ForexSpirit

домейнI’ve been following two threads on Forex Factory for the past week, which is a rather rare occurrence these days. Both are fascinating, but for different reasons.

The first is Jacko’s House of Pleasure and Pain, a thread which I have referenced quite a few times in the past, as I attempted to replicate Jacko’s long term trading approach on the EUR/USD and implement his anti-hedging technique. I even signed up for a year to follow his member’s only blog. During that year he started touting a private fund that he would actively manage. I had no interest in having someone else manage my money so I never bothered to investigate it further.

It seems now that those who did invest are regretting doing so, as Jacko has seemingly stopped answering fund e-mails and won’t fulfill withdrawal requests, all while he still updates his regular member’s blog. Posts such as this makes it look like a pretty bad situation. I can only hope that people get their money back and that Wayne Jackson isn’t another good trader turned rogue.

The second thread is Building an equity millipede. Some sort of lightbulb went on in my head as I read this thread for the first time. pipEasy espouses many of the same trading philosophies that seemed to fit me so well when I was trading the BWILC methodology: long term outlook, acknowledging the random nature of the market and thus the randomness inherent in any given trade entry and low leverage.

I never got to grips with the way that Dirk du Toit used hedging with BWILC; I never saw the advantage in hedging losing trades. I was always more comfortable in just taking the loss and moving on. The equity millipede approach uses hedging with a completely different mindset in place: that of never knowing the long term direction of the market and using hedging to place yourself in the market to take advantage of the long term trend no matter which way it ends up going. You are hedging winning trades, not losers.

It has impressed me so much that I’m in the process of getting myself set up with an account that allows hedging once again.

I’m getting more and more comfortable using the price action knowledge I’ve gained this year in making entries. I think using price action as my primary method of entering trades and coupling it with the long term nature of the millipede could suit me down to the ground.

I haven’t had anything really pressing to talk about in the last few weeks, so this update is just a mish mash of various thoughts and observations.

I’m still on the price action trading path. All trade entry, exits and market musings are still being recorded. I’m not spending as much time as I would like actually reviewing those recordings, so that is something I am planning on addressing.

March ended up breakeven, which considering it was the first month of putting into practice what I was learning I’m pretty happy with. Trading the 5 minute charts began to catch up with me just over two weeks ago, resulting in a burnout phase. I’ve experienced these quite a few times before. It just meant that it was time to down tools, step back and not trade for a week or two.

This break offered me another opportunity to evaluate how things have been going so far this year and try and determine if I was happy with the method and my progress. I mulled whether to stay on the short term charts (5 minutes) or if I should bump up the time frame a bit. Was I going to trade strictly on price action, or try and weave what I had learnt into previous strategies I had tried? Did I want to stick to going all in on a trade, or try scaling in and out?

I was solely tempted by doing all these and more as I mulled things over. In the end, the only thing I have decided to do is move from the 5 minute chart up to a 1 hour chart. The main reasons for doing so are to allow my trading to mesh more easily into my daily routine and to lengthen the times between burnouts. On the 5 minute chart I was either looking to scalp 10 pips or grab 40 or more pips if I saw the potential for a bigger move, with initial stop losses in the range of 10 to 20 pips. Moving up to the 1 hour chart, I have to increase my targets and stops accordingly. So now I’m gunning for 50 pips minimum, and around 200 if I see the potential for a strong move, with a stop loss of around 50 pips subject to the prevailing price action.

I was using Oanda’s demo platform (FXGame) up until just before I took my short hiatus, but it started having serious reliability issues (like not being able to log in at all for a few days in a row). It drove me nuts enough that I have switched over to my live Oanda account, but instead of trading my usual position size of around 10:1 I’m keeping it low key at just 1:1.

This might also be useful in that I’ve started to play around with Currensee a bit more. Currensee only tracks live account trades and it was only recently that they actually added Oanda as a supported broker. Before that I had an account that I could do absolutely nothing with. Does anyone else use Currensee? If so, what benefits do you get from it to date?

If anyone wants to become friends or form a virtual trading team on Currensee, feel free to contact me. Mention my blog if you do so, as I block all invites as a general rule if I have no idea who you are or why you’ve chosen me.

Last nugget of trivia relates to my fingers. I’ve had a long standing (bad) habit of picking the skin around my finger nails. Disgusting, I know. But I have pretty dry skin most of the time and idle fingers would often attempt to smooth things out, often resulting in cuts and just making things worse. It has always been an ingrained habit and one I’ve attempted to banish many times.

Trading is in many ways all about forming new habits and sticking to them. A few years back I remember thinking that if I couldn’t change my habits when it came to my finger nails then how was I ever going to stick to habits that would benefit my trading. I was pretty sure that I’d only ever make any sustained progress on the trading front if there was improvement with my fingers. Probably the weirdest link I’ve ever made about trading on this blog!

The good news is that I actually have made enormous progress on my finger nail picking habit over the past two to three months. The key has been putting in place a new regular habit that prevents me even having the chance to make a mess of my fingers. The new habit simply involves moisturising my fingers with a good cream. I’m only ever really tempted to rip up my fingers when the skin is bone dry. With moist skin, running my fingers over the nails doesn’t pick up any dry bumps that makes me want to sort them out. The quality of the cream has actually been a key component. Previous creams I’ve used just didn’t last long enough and dried out too quickly. Since I’ve started using a Bigelow cream I just have to apply it twice daily. I’ve added the application into my usual brush teeth, shave, etc. routine.

Sometimes it’s the little things that give us hope yet!

Pretty much all my trading time so far this year has been spent reading, digesting and applying price action that I have gleaned from Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader by Al Brooks.

This has to be the most densely packed trading book that I’ve ever read. I have had the book for about two months and have made it just past the half way mark. Each page is generally commenting on multiple bars that appear on a chart, showing how a price action setup or concept unfolded. There’s no purple prose promising dreams of riches. Just comments on individual bars and how each bar developed the picture of what a price action trader would see as it happened.

It’s not an easy read. Some even find Mr Brooks’ style to be hard to take, judging by some of the Amazon review comments. I’ve read worse, way worse. That’s not to say that a good copy editor wouldn’t be able to make the book more readable (which would certainly be nice if a second edition is ever considered), just that I have no problems understanding the concepts and descriptions of those concepts that Mr Brooks uses.

If you have concerns about this readability aspect, I would certainly recommend that you preview the book using a service such as Google books. Reading the preface and first chapter should give you a good idea if the writing style is going to drive you crazy or not.

I have been trading off 5 minute EUR/USD charts since early February, looking to only enter higher probability trades and it certainly seems to be paying off so far.

There’s plenty of additional material that Al Brooks has made available, mainly consisting of articles that he wrote for Futures magazine before he published his book, along with some online seminars.

Here’s what I’ve come across, mainly from forum threads on places such as Traders Laboratory and Big Mike’s.

Articles:
Price Action Fundamentals
Failed Flags
Breakouts and Micro Trendlines
Reversals
Price Action Lines
5 Minutes to Fame in the E-mini

Online seminars:
A Month of Great Trades
How to Trade the Market Open
Trading Best Price Action

Last but not least there is Mr Brooks own website, where he posts post market analysis of the S&P E-mini. This is great for taking a look at how Al views things on a day to day basis.

If you have any interest in price action then all of this stuff is well worth checking out.

Over the Christmas holidays I read Enhancing Trader Performance by Brett Steenbarger. This is definitely one of the better trading books I’ve read over the years. One of the key concepts of the book is that reviewing your trading performance is a vital steps in becoming a better trader.

During the years that I have been writing this blog I’ve often done daily, weekly and monthly performance reviews. It can be difficult to go back and review these types of trading critiques as they were written with full knowledge of what unfolded after trades were opened and closed. What is missing is a clear snapshot of only the information that was available when a decision to enter or exit a trade was made. The thoughts and rationales that are only ever found at the hard right hand edge of the chart are lost. Only certain pieces of the puzzle are remembered and recorded at a later date.

To get a better insight into my thought processes and trading behaviour I have started to record my trading sessions as I’m trading. I have been using Camstudio, a free video recording application, to tape my trading as it happens. It records my chart and trading platform and I use a microphone to provide a running commentary of what I am thinking. I try to spell it all out: what I’m seeing on the charts, how I’m feeling, where I see potential trade entries, am I bored, focused, distracted.

On the weekends I then try to find the time to review at least one trading session from during the week. It certainly is an enlightening experience peeking over your own shoulder as you trade. You get to take a step back and look at what you did both right and wrong.

I have been able to keep to the trading schedule that I started last year. I’m not sure if getting up before 6am is a habit yet, even after doing it for almost two months, but I’m getting there.

Up until the end of January I was trading the 6-7 EST hour, to try and see how well trading a slightly quieter time suited me. This hour was a European session only time and led into the lunchtimes of Frankfurt and London traders. It was often rangebound. It was also noticeably quite in the lead up to important news events such as NFP data or ECB rate announcements.

Since the start of this month I have switched to trading the start of the NY session. I don’t want to be trading during any of the big news announcements so I’m looking to be trading from about 8:45 til 10 EST. I want to see if I have a preference for more volatile and active markets.

It certainly helps that I am only trading in a concentrated one hour block when it comes to recording my performance. On the other hand, I don’t see any reason why a trader couldn’t record their thoughts and market actions any time they’re looking to enter or exit the market while trading a higher time frame. A video editing application such as Sony Vegas Movie Studio 9 can be used to edit together various clips so that a single video documents a single trade or a whole weeks worth of trading.

I’ve certainly found it to be of great benefit in only the short time I’ve been doing it and I don’t think I’ll be able to trade without recording my every thought and action going forward.

Another benefit is that having to speak my mind has helped me cut down on taking impulsive trades. They’re not gone completely but their frequency has been severely reduced in just a few short weeks. When you have to verbally describe setups it becomes glaringly obvious when you jump into a trade with price tearing away without you having had a plan in place beforehand. Another push in trying to get rid of impulsive trades has seen me looking to understand price action more. I’ll go into what I’m studying here in my next post.

Over the holidays I found out that Richard McCall had been charged and convicted of fraud by the CFTC back in 2006/7.

I had always thought highly of Richard McCall after reading his Way of the Warrior-Trader book and watching his educational videos. He always struck me as more of a teacher or coach than a straight up trader and that is the vein in which I took his work.

The full complaint, preliminary injunction order and final injuction order can be found on the CFTC website.

Seems like he overstepped his comfort zone and ended up straying form those universal laws he holds in such high regard, as detailed in the March 2006 CFTC press release:

Specifically, between March and June 2004, as alleged in the complaint, McCall made the following claims on his web site: 1) he was an experienced futures trader; with his trading results consistently ranked among “the top 5% of traders worldwide”; and 2) students following his Sabaki-Micro Trading for Futures would have “a better than 90% chance of being profitable.”

The complaint also alleges that, although McCall touted the profit potential that could be achieved by following his trading advice, he failed to disclose that he actually had traded commodity futures for only one year beginning in 2003, and that the account in which he traded experienced consistent trading losses, rather than profits.

The complaint also details that no proof could be found for any degrees held by Dr. Richard McCall. The mythical nature of his doctorate only had me chuckling as I couldn’t help think of Derek Smart (where a similar sort of doctorate debate raged for months in the gaming sphere way back in the 90s).

I still think his book contains a lot of great insight and useful information, especially on the mindset needed for trading, but it is sort of tainted now by knowing he’s been busted by the CFTC.