Trading wise, this was a bit of a sleeper morning for the Euro I was a bit surprised to see it wake up. I managed to fade the trend reasonably well at the end, but I unfortunately missed the perfect retracement setup (which would have been worth 30 pips).

Overall, +12 pips for the morning on 25k, adding another $25 to the chip stack (as Don would say).

LT

4-10-09 Bank holiday

2009-04-10T05:08:00.000-07:00

Well I thought I might sneak in a trade or two last night or even this morning, but the market is indeed sleeping. So instead, I've been thinking about my upcoming Mexico trip.

Total added to the chip stack this week = $408.59 or about 82 pips on 50,000. Had a great start to to the week and was fairly convinced I might have a shot at the $500 mark, but after Monday the action started tapering off. Back to work next week.

LT

4-9-09 Hanging out in the doledrums

2009-04-09T07:13:00.000-07:00

Pretty uninspired pace this morning even with all the news. We are in a tight range bound market no doubt. No trades.

4-8-09 Slow morning

2009-04-08T07:00:00.000-07:00

We are continuing to consolidate this morning after having a fairly decent retracement from yesterday's lows during the London session. The pace was so indeterminate I took early profits and decided to lay low. +12 pips

LT

4-7-09 No Trades

2009-04-07T07:05:00.000-07:00

After a very volatile London session, there just weren't a lot of opportunities during NY. Was looking for a wholesale retracement that just never quite got there.

LT

4-6-09

2009-04-06T06:54:00.000-07:00

A good start to the week here with +45 pips to start. Happy Monday? Isn't that a contradiction in terms?

LT

4-5-09 Yeah it's Sunday

2009-04-05T19:18:00.000-07:00

Don't normally trade in the evenings let alone on a Sunday, but I just couldn't wait this week. Too pumped up to push my limits even further.

+15 on 2 X 50k lots.

LT

P.S. Yep I'm playing with MBT's platform tonight. I really like Oanda but am thinking of backup options as well.

4-3-09 Trading Reflections

2009-04-03T06:32:00.000-07:00

This certainly has been an interesting week. I started off on Monday on the wrong foot, but quickly got back to the swing of things on Tuesday. On Tuesday I started visualizing my goal of making $300 for the week. Thursday was amazingly volatile as we saw the Euro strengthen. And Friday has been a good wrap up to the week.

I admit, that I am posting early on Friday. Why? I've made my goal and then some, and I've lost a fair amount of focus. Two things I need to do next week: 1) setup a qualitative spreadsheet of how the market day is setting up and how I feel (similar to Don Miller's spreadsheet, 2) I need to set a higher dollar goal for next week.

Today was +15 (ok I took a second trade at 1 cent per pip that made another +15).

For the week +87 pips and $455.55. The weekly goal was $300. I will be revising my goals over the weekend and will need to step things up a bit. Perhaps my 4 week goal should be closer to $750 a week.

LT

Trade or Die

2009-04-02T12:06:00.000-07:00

What if I put a loaded gun to your head right now and said, “Trade well or die.” Could you do it? What if I threatened your family? Could you execute your trading plan, avoid blowing out your account and make money at the end of the month/year etc.? How about make 10% ROI monthly? How about 500% annually? How would you trade if your life was literally at stake?

For those of you who have never traded before or are relatively new, my guess is that you would roll over and die. But how about those traders who have been doing this awhile but are unsatisfied and/or inconsistent with their trading?

This may seem like a silly or extreme psychological stretch for most of you. But picture this. If you were a CIA agent, or a Navy Seal, or a Green Beret your life (and perhaps those whom you hold dear) would be on the line every day. In the book “Unbeatable” by Jack Schropp, the author states that many individuals fail to achieve their aspirations because they lack focus. As a former Navy Seal, he knows from personal experience that the ability to remain focused while waiting for hours in near freezing wastewater, in enemy territory, with no backup, leeches crawling on your skin, etc. is what separates the wanna-be recruits from the elite. He also states that you don’t get to this level of focus by being in your comfort zone. During Navy Seal training recruits are pushed to extreme physical levels and taunted by their trainers to test their ability to manage their emotions (see reality) even when things are seemingly at their worst. Sounds like a boot camp for lazy traders to me!

The problem for many struggling/breakeven traders (including myself at times) is that they have nebulous goals devoid of passion. They get started on the right foot but become complacent with where they are. Usually this complacency sets in at the top of their equity curve. How many times have you traded 90% of the day well, and then given back a great deal of profits at the end of the day/week/month? Being a “sunshine patriot” regarding your trading is easy. But how do you fare at the 11th hour, when the chips are down, you are feeling tired, and you just wanna quit? Are you gonna ring the bell recruit?

Here are some of the passionate affirmations I visualize to myself during my darkest trading times:

“Trading means freedom – I never want to be a slave to the illusory bonds of money”

“Trading means excellence (arête) – I will never know what I am capable of until I ask more of myself than I ever thought possible”

“Trading means understanding – By understanding the market I deepen understanding of myself”

“Trading means helping others – Only when I can adequately provide for myself and my family can I help others, whether this is financially, intellectually, emotionally, or spiritually”

What mental tools would you use to stay focused in your trading if your life and those you cared for was literally at stake?

4-2-09 Taking the Hard trades

2009-04-02T06:56:00.001-07:00

Looking at the result of the trades this morning looks like easy money. But the emotions were hot and it was hard to tell if we were going to sustain heavy buying interest or not. I'm particularly happy with the light sizing for my initial position in the second trade, but I'm left wondering if I failed to add heavily enough.

In any event +45 pips for the morning.

LT

4-1-09

2009-04-01T07:17:00.000-07:00

Added another +15 pips to the pot. Pretty slow morning, pace wise, and was surprised we didn't make another attempt at the 1.3220 level.

3-31-09 Wrapping up the month

2009-03-31T07:10:00.000-07:00

Back to solid trading today with a decent +20 pips added to the bucket. Although I wasn't taking many trades earlier this month, we ended up with a very modest +87 pips for the month. This is about 1/4 of what I'm shooting for based on my training goals. I'm not too worried about this, considering I hadn't been going full out until the last couple weeks. We'll see how much we can improve this in April.

LT

Trading Schedule

2009-03-30T12:48:00.000-07:00

I keep thinking about how trading is like a "race" or a "sports competition". With that thought in mind, I came across Beat Your Personal Best looking for something to give me that edge.

Right now as I've mentioned a few times on the blog, I'm not too happy with my trading. Unlike what a few folks have mentioned though, changing my "setup", "hours", "market", etc. isn't likely to fix my problem. Just as changing your running shoes, the track, or the time of day you run won't help you beat your personal best.

Let's start with Personal Best. My personal best is $1,000 per contract per month (or about 10%). My goal is to beat that personal best and make $2,000 per contract per month (or about 20%). Oh yes, and all within a 2.5 hour period per day max (which is how I set my original personal best).

I started off this week thinking I was going to make $500 per contract. Reviewing todays trades which I got into too heavy, too early, I need to revise this and work my way up to this figure with a training routine.

My training routine is as follows:

Week 1
Mon - Trade 2.5 hours
- Simulator at 1X speed for 1 hour
Tues - Trade 2.5 hours
Wed - Trade 2.5 hours
- Review mechanics 1 hour
Thur - Trade 2.5 hours
Fri - Trade 2.5 hours
- Simulator 5X speed for 1 hour
Weekly target: $300

Week 2
Mon - Trade 2.5 hours
Tues - Trade 2.5 hours
- Simulator at 5X speed for 2 hour
Wed - Trade 2.5 hours
Thur - Trade 2.5 hours
- Review identifying market "emotions" 2 hours
Fri - Trade 2.5 hours
- Simulator 10X speed for 1 hour
Weekly target: $350

Week 3
Mon - Trade 2.5 hours
- Simulator at 3X speed for 1 hour
Tues - Trade 2.5 hours
Wed - Trade 2.5 hours
- Review tactics 1 hour
Thur - Trade 2.5 hours
Fri - Trade 2.5 hours
- Simulator 5X speed for 1 hour
Weekly target: $375

Week 4
Mon - Trade 2.5 hours
Tues - Trade 2.5 hours
- Simulator at 5X speed for 1 hour
Wed - Trade 2.5 hours
Thur - Trade 2.5 hours
- Review mental focus and "centering" exercises
Fri - Trade 2.5 hours
Weekly target: $425

From Week 5 onward the "race" is on!

LT

3-30-09 Too early to the game

2009-03-30T07:14:00.001-07:00

That pretty much sums it up this morning for me. Too early to the game with too heavy a position.

-8 pips.

LT

The guy on the other side of the net

2009-03-28T10:29:00.000-07:00

I came across a great article recently called 10 Characteristics of a Great Competitor and thought this would be great weekend reading material.

Here is my favorite point of the article:

Analyze their Opponent

Great competitors understand that the challenge in competition is all about outplaying the opponent on the other side of the net. It is a challenge that requires planning and preparation in advance of the match. They rely on past experience from matches against that opponent to determine what the opponent likes to do and what they don’t like to do. They consider how the opponent has been playing lately and the strategy other players used against this opponent that might might have been successful. All this information is factored in before they ever step foot on the court. Especially against unfamiliar opponents, they pay close attention during the warm-ups, to gather as much pertinent information as they can. By the time the match starts, the great competitor knows what to expect and can effectively anticipate patterns of play, what the opponent’s tendencies will be under pressure and it helps them shape a winning game plan.. Through the course of a match, great players stay tuned in to the opponent’s emotional state and will do whatever they can to diminish the opponent’s level of confidence. They look to capitalize on every opportunity to attack True competitors don’t beat themselves up, they beat you up and are masters at getting you to self destruct.

Average competitors tend to be far more self-absorbed in competition, often times almost oblivious about who they are playing. These players feel whether they win or lose it is all about how they played and the opponent hardly factors into the equation. Very little energy is focused on analyzing the opponent. Players, who are too self-absorbed in their match play, often beat themselves before the opponent has a chance to lose. Great competitors realize “it is more about who I’m playing than it is about me”, which takes some of the pressure off their skills and keeps them more tuned in to the battle at hand.

Keep this in mind when you put your next trade on. Are you the amateur who is playing this game without thought of the other guy, or are you analyzing the competition to take your opponent by surprise?

The best trades are an ambush for the "dumb" money. And if you can't spot the "dumb" money in the room - then it's probably you. Wait until the opportune moment when you can capitalize on the "dumb" money's weakness and you will be well on your way to sustaining a trading edge.

LT

Some Advice for a Beginning Trader

2009-03-27T08:28:00.000-07:00

Everyonce in awhile I get asked for advice on how to become a trader. Here are some thoughts I put together on a beginner's approach to trading.

My strong suggestion for a beginning trader would be to try to just learn about the markets. You don't want to be reliant on someone else's experience, trading calls, trading robots, etc.

My second suggestion is spend some time finding out whether you LIKE trading or not. This takes time. Look at different markets, different timeframes, trading styles, indicators, etc. See what appeals to (or sometimes just as useful, what doesn't).

Third, all the people I know who trade successfully LOVE what they do. It takes passion, dedication, and thousands of hours to be successful. That's no lie. But when you first start out how do you know whether you are going to be that passionate about anything? You don't. So don't focus on making money. Focus on having fun. Seriously. Enjoy learning - enjoy watching crazy stuff happen in the market every day. And if you do that long enough you will KNOW if you are going to make this your life's passion - or not. So don't get hung up on making money until you've figured that out.

Best of luck.

LT

3-27-09 Waking up to opportunity

2009-03-27T06:03:00.000-07:00

I think I mentioned how several times last week I woke up just to find I'd missed a (or the) great trading opportunity of the morning. Not today. Soon as I pulled up my charts I knew it was time to buy. Ah extreme emotions (as long as they aren't mine) :)

Hit 2 50k lots for a total of +22 pips.

Total for the week: +24, -3.4, +7.6, NA, +22 for a grand total of +50.2 pips or about 3R on 50k lots.

Goal for next week +75 pips on the same lot size.

LT

P.S. Am thinking about going back to live in a few weeks. We'll see how things go

3-26-09 Missed opportunities

2009-03-26T08:12:00.000-07:00

Didn't trade at all this morning as I wasn't feeling well and was totally exhausted. I really respect Don and Jules for being able to stick out sick days and trade through, but I just wasn't able to hang this morning. To bad...lots of great opportunities.

LT

3-25-09

2009-03-25T06:46:00.000-07:00

Not much to say about this morning except it was pretty quiet other than one brief emotional outburst. Stayed out of trouble +7 pips

3-24-09 Had the Market on the Ropes

2009-03-24T06:46:00.000-07:00

Today I struggled getting out the gate to find the "emotion" of the morning. However, I soon got into the swing of things and took a couple o.k. scalps.

However, at 6:18 I had a golden opportunity and I let my own thoughts get in the way. We bounced hard off of support at a well established level on the 60 min charts and even though I was a little early getting in and very early getting out I scalped a few pips.

The problem is that this was the most over emotional moment of the day so far. And it was obvious that sellers wanted to continue the rampage set by yesterday's trending day. And it was so obviously not going to happen twice. I made 2 key mistakes on this trade. The first was I got out with a pittance of a sum. And the second was that I got out about where I should have added to my position.

When you have the markets on the ropes, you gotta go for the jugular. You don't get that many very high probability trades, and you can't let your own fears get added to the fears of the sheeple.

-2 pips on the day doesn't tell the whole story at all. This easily should have been a +25 to +30 day. No excuses.

LT

3-23-09 - You ain't a trading robot!

2009-03-23T06:32:00.000-07:00

First, I'd like to say a big thank you to Don Miller. Somewhere in his vast collection of videos he reflects on a truly sage piece of trading advice, and that is that he trades based on emotions. Not his emotions, but the market's. This isn't some news flash to me; however, I never really trusted those signals. I traded in my robotic, mechanical fashion like a retarded monkey. With this piece of advice, and my wife's admonition, "you never trust yourself to trade right" (ouch!) I decided to change how I prioritize my trading.

I have always had a very strong interest in trade tactics and mechanics, but I realized that my strategy of "capturing short-term momentum moves" was about as vague and useless as one could get. So, I'd like to change that to "capturing short-term momentum moves based on extreme emotion in the market."

With that change, we've had some good results today. Interestingly enough, I called each emotional swing (if you will) correctly. But I'm still working out the bugs in execution. You'll also notice I'm trading half size at this point, and that is for two reasons: 1) my trading was poor last week, and 2) I'm scaling into and out of trades.

Overall result for the morning: +14 - what it easily could and should have been +24. Still, if anything, I am more excited to trade than ever. It felt right trading this morning. I knew things. I traded based on what I knew. The mechanics supported me, but didn't stifle me. I felt like an artist.

LT

P.S. Just made another 10 pips on yet another emotional golden opportunity this morning. Too funny. So make that +24 out of a possible +34 for the day.

3-20-09

2009-03-20T07:01:00.000-07:00

This morning was all about not getting chopped up. Not a lot going on the 60 min time frame. This was a good clue early on that only the locals would be playing. Tried not to get too fancy and to keep my expectations grounded. +5 on the day.

This week was not so hot: +0.4

Admittedly I think I traded pretty well during a non momentum style market. I'm really only disappointed in Thursday's results.

LT

3-19-09 Want to buy a mechanic

2009-03-19T06:32:00.000-07:00

When I first started trading, all I thought about where setups. Find the perfect entry and you would be a gazillionare.

Look at all the beautiful entries I took this morning. I took every single one of them - perfectly entered. Unfortunately, less than half were exited at the correct time. Out of those 6 trades I held 5 of them too long.

Um helloooooo! You are not Dennis Richard. You are a freaking scalper. You need to be a ninja. Undetected and unsuspected.

So here's the damage -4.5 pips out of a total possible of +25. Seriously? Yeah seriously. WTF!

Here is my mantra for tomorrow: You are a Ninja; if you are up +6 pips you will take the freaking trade off the table if it ever retraces to +3. Always, I don't care about excuses! Also if you don't see volume expanding in your direction just get out immediately.

LT

When Trading Discipline Fails

2009-03-18T12:14:00.000-07:00

Discipline is the ability to ensure consistency of thought and action. When we think in a disciplined manner our mind does not stray from the action at hand. Thoughts become actions. Actions become results. Results provide feedback to our thoughts.

Mark Douglas and many others have written books and articles describing the need for discipline in trading. Discipline is widely proscribed for struggling traders as a panaecea for our ills. Despite these educational materials, most traders never ever reach trading success consistently. Why is that?

Steve Pavlina articulately states that self-discipline is only attainable through acceptance of reality. If we wish to be discliplined then we must assess how disciplined we currently are. Thus we might consider the following:

do you have a trading methodology that is clearly defined (i.e. written down)?
do you trade the same methods every day/week/month?
do you have a predetermined stop loss?
do you honor it?
do you have a predetermined contract size?
do you honor it?
do you ever take a position just because (e.g. you wanted to get back at the market)?
do you trade differently because you are up/down $X?
do you trade differently because you aren't feeling well?
do you trade differently because of overly negative/positive thinking?
what do you wear while you are trading?
how comfortable are you with your trading desk/computer setup?
how comfortable are you with your trading software?
do you have a backup in case your trade station goes down?
do you have a drop dead point for the day/week/month/year?
do you honor it?
how does it feel to hit that drop dead point? do you act any differently in subsequent trading?

Take a real awareness test of these items. How disciplined are you as a trader? Based on the statistics, there are very few of us who can positively affirm all of the above results all the time.

Why is that, and what is it that happens to our rational selves when Trading Discipline fails?

Imagine for a moment that the market has been very choppy in a tight range all morning. You have diligently taken all of your method's signals and been stopped out several times in a row. You are near your drop dead point for the day. Suddenly, the market surges up towards the edge of the range. Is your finger already hitting the buy button without a trading signal?

What just happened is that your emotions have bamboozled you. You have been pawned. Not by the market, but by yourself. Your vision of what reality should be, a positive account statement, is in direct conflict with truth, a negative one. Your emotions have kicked your brain out of the drivers seat and you are gonna "smash the market's face in".

Moments after placing that order, your rational brain come back online. Oh - $hit you say! What was I thinking? Now what do I do? And while your rational brain is trying to resolve this issue the market is ticking lower, and lower. Now your mind is scrambling. You know that you broke discipline and are going to have that on your account statement if you don't "fix" the problem. Well, you rationalize, we are still in a range, I can hold onto this position and get out at a better price once it bounces. As the day progresses the market never reaches your initial entry point. It comes close, but never gets you back to being "whole".

Later that afternoon, the market starts to turn down. It starts giving you valid signals to sell a breakout. Normally, if you weren't so emotionally handcuffed to this trade, there is good chance you would take this sell opportunity here. But you don't. You are bleeding pretty bad already, your account is at -$500 per contract already and you just can't take that hit. Suddenly, there are no buyers and only sellers. The market explodes south of the range, and is pushing with heavy institutional selling. Everything in your body and mind wishes you had not only closed your buy position, but had sold as well. Damn, damn, damn, is all you can think.

Eventually, you exit your long position. Either your rational mind wakes you up and realizes that you could lose your account, or you get a margin call from your broker. You might have even averaged on the way down to try to minimize the damage. But it doesn't matter. You've had a "blow out" experience. Your account is red, your confidence is shattered, your emotions torn.

Where was all that discipline? How many times have you been there before? Can anyone relate to these experiences?

LT

P.S. In the next article I will discuss my thoughts on self-discipline and trading, specifically on techniques I use to monitor and curb the emotional thought processes that can lead to blow out trading.

3-18-09 Ugly trading

2009-03-18T06:52:00.000-07:00

This morning's trading action felt a bit like being led on. After watching a very strong New York open, the volatility for the day just fizzled.

Two lessons to take from today's trading. One, letting my stop get hit by Oanda's execution is a mistake (duh). Took 2 pips worth of totally unnecessary slippage on that first trade. Second, was that being close to my drop dead point, I choked and didn't take trade number 3. It is very hard to take 2 losers in a row and then come in with the exact same trade idea and make number 3 a go. Unfortunately, this is exactly what ends up being profitable 9 times out of 10.

Overall -7.5. Not exactly on my A game this morning, and the market wasn't exactly giving away freebies. Feeling pissed at myself for getting sucked into taking any trades at all with this weaktastic volatility, but not sure I could have seen things any other way.

LT

Working Hard for my money 3-17-09

2009-03-17T06:42:00.000-07:00

There are some days when trading is the easiest thing in the world. This wasn't one of those days. And the shame of it was that I missed an easy +10 pip trade right at the beginning of the day (technically a few minutes before my trading day). If I had a pip for every time that happened to me I'd be a very rich man indeed.

At the end I held on to my patience pretty well. I could have exited the 2nd to last trade just a bit faster. But I admit, digging ditches was starting to break my back. Overall, I can't complain: +9.4 pips for the day. But it sure wasn't fun.

LT

3-16-09

2009-03-16T07:14:00.000-07:00

Pretty tight little range this morning after some big European moves. -2 pips on the day. Could have grabbed a couple more trades and perhaps a few more opportunities, but overall, not too bad on such a tightly ranging morning.

Trading Video for 3-13-09

2009-03-14T22:13:00.000-07:00

I've posted another trading video to describe how I took my trades on Friday.

LT

3-13-09 Weekly Recap

2009-03-13T06:19:00.000-07:00

Only took a couple of trades this morning for +6.5 pips. Do you ever have days where you just don't feel like trading? I know - weird. A fair amount of this I attribute to the fact that it's Friday, the 13th no less, and I have been fighting off being sick for the past couple of days. I don't really feel terrible at the moment, just apathetic. Meh, too much psychoanalysis isn't going to help my trading results.

Bottom line +31.4 pips this week. Overall, my weekly goal is to make 3%, and my monthly goal is to make 12%. I did accomplish my weekly goal, making 4.5%.

There were a lot more available opportunities on certain days (um today for example); however, I feel I really traded my best on Monday (yes I know it was a small losing day). Why? Because that day was very difficult and I managed not to blow myself up. Tuesday's 15 pips were a gimmie. My cat could have made money on that day (well except for the opposable thumbs requirements).

I think a few more weeks of paper trading are still in order before I go back to live. I really had some negative thoughts that got me off to a rough start on Thursday in particular. Toward the end I was trying not to get frustrated with the behavior of the market (it was very volatile but with little follow through). Instead I need to be focused on trading not only when my signal patterns line up, but also when the market movement is consistent with my style of trading.

LT

3-12-09 Erratic thoughts

2009-03-12T06:36:00.000-07:00

After the first three trades of the day I thought we would be getting into some market normalcy as we've seen earlier this week. The fourth trade was a roller coaster. Despite the positive results, market volatility made this and the last trade kinda hectic. Happy to end the day with +10 pips to the good after a rough start.

3-11-09 Not feeling too well

2009-03-11T07:27:00.000-07:00

Yep, I took the first trade of the day for +4.5 pips and decided I just couldn't keep myself awake any longer. Not feeling too good this morning. Looks like I missed out on a few pips (probably another +10 or so net).

Don't know how Jules trades sick all the time. Just can't concentrate with that.

LT

Reinventing Trading Success

2009-03-10T08:32:00.000-07:00

I remember reading Paul Tudor Jones talk about the emphemeral nature of trading success in Market Wizards and how he was more scared of losing than ever before. Brett Steinbarger has mentioned the need for us as traders to occasionally reinvent ourselves and that the difference between a competant trader an expert trader was this ability to go to the edge as a trader and come back from a debilitating losing streak or fundamental change in the marketplace we trade.

Thinking back to when I was 16, I ran into this very dilemma. Not with trading, but with golf. I had started playing golf when I was 9. I wasn't Tiger Woods, but for my age I was pretty good. Moreover, I was passionate about playing golf. I analyzed my golf game even when I wasn't on the course. I was constantly looking for new ways to improve myself. And then I hit a growth spurt around 15 or so. And my game went from being good to pretty crummy almost overnight. I spent extra time on the practice range, went to several golf instructors, and overall became obsessed with "fixing" my golf swing. I was emotionally distraught over this process, going from the lows of not even being able to make contact with the ball, to the highs of occasionally seeing my old golf swing "coming back". Eventually, I discovered that I had been placing undue expectations on myself, not because I really felt compelled to play golf for myself, but rather because I thought that it would please my father. Upon this discovery, and the fact that this compulsion was nearly entirely fictious, I quit playing golf (well o.k. I still occassionally hack around).

Perhaps I surprised you there. Did you think I would go on to be the next Tiger Woods?

Trading on the other hand is something I've never done for someone else. The good news about trading is that it is so highly ostracized by normal social circles that there really is no reason to be doing this for anyone other than yourself. The bad news is that you can't rely on these normal social circles to fuel your low emotional energies when the rest of life (or even your trading) is beating you up. Fortunately, the market itself is a social circle that provides direct feedback. Listening and learning to the market's conversations is one of the elements that compels me to trade. Also, there are social networks such as this blog (and others) available on the internet. These are the elements that provided me with a successful motivation for trading in the first place.

Having gotten out of the "zone" from these elements in recent trading months has been due to me questioning my ability to understand other people's emotions (specifically certain important other people). When I am able to understand and integrate these emotional elements into the way that I read people (and the markets), I believe I will be well on my way to reinventing success.

My trading modus operandi will then be, "deriving understanding of myself, through the observation and interaction of other people and the markets, which are synonymous."

LT

3-10-09

2009-03-10T06:37:00.000-07:00

Wrapping it up a little early here, as the market is consolidating and I don't see anything setting up in the next 10 minutes.

The good news is this is my first winning day since starting back. The bad news is that I gave away free pips on such an easy day. The first trade really should have been +3 but I held it to +0, wanting to give an obvious go-getter trade maximum leeway. Hint - good trades don't need leeway. Second, and this is where I really screwed up, is entering the 3rd trade prematurely. Apparently, I am so good that I don't need a real trading signal! Yeah that was an expensive 7 pips down the rat hole.

Overall +15 but should have had +25. Disappointing result on such an easy day.

3-9-09

2009-03-09T06:56:00.000-07:00

First trade should never have been taken. You don't enter a trade that has setup with a candle that goes immediately against the position you are wanting to take and then hop in because it later shows momentum. Dumb.

The last trade I got in a little late, not real bad but missed a couple pips there.

Other than that, I think I need to do a video to remind myself what my ABC setups look like. I missed both of the ABC setups today. Silly.

Actual results -4.7 pips out of a total of +13 possible for the morning. I don't feel too bad about this, since this wasn't the easiest day to trade, but really, some very stupid mistakes in there.

Scalping Forex Setup - LL LH

2009-03-07T14:06:00.000-08:00

We'll I promised that I would get some video up here, so I've put together a video describing one of my bread and butter setups the LL LH (or for longs HH HL). I know that the sound leads the video just by a few seconds so if things look a little off that is why. Still learning the video thing. Let me know what you think.

3-6-09 Calling it a day

2009-03-06T06:38:00.000-08:00

So a couple of things. First, I did really well with taking most all of my signals. Second, I missed the best winning signal of the day (would have been good for +15). Lastly, I didn't keep my cool on the second to last trade and sat through a 22 pip drawdown. Yep, that's $%&! trading right there in a nut shell. I didn't get burned today but that doesn't mean squat. I coulda got out at -6 pips.

Losers average losers.

Overall -1.3 pips. Yeah no biggie, except I surrendered +23 pips to the market by failing to take 2 trades. Stupid, huh?

On the plus side, I am starting to get over my fear of trading. Yep, I'm convinced, I'm a afraid to trade at the moment. Gotta chip away at that. I'm a good person, I deserve to trade. Must keep telling myself that...

3-6-09

2009-03-06T06:02:00.000-08:00

So I missed the first trade of the morning. What was I thinking? Trying to see too much into my patterns. If the pattern is there, trade it. It's that simple.

Second trade was actually the dicier of the 2 setups, and I pulled it off very nicely, riding the momentum until we hit nearby support. Need to focus on this type of trading. In and out, like a ninja.

3-5-09 Daily review

2009-03-05T08:12:00.000-08:00

I definately had a better idea of my conscious thoughts for the day. I didn't get lost in negative mental feedback loops as much as yesterday. I think my biggest criticism for the day is that I had difficulty resolving conflicting signals, and this is most likely due to an incomplete definition for a few of those signals.

During my trading period there were 7 possible setups. 4 of these setups were invalidated for various reasons, leaving 3 valid setups, of which I took 1. The reason for that is that the other 2 valid setups were in possible conflict with other potential setups. If I had taken these other two setups my results for the day would have been +22 instead of -8 pips.

The first legitimate setup that I missed (I saw it I just didn't know what to do) occured directly after a potential ABC setup. Unfortunately that ABC setup was invalid because the signal candle formed a new resistance below the previous wave of resistance. This confused me into doing nothing on the next trade which was a valid 3LL short. The second legitimate setup that I missed was a valid ABC setup, but now I was confused on the exact entry for my ABC (due to the previous error). This caused me to miss the entry timing (again I saw the setup but didn't know when exactly to get in). And before anyone comments on it, yes I have extensively tested these signals, but this is the first time I am trading them all together (previously I only traded the LL/HH setups).

Some lessons/thoughts for the day:

1) For the ABC setup, the entry candle should preferably break above the previous S/R. If it forms a new S/R below/above the previous, then exit the trade at market.
2) Do not take a second ABC trade the same trend as the first (almost made this mistake)
3) Skipping disproportionate LL trades is good (I knew this already).
4) Skipping trades that are up against a strong well established S/R floor is a good idea (again I knew this)
5) Keeping my head screwed on straight - priceless (yes I am learning this still)

LT

P.S. most of these technical terms probably don't mean much without further explanation. What is an "ABC" setup? I will be covering my setups in a later post.

3-5-09 continued

2009-03-05T06:49:00.000-08:00

This was a decent setup of a failed double bottom right at support. Too bad I was too slow to get in on time. Wasn't gonna chase it. I didn't trade the following LL simply because we were losing volume at a major support line.

3-5-09 First Trade

2009-03-05T06:15:00.001-08:00

Off to a slow start this morning. When the market is trying to tell you it's slow, it's slow. Must...pull...the...bananas...out...of...my...ears. Mkay all better now. Really.

Working on thoughts and expectations

2009-03-04T08:12:00.000-08:00

I'm giving a lot of consideration right now to what I am thinking while I'm trading. Perhaps I even need to add this to my daily blotter. For most of the morning I stayed out of the market (even missing a really good trade opportunity) because I was worried about posting a losing trade. Eventually I realized the erroneousness of this thought process and got into the flow (mostly). Unfortunately, these expectations of being "right" or "making money" got in the way on my second trade causing me to close somewhat early. What's truly funny is that there is no real money on the line. It's just paper. But my thoughts are tuned to treat this as real trading, and as such my real trading problems are coming through.

Specifically, regarding the trade I didn't hold. There are 3 rules that came into play:

1) If I am up 1R or more and the trade falters 30% - bail out.
2) If I see volume coming on to reinforce my trade I will continue to hold the trade over 1.5 R until volume falters.
3) Typical profit target is 1.5R

These are all very fine rules and have been tested extensively. However, I had a doubt. After the trade began to falter say 20-30% ish, I thought, "I don't want a loser to start the day". And hit the exit. I actually strictly followed my rules. But it is like the Matrix - you have to know when to bend the rules, or even break them. Why? Because the reason price faltered was it was setting up to break out. Selling volume didn't come in, but buying volume temporarily stopped - only to be replaced by a dirth of buying orders moments later. A big part of my edge as a discretionary trader is "reading" the market. If I trade like a retarded robot I can expect to see results indicitive of that level of trading. Much like playing a musical instrument, I need to trust myself to improvise well when needed.

3-4-09 wrap up

2009-03-04T06:54:00.000-08:00

Overall this was a fairly average morning for the Euro. I missed a couple of good setups by not being a little more on the ball. No biggie. One gripe is that I should have had 15 pips on the first trade I took. The volume was there, the money was staring me in the face (o.k. virtual money). Why am I so damn disciplined about taking losses but have trouble sticking out a win?

3-4-09

2009-03-04T05:56:00.000-08:00

If we can break above 1.2560 this should be a good area for a long.

Time for some changes

2009-03-03T14:52:00.000-08:00

We'll I think it's time for some changes. I would like to thank Jules and Lonely Trader for bugging me not to stop blogging.

Here's the deal. I lost my mind over the past few months. With several things really. Like I can't teach anyone how to trade (especially my independent wife - who by the way would rather knit than trade). Or that I need to say anything constructive/instructive in my blog (thank you Jules for pointing this out). Like do I really hate short-term trading, or am I driving myself crazy with expectations (or really the fear of other people's expectations)? Some days you just don't want to deal with that after having a multiple R losing day. Or be accountable in any way whatsoever.

The problem is that I lost sight of what this blog is good for. Namely it is my reality check. That if I have a really bad trade/day/week/etc. I can't hide under my pillow or stuff the brokerage sheet in the shedder (as bad as I want to sometimes). On the flip side, hopefully some of you will check my ego at the door if I beat the snot out of the market for a day or two (before reality comes back).

So with that said (and for the few readers who are left), I need to make some changes to this blog:

1) Needs to be less ugly. Help! Maybe time to go wordpress? Not sure.
2) I want to find a reasonably easy way to get some video up on the site. This will help keep me accountable knowing that people will be watching my trades.
3) Things are gonna get a lot more visceral around here. If I have a shit/good day you are gonna hear about it (thanks Jules).
4) You will be seeing a daily blotter. Right now I'm back to paper trading. Before you ask, no I haven't blown my account. But my confidence is blown (not by the market - by myself). I've had this lack of confidence with my trading occur before but didn't listen to my doubts. This time I will. I need to have that accountability to get back on track.

O.k. I guess that's all. Hehe.

LT

Shoutout to JJRVAT

2008-12-10T08:59:00.000-08:00

First, a couple of you have asked where I've been lately. Still here. I'm working hard on putting together an adequate training regimen for my wife (who has expressed an interest in trading). I never realized until now how much I simply take for granted after trading for several years.

Secondly, as I've been trying to review my own learning process I am going back to internet resources that have helped me progress as a trader. That said, I wanted to give a shout out to JJRVAT and his thread on EliteTrader called Day-Trading 2.0.

This thread had definately influenced the way I approach trading and is probably one of the very best threads out there for the short-term (i.e. scalping) trader. The first ten pages or so are simply brilliant.

Enjoy.

LT

President Obama, U.S. Dollar and Stocks

2008-11-05T08:16:00.000-08:00

Knowing that I risk alienating a fair amount of my readership with this statement I will go ahead and say it anyway. Yes We Can! Yes We Did! GOBAMA!

Also, although I rarely give my opinion on macro economics I will indulge myself here and talk a little bit about what I see as some potential impacts of the new presidency on the U.S. dollar and stock markets.

Right now, we are in a bear market (for stocks and bull for U.S. $ and Yen) as Jesse Livermore would say. The new presidency won't change that. However, what we will likely see in the near term for the dollar is a second test of the highs and either a bounce or continuation. My guess is that at least for the short-term we haven't seen the final high yet for the U.S. (or for the Yen for that matter). Why you ask? There are a number of reasons, but most importantly I think there has been a long-term overvaluation of the Euro that is now being questioned world-wide as we see banks struggle in Europe as well as the U.S. So why is the U.S $ benefiting from this? Although people have not held much esteem in recent years for the $ they do for U.S. treasuries. The recent strength of the Yen has been much discussed and again there are many reasons for this most notably the unwinding of the carry trade.

So what about U.S. and worldwide stocks? As I said earlier, we are in a bear market. Even Mr. Change Obama can't fix that. Although he and Bernake will try their darnest. What I see for stocks right now is that we are bouncing off the lows (looking at the DJIA) in a retracement. Why a retracement and not a recovery? Why son, this is a Bear market like I told you. It ain't over yet. Also, if you look at the two times that we tested the lows of around 8000 it was on relatively light volume. I want to see that there are truly no more sellers in the market before I'm convinced we've come anywhere near the bottom.

We've talked a lot about the short-term implications of our new President on the markets and now its time for some real speculation :) Our new president, despite some concerns, appears to be a rational man willing to listen to both sides of the parties. His economic policies are largely centered around helping the middle class to get back on their feet (something we haven't seen in awhile). At the same time he's shown that he supports protecting big business as well by supporting the bailout. What is more important than his policies is how he makes people feel. The middle class and poor have felt left out of the loop for the last 8 years (at least that's how the polls speak in my mind). This is also the largest and most important group of consumers. Regaining their confidence and ensuring their sense of security is something Obama has shown a great capacity for. Since consumer confidence is the key consumer spending and hence the health of the markets, it is my belief that the new president will help setup the next bull market in stocks. That being said - this is a bear market, son. And its going to take at least 3 to 4 years before we see any sort of real change for the marketplace.

Lessons from "Reminiscences of a Stock Operator"

2008-11-02T10:37:00.000-08:00

This morning I received a copy of the typical "Doom and Gloom" article that has been floating around recently from a fellow friend and trader. The article was filled with the typical economist bleating regarding how we are going to enter a prolonged economic contraction (i.e. another Great Depression) etc., etc. and that the world has never experienced the level of greed that we have seen in recent years on Wall Street and that the world as we know it will end.

Good grief people! Read your history. Just this morning I was re-reading "Reminiscences of a Stock Operator" by Edwin Lefevre for about the 100th time. Why? Because there is nothing new under the sun when it comes to the markets. It doesn't matter if the year is 2008 or 1908 or 1858.

A great example of this is when Livingston (a fictional character based on the true stock operator Livermore) is discussing his involvement with the manipulation of the Consolidated Stove stock. In this scenario, a number of uninteresting and not particularly profitable stove companies are consolidated into one stock to be marketed and hyped on the general market and sold for more than their current value. Gee, I say to myself, this sounds a lot like a CDO! And this type of activity was rampant in the 1920's bull market. Livermore also goes on about the weak moral fiber of his associates (not to mention his own sordid manipulation of the stock). Sounds just like Wall Street today, doesn't it!

So for all of you out there, including my good friend, please take heart. The more that the economists and general public are saying that this is the end of the world the more convinced I am this bear market (for stocks) is reaching the end of the line. We aren't there yet, in my humble opinion. I am still waiting to hear from the general masses that a) they will never buy stocks again, b) the U.S. will declare bankruptcy any minute. When I start hearing this type of talk "from the shoeshine boy" as Livingston would put it, then I will know that it is time to be a bull again. Until then, I continue to listen to the market, not the hype. I strongly suggest you do the same.

LT

Setting Trading Goals

2008-10-22T08:52:00.000-07:00

After talking with many beginning traders, I've seen a common theme that often limits them from their full potential. Unrealistic or undefined goals.

Now one of the reasons for this is that most beginning traders want to make money the same way they do at their day job. Make $X per day, every day. Or they have a $500 account and want to turn it into $10k.

Well I'm here to tell you that the above situations aren't very realistic. Are they achievable? I won't argue that. But what I will say is that they aren't probable. And in trading that is the name of the game. Probability.

When I meet with traders beginning their trading path I tell them, look wouldn't you like to start with a challenging but achievable goal? Like beating the top CTA's in the world? And they say that sounds pretty tough. And I say yes, tough, but achievable. All you need to do is make 30% per year with a maximum intraday drawdown of no more than 25%. And these new traders look at me like I'm crazy. "30% is that all?" they say. No way they tell me. I want to make $500 a day or turn this $500 account into $10k. So I ask them, what type of drawdown do you intend to have while doing that? They look at me like a space alien, "drawdown, no I don't want any of that". So basically, they are telling me that they want to make like 2000% per year with a 0% intraday drawdown. Put in those terms it sounds pretty looney, right? But, seriously, this is what they tell me.

I am here to tell you that you need to start with realistic achievable goals. Imagine as a beginning golfer you tell yourself and others that not only do you want to beat Tiger Woods, but you want to beat him by a ratio of 100:1. And you want to do it every day, day in, and day out. You'd be a laughing stock. No one could possibly take you seriously.

I understand that most beginning traders are undercapitalized. I understand that you "need to make money now", but these are the very weaknesses that will destroy you. It isn't the market or the evil speculators doing it to you. It's you doing it to yourself. If you are undercapitalized the best thing you can do for yourself is to not trade until you are well capitalized. Go get a second job, save your pennies, or start a small business on the side. If you don't have the discipline and drive to make those things happen then you won't have the discipline and drive to stick through a bad trading month, or quarter, or year.

Do yourself a favor and set realistic trading goals and recognize that making money everyday isn't how this business works and that you aren't going to beat Tiger Woods by a ratio of 100:1.

LT

P.S. "Typically 3 months make my entire year. 3 months I lose, 6 months are small winners to breakeven. But those 3 months make it all worthwhile." Loosely paraphrased from Phil McGrew.

Waiting for the other shoe to drop...

2008-10-11T21:47:00.001-07:00

After the last couple weeks I'm just waiting for the other shoe to drop. To give you an idea, a typical month for this trading method averages about 15-20% with these risk numbers. So we're a bit above the curve to say the least.

Paper Trading = Waste of Time?

2008-10-06T09:41:00.000-07:00

Jules has recently posted an excellent thread regarding the controversy of paper trading vs. real trading. Too many times I have heard other traders state that simulated or paper trading is worthless.

Essentially, these folks are telling us that aspiring surgeons should just go operate on someone without dissecting a frog brain first. Or that an aspiring pilot should just hop on a 747 and learn while endangering hundreds of passengers. Or that an engineer shouldn’t prototype a new design of spacecraft. I think you get the point. Doing this sort of thing is madness.

And yet people really think that trading a live account with no defined edge and no experience will yield different results. That somehow these aspiring traders won’t blow up their account? What exactly are these folks thinking? I guess they aren’t.

Also, I would like to differentiate the people who utilize simulated and paper trading as a training tool and those who are playing around. Obviously anyone can cut open a dead frog. However, only in a training environment and with the proper dedication can one learn anything valuable out of cutting open a dead frog. If I just go in there and use a meat cleaver and don’t really identify what I’m cutting open and haven’t read my biology text book then I would learn exactly nothing. Similarly, I could go into a simulated account/paper account and trade at 100:1 leverage, average my losers and essentially “play around” with my paper account. This is significantly different than researching a definable, quantitative edge, challenging all of my assumptions, and testing that edge in a controlled and realistic environment while practicing sound money management and risk principles.

Lastly, I would like to state that yes there are definite differences between paper/simulated trading and live trading. Psychology does play a role. However, I don’t care if you have the psychological prowess of a Zen Master – if you can’t quantify and test what you are doing then you have no chance in trading well - None.

Given the recent economic climate, it should be pretty obvious that there are a lot of so called Masters of Wallstreet that do not know what they are doing. Maybe they should have done some realistic simulations/paper trading before taking their accounts live?

The Real Reason 95% of Traders Fail

2008-09-29T09:09:00.000-07:00

You’ve all seen this statistics that are anecdotally given out at trading forums, seminars and the like. And I’ve always thought to myself, wow, is it really that bad? I mean I’m not that smart and I don’t work that hard that I should be in the top 5% right?

This Saturday I had an interesting discussion with a fellow trader who’s been successfully trading the markets for longer than I have. He told me that he’s had guys come to him for help before (having heard that he knows how to trade) and he will ask them to please read a certain trading book. The next time that person talks to him they tell him that they purchased the trading book and are reading it. And so he asks them, “Do you have the book right in front of you?” When they invariably say yes he says, “So on page 114 paragraph 2 what does it say?” 9 times out of 10 they log off IM and he never hears from them again.

To me this is an incredible story. The “average trader” doesn’t have the commitment to go purchase and read a book that is $15 and then has the audacity to lie about it. What does this say about the “average trader”? In my mind they are a total joke. No wonder 95% fail if this is the pool of “average traders” that exists. I mean how is that trader going to actually test a methodology if they can’t commit to something so simple? How will they ever endure the painful and psychologically debilitating process that is a prolonged drawdown? The answer, I believe, is that they cannot. And that is why 95% fail.

But for those of you who are capable of the blood, sweat, and tears that are required to learn about, create, and test trading systems I feel very confident that 95% of you will succeed. Where did I get this statistic from? I just made it up. But seriously, I have never met a trader that has done his homework for 3-5 years who hasn’t been successful. Thus, in my mind the only trader that I ever have to really compete against are the 5% that can actually do their homework.

For myself I have my own litmus test as to the longevity of a potential trader. Can you commit to testing your trading idea (either candle by candle, backtest, or forward test) for at least 60 trades? If you cannot do this simple exercise then quit now, for you will never succeed. If you can then congratulations! Welcome to the 5% club.

LT

Trading Wife

2008-09-24T09:07:00.000-07:00

No I’m not trading in my wife. (She’s irreplaceable). She’s expressed an interest in learning to trade. All these years I thought she was absolutely uninterested in trading, but actually she was interested yet worried about taking over “my thing”. I guess I understand that. But trading isn’t exactly like a bachelor’s party…

So I’m having her start off learning the important things (many of which I did learn in the early years), without all the fluff and snake oil (which is almost impossible to avoid). I’m having her start with Forex because it was what I started with and because I still think in many ways it’s the easiest to trade (yes I’m sure some of you disagree with that statement). Also it has the advantage of having its best trading hours during the late P.M. early A.M. our time which is most conducive to her schedule (since she is still working during the day). We will split the trading duties into roughly 4 hour blocks and basically trade from about 12:00 a.m. our time to about 8:00 a.m.

We’re going to trade an old favorite of mine – Phil McGrew’s dots. And for the first time in a long time I’ll (actually we’ll) be able to trade on the 15 minute timeframe (which is what Phil himself trades). I’ve not been able to juggle this and trade other markets like the eminis so it had been put aside for the last couple years (which is too bad since it is a great methodology). I think this system will be a good one for her to learn on since it is not entirely mechanical or discretionary but a little bit of both. It’s mechanical enough that someone new to the markets isn’t overwhelmed with information, but discretionary enough to take advantage of intelligent insight.

So for the next 4-6 months I’m having her learn the basics plus get familiar with the dots (Phil has a wonderful 100 page + manual that I deeply admire). Also during that time I’ll have her start testing the system the same way I do (candle by candle) to gain confidence in trading it and understand how drawdowns work. After that we’ll have her start with a demo account for another 3 months to understand mechanical execution, and then we’ll start with a small account trading live and see where things go from there.

The best part about all of this? I can talk about trading with her now and not receive the glassy eyed look. Priceless :)

LT

PS The picture is of a week I traded the 15 min dots back in April 2006. Good then, still good now. That's a robust system IMHO.

The Frugal Trader

2008-09-18T11:02:00.000-07:00

Protecting your assets doesn’t seem a foregone conclusion as it did even a year ago. Iceberg risk isn’t just a theory anymore. Unfortunately your money isn’t safe.

Several frugal blogs have described some ideas to conserve money for the upcoming Great Depression Part II. I have several ideas on how we as traders can reduce (but never eliminate) our personal portfolio risk.

1) Set aside at least 2 years (better if you can do 5) of your total free capital. Put this capital in government backed savings accounts. In at least 3 banks worldwide. I recommend 1 U.S. bank, 1 European bank (Swiss Bank is good), and 1 Asian bank (Singapore or Hong Kong). Want to be even more secure? Put at least half of it in gold – jewelry, coins, etc.

2) If you are Forex trader, split your account between Spot FX and Currency Futures. Remember that the 6E and the EUR/USD trade in a very similar fashion and Futures are regulated and often insured (check with your broker).

3) Have at least 3 or 4 brokerages (as reputable as you can find) as possible. Make sure they don’t all clear from the same clearing firm.

4) Get your family on a budget. Tell me you already have one. Monitor that budget at least monthly.

5) Reduce all debts to zero – that includes your house. Can’t afford to pay all cash for your house? Get a condo.

6) De-leverage your trading as much as possible. Are you currently risking 3% per trade? Get it down to 1% - or less if possible.

7) No lattes! Reduce your latte and eating out habits. Eat at home. You will lose weight, save money, and help the environment. See if you can cut your total food costs in half. It isn’t that hard.

8) Grow your own food. There are several urban homesteaders who feed their family entirely from 1/10 of an acre. You might have to become vegetarian to make it happen (yep I hate veggies too – get over it). Get into gardening. Re-invent the Victory Garden for your home. WWII rationing may seem quite pleasant compared to the upcoming storm.

9) Kill your T.V. If you subscribe to cable cancel your subscription. T.V. rots your brain anyway.

10) Kill your cell phone. Do you remember when you were a kid? There were no cell phones. It’s a waste of money; nobody really cares about your 100 texts per day anyway. It will relieve stress and help you disconnect from unnecessary distractions. Still can’t live without it? Any disconnected cell phone is still able to dial 911 (the only number you really need in an emergency).

Some of this might seem a little over the top. Didn't we all get into trading so that we could live the Lifestyles of the Rich and Famous? That may be true for some, but for me it's about personal and financial freedom. How can we be free when an iceberg could put us underwater at any time? Remember, just because you're paranoid doesn't mean the market isn't out to get you.

LT

Advice to My Younger Self

2008-09-12T10:21:00.001-07:00

Recently I have been discussing optimal f and appropriate risk over at Phil McGrew's forum. Below is some information I posted to a young trader (in his twenties) that sounds like advice I wish I had listened to when I was getting into trading.

I'm glad to hear that you'll be starting off slowly and on the right foot. All of us make lots of mistakes in the beginning and one of the most dangerous is wanting to do too much too fast (I want to grow my $5k account to $500k in 2 years lol). Imagine if a medical intern wanted to perform complex brain surgery in their first week. Obviously complex brain surgery (ala trading a large % risk) is possible, but not safe for beginning interns.

Remember that trading is a great career/business (not fad or get rich scheme) and that you want to be enjoying it for many years to come. Just like a great surgeon it will take you many years to become proficient and even more years to become a master. Try not to think of this as a bad thing - but rather as job security. Remember, the rewards are exponential. It may seem like a long time but imagine the trader you will be when you are 30 or 40. Ten or twenty years may seem like a very long time to you right now but it is not. And because you are young you have the time to enjoy the rest of your life doing something you love (hopefully you love trading or will grow to love it) it is important to build your skills and set your goals with the long term in mind.

To give you an idea of what goals you should be thinking about, consider this. 9 out of 10 of the top CTA funds listed at Attain Capital have not made more than 15% this year with a max DD of 25%. Each of these funds manages well over $50 million. If you could put together a live account track record for 5 years that beat these numbers (or even met them) then you could manage $10 million or more and make in excess of $500K per year (assuming a profitable year). Obviously this is not the only way to make money as a trader but it is a very viable one for those who do not have many thousands of dollars to trade but DO have a reliable low risk track record.

Alternatively, consider this scenario. Start with $10k. Making only 75% per year (with a max DD of 25%) in 10 years you could be making in excess of $250k per year (assuming you can mentally survive 25% drawdowns on a million dollar account). Welcome to the top 1% income earners in the U.S. This would include paying your taxes (can't avoid that silly). I chose 75% because most of the successful traders I personally know and many of those interviewed in market wizards can average at least 50-75% per year. The advantage of this method is that you only have to deal with the psychological pressure of risking your own money (which is easier for some people), however, the downside is that you cannot start withdrawing funds in year 1. It will take at least 5 years before you can start withdrawing anything. So don't quit your day job.

Remember that although these returns are very possible, they are not linear. Consider the fact that it is entirely possible to make no money (or even lose money) for a year or more (this is mentioned in the track records of several successful market wizards) and hence having emergency savings (that is not traded) is a very wise choice. I am personally working up to having about 2 years of saved income and adding to it during the good years.

So why is it at every beginners forum (such as ForexFactory, EliteTrader, etc.) they are talking about making 300-700% per year? I don't know. Of course making that much is possible, but sustaining that year after year is highly unlikely. Also most traders attempting to make that much put too much financial and pyschological pressure on themselves to do so. There is a LOT of obfuscation of this fact in the beginners forums.

In conclusion, if I knew then what I know now I would have spent more time building confidence with either a demo account or preferably a very lightly leveraged real account (say 1% risk). 6 months to a year is the minimium to tell you anything in my humble opinion. Don't change ANYTHING during that period (of course you better test your ideas thoroughly beforehand and challenge your assumptions). Experience counts for so much in this business (same as brain surgery).

Hopefully this isn't too preachy or too long. Just some straight talk I wished I had listened to a few years ago (yeah I was told).

P.S. Although I ignored this until fairly recently, consider the fact that most of the people who become wealthy (not inherit it) are very frugal. Learn to live frugally. You will appreciate the wealth you make that much more and you will aquire it at an amazing pace. This is an often discounted tidbit of wisdom in the trading world, but take it to heart. When we are young we live happily on little money (I wish I could live as carefree as I did when I was 20). As we get older we buy toys, cars, houses, etc. We become more trapped in our job. We have less freedom, less happiness. This is a trap. Learn to escape it. Money will not make you happy. Only you can do that. Check out Get Rich Slowly for more frugal ideas.