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.
