Screen Shot Trades and Trader Talk

Short Introduction to my First Post of 2013!

Well it’s been quite a while since I have written anything for this old blog of mine. That’s not because there has not been much going on quite the reverse, too much has been going on.  Way too much which means that I should get down to the task and write about it.

Well since this is my first entry for 2013 and it’s almost over, I may as well start with something simple and easy. And that is some recent trades of mine.

I managed to gather a small grub stake (Funds for trading)  to trade.  £5,000 to be exact.  When trading, it’s important to start with a decent grub stake. For example last year I  managed to scrape together a grub stake of £2,000.  After buying the charting and squawk box I was left with just £1,700 to trade. This allowed me to trade around £5.00 - £10.00 a tick.  In  the first week I was up about 30%, but the next week after trading from morning to market close I was flat. All that work for nothing. I traded around 10 trades (round trips) per day.  There were two frustrations, the first I was desperately trying to earn a living off it. The second was that I wanted to grow the account at the same time, and finally I was practicing my short side of trading. Because my grub stake was so small it meant that I was taking more risk to generate say £100 -£150 per day. By the third week  I blow up, this was after a number of lost opportunities to go short and hesitating while in the trade then cutting the small profits. Then  I realised that if that the amount I money required to live of meant I was taking too much risk on to generate it, after all 10 – 15% per day is fairly risky.  In addition making withdrawals meant my account was never growing and was vulnerable to a large draw down.

I decided to be reckless and short over an event. Placing a large stop, with my children screaming at my heels about some minor issue the stress levels were just too much for me. I retired into the bedroom and went to sleep. The announcement came and my stop got hit,  I started to chase my loses which of course lead to more losses.

I did take profits when they came and so when I blew up my account I lost a total of £900.00.

Often times when a trader blows up their account it doesn’t have to mean they have a lost all their money only the money that was in the account. Obviously any withdrawals have been taken away from market risk.  Still when your adequately funded it helps to reduce the likely hood of blowing up due to taking risk simply to make a living. What am I talking about. Well you need to be able to earn a living and  be  able to add to your account to absorb the down days. So if you can live on £300 a day and you have say £200 to cover your down days then another £200.00 to grow our account your going to need to make £1,000 if that represents 10% of our account size that’s risky. If only 5% then that’s not too bad (£20,000). 

So that was way lost year 2012!

This year, I managed to get a small grub stake I was trading mini lot’s of 1/10 of a lot.  Started trading up to 2 lot equivalent and managed to generate £1,400 of P&L  by the end of the week, that’s after two losing days.   However the broker Prospreads decided that the mini lots were simply an introduction to using the trading platform and reduced my maximum size to 1 lot. They announced this change during the trading day when my account was in loss. It restricted my tools to double up ( Martindale technique).

For the next two weeks I was up and down on my account. One day up £600 next down £950 then up £440. I suffer from a chronic inclination to trade whether I am up or down. Often times the broker will send me a message reminding me that the market closes at 21:00 hours!  I just love to be in the trade.

Basic approach has been to jump into the water, with a view to reach a certain destination and see how the tide is. If it’s too strong to go in the direction I wish I simply go with the tides direction. Obviously this has pluses and minuses. On the minus side jumping in means that you may get caught by a strong tide in the wrong direction, by the time you realise where it’s going your down on the P&L by around £-500 I have been in positions that have been of side £600+ and by the time I have found the trend and traded it it’s meant I have had to hold on to a winning position for £800 to be £200 up on the day.  But the rewards are if you are going in the right direction you get to keep all the £800.00.

For example the Thursdays Interest rate Announcement trading day:

The next day was Non Farm Payrolls

Having had a decent trading result the previous day, I decided to be cautious on Non Farm Payrolls, therefore  was only going to go in with a 1 lot at 9040 ( first Arrow) , with the pivot point of 9074 as my exit. Overall on the daily chart it looks all bearish but for both the S&P and the DAX both main pivot points had not been breached. Technically a high probability trade worth around £708 . I figured the pivot would be hit prior to the NFP announcement, why I have no idea?

Well as soon as I entered the price declined down to around the 9030’s level. I then realised that I was the last fool to have brought at 40, it never reached passed that level for the next four to five hours! Since it was languishing around the lower 30’s I decided to be “smart” and add an additional lot. By the time it was 13:20 hours 10 minutes prior to the NFP announcement I realised I was on my own the expected figure was 125,000 jobs, consensus and the media were very bearish on it. I had a deep stop at 9010.

The figure was 204.000 a surprise so expect the bullish move. First I saw the Bund drop like a stone, I realised that I was going to be stopped out, but since it was such a bullish announcement any price movement was likely to rise up from any pull back.

At that moment 20 seconds after the announcement my trading platform (i.e my Broker’s platform) crashed and my stop was hit (Second Arrow) . By the time I had restarted the computer and log onto my brokers platform my P&L was -£1345.00 I jumped in at 9009, the price having crawled back up from it’s low of 8988! I tried to get in early with my conviction that the price will hit the pivot point above even though I am overall bearish on the market, having seen the spike the day before representing the DAX’s all time highs. 

The broker said that as my account was now a mere £3400.00 I did not have enough equity for margin to trade with a 2 lot! I remained in with my little one lot until my equity rose then  I banged in with that extra 1 lot. By the end of the hour candle it was showing a rock solid hammer.  My conviction was complete, I placed my trailing stop at 8990 and waited it out.  I was holding on as my trade accumulated in profit, showing £1700+ at one state and I was in profit of around £400. The S&P looked like it was on its way to its pivot point of 1758. One takes notice of the EuroStoxx in the morning and the S&P by the US Open at 14:30 hours GMT.  The price retraced from it’s strong upward move ( to take some breath) my £400 profit now went into a loss of around - £660, I continued to hold, and was aggressive in raising my limit order from the original 9074 to 9085.

Finally, as the price neared the pivot of 9074 I held my nerve and watched it broke through.  I then had second thoughts but being greedy, I once more reminded myself: “Always leave some for the other guy”.  I closed my position at 9077 with a profit of £1168.00 (Third Arrow)  not bad considering my original profit goal was £700.00.

It’s not often one trades the Non Farm Payroll to be on the wrong side of it and still come back with a profit. I was happy with my trading that day. I believe the broker tried to pull a fast one. But for me the lesson was first don’t always come in guns a blazing in full size. Stops play a good role to give clear heads, and limiting losses, certainly in times of when a broker tries their shenanigans’. The focus should first and last be about the trade idea and it’s relationship with the market in play not simply about the money.

UBS & The Magic Umbrella

UBS & The Magic Umbrella

With nothing in my diary of late I decided to attend the trial of Kweku Adoboli the “rogue trader” of UBS. It has been alleged that he and he alone was responsible for up to an eye popping $2.5 Billion in trading losses.

Kweku is Twi (Ghanaian) for Wednesday born, and the name is associated with a hard-nosed type of boy, but looking at Kweku he seems an affable type of young man. Sitting in the courtroom surrounded by his legal team he seemed like somebody glad that the show has began. Other than his legal team only his sister and another fellow were there to provide moral support. With a platoon of News reporters in attendance, I was informed that last Friday there were 80 but today only around 15. Given the scale of what has happened it seemed like he has been hung out to dry. As events began unfolding the obvious question was "Why was he the only one in the Dock?".

He is a man who had rose steadily up the ranks with a starting salary around £30,000 with a £10,000 bonus, then the next year £33,000 with bonus up to £15,000 then two years later a £110,000 salary and £250,000 bonus made of shares. The bonuses were paid out annually around February covering the previous year.

The prosecution made much of his profligate spending. At the time of his arrest his scattered accounts were overdrawn. For a young man earning £6000.00 per month net it’s not the first sort of profile customer you’d expect for Payday or Wonga loans yet that’s what he applied for.

He had his fingers rapped over having an IG spread betting account, trading a number of shares, Daimler and Tullow Oil for example. Yet his trading was not too great since in the year 2011 he had lost £123,000. That's £13,000 more than his £110,000 salary. It means that until he received some of his bonus he was skint. Considering that spread betting is the amateur version of his own profession of trading that alone should raise alarm bells.

Later UBS banned it’s traders from having a spread betting account yet he still went ahead and opened a City Index account. His trading improved and he managed to generate £18,000 profit.

I would hazard a guess and say that most traders have spread betting accounts. It’s the 21st century version of “Front running” and most possibly an unofficial “perk” of the business.

The term;

“Let him who is without sin cast the first stone”

 Comes to mind.

During the lunchtime interval I was introduced to Kweku in making some small talk as he glanced at the book I was holding in my hand I asked him:


“ Have you ever read this book?” –


Reminiscences of a Stock Operator

by Edwin Lefevere


“That book is real old school, I started to read it but found it a bit dry.”

Then on reflecting he added;


“Maybe if I had of read all of it I might not be here.”

The prosecution barrister after having gone through Mr Adoboli’s personal finances kept on droning on in a flat tone, sending both me and one of the Jurors to sleep.

Just when I thought it was a mistake to be here in the courtroom and was fidgeting in my seat along with the five other only members of the Public the prosecution called in a Mr Evans, the independent Expert.

Mr Evans, apparently held a number of senior management positions in J.P Morgan so the jury was lead to believe that he certainly knew his onions regarding trading. He was no longer with JP Morgan now. The barrister for the Defence established from Mr Evans that he had only spent 3 years on the actual trading floor between 1998 and 2001, during the boom times of the dot.com era of trading!

Using the car sales man analogy he tried to explain to the Jury what traders do. Starting with selling or buying one car, but rapidly expanding to selling millions of cars until the Barrister had to pull him back down to the notion of selling or buying one car. To be fair he done an okay job, but when terms like selling 1,500 put options were mentioned in emails sent to and fro between the trading desk, he did not do a good job in explaining what sort of size 1500 put options are and how that would affect the market. 1500 options = 15,000 euros per tick minimum movement x 100,000 euros per options contract value…………do the maths 100,000 euros x 1500. This was the banks exposure to the market on one occasion.

The prosecution seemed to make great play on the notion of risk between booking a trade and the settlement date. To my surprise the Expert witness was going along with it. The implications being made that some sort of funny accounting was going on between the time a trade was booked and the time it was actually settled. Basically trying to portray trader’s risk as within this time. So we are told that the important things to consider when settlement comes is:

a. the Price

b. the Size of the contract

c. and the delivery date

I would also add, or would think the direction of that trade was very relevant did the trader buy it or sell it?

The reality is that one of the biggest risks is between the time when a trade is entered into the market and closed out of the market.

But here’s the rub. Trial by jury was originally supposed to be being judged by one’s peers. But in all honesty when the expert witness Mr Evans tells the jury that a number of synthetic longs were made and at some point an exchange for physicals were required, do we really believe that a random jury would understand what he is talking about. After all the explanation of a Futures contract was a bit flawed.

When I was studying to become a derivatives broker I decided I was going to do some intensive study and complete the exam in four weeks flat out. Here the jury is expected to go from basic concepts to high octane trading with hedging of position and delta one to boot within 8 weeks.

Surely in matters like this one should judge one’s true peers that is other traders from other Banks who understand the rules and environment. Or at the very least the jury should have a day out on a trading floor and have an Expert witness explain what is going on. You cannot get that through looking at a photograph. Still I am sure that they will be doing catch up but boy that’s a lot of homework.

These investment bankers certainly know size. On a desk of four traders their desk trading limits were $100 Million, but still to come more information is required to understand what type of trades they were doing, how many trades per day, or were overnight positions being taken which would have required bigger margin requirements. That in turn would require authorisation. For example on the DAX the margin for a 1 lot during the day is 2950 euros but for an over night position it’s around 13,000 euros, so total margin call in the day on say 1500 lots would be 4,4250’00 but if you kept that position overnight an additional 15,07,500 would be needed.

Another interesting point was when the Defence Barrister was asking the Expert about the role and job of the trader being to buy at a good price and sell at a good price to make a good profit. The expert pointed out that it also depends on whether the banks clients also wanted the financial instrument (product) too. In such an instance the Bank would be likely to “give up” the trade and defer to the client, to maintain good relations. That would seem fair, but in this instance the question referred to proprietary trading not market making so( I am no lawyer) I assume that “Chinese” Walls would be required and therefore the banks clients should officially not even be aware of the goings on of the Banks proprietary desk since this is Desk trades the banks capital not the clients. I would seem that “Chinese Walls” have ears. Indeed it is surprising that the Financial Services Authority do not automatically serve as Expert witnesses and relate to a jury exactly how things should be according to it’s own directives.

Some discussion was made about the old question:

“Is trading and gambling the same thing? “

Also mention of the martingale technique a classic losing strategy based on the arcane habits of the residents of a Southern European town known to always double up if they have lost the previous bet. Most traders carryout the anti martingale effect of only doubling up if they are winning. It’s all there in Edwin Lefevre’s book on Jesse Livermore.

Much comment was made on the use of IB or messaging systems traders and brokers love them. To the extent that they using them to communicate with each other on the same desk. It’s a new way of whispering to one another. You can communicate your ideas and thoughts to the person two seats away from you and the man or woman in the middle won’t even know what your talking about, unless you decided to add her to the chat room. This is how traders communicate, some say its all about fast markets and getting the message out quicker………..I disagree. For me it’s about creating niches, sub-groups, in groups and out groups depending on who has access to the chat room. This assists in directing traders in their trading decisions. It's an area that needs regulating.

One point that has yet to come out of the trial is the timing of when all this was revealed.  Things started getting hot for Kweku around late July and early August 2011. Fellow traders check your charts we all know what was going on at that time. The year started with a little bump over the Arab Spring. Then a larger bump with the Tsunami and earthquake in Japan. Then the Sh*t really hit the fan in late July\August with the Obama medicare indecision of the congress and the politics of dragging through followed by the rogue ratings agency that decided to down grade the USA for the first time in the USA's history. I suppose it was the economists version of an anti Nobel Peace prize on Obama's handling of the economy. The net result was the largers drop in the Equity markets since 2008, and for those of us seeking refuge in the Bond markets that too decided to become extremely volatile on the bearish side. I documented my trading over this period. It would seem that this was a catalyst that brought out the problems on Adoboli's desk.

Estelle Shirbon of Reuters writes:

“The question of how much UBS managers knew about Adoboli's trades and whether or not they condoned his breaking of internal rules in the pursuit of profit will be central to the case.”


In the 1990’s the name of the secreted account in which Nick Leeson hid his trading losses was the notorious 8888 accounts.

In the 21st Century version it’s called the Umbrella account. So what is it? It appears to be an account that is used by traders to smooth out one’s P&L sort of like how the Italian Businessmen always have two sets of accounting figures, one they show the tax man and the true one.

In Kweku Adoboli’s case this “Umbrella” account appears to of been used routinely by more than one person on the trading desk.

John Hughes another senior trade once commented to Kweku via IB

"All I can say is thank fuck for your umbrella," then again "We might need to unlock some umbrella." . On another occasion he asked Kweku "How much is (in the) umbrella?"

Estelle Shirbon of Reuters writes:

“The question of how much UBS managers knew about Adoboli's trades and whether or not they condoned his breaking of internal rules in the pursuit of profit will be central to the case.”

Well it was certainly a gripping day at Court, I think as a trader the last word should go to Kweku Adoboli that aptly describes the whole situation:

“When I was young I used to think I did not know much but all the people higher up did, now I am older I realise that they don’t know very much either.”

http://youtu.be/GMbYWtUbu-0

Nuff Said!

Trading Goal & Past Performance Trading Record

The First Graph is an aggressive Trading Goal. Obviously not a trading plan, as I have put no details of money management or entry and exits. Primarily it's for patient play, to sit in front of your computer until you see a trade that is so obvious. Because it is only looking for a few ticks it's time range is one day. But with decent trading platform and size it could be every two hours ! 

The second Graph is from an actual trading period, one of my better one's despite two very large drawdowns. My starting capital was actually £2,600 then topped up to £3,350.00.  Midway through after my second big draw down I put £8,000 back in. Ones focus should be on the P&L per day and the number of trades carried out. I find it interesting to go over these and figure, what short of market was I trading in! What have been my natural highs or low's what barriers are existing in my mind. An obvious one is reaching £100,000. What you should notice is how my actual trading follows the first Graph, in terms of doubling my account size, up and till my huge drawdown, I managed to double my account on average every seven days. This was done through increasing my size as my account grew. At sum point ( mine was £200,000) one should reduce their size substantially and this is what preserves your account. at my peak I was trading £750.00 a tick, if I had of switched to £100 or even better £50.00 per tick this would have preserved my capital. Like a rocket, the most difficult part is the lifting of the account into the major positive zone before coasting towards the stars.

Past Performance Trading Stat

In search of Elderado

Drama with Obama

Having waited for around four months of raising my grubstake once more I managed to amass £8500.00 a princely sum to trade.

Also changed brokers for a direct market access one. They provided level II trading and a squawk box, all in all a good package. The broker is combination of futures trading and spread betting. Trading is done in proper lot sizes so when trading the DAX the lowest trade is a one lot at 12.50 euros a tick or 25 euros a full point. The amount I was able to trade up to was around 3 – 4 lot’s but I only traded mainly 1 – 2 or three in exceptional circumstances.

While I was waiting on the funds I day traded on the brokers’ simulator for over a 6 week period and was doing quite well. When funds arrived was when the fun began.

I think because I was kept waiting for the funds I was far too eager to get stuck in. Peter Clein and Kevin Thomas both ex floor traders on Liffe Exchange taught me and my peers that a trader should be able to get in at any level of the market and trade out if it. The importance was less about the entry and more about the money management.

The first week and a few day’s went well, I averaged around £1,000 per day. So pleased with myself I even went to Jermyn Street and brought myself a nice New & Lingwood Shirt and a big fat cigar! I stood at Piccadilly trying to work out the best way and method of trading to an optimum of 100 euros a tick! Then I extrapolated this at ten ticks a day giving a monthly income of 20,000 euros. My Lord what was I going to do with all these riches.

In the background the noise on the CNBC , Bloomberg and Aljazzera was talking constantly about how the Senate in Washington could not agree on Obama’s health care plan. The markets were becoming a little sick, no wonder considering the amount of volatility. The next few days in the market I was losing big time, massive falls in a account, one day I lost 5,000 euros alone, the next 1500. I started to regain my composure by observing that the German Government Bund was going in synch with the markets and going the opposite way to equity indices. In short if like many traders you have a “Long” bias then switching to the Bund from the DAX would allow you to trade the upside in Equity down sliding market.

It worked and I was gaining some ground, until the rating agency decided after Obama managed to get the healthcare bill passed, to downgrade the USA, a first in Americas history. The rating agency wanted to show the world it could make independent decisions…………hmmm-great stuff and bloody bad timing as far as I was concerned. The German Bund dropped 300 ticks on the day, and I was catching a falling knife the whole day. I could not understand why the Bund would drop when the USA future looked so bad; I mean the Bund is the next thing to Gold. But as John Maynard Keynes so right said:

“The Markets can remain irrational longer than one can remain solvent.”

That day wiped me out and I was left with crumbs. The money I had waited for so long withered into dust and my tail was firmly between my legs.


I started looking at a weekly graph over the last five years. On that graph I noticed that all the times I entered the market some major down turn had occurred. Excluding my initial entry into the markets way back in 2005.

I did carry out the idea of trying to fund a reserve account which went well at first. However I was too quick to fund my active account when the trading went bad. In retrospect, when your active account plummets it’s better to take a few days off and think about what the market is actually doing and how you are actually trading, before jumping in with the reserves.

These are hard lessons. Which eventually will be overcome and learned from.

Another lesson which I observed about myself was what and how I felt when a big loss comes my way.


“The feeling is that of a disbelief, then existentialist disassociation, from the market, from your account with the anxiety of hoping your losing position comes back into the black. You can feel a sense of being paralysed a rabbit caught in the headlights.
“

The best way to counter this is of course predetermining your stop on each trade. Having and sticking to your daily stop. It would also be a great benefit to have a neutral person to shut your losing position down, and turn your trading platform off. They could then ban you from trading for the rest of the day. I.e you both agree a daily stop an if this person sees that you have hit it. They shut you out.

Starting All Over Again

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This year has started terribly.

Last year I managed to transform £2600.00 into £25,000 within 8 weeks. The peak in paper profits was £118,000. Back then I traded fearlessly. Using previous day’s high’s and lows as support and resistance. After the birth of my babies I dabbled once more in trading but with a small account. I blew it. In the first quarter this year, I started again with a small account I blew that too.

Well trading in such turbulent times with the Arab uprising and Japanese tragedy meant that the volatility was too much for such small accounts to trade. These account sizes were £3,000 and £2,000 respectively. Things had changed. My main business went into freefall after a major client double-crossed me. So no longer did I have a cushion to rely on. Then my daughter was terribly ill which meant my wife and I was rushing back and forth to hospital.

Then my broker changed the rules. No longer was I to have a £40 - £1.00 margins it was to be increased to £70 - £1.00. Also the maximum allowed trading size was reduced to £100.00 a tick. This was a big reduction considering the maximum I was trading last year was £750.00 a tick.

My main business was flattering, a major client was doing everything to squeeze me out of business so when I did one more deal with them it enabled me to fund my trading account to a decent size.

My ambition to create a trading arcade in West Africa took a step back.

Looking at the options available, I have decided to tough it out and try and trade remotely from home. Of course having small babies will be a major distraction. And the restrictions from my broker meant that I have decided to switch for one that allows direct market access. It’s not perfect but the bid\ask spread is tighter.

I don’t’ believe that I will replicate what I did before, but I am looking more for a gradual slope upwards. This really is a make or break situation I have been practicing on the new brokers simulator for the last six week. And in the last two weeks have been averaging between 500 – 1,000 euros per day on a maximum 2 lot. We all know that simulator trading is much much different to live markets. But "train hard fight easy"
is a good mantra.

I have decided to divide profits into the following:

1. 30% Remains in the Trading Account

2. 40% Is placed into a reserve trading account (Back UP) up to
a hopeful £25,000.

3. 30% Goes into the Household purse.

Money Management is going to be the key to success now. I want to keep an eye on the risk element of a bad trades. The size I am trading relative to my account. To this end I shall have some tables regarding the risk ratio graph for "Ruin" and another table that shows me what the daily profit means in terms of annual income. Sometimes we forget that making a mere £150.00 in a day is the pro rata amount for £40,000 a year!

I shall keep readers posted.

Trading Track Record & Lessons Learned

4th Quarter Trading Record



The Trading Record Reflections

I started trading with £2,600.00. I had previously placed around £5,000 that evaporated within days. I had not really had a plan, and was trading in the moment.

What differed in my approach on the 1st of October was that I decided to stick with the basic tenants of my trading plan, which were namely:

· Trade what you see
· Trade on probabilities
· Accept the risk

Rule No1 - Trade what you see:

Trading what you see is more about one’s subjective interpretations of what the market is showing rather than any absolute science. For this to be effective one requires some sort of method to evaluate what one thinks the market is saying. To this end, I use traditional Technical Analysis methods, below are some of the following:

· Candlesticks
· Pivot Points
· High\Low\Open & Close – the previous day
· Volume
· Point & Figure – For Support and Resistance

I have a few Candlestick patterns that I use for entry and exit, when they come into play I trade them. Often I will anticipate the pattern, which is dangerous.

Rule No2 - Trade on Probabilities;

For me this is more important than the first rule. Because we don’t know what the outcome of any trade will be we need to apply a degree of probability as to the success of a particular trade. By doing this in advance we are accepting that there is a risk to this trade. It challenges your logical mind to be converted to instinctive flow. Even if the probability is high, one will still be unsure of the time such a trade will come to pass. Evaluating the probability of a trade should determine the amount of risk one will undertake on the trade, or whether it is worth taking the trade at all.

Many traders underestimate the importance of probability in trading. Probability is what makes trading as interesting as it is.

John Haigh’s book “ Taking Chances, winning with probability” .
And for reading on your commute
Frederick Mosteller’s book “ Fifty Challenging Problems in Probability, with Solutions”.

These books, inform the trader about probabilities and how best to encounter them.



Rule No3 - Accept the Risk

This is the hard part for most traders. Basically it is the part that one determines that they were wrong on the first rule. If a trader can learn to accept the risk, it should guide them towards better money management! Easier said than done. But if one can accept the risk then the trade will be one of curiosity than having to stake your “reputation” on the line. Accepting the risk means that being wrong is a big part of trading, and a part that all traders should get used to. . Mark Douglas’s “The Disciplined Trader” is a brilliant book to read in this regard for Rules 2 & 3.

Finally another brilliant book for the trader is:

“The Futures Game, Who wins, Who loses and Why?” by Richard Teweles and Frank, Jones (Nov 30, 1998)the chapter on money management in particular is value.

The Trading.

I started out with the intention of achieving 10 ticks aday at full size. The market was in a bullish phase and so my bullish bias worked in my favour. Generally I was day trading but would stay in a position over night if I thought that the momentum would carry me the next day. I quickly found that 10 ticks a day was too limited a target so continued trading after I had achieved my 10 ticks.

For my charting I use E-signal. I used the previous day’s Open High Low and Close, which is a very strong indicator for support and resistance along with Point & Figure levels. Also using Pivot Points aided my exit of positions. The previous OHLC helped me no end when I placed a trade and the market went against me, it allowed me to coolly wait and see whether or not the market was trading within these ranges. I could then use these levels for my Stop’s.

Another very important lesson came from my wife! She told me I should pay myself. This has always been one of my weaknesses. I enjoy trading for trading’s sake rather than all the riches it may bring me. Budd Fox asked Gordon Gecko “How much is enough, Gordon?” in which he replies:

“it’s not a question of how much is enough, it’s a Zero Sum game, somebody wins and somebody loses.”

I disagree with that statement, but agree more with Fagon’s ditto in Charles Dickson’s Oliver Twist: “In this world only one thing counts, money in the bank and in large amounts”.

By regularly paying myself I was turning paper profits into real profits. Crystallising my winnings. This act saved me in the end. The problem was for me is I am not very materialistic, so after a while I had run out of things to buy.

When trading, you should have one eye on paying yourself and another on increasing your capital base in which to increase your trading size.

One of the most important lessons I learned with the idea of breaking my capital base into one Unit of a 1,000. i.e. if I had £1,000 I traded to a size which was relevant to £1,000. If I was trading £10,000 I traded in the same percentages, as I would have if it were a £1,000. the effect of this allowed me not to be spooked out about the size of my positions which at one point I was trading £750.00 a tick, by my trading mantra it was only 7.5 units per tick.

This meant that each time I hit a level, I was back where I started.

£1,000 = 1000 units
£10,000 = 1000 units
£40,000 = 400 units
£50,000 = 500 units

This was a big deception on my part, but allowed me to trade more fearlessly than if I had of simply thought about it in pure monetary terms. This is because previously I had no difficulty whatsoever of turning £200.00 into £1,000 in one day. But psychologically turning £2,000 into £10,000 seemed way too much of an accomplishment! This simple deception enabled me to trade more fearless and focus on the trade more than the monetary outcome or risk.

Problems in Trading

The problems of my trading were three fold. And classic No NO NO’s

I was trading the DAX. It was around 6750.00 watching CNBC news the German lady, predicted that “Investment Bankers believe the DAX should hit the 7,000 mark”. This tip and prediction was fatal for me. It had me thinking beyond the Day trade and more in the future, in short it started to make me violate my rule No 1.

The second problem was that I had run out of things to pay myself, my wife was expecting twins, and so I felt that the one think we really did need was house. Doing my sums I worked out that trading at £750 per tick with an existing capital base of £100,000 would mean if the DAX did indeed reach 7,0000 I would be in for over £280,000 that would enable me to buy a house almost outright or place a sizable deposit and still give me a decent Trading account size. = Greed was not good. Deep deep down I knew this approach was risky, but as things were going too well for me I had that little devil say to me :

“Go on, go for it. 7,000 is only 250 ticks away”.

Now the Twins came along, which was the best experience a man can have and I was over the Moon. They came early, so were in an incubator for over a month. This meant having to travel to hospital daily to visit them and check on them. This also meant trying to impose time restrictions on my trading positions based on my visiting times to the hospital rather than what the market was actually doing.

This new arrangement started on day one of their birth, and by day two I encountered my largest loss on one day. £62,500! The sad part was I broke rule No 3 that day. First I tried to impose my will on the market, in terms of time. At that time I had a deep stop but the market “looked” like it was going to stop me out, so I did not accept my risk and reversed my position. The net effect was this.

One, the market did not actually reach my stop position, instead it rose back up to my original position on the start of the day i.e 6750. Only I had taken my loss around 6690 and reversed adding to my losses back up to 6745 where it closed for the day!

Overall from the chart patterns I accepted that I was right to have traded what I traded, but big question marks over the size of my position. Around the same time I had a car accident on my way to hospital which I suppose was nature’s way of telling me to slow down.

The DAX did travel up to 7090 before Christmas, but I was out after a few more bad day’s down to my loss of focus and the events in Ireland. I was trading a huge gap, but did not have a defence against a GAP trade going against you! This a loss of £21,000 for me was the worst trade as I had made a good come back from my £60,000+ loss day. It was the same time around my car accident.

Still despite the hectic Market and home life. I believe the formula is there for trading success. In essence I started with £2,600 and finished in 7 weeks with £21,000. No bad return. Although my highest paper profit was £119,000!

MONEY BEGETS MONEY!!!

I do keep a record of my trading day’s P&L hence the graph. What I noticed was astounding.

1. It took me 16 days to turn my £2,600 into £25,000
2. And only 8 days to turn £25,000 into £50,000

3. 5 days to turn £50,000 into £100,000.

Of course it took me only 1 day to turn £81,000 into £35,000 !

The thing that struck me is that provided that one has a trading plan in place and sufficient Capital Account to cover their living expenses. Trading is a viable occupation for the committed enthusiast.

One of the issues traders have is that starting with a small capital account, they become bored of the monetary returns forgetting about the actual nominal returns. I.e, if one’s target is 10 ticks a day, and you start with £1.00 per tick.

· Gaining £10.00 per day may cover ones lunch break but not one’s general lifestyle.
· The temptation is to go for more ticks say 50 ticks to have £50.00 but now we are getting far too risky. Setting oneself up to fail.
· By being patient and gaining constantly 10 ticks a day – over say a 60 – 90 day period trading a minimum of x 5 trades a day, one would accumulate the confidence to trade £100.00 per tick.

Now £1,000 per day is not too bad.

Remember though

“Only one thing in this world (Trading) count’s, and that’s money in the Bank in Large amounts” which excludes paper profits.