If you've been following me then you're aware that I've been involved in a few trades for a few weeks now. Well on Sunday, I was finally closed out of one for profit. This was a really mentally tough trade to sit through because throughout the course of two weeks it went from down 50pips to being up almost 100pips, to being sucked all the way back to a small draw-down before finally ending with a profit. This was a true test of my mental discipline and it paid off. It hurt a lot to watch it go from a big profit, back to zero but sitting through it, gave me confidence to sit through the next trade that takes the same course. It's kind of like that saying won't doesn't kill you makes your stronger. Being a runner, I think of it as doing that hard workout that kicks your butt, but then being able to come out the next time and pushing further than you did the last time.
This is a hard topic for me to write about because I'm honestly still on the fence on where I stand on this issue. I am a technical trader that looks at every chart individual and not in the bigger scheme of things. For example, if I see a trade set up that has me looking short on the EUR/USD that doesn't mean that I'm bearish on the Euro as a whole just that one particular pair. However yesterday I had an interesting set-up. I was short in the EURUSD from a few days earlier but I was also long in the GBPUSD. At first I was thinking to myself "Ok, worst case, one will lose and the other will win. best case, one will win while the other retraces, then rally and I'll two winners." But the more I sat in the trade the more uncomfortable I felt being in both going opposite direction. And the actually chart setups wern't helping be out as far as confidence went either. So I decided that just to stay sane I had to exit one of the trades. Since the EURUSD trade was placed first and had a wider profit target (and was already in good position) I decided to exit the GBPUSD trade. The original target was about 50pips of profit and I exited with about 20pips, but the key was that I was not comfortable again. I was taught that you gut feeling is right the majority of the time so I went with it. Even if the trade (which was an eventual loser) had rallied the other way, I was ok with that, because I felt calm again as a trader. As my mentor said yesterday "You'll soon learn that breaking even in this business, is just as good as a win."
A wise man once told me "if you can make 20 pips a day you'll become a rich man." The power in this statement lies in the mindset of thinking about your earnings as a percentage instead of an exact dollar figure. If you have a good money management system then you should be increasing the amount you trade based on your account size. For example say you have a $5,000 account and are trading 1 mini lot. A 20 pip day would equal you $20. However if your trading with an account of say $20,000 then that one mini lot bet will probably be more like 4 or 5 mini lots. If your sticking to that same plan of making 20 pips a day, instead of $20 dollars, you are now making $80-$100 per day. Let's do some quick math, if there are about 20 trading days in the month and you're making $100 a day then suddenly you find yourself making $2,000 a month which would equal $24,000 a year. It's all about compounding. Then if you would like to go even further into the rabbits hole. if you are making $24,000 a year and are working on growing your account rather than cashing out all of your profit each month you would now have doubled your account. Since you're now trading with a $40,000 account (to make things easy) you can now trade with (or close to) a full standard lot which is 10mini's. Now that 20 pips per day gets you double what you were making before. Of course this method means nothing if you don't have a well planned out money management system. Having a planned out system is very important because if you just add to what you trade without protecting yourself then you can have one loss that wipes you out and puts you back to square one.
The point is to not be compared with the exact dollar amount when first becoming a trader. this will drive you to get greedy and over trade and ultimately lose. Or even worse, have a streak of great wins just to see it blown up by one or two bad trades. Think for the future. Think to yourself "this may only be a $20 winner today, but a year from now, the same exact trade will be $50, and in 5 years this same trade will be worth $200." The money will eventually come. But if you properly prepare yourself now, then all you have to do is the same exact thing and get a bigger payout. Think of it as a yearly raise for doing the exact same thing that you've been doing.
If you've been following the markets since the disaster in Japan then you've noticed that it has been like the wild wild west out there. Keep in mind I have only been participating in the Forex market for a little over a year now, but this is the first time I have seen this many long wicked candles on what seems to be like a daily basis. Trading in a market like this (if you chose to) are a good test of ones discipline. I know that the old me would have tried to jump on one of those big candles only to get quickly reversed for a giant loss. Now I just sit back and enjoy the show. Don't get me wrong, I have been in a few trades this week on both the short-term and swing trading time frames, but I have stayed away from making impulse decisions and have stuck to my trading plan. Honestly it is a little scary to think that a long wick can knock me out of a good trade, as I was last week in the EUR/AUD which would have been a good winner, but hats just part of the game. I'm currently in 2 positions right now and am watching one of them very cautiously hoping we don't get one of those crazy bounces in the direction opposite of what I'm going. We'll see.
I'm aware that I have gotten away from specific trading talk since I've been writing this series but I feel as if my experiences down there may be well worth it people in the same boast as myself. However while I've been writing I've been using a new system to trade. Actually I take that back, not a new system, but the same ratio trading system on a different time frame. My mentor Jason has recently held another 2 week free trial for the introduction to his new class that he's teaching. While sitting in on this class he used "Range Bars" to demonstrate his ratio trading system since a 4hr chart would present may examples for the trial. So I loaded up some charts and decided to follow along and use what he had previously taught me on this smaller time frame. To my surprise I liked it a lot. The main reason I like it was because of the risk/reward ratios. Usually I (and I still do) swing trade on a 4hr time frame. However two things bother me about using this large of a time frame. First, unless your watching a bunch of pairs, there can be instances where you go weeks without getting a single signal. This is hard for me because I often get into the habit of trying to "create" trades, by telling myself that something is what it isn't. Secondly, the stop losses have to be put so far away in order to be safe. For example, i'm in a trade right now where the target is about 400pips away and the stop was about 200pips. Not only does this mean that I have to be willing to take a 200pip loss, but I also have to watch hundred's of pips sit there on the table when waiting to get to my target. This may not be difficult to a trader with a large account. but when yours in small like mine, you get in the habit (and yest i know its wrong) of seeing money on the table and wanting to grab it asap. On the smaller time frame the targets and stops are much more manageable. the only downside is that when trading a smaller time frame you must be in front of your computer at all times or you risk the chance of missing one.
Sorry for the delay in getting part 5 to you. I've had a busy week both in and out of the market while at the same time getting ready to journey down south once more in a few days. Hopefully I learned something from my last experience. Although I learned a bunch of hard taught lessons last time, I mentioned that I still came out with positive feelings. Yes, I had a losing week, but one thing that I did gain was respect. Same song and dance, but whenever you do something new or out of the norm people will feel a certain way about you. We've gone down this path before so i won't go into details. During my trip down south I had many people come up to me an actually ask me what I was doing, or what I was looking at. Yes it could have been fake, or just to be nice, but it felt good to have people give positive comments instead of constantly bashing you about what you do. Since I'm self employed I don't have a boss to come around and tell me good job. Some people even wanted be to briefly explain to them what exactly I was doing. So even though it wasn't in a big way by any means, I had the chance to show off what I did which felt good.
This trip may have been a turning point in my trading career, as I've been doing pretty decent since coming home. Maybe it's confidence gained through others lending positive remarks. Maybe its digging deep and getting through a week that seemed like it was destined for failure. Maybe I've just finally hit that point where I've messes up so many times that I have to be right. Who knows, who cares. I've been at this business for 6 months and 15 days and it's about time things start feeling well again.
Today's entry deals with discipline. But before I start let me tell you about a conversation I had with my brother yesterday. We spoke earlier in the day about him starting a new schedule at his job, one that he enjoyed more than his current one. Although it's not his dream job, he understands that it's something he has to get through in order to take the next step in life. I responded by telling him not to lose hope and to use this part of his life as motivation, so that once he is done with it, he will never want to go back. He agreed with me and commented on my recent situation saying
"Man, I commend you every day for making the move you did. You're doing what A LOT of people are afraid to do and that's follow their dreams. People expect it to be easy and that's why some people may not understand why you do what you do. Not that an answer is needed but it's so obvious!"
Being self-employed is difficult, especially when you're young and broke and you have bills at the end of the month that have to be paid. It's even harder when your job doesn't have a set pay scale. It's even worse when you consider that you can actually lose money every month. It's things like this that sometimes make me want to take the easy way out and just go after a 9-5. But like my brother said that would be the easy way out.
With all of the difficulties I dealt with on my trip (different work setup, having no internet to start and being forced to change my routine) it would have been easy to just say "I'm not doing it this week" and enjoy my time in the sun. But how would that be positive? I told myself I was going to conduct business as usual even though I was away and that's what I did. I didn't have the computer setup that I preferred, so I did the best with what I had, I didn't have internet, so I went out and bought some, I didn't feel like waking up 4 something in the morning and chugging coffee, but I did it anyway. I honestly wish I can say that I had a super week of trading as a pay off, but I didn't. My trading sucked that week. But you know what, I came out a much stronger person because I proved to myself how dedicated I was. And I hate to take into consideration what other people think, but I also proved to some others that what I do is not a joke.
A little off topic, but when people hear self-employed they usually don't take you serious because it's not the norm. It's not what they expect, not what they're used to so they write you off. But you know what, I just don't dare to be different, I LIKE IT. I don't want to fit in with everybody else, because that would mean that I'm average and why should I strive to be average? Let me stop, because this rant can go on forever, but the point was that discipline is the key to success and if you are dedicated enough to a certain task, you will eventually succeed at it.
It's very ironic that today's entry is about routine seeing how mine was pretty much off the entire day. Today was my off day from volunteer coaching in the afternoon and I had a long list of things that I wanted to get accomplished since usually my schedule is pretty full. There was nothing really crucial on my to do list, just some simple things, like run to the bank, workout, grocery shopping, reading and reviewing and updating my business plan. Then I got the worst phone call in the world. Well not the worst, but one of those phone calls where I was asked to do something by my girlfriends mother (so you know you can't say no) but without her giving you an exact time of when she wanted to meet up and do it. Needless to say I was on edge all day, hesitant to stray too far away in fear that as soon as I did, it would be time to complete the task. I talk about routines because when working from home having a set routine is crucial to success. having one keeps you accountable and allows you to stay organized. And trust me if you're a full-time trader in the Forex market (which is open 24 hours a day) it is easy to simply say "well I have all day to trade so I'll just do it later." FALSE!
My daily routine is simple. My trading day goes from 5:45am to 12 noon giving me about 6 hours in the market each day. Keep in mind I can whenever I see a signal I like, but this is the period that I dedicate to being in front of my computer and actively watching the market. However, during my week down south with the track & field team, I had to alter my routine to fit our training schedule. Our bus left for practice at 8:45am and didn't return until around 1pmish so I knew that if I wanted to get some work done it had to be in the morning before our 50 plus athletes were awake. I had two choices, stay up really late at night or wake up really early in the morning. Anybody who knows me knows I'm an early bird so I decided to wake up 4:00 and trade until 8:00 every morning. "Yeah! I can do that. No biggie. Who needs sleep anyway I'm a man." lol A single day later my entire mindset changed. Waking up that early and being productive was one of the hardest things ever. Waking up wasn't as much of a problem after fighting through the initial pain and urges to go back to sleep. But getting my brain to function in a way that was needed to properly and efficiently trade was much harder than expected. And because of this I missed many trading opportunities that I may have caught otherwise. "Humans are creatures of habit" and everything I was used to felt like it was flipped upside down. I never realized how important going through my daily routine was until I was forced out of it. When I came home and traded the market Monday morning I woke up with a big smile on my face. So happy to have my dual monitors and my gigantic white board at my side. Back to normal.
P.S. Did anybody see what happened in the market today? If I wasn't writing these series I would have a lot to say about the recent destruction going on. What am i doing? I'm going to sit back and watch until i feel it is safe to participate again. Wowzers! it's been Banan
Even though I was away from home I figured that I would be able to continue my daily trading routine. After all everything I needed was right in front of me. A notebook to take notes in and my laptop to access my charts on, and my will and desire to make some money. Unfortunately I forgot to inquire about the most important factor. A good internet connection. As I smacked myself in the head repeatedly calling myself an idiot, I wondered what my solutions were. Having an internet feed was critical because without one I would not be able to place any trades electronically. Sure I could call into my broker but the problem with that was that my trading day is half finished by the time their offices even open. While going into shock mode one of my colleagues informed me that he had a mobile hotspot on his phone that I could use to access the internet. This was a big relief, unfortunately when I connected to it the network speed wasn't fast enough for the charting package I use. Being a professional trader means that you need the fastest connection speed when trading. Any hiccups or connection losses can be dire to your success, especially if you're a day trader scalping for pips. Long story short I had to go out and buy a broadband connecter from my mobile phone provider which cost me a lot more than what I was willing to spend. However, I had no choice. Call in the price of business.
Coming tomorrow: Adjusting your routine.
Last Saturday I left for South Carolina for a training trip with the Track & Field team that I coach. Maybe I was being a little naive but when planning for week-long trip I assumed that my trading wouldn't be affected. After all I was bringing my laptop with me which had the same charting package as I use at home on it, and I was also bringing a copy of my trading plan and a notebook to take notes in (instead of using my whiteboards) Even before we arrived at the house I discovered that I was ever wrong. I had many set backs on this trip, but at the end of the day I think I came out a better trader. Over the next few days I will go over the many issues and challenges that I faced during this adventure. I have created a 5 part series to keep you entertained this week that I think is well worth reading for any trader that may be on the road and some point or another. Trust me this week was a big eye opener for me, but I am happy that I went through it because I now know how to better prepare for the next time. I hope you enjoy this series and be on the lookout for Part 2 (The Network) coming tomorrow!