TraderInterviews.com: Hello, everybody. Welcome back to traderinterviews.com. Thanks for joining me for another show this week. As usual, the idea of every one of these interviews is to give you something to think about in your own trading and maybe some strategies to try and some ways to look at the market you may not have considered in the past by talking to other traders and see how they do it. Today, we’re going to be speaking with Derek, and he’s going to talk to us about how he approaches the market. So, Derek, thanks very much for joining me on the phone today.
Derek: My pleasure.
TraderInterviews.com: Do you trade the spot market or you trade futures and options, that sort of thing as well?
Derek: Spot market only. As far as approach, I think that I take relatively a simplistic approach, and I don’t really lump myself into one category. I think by education and background, I’m kind of a fundamental trader. When you say fundamentals and currencies, they don’t really jive, but I do take a somewhat fundamental approach to the currency market. However, if you’re going to lump a style which I refuse to be boxed into one particular style, I would be a position trader or swing trader by desire but the market doesn’t really dictate that all the time. So, I’m an intraday trader by need, and then I’m going to convert when the trades work out in my favor, and I can manage them properly. Then I’m seeking the opportunity to convert an intraday trade into position trade where warranted, so it’s the multi-approach that I think is by far for me the most successful aspect of my nature, and then not forcing myself into say, “I am this.” A lot of people don’t want to say they’re intraday traders. It’s a bad word, and I happen to applaud it and embrace it, and know that I want to be a chameleon and adjust myself and my behavior based on how the market is dictating what we do and so we get a roll of the punches, and I do that.
TraderInterviews.com: So let’s start with the fundamental, and then we’ll get into some of the technical things. What outside of currency markets or within the currency markets do you watch everyday that kind of gives you an idea where things are heading?
Derek: Well, in the currency market, the focus is obviously on the economic news. I say fundamentally, and so now I get a chance to answer this. Unlike a company when you’re looking at a corporate starting in the news reports, we don’t have that out of a country, but we do have their economic news to deal with. I treat that economic news as my fundamental way to look at that economy or the currency itself. There are some of the reports I favor more than others. Non-farm payroll is the most substantial news event in the currency arena. A lot of people are afraid to trade it. It’s probably because they don’t have the right tools or strategies. But then the purchasing managers reports and the CPIs, and some of those things, housing, sales, and new homes construction. Those things are all real, good lead indicators to business and economies and so I treat that from a fundamental standpoint. I think that’s how it should be traded.
TraderInterviews.com: Are you putting on trades before these announcements come out, or are you playing the reaction?
Derek: No, no, no, no, no. You’re gambling and throwing the dice up against the wall if you’re trying to do these things in front of the news releases. If that’s your style, then to go to Monaco or Vegas and have some fun while you’re doing it. I let the reports come out. Sometimes things act in a fundamentally rational way. Today would be a great example of things not acting fundamentally rational. My process is not ill. To take it in front of news for lack of better statements, take something in front of news, put you in a position where you’re predicting and forecasting. Predicting and forecasting, I think, should be avoided, and I think that is probably one of the biggest problems most traders face. I approach the market from an aspect of anticipating the possibility than reacting to the reality. Now, I say that, and I know it sounds really simple to say that, and everybody said, “Oh, I do that.” But the fact is most traders are so darn busy trying to predict the forecast that they don’t even notice what’s happening. To take a trade in front of a major news announcement, again, boils down to nothing more than relying on where you act, and I don’t think she’s said nice, so I refuse to rely on that as that’s not a strategy. That is simple gambling and not with my dollars.
TraderInterviews.com: All right. So, let’s give an example here. You said today is an example of a market not reacting rationally. So, how do you trade a market like that? What did you do today to make some money even though it wasn’t acting rationally?
Derek: Well, actually, today I would say that I didn’t really have a good outcome on the day, although�then discipline becomes…you’ll hit on my other patience and discipline becomes my hot tickets. I always say traders enter the market with fear, apprehension, and greed. And I say these are three sets of three, fear, apprehension and greed. They have to be replaced by patience, discipline, and consistency because trading is based on momentum, divergence, and trend. Today, we had both crude oil inventories to mount. Fundamentally, if you look at the crude oil, the expectations were inventories to be down showing that there’s been a demand. The demand would say, “Hey, inventories had to be replenished.” Oil prices will then go up because of that. If the oil prices are going up, then the dollar is going to go down and the exact opposite happened. In front of the news, the oil started coming down but then the dollar took the opposite reaction of what I would’ve assumed. Dollar and the yen have an inverse relationship to oil, and then the Canadian dollar has a correlated relationship with oil because they’re a seller, and the US and Japan are buyers. But today with the news announcement, one would’ve assumed and could’ve anticipated that he would’ve seen in the dollar CAD fair, I was assuming that the trade would start to move down. It did get the initial appearance that was exactly what was going to happen, so I did take a short transaction on the dollar CAD today and lost a little bit of money, so like 10.0530 range but then the discipline kicks in. I’m pretty admin about stops, and I’m not going to let something sit there making an excuse for a trade. So, before it reached the 50 level, I was out of the trade, lost I think 14 and a half pips and that’s just no big deal. Now, later on, we recovered and actually took the trade short. Later on, it did develop and made back more than I had lost but the two trades together, but the sum of the two trades together is nothing to ride home about if you will. Based on the recovery, it’s not making mistakes necessarily to recovery.
TraderInterviews.com: I like the fact that you brought up this initially that it was a losing trade at first, and then it comes back and then you were able to still stay with that strategy and make some money on it. If not, a lot anyway. But I think a lot of traders, even newer traders are right a lot of the times. They’re just not right at the right time. And so, what are your suggestions about how to fix that?
Derek: Now, see, that’s an excellent point, and you hit on something that’s almost like a pet peeve of mine because how many times and I think anybody who is going to listen to this conversation is going to say to themselves how many times have they actually said, “I should have bought when I sold and should have sold when I bought I would’ve made money.” I mean, I raise my hand. I’ve said that to myself, and we get frustrated like, “I’m always on the wrong side of the trade.” Well, that tells me two things. Number one, you identified something moving, OK, and it comes down to the entry. So, it’s a misnomer that you’re going to buy the bottom and sell at the top, or soar at the top and buy at the bottom. As a matter of fact, people will tell you they do that. Run from them. They’re lying. The fact is we’re not going to get it perfect, but we want to get close. I always your rules of trading are equivalent to horseshoes and hand grenades. You can get close and still be effective. So, I just need to be close. I don’t have to get it perfect, but I need to get close. However, if I’m outside that margin what I call close, then I’ve made a mistake, and that means you’re either going to be a little bit too early or a little bit too late. But if you’re lot a bit too early, or for most traders, because most traders are looking for too many things to line up, they need to plan to align, then they’re always too late. The herd is usually late. So by the time the average trader is getting in and this is going to sound cold, but by the time the average trader is getting in, I’m selling to them. I’m giving them part of my trade and I’m saying, “Thank you very much because the herd came in late, and I want to take advantage of that herd mentality.” So for the average trader out there saying, “How do I hone my skills?” You have to look at the trade. There is nothing to be gained by looking back at the things you did right. There is a tremendous amount to be learned by your mistakes. So you look back at that and say, “What was wrong here?” Were you too early and didn’t have the patience to sit it? You were just so early that it kept coming down, down, down, and it worked against you. And you got out, and ultimately, it worked or were you just tremendously late? I mean, I got to tell you, of all the things the trader can be doing wrong, honing that entry decision is one of the easiest things to correct. So, it doesn’t matter style. It doesn’t matter time of day. It doesn’t even matter financial instruments as far as I’m concerned. If you can get the entry right, we can sit here and talk all day long about where would exit and the styles and maybe the figure, the pivot, news, time of day. I could rattle off more than a dozen reasons you might exit a trade, but the entry regardless of time, person, risk tolerance, pair, currency, financial instrument, a great entry is just that, it’s a great entry. So your focus is to identify what you’re doing wrong in your entry and then modifying that behavior. That’s truly a long term key to success.
TraderInterviews.com: Well, in somewhere along the line in your trading evolution, you made that transition. You probably started out with the herd, and then at some point realized something and the chart is telling you how to get in front of that herd. Can you identify what that was or can you explain what you’re seeing that the herd is not seeing yet?
Derek: I think well, this is going to be the two of my own horn. I mean, I’ve been doing this more than 20 years, and I was educated by Harvey Houtkin who basically is one of the creators of electronic trading in the world, but he goes back in a time where we didn’t have a lot of tools. I mean, we were looking at time sales, and we had very little charts. So we really had to be more instinctive and your intuitive nature, we always say that your gut reaction is usually the thing. Medical research has proven that the brain has more information in it than you can verbalize and resuscitate, so that gut reaction is more than just a gut reaction. Harvey really taught us that. Plus, he taught us, as a new trader, Harvey taught me what I call the foundation of trading. There are only seven things that can happen. There are only seven market events that can take place. So, again, it goes back to not predicting but anticipating anywhere you’re in the market. There are a couple two or three things that can happen from where we are now, so you’re anticipating the possibilities, reacting to that reality. I’ve taken that a step further in my progression and what I have done is and I don’t want to take full credit for this, but with a programmer and some guys of some pretty good technical study, we have built on technology looking at pure price. So I don’t care about time. I don’t look at anything time based. I only look at price movement so maybe it take me back to the tape reader. In the old day, they’re showing the guy reading the ticker tape. What’s he doing? He’s looking at time sales. When I first started trading, the only technical indicators we had was time sales. You can’t deny the price. Time is completely strict out. I’m like, “Huh.” I don’t look at a five-minute chart. I don’t look at an average chart. I don’t look at a four-hour chart. I don’t care, and as a trader, a trader shouldn’t care about how long or short it’s taking for the movement to happen. What traders care about is price. So does it take 20 minutes, take two minutes, take two days? I don’t care. I want to know what’s happened to the price. So I’m a pure price trader because time is irrelevant. I used the analogy when I was a stockbroker. A client never called me and said, “Hey, I want to get out of my position.” Or, “Let’s buy this stock, and let’s go ahead and get in it, $35.72.” That’s not what they say, it’s 50, it’s 100, it’s 75. We’ve looked at the figure. In currency trading and we’ll figure how to support our exitence. Why? It’s a round number. That’s a psychological thing. Well, somehow, psychologically, the chart thinks people came up with time. So, they look at five-minute charts, 10-minute charts, 50-minute charts, hourly charts, and daily charts. It has nothing to do with it. You got to break it down to what is happening to the price because within the day, you’re making your decisions. Your decisions should be based on price not time.
TraderInterviews.com: Yeah. So one of the things I’ve heard with successful traders over and over again is that they’re not looking at a chart about where price is going next. Let me back that up. What they’re looking at is what are traders going to pay for this in two minutes rather than what I think this thing is worth in two minutes. Is that going to sum up what you’re talking about?
Derek: Either way, yeah. I think and probably not good in explaining as I’m doing it. But, yes, because being part of that is support and resistance comes in play, the trend and momentum. I love analogies. I always say, “Eat famine. Don’t be famine. Don’t fight the trend.” When we talked about the entry and exit, the entry is the critical thing and maybe a little bit early or a little bit late but if you’re not fighting the trend, the average is, the oldest thing in the industry is the trend your friend and tell the trend then. The trend is your friend. It will compensate for that mistake. Traders are looking at not only where it has been but what does that mean and what potentially into the future. So, again, I’m not trying to predict. I don’t want to predict, but I can say because of this pattern, because of the price escalating or declining, and there are some things, there are a couple specific indicator tools I use. I’m telling you, I’m one of the simplest guys there is out there when it comes to tools. I mean, I see some of these guys’ screens and pages. My joke is the prettiest page with all that stuff on it never makes money. It just never does. So it’s really all about support and resistance where price has been, and the flow, and the trend. Is the momentum and trend accelerating or decelerating? Are we reaching resistance or support? How are we dealing with things under resistance and support? The best trades I’ve made this week have been based on dealing with support and resistance, and handling and looking at support. You can use support and resistance for your benefit, both for target standpoints and from stop to standpoints. So you use those, but you use that past information as a benefit for future.
TraderInterviews.com: What are you watching that helps you with support and resistance whether be pivot points, moving averages? What is it for you?
Derek: Again, here comes pure price. Pure price identifies support and resistance very eloquently. When you’re looking at pure price and remove time, it doesn’t matter. Your technical indicator, or study, or oscillator tool, they all become more efficient and work. You can reduce lag when you remove time. I don’t know of any other way to remove time other than what I’ve done, and that’s because the pure pricing model makes sense. As far as technical indicators or things that I look at specifically, so again, no time frame, it’s price. But if you look at the other things I do, moving averages have a lot to do with it. Support and resistance has a lot to do with it. There is one oscillator that we use. We created it. I’m going to say it looks pretty similar to like a MACD. It kind of based on a MACD philosophy. The inherent problem with oscillators is they’re all major lagging indicators and so is removing the lag and creating an oscillator more of a MACD type instrument that is, again, looking at a pure price. I can’t harp on that enough. And then there’s one specific tool that we’ve created and that I have spent an enormous amount of time. The two things I’d probably spend more time back testing and utilizing with the past 15, 17 years is moving averages. The latest things that I’ve created are what I call the currency strength index or my CCYX. I know there are other currency strength tools out there, but I’ve taken the best of everything that can possibly be done. I’m disassembling pairs. I’m looking at each individual currency. You say, “The Euro dollar is going higher.” So in a pair situation, that means the Euro is moving up but the dollar is moving down in theory. But when you’re looking at a currency pair, you can’t see that pair. You would just assume because you’re looking at the average chart of the two. So I created a tool that disassembles it. So I’m looking what the dollar is doing, and I’m looking at the Euro is doing individually. I’m actually looking at the eight major currencies, and then I sit down and look at that, and say, “OK. What’s trending higher? What’s trending lower? How does that affect the pairs I trade? Which one of those is moving up the most? Which one of those is moving down the most? Which is moving up mostly that is being most consistent, not having so much jagged activity on the way up or down?” And then if we get it, how does that affect the pairs I trade, the consistency of trading something over and over again? There’s another big problem, traders, they jump from tool to tool. They’re searching for lowly grail. They never give anything a chance to work. They want instant gratification, and they jump from stock to stock, or option to option, or pair to pair. And the fact is you just got to dig in. You got to dig your fox hole and make it work. You got to develop confidence in your tools, and then trade your tools with confidence.
TraderInterviews.com: You mentioned not having time on there, but you got to put something on a chart unless you’re just using tick charts or pip charts and taking currency, so what are you watching in terms of are you watching five minutes or ticks or what is it?
Derek: I will get five-pip, eight-pip at 15-pip charts would be my most common structure of my charts. I, also, for a long term analysis use a…we have a point and figure component of our charting. So for the longer term what I call the top down analysis or we refer to it as “Monet”, stepping back and taking a look just like in a fresh domestic art, you got to step back and take a look to see the picture. But it’s nice to get up close and see the detail. Most traders are fixated on one-minute, five-minute charts. They don’t really know what’s really going on. So we use a point figure. I’ve really looked at that as my top down or my Monet approach, and then I go into detail, look at the 15 pip to see the intraday trend, look at the eight to look for what I consider the more ideal entry. And the five pip is going to give me my detail and be my front runner, a pre-runner, and tell me something may be happening. So that’s how I break it down. Moving averages are incorporated in all those charts. My TFXT is incorporated on all those charts and using CCYX, my currency strength index, is a constant component of that.
TraderInterviews.com: In terms of the stop you said you had today was 14 pips, how are you setting that in terms of the profit targets as well?
Derek: Well, now the stop wasn’t 14. OK. You put in a stop. The stop is your worst case scenario. You’re not going to sit there and let it get hit. If you’re wrong, you’re wrong. So typically, depending on the pair and the volatility of that pair like a pound/yen would be more than say Euro/dollar. I’m going to use anywhere from a 20 to maybe 40-pip stop. Forty would be pretty wide for me, typically, 20 to 30. But that doesn’t mean I’m going to let those get hit. Sometimes they do. Sometimes the markets move. A person when they leave their house today, they listen to this and they go out and they’re getting their car to go to the grocery store and get the kids or whatever. They’re taking more risk and then they trade, but each person when they get in their car who’s taken out a stop order because they have insurance and they have a deductible that they’ve set on insurance. That’s the maximum amount they want to be out if they drive in the side of a Rolls-Royce tomorrow. The same thing needs to happen in a trade. There’s got to be a maximum draw down that you’re willing to go down on it per trade, per day, per week. And you hit those, you got to stop. Now, the discipline has becomes managing a winning trade. Fairly simple, it’s a lot of fun, it’s why we trade, handling the mistakes which are in fact inevitable in the key to long term success. So it goes back to my discipline statement. I had a 20-pip stop on this trade, but I was wrong, and I knew I was wrong. If this isn’t doing what it’s supposed to be doing, I’m looking at some other things. I’m looking at that currency. I mean, I’m getting a warning sign that five pips already crossing up. I’m seeing them losing the momentum. It’s not my favor as it was initially. I could’ve capped out with a quick profit but I didn’t, gambling with regret. So it was a one time that trade was positive by at least 15 pips, maybe more. One of my rules is�you can bend your rule�One of my rules is you’re up 15 pips, you don’t let it go naked. I’d rather flap the trade than let it go negative. In this case, I still say, “well it’s a news thing, it’s a little bit more volatile. I gave it a little bit of a run. So if you think I was 15 pips up and now I’m almost 15 pips down, that’s a 30-pip reversal, I’m done. I’m now out the trade. I don’t need to wait for my stop and ultimately it went a lot higher than that, and where I shouldered the second time, it was at a much higher price point. So it actually became a better trade.
TraderInterviews.com: What was it about the second time that said, “OK. Now, I think it’s time.” If I was there at the first time…
Derek: I think the market just flat out to settle down. The market started doing what fundamentally it should have been doing. The dollar did start moving down. You kind of kick yourself sometimes like, “Well, that’s it. I should have been more patient and waited for this.” So it’s not a matter of, “Oh, gosh. I was dumb.” It’s a matter of once, again, get back on the saddle. Get back in there and have the tenacity to stay with it and follow. Then it goes back to what I said, you follow the same pairs of the same financial instrument. Trade it over and over again. You get to know it. I’ve got children. I can tell when my kids lie to me for the most part. I’d like to say I can, but I can. If you have children, and you’re children are in front of me, and I don’t know your kids, and they’re lying to me. Your kids could probably tell me tall tale. I don’t know that. You might be suddenly going, “Oh, my God, Billy. Why are you lying to him?” I don’t know that, but I know when my kids are lying. I can read them like a book. Well, that’s one. I trade the same pairs over and over again. I can tell when they’re lying to me, too. Not always but for the most part, I know when they’re telling me the truth.
TraderInterviews.com: That’s a great analogy along with the car insurance deductible as your stop loss for driving. I love that. I’ve never heard of that, but it makes perfect sense.
Derek: I think I’m an analogy-driven guy. I mean, because when I use things in an analogy format, I think it can put it into a very practical. I don’t think I know at all about trading. Chances are I know more than the average person that comes to me. I don’t know it all. I always joke, the day you think you know it all about trading is the day you close your account. But I really enjoy sharing with other people and teaching other people how to trade, and how it’s not changing them. It takes them 30, 40, 50, or 60 years to get the way they are now. Heaven forbid, I’m going to try and change somebody. But if I teach you to modify your behavior, if I can show you a way to see a 5, or 10, or 15% improvement in your behavior and instill some discipline, that slight modification of behavior for most traders is the key to massive success. Most people are spinning the wheels on little bit positive, little bit negative, little bit positive, little bit negative. So I use analogies all the time because then it’s a visualization thing.
TraderInterviews.com: You mentioned momentum at one point. I know in equities and everything else, volume is a big part of that. But, of course, you don’t have that volume, so talk about that. How are you determining momentum then as well on the market?
Derek: And I don’t want to make this sound like I’ve got the best thing in the world, but I have some tools that I use, and I use them consistently. I just said that in our charts, I remove time. We don’t look at time. So that removal of time we then use that as our momentum tool. It’s not an entry indication that we have what we call the average time of bar. So a new bar is not created until the current range is filled. So I have a tool that’s called the average timing bar that’s doing nothing more than putting a stopwatch and say, “OK.” If each bar is creating self-based on its own time frame, and they’re not standardized, but they are standardized by price. Remember, that’s important, looking at price. Well, the ATB is saying, “OK. If we reach a support and resistance point, what happens? It’s a collision of buyers and sellers.” My analogy on that is think about the revolutionary wars where the entry would line up on flanks from each other and then very organized. Half of them would shoot. Half of them would reload. Half of them would shoot. Half of them would reload. And who won the war? Then that’s who won. So support and resistance is that same calvary fight, buyers and sellers coming and colliding. Who wins the war is whether support or resistance went down. Well, what happens when we stop to have a skirmish? The markets slow down. We get stuck at a support and resistance point so those ATB linked then. Then once we’ve passed that support or resistance point, the momentum comes back to the market place and my ATBs show that the bars are filling quicker. I don’t have to see pure volume. You can look at futures volume by the way. I don’t have to see just the volume. I can look at the momentum coming into the bar, how slow or fast they’re filling, and that becomes a tremendous momentum indication. The other is just taking off the CCYX. We have a numerical code associated with the movement of each individual currency. And one of the traders in my team took and he’s an excel spreadsheet wizard, and he created an excel spreadsheet, a color mapping what we call the CCYX worksheet. We actually track those codes, and so we’ll input those codes. It gives us some divergence, calculations, some movement calculations automatically, and some percentage calculations. So we can see if the momentum is accelerating or decelerating a trend. They don’t make V patterns. They don’t make inverted V pattern. So we don’t go up, up, up, up, and then turn around and go right back down. We don’t do that. If something moves up, and then it’s going to hit a crescendo and it’s going to stall out for a while. Whether it’s going to move higher or starts to reverse, there are some things like divergence and situations like that, we’ll look at to determine if the direction is going to change now potentially or not. Remember, you anticipate. I get to move up. I consolidate. Once I’m consolidating, what can happen? I could continue to consolidate or I’m going to break or I’ll break down. I can’t go east forever. At some point, it’s got to break out or break down so I can anticipate what may happen up there, but we track those codes, and we’ll see it go to 45, then 46, then 50, then 52. Then maybe it’s back down to 51 and then 50, and then 51, and all of the sudden 49, 48, 42 so on and so forth. So we track the codes and look at momentum and trend that way. Is it accelerating? Is it decelerating?
TraderInterviews.com: One of the things you said was ATB, A-T as in atom tom boy?
Derek: Atom tom boy, that stands for Average Time in Bar.
TraderInterviews.com: Got it. OK.
Derek: Then indicator I have created. Well, actually, I won’t take credit for that. One of my guys created that thing. And we have an associated tool called the ACH which is the Average Candle Height which is also taking the clarity. When you’re looking at pure price you have a much more what I call a noise-free charting environment. So tails and wicks less frequent. They’re still present because you’re still looking at open and close, high and low, but you don’t have massive tails and wicks. So the presence of that becomes more important. With the ACH, it’s going to extend it. Visualize a histogram, and if I have a bar and so the ATB is a histogram going down, and then the ACH is a histogram going up. So the longer the ATB, the longer the bar, I have the more extended histogram pointing down, right? On the ACH, if my bars are full and they’re mainly just looking at the high and the low, and the close are all inside that bar, no tail or wick, so the ACH is going to get longer and longer, and longer, and longer. If I start seeing tails and wicks become present and consistently, it’s going to knock down that histogram of the ACH. So we’re using the two things. Two of the biggest inherent benefits of looking at pure price is you remove time. So we’re using that removal of time to our benefit on the ATB, the Average Timing Bar, and the clarity, and the noise free, and the cleanliness of the chart, so the presence of tails and wicks are much more substantial. So we’re using the removal of the majority of the tails and wicks to our advantage. We have an indicator and they’re kind of a yin and yang to each other. They have made the stat with each other. They take a very little space, and that’s always nice. They’re very simplistic to recognize.
TraderInterviews.com: So kind of just turning a candlestick pattern recognition system into just pure numbers to get a feel for it quickly.
Derek: Absolutely. Absolutely. Time is worthless to me, and it really comes down to price. Once again, fear, apprehension, and greed got to be patience, discipline, and consistency because trading is based on momentum, trend, and divergence.
TraderInterviews.com: All right. We’ll finish up with this. Goals for yourself. Do you set a dollar amount you want to make everyday, every week, every month? How do you set goals for yourself?
Derek: The goals should be broken down. I think it should be a top down approach for most traders. The goal is a great situation. A trader should look at and say, “Hey, this is what I think is reasonable for the year divided by 250 because you’re not going to trade everyday of the year even though it’s available to you.” And boil that down to a daily goal, and then that should also be your stop discipline. If I’m going to have a stop per trading per day, I don’t want more than one trade. I don’t want a good trade to take out more than one bad trade, or one bad trade take out more than one good trade. I want a day to take out more than a good day. That’s how you set your stops, and I managed it from that standpoint. I think that’s the way it should be done. It’s a pretty simplistic approach, but you got to have some goals for yourself and then consistency. Based on your consistency, maybe it’s a 30-day consistency, 60-, 90-day, then you can raise that goal. But remember, as a trader, I don’t have to be right all the time. I’m not going to be right all the time. I just explained that. I mean, if the trade’s on the Euro dollar on Sunday and Monday, we’re out standing trades on Tuesday and on trades on dollar/CAD today didn’t work out so well. So you’re not always going to be right. That’s just all there is to it, but even if you blindfold me and let me enter the trade blindfolded, then let me take the blindfold off and manage the trade. If I can manage the winners, that’s the easy part. Just like I said if I can manage the losers with discipline and not let them run. It makes excuses and move stops. Moving stops averaging into a losing position, doubling down, those are all theories and things…all those are principal deployed by traders who won’t be trading very long. I mean, that’s cold in heart but that’s the fact. You want to double down on a losing position, so yeah, you’re going to be done soon. You want to add that losing position, so yeah, you’re going to be done soon. And you want to not have discipline and move your stops and stuff, guess what, it’s human nature. We don’t want to admit our wrong. It’s the ego. This all just boils to mental. So as guys, we don’t want to admit that we’re wrong, and that’s stopping in the car and asking for directions, another one of my analogies. And then after we do stop and ask for directions, what are we doing? We’re hitting the gas hard, hitting the break hard, and taking it out on our car. It wasn’t our fault we got lost. We couldn’t ask for directions. Well, in a trade, what happens with a trader in a trade? They make a bad trade. They don’t want to admit it. They finally do when it’s a trade wreck, and then guess what? We want all of our money back on the next trade. That’s not how it works. So you’ve got to control the emotions, and you’ve got to control the mistakes. Even if you’re only batting it 50% or less even, if I can have my losers be smaller than my winners on average, I’m going to make money. So as I raise my win percentages, suddenly I become monumentally profitable and that’s the key to success.
TraderInterviews.com: All right. One last thing, NFA, what are your thoughts on them trying to go to four to one margin and some other things they’ve done with the spot forks market lately?
Derek: Tragic for the US brokers and banks, won’t affect the market globally. They want to change and 101 were implemented globally. That needs to be given a chance to work out, and it’s a reasonable solution. It needs some time. If you can make a solution that’s one country based, then guess what? The jobs, and the moneys, and the assets, and the accounts are all going to go off outside the United States. It’ll be judgmental for you as banks and brokers. It won’t affect a trader. A real trader won’t be affected at all. We’ll be moving accounts to the UK, Switzerland. Some of these guys will build a Bahamas which probably is a good choice. But neither here nor there, the assets will just leave the United States. So if the current administration is trying to create jobs, then the CFTC Regulation should not be passed.
TraderInterviews.com: Derek, thanks for your time today. I really appreciate you taking the time to share some thoughts with us and best in luck with the trading.
Derek: Tim, thank you very much for the opportunity and I look forward to talking with you again.
…join the fun at
https://securefxpayments.com/PaymentProcessing/fxtfx/Default2.aspx
