ForexSpirit

When I returned from my blogging hiatus I mentioned that I had rather bizarre things such as bunnies and ice cream on my mind. Time to finally explain what I meant.

In most traditional forms of trading education you are taught to wait for all your entry rules and criteria to be met before pulling the trigger. To prevent overtrading you are instructed to look for only high-probability entries. In the militaristic parlance that the trading world seems to love steeping itself in, you are looking for a sniper shot: sharp, focused and pin-point accurate. At all costs you are looking to avoid the dreaded shotgun approach: a wildly inaccurate spray of shots/trades that shows a lack of focus and clear reasoning as to what you are doing.

A slightly fluffier analogy is put forward by Dirk du Toit that gets the point across just as well, but without the need to be a weapons expert. Imagine yourself taking part in an Easter egg hunt. It’s spring time and all the flowers in the garden are beginning to bloom. Hidden behind their colourful blossoms or in the nooks of tall trees are the chocolate bunnies and Easter eggs that your sweet tooth craves. You begin your hunt, foraging amongst the plants and flowers to find the tasty treasures.

Finding an egg is equivalent to having all the entry criteria for a trade fulfilled. You are looking for something specific. Patience, concentration and persistence are needed to complete the task.

The Easter egg hunt is very much the traditional way of trading.

Dirk teaches you to look at the world of trading not as hunting for eggs but as enjoying a nice bowl of ice cream. The inherently random nature of the markets in the short term underpins this new viewpoint.

If anything can truly happen next in the markets, then it is viewed as a fallacy to wait so long until the supposedly perfect conditions arrive for a trade to be taken. Instead of putting all that hunting around for some tasty chocolate, you experience the market as a tub of ice cream where you can take a big or small spoonful wherever you want.

You dip in an out as your view of the market evolves. It is a fundamentally different view on how to trade and one that Dirk expounds as the best way to exploit trading within a median grid.

I lived within that ice cream world for a long time and while it did seem to suit me rather well, I took a few too many large spoonfuls and got brain freeze. (These food analogies are much more fun than the military ones!)

I’ve since put the ice cream back in the freezer and gone hunting for eggs.

It was an invaluable experience trading that way. It took a long time but I found that it was not the perfect match to my trading personality that I thought it was. Without incredibly strict management handling losses they can end up managing me.

The leeway and openness needed to eat ice cream preyed on my weakness when price went swiftly and significantly against me.

I’m sure that many of the people still following Dirk’s methods are experiencing significant drawdowns right now due to the large drop in EUR/USD over the past two weeks. If comments on the DrForex forum are any indication many of them are experiencing 15-20% unrealised losses. I am sure that many are going to have to take those losses so as to free up some much needed leverage to be able to place new positions.

In this light my 9% last month does not so bad (but it’s all relative of course and a loss is still a loss).

I still find Dirk’s market outlook and daily briefings invaluable and think that his grid trading 4×1 methodology to be a perfectly valid approach to trading; just like any way of trading it must suit your own trading personality.