Redundancy - an 11th hour reprieve

Faceless Bureaucrat:  At 4.40pm today, the 31st March, I received my fixed term contract extending my NHS employment to September 30 2011 on my current terms and conditions.  An 11th hour reprieve if ever there was one.        
The champagne will be flowing tonight.                          

Faceless Bureaucrat has worked her magic, shown infinite flexibility and adaptability and taken a role as "Training Lead" for a new commissioning tool built by the private sector and now being flogged by the NHS with FB in the forefront of the flogging it seems.  My role will be to train GPs and Practice Managers in this new toy which will apparently help them to manage patients at high risk of hospital admission (to keep them healthier longer and keep them out of expensive hospitals) and to check the accuracy of the bills coming from hospitals.

My CV now really does look like it's been in free fall since 1999 when I acquired the job title of Chief Executive.  In a reorganisation of 2002 I swapped "Chief Executive" for "Director" and was happy to do so as my pay increased by about 20%.  In 2006 I swapped "Director" (and sitting on the Board) for "Assistant Director" and was willing to do so as my pay did not drop and I left a lot of organisational politics behind me.

Since then my job titles have no longer had any reference to "Chief", "Director" or even "Manager", instead I have been a "Partner" or a "Consultant" and now, the finale...a "Lead".  And still on the same pay scale as I was when I first became a director...

And in the Alice in Wonderland world of the NHS my pay is 33% higher now than when I took that first director post.  Inflation has eaten about two thirds of that but still, I'm not complaining.

This new Lead Trainer role is probably the kiss of death to my CV but who cares if it keeps me in the NHS past that special day when my redundancy pay eligibility is triggered?  The role is not challenging, will leave me with the head space I need to trade and I will be able to work flexibly and keep trading in the mornings.

Am I ruthlessly exploiting the NHS or has it ruthlessly exploited me?

Escaping the Axe

Faceless Bureaucrat:  It seems that Bad Assed Trader has taken over our blog with her boundless enthusiasm for trading the Forex, but she's forgetting who is supplying her with the money to keep her in trades right now.  After all, she hasn't yet turned a consistent profit has she?  Hm?

So I'm back to update you on my progress in seeking to escape the axe of Great British Public Sector cuts.

Just to recap: we were told in December that our NHS organisation was likely to close at the end of March 2011 (yes, Thursday).   We went through the obligatory 3 month consultation period required when an organisation is making more than 100 people redundant.  We thought that our team might be able to survive by becoming self funding but within a couple of months it became apparent that the NHS commissioners of London no longer wanted to pay for training - at least not from an NHS organisation.  The Strategic Health Authority of London instead signed a contract with a consortium of private sector organisations to provide training and development support to the new NHS commissioners now emerging - the GP commissioning consortia.

The work of our NHS organisation is now being privatised but most of us it seems are not eligible to transfer to these organisations because of the way the work is being commissioned.  They've made sure it isn't a simple case of the work transferring, this allows them to make us redundant and get lots of public sector workers off the national public sector balance sheet.

So I duly received my letter at the beginning of March telling me that I had one month to find other work in the NHS or I would be served notice of redundancy.

Regular readers will know that I'd rather not be made redundant just now.  I did rather agonise over this as it looked like I'd get four months' pay and that this might be a once in a lifetime opportunity to get paid without having to work.

However, over the last couple of months it has become clear that this is not a once in a lifetime opportunity and if I can hang on in until September time I may get the opportunity again - and by then I will be eligible for a much bigger redundancy cheque - one that will allow me to trade unhindered by paid work for at least a year.

I have watched many NHS managers taking voluntary redundancy cheques worth tens of thousands of pounds - some of them more than £100,000.  Many of these people are really talented managers with a great deal of experience, able to turn their hands to many different management roles and challenges.  And the NHS is paying them to go.  It seems incredible.  I never would have believed it until now, witnessing it first hand.

But it has persuaded me that I too may get this opportunity.  I just need to stay in until September.

Well, I admit I've taken things up to the wire a bit, given my redundancy notice is due later this week.  However, I've had to be careful not to end up landing myself with a job that does not preserve the unusual working arrangements I currently enjoy.  I work 27 hours a week, 3 of them from home, and I'm able to work them flexibly on the days that generally suit me.  And yet I get a very good salary for this.

Also, as my career coach, Ciaran, pointed out a few weeks ago, if I want to succeed at trading I need to do a job that allows me the "head space" to trade, rather than one that consumes all my mental powers (not difficult).

So I've had a bit of a balancing act, needing to secure something which would keep me in the NHS for another 6 months but, preferably, no longer and provide me with these specific terms and conditions.

Now I don't want to tempt fate because I have not yet seen a signed contract.  So I'm not going to tell you anymore yet.  Only to say that I do expect, this week, to receive a signed contract for 6 months more work in the NHS on my current terms.

How I have done it God only knows.

They say it's not over til the fat lady sings.  Well I don't think of myself as fat but this lady will certainly be singing once this is in the bag...

The Secrets of a Successful Multi-Millionaire

Bad Assed Trader:  Sometimes when you're struggling with something in life you find that the message you need to hear is repeatedly thrown your way - as if fate is trying to tell you something.

In reality I suspect that when we're struggling with something we're more receptive to the message but so it has been for me this week.  I keep hearing of instances where discipline and consistency have led to success.

The latest instance was from MoneyWeek magazine, of which I am a regular reader.  An article by Tim Price, director of investments at PFP Wealth Management was so relevant and timely as to appear like a supernatural adviser urging me to continue with my trading strategy and giving me reassurance that it will succeed.

The article is about Jesse Livermore, born in 1877 whose fortunes peaked in 1929 with a net worth of $100m (equivalent to over $1bn today).  He used his own money and his own system of trading and said "The game of speculation is the most uniformly fascinating game in the world.  But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer.  They will die poor."

As Tim Price says in his article "Consistently profitable trading - following Livermore's rules - is perfectly possible.  The reason why it is not more widely achieved is simply because it requires significant mental discipline, and not much else.  The prevailing human tendency today is to look for quick wins and to avoid hard graft or any form of psychological pain, or effort."

Livermore's approach requires no market forecasting, no analysis of fundamentals (such as economics and politics).  He says you should never trust your own opinion or back your judgement "until the action of the market itself confirms your opinion" - it is purely technical analysis.

Livermore's strategy is based on trend following ("The trend is your friend" as traders like to say).  It is also based on risk management which means always knowing how much of your overall capital you are prepared to risk on any given trade (like the 1% rule I always follow) and knowing precisely when you will get out.  If you do not have an exit strategy, you do not have a strategy, full stop.


Livermore himself admitted that he lost money whenever he failed to follow his own rules (during his career he made and lost several fortunes).  I was amazed to read how similar to my rules (I claim no credit for them - I was taught them) Livermore's rules were, such as:

• Stick with the trend
• Don't trade when there are no obvious opportunities
• Wait for the market to confirm your opinion before trading
• Cut your losses but let your winning positions run
• Don't follow too many markets
• Never average down into a losing position

I didn't understand what that last rule meant so I googled it to find out.  It basically means don't add to a losing position - don't buy more of whatever you've bought that is losing value.  Apparently people do that because by buying more it means the average value of their initial investment is decreased (buy 5 apples at £1 and the average cost is £1, if you then go on to buy 5 apples at 60p then the average cost of your 10 apples is 80p, which throws a better light on your overall investment: 10 apples at 80p each looks better than 5 apples at £1 each).  I had never thought to do such a thing and so will have no problem sticking to that rule, I have never been tempted to add to a losing position - in my eyes that definitely looks like throwing good money after bad.

I reflect that some of his (and my) rules are easier for me to follow than others.

I have had no problem sticking with my 1% risk rule.  I have had no problem cutting the losses, only once did I move my stop loss by 2 pips and cannot imagine doing such a daft thing again.  But I understand from listening to other traders that this is a common failing.

I don't follow too many markets - at present I am only following the Euro and only trading the five minute time frame, so I can't be more discerning than that.

The rules which are most difficult to follow are the others.  Not trading when there are no obvious opportunities.  This is something which I think becomes easier with more experience as a trader. When you're a novice none of it seems to be really obvious and you have to do quite a bit of analysis to find the trade that meets your rules.  So if nothing jumps out at you then a common mistake I've made is to think that you just haven't looked hard enough and you will see one if you keep looking.

Of course you then do find a trade because you make one.  I am still working on this rule.

Letting the profit run is a rule I am able to follow to a degree, but I have come to learn that I need to set a target which is reasonable and technically justifiable and walk away because trying to manage a trade when you're in it is very tricky and your mind plays games with you.  You ignore the warning signals that show price is moving against you because you want the trade to keep going your way - a symptom of greed.  Or you believe that price is turning against you before the technical signs are apparent - a symptom of fear.

Fear and greed are the main drivers of emotional trading and both wreck your trading strategy, your trading record and your trading profits.  Best to set the target at a time when you are objective (ideally before you place the trade) and stick to it.  I find writing it down as part of my plan for that trade helps.  But to be quite frank, I'm still struggling a bit with this rule.

Sticking with the trend.  Well I like to think I follow that rule but when I review my trades after the event I sometimes find that this has not been the case - so clearly I do unconsciously break that rule. It was a mistake I made more as a complete beginner, particularly trading the Forex when you have four different time frames and may think you are trading with the trend but, if you look at a higher time frame it is apparent that you are not.  Price can be going up on the hourly and five minute charts but down on the four hourly and daily charts - it's all part of the inevitable cyclicity of price action. Learning to trade the Fx is all about getting the time frames aligned so you are going with the trend in all four of them - and my trading strategy is based on spotting the moment where price on the five minute chart is just turning back to follow the same trend as the other three time frames.

One of my trading tutors, Chris, explained it brilliantly.  He said you have to imagine that the four time frames are like a family going out for a walk in the park.  The daily chart is the grandfather, he determines the direction of the walk (or trend). The four hourly trend is the father and he also strongly influences the direction (of the walk/trend).  The hourly chart is the big brother who you want to see walking alongside his father and grandfather.  The five minute chart is the little, rather wayward, brother.  He's only 2 or 3 years old and he keeps letting go of his big brother's hand and dashing off in a different direction to the other three.  He's only allowed to do that for a short while before they grab him and pull him back into line.

So my strategy is about spotting when that little boy has dashed off and then, most importantly, the moment when his family tug him back into line.  When they do he swings back into their direction and of course being a keen and energetic little thing he starts to lead the way, sometimes with quite a head start. This is reflected in the price going from a sharp or gentle movement against the trend to a sudden whiplash back into the trend and a hearty price movement in your favour - if you catch it.

And then I come to the last and most difficult of Livermore's (and my) rules - Wait for the market to confirm your opinion before trading.  Traders always say "Trade what you see, not what you think" and this is what they mean by it.  And it's so hard!

When you've done a bit of analysis and you can see that the trend is up on the daily, four hourly and hourly time frames and it's down on the five minute time frame then you believe it's only a matter of time before price turns back up and you're watching every movement on the chart expecting to see confirmation of this change.  And because you're expecting it you read into it, you start to think rather than just see.

Successful trading is about not thinking but just seeing and accepting that.

Tim Price, in his article, strongly recommends the value of following the trend.  He says "you would be surprised to discover how many professional investors have no interest in Livermore or in following these few essential rules".  I am surprised to hear that as it seems pretty basic but then I guess someone has to set the trend and if not the professional investors then who?

In the meantime, I agree with Tim and Livermore, and would only say in my own Bad Assed Trader way, that the most difficult part of trading seems to me to be waiting for the market to confirm one's opinion. If you can get that right then I reckon you have it made.

The Power of No Position - an Important Trading Strategy

Bad Assed Trader:  Like a reformed alcohol-misuser abstaining from the demon drink I am learning to resist the siren calls of the market.  Adopting my new approach - only trading the Euro (EUR USD) and only trading my sniper/sniper pivot strategy according to my very strict rules - has already tested my metal considerably.

On Monday and Tuesday I hung around my computer for hours and no set up came.  On Wednesday I followed my rules and took a trade which bombed within the hour taking my 1% with it.  My set up then occurred again within half an hour so I took it again.  If my rules had been to take 20 pips then this one might just have come home.  However, I had set a reasonable target and was obliged to wait for price to hit it.  I was watching it though as it faffed around for so long, on a gentle incline in my direction, that it had not hit my target when Member Fisher of the US Federal Reserves started speaking.

One of my rules is not to trade whilst the news is on and I know how much volatility these guys can create when they start to speak, so when I saw price action start to tank I pulled that trade for a 50p loss (1 pip) and was glad I had when I saw it continue rapidly in that direction.

This morning the Euro has been under the 50 moving average on the hourly chart so although I was up and looking at the charts at 6.30am despite a night on the town with some girlfriends last night, I turned the computer off and read the papers in bed instead.

I have had to remind myself repeatedly the mantra the professional traders say that "No position is still a position" and that "Knowing when to stay out of the market is key to success".  So I have not been cruising for opportunities, I am sticking to my rules and preserving my capital for the high probability trades that occur with my set up.

Adjusting to this position is tricky as one feels one should be doing something.  Instead I have to look at doing nothing as a really positive thing to do.  I remind myself that to hit my monthly target of 10% I only have to place a couple of trades a week and that includes losing trades.  If that means that this week I've placed a couple of losers then the likelihood is that next week I'll be placing one or two winning trades bringing in something closer to 3% each.

I have to accept, on a deep level, that staying out is a positive thing to do.  This includes noticing significant price movement and opportunities to trade, but staying out because they do not meet my criteria rather than being seduced into lower probability set ups.

It is not easy to stay out but I understand now that this is absolutely necessary if I am to succeed, with any consistency, at trading.  In my head I furiously play Orpheus's lyre (see my last blog) and gradually the siren market voices die away...

An Exciting Discovery and the relevance of Greek mythology to trading

Bad Assed Trader: Following my last confessional post in which I publicly whipped myself for trading in the future rather than in the now (do read if you’re having a bad day and would like to gloat at the misfortunes of others) I am moving on to my brighter trading future with confidence and a cleansed soul.

I start by rearranging my trading desk which is surrounded by noticeboards on which are pinned motivational messages, rules and routines to follow, pictures of charts showing successful trades with entry and exit points highlighted and general stuff the point of which is to keep me on track.  It’s had mixed success to date but I live in hope. Guests to our house visit this shrine to trading with some bemusement.  I suspect my husband may interpret the whole affair as the mark of a desperate woman.

I tell myself that rearranging my trading desk and updating my motivational display is not akin to shuffling the deckchairs during the sinking of the Titanic.  Rather, I am taking my trading psychology down to the next level of my consciousness to more deeply embed the key issues I have to conquer in my still amateur mind set.

Next I take stock on my trades over the past week and month and look for recurring themes and areas for hope.  Of course hope is an emotion linked to the future and you may well point out that my trading is all supposed to be in the Now Moment. 

This is true whilst actually looking for, placing and executing trades, but I’m beginning to appreciate the importance of regularly taking stock (ie reviewing past performance) in order to understand the strengths and weaknesses of one’s trading to learn and improve.  And having identified these areas even more important it seems is that one must then Make Decisions and Resolve To Take Action to remedy the weaknesses and build on the strengths.

In the last few weeks since I’ve been following Emmanuel’s strict instructions to trade just the one strategy, the sniper, I have come to see these reviews as light bulb moments and today is no exception.

I knew my performance this past week was variable and that if I had followed my rules and my trading plan for each trade then this week would have concluded with me 3.7% up instead of 1.5% down. This has presented me with another opportunity to learn the lesson of Following The Rules. 

When my two girls were growing up I used to love sharing with them my pearls of motherly wisdom and one of my favourites was “If you don’t learn the lesson the first time in life, you get to sit the class again…and again…and again…”.  My younger daughter, Ruby, thoughtfully reflected this back to me yesterday when I shared with her the outcome of my recent efforts.

Ah, the young have much to teach us.

I thanked her through gritted teeth.

But I return to my learning of the week.  Almost as interesting as that lesson about following the rules was my apparent love-in with the Euro.

During my first months as a trader I was ambivalent about the Euro and in fact seemed to have developed something of a caution to it.  I can’t remember nor can I understand why now as it has increasingly become my cherished currency when paired up against the US dollar.

I look over my trades for the past month and find that if I had only traded the Euro (EUR USD) I would have made 132 pips, a fairly respectable 6.6%.  I also notice that only twice do I seem to have broken my rules over the course of 9 trades, one of which was when actually managing the trade (I moved my target).

This brightens my outlook considerably.  Here I seem to have hit upon a currency pair that resonates for me, where I am better behaved and actually already making a profit.  If I had stuck to my rules with all 9 trades rather than only 7 of them I would have made 196 pips – which is nearly 10%.  And guess what?  My monthly target is 10%...bingo!

I have a new resolution.  It is simple.  I will henceforth only trade the Euro and will absolutely stick to my rules.

I reflect on this resolution for a few hours.  At first it seems wonderful.  I will probably only need to place a couple of trades a week, after all in the past month I placed 9 Euro trades and won 5 of them.  The reason I profited from this almost even split of wins to losses is that I always place a stop loss to take me out of the trade at 1% (20 pips) if the trade goes the wrong way, but if it goes the right way my target is often 2-3%.  It doesn’t need a mathematician to work out that this is a winning strategy.

In my head I run through the reality of placing only a couple of trades a week.  I currently spend about 3 hours every weekday morning watching price action on my computer screen.  I may still have to do that in order to wait for the set ups but must find some way of preventing myself from then browsing through the other currency pairs to look for a set up there which I would then be tempted to take and which would undermine my new Trading Plan.  Discipline discipline discipline.

I’ve also come to realise that I will profit better by placing a realistic, justifiable but reasonably ambitious target at the beginning of a Euro trade and walk away, rather than spending hours watching price action and judging when the move is over – something which whiles away the hours but can be frustrating when you don’t get it right – given the time you have invested in order to squeeze those extra few pips out.

It dawns on me that only placing a couple, maybe 3 trades a week means I should do away with weekly targets altogether to reduce the pressure to trade and the chances of taking lower probability set ups.  Also, about half the time I would be watching the charts for a few hours without placing a trade at all.  I anticipate that this may feel like a waste of time and that I will again be tempted to look for a set up elsewhere if my Euro set up does not come at all one morning.  Again - discipline discipline discipline.

I realise that despite the Plan appearing simple and requiring of very little actual work it may be quite tricky to put into action.  Why might this be so?

Well, the more I consider it the more I realise that the market is actually like the Sirens of Greek mythology which, if you're not familiar with the concept, Wikipedia describes as:

"In Greek mythology, the Sirens were three dangerous bird-women, portrayed as seductresses who lured nearby sailors with their enchanting music and voices to shipwreck on the rocky coast of their island." 

The market is just like that to novice traders.  It is a seductress.  It forever beckons to traders "Come inside, endless trades, infinite money...." and those traders too weak willed to resist end up like those hapless sailors, shipwrecked on the rocks with a ravaged trading account.

I know I will need every ounce of my discipline to resist these Siren calls.  But I believe it is easier to do so when you are armed with a plan in which you have complete belief.  In Greek mythology Jason (as in Jason and the Argonauts, who is also seen as the mythical founder of the city Ljubljana, the capital of Slovenia) devised a cunning plan in order to safely pass the Sirens on his journey. He took a chap with him called Orpheus who was a dab hand with the lyre (pictured below). 

When Orpheus heard the beautiful soporific (sleep making) voices of the Sirens he drew out his lyre and played his music more beautifully than they, drowning out their voices, and Jason and his chums passed safely.

My Trading Plan is now my lyre, arming me against the Siren voices of the market.  I must believe in it completely for it to provide me with the protection I need.  I resolve to put a picture of a lyre up on one of my motivational boards to remind me of the value of my Plan and the danger of being a shipwrecked sailor at the hands of the Siren Market.

So, having explored the relevance of Greek mythology to trading I continue to reflect on how I will actually put my new Plan into action.

I start to appreciate that my Plan now requires a fundamental shift in my thinking.  Imagine a job where you sit at home, watch a computer for 3 or 4 hours every morning – often being able to set an alert (an alarm that sounds when price reaches a key point according to your set up) and therefore get on and read a book or magazine whilst you wait.  Imagine that all that is required is to wait for your particular pattern to appear and if it doesn’t you walk away, doing nothing.  If the pattern does appear you only have to make a judgement about the point where price has a high probability of reaching and set your target, place your stop loss and enter the trade at the right moment.  Then your work is done for the day.

Imagine this happens 2, 3 or maybe 4 times a week and as a result you get paid a high tax free sum every month.  Invest £20,000 in your account and you’d be taking, on average, £2,000 a month from this job.  Double your investment and your pay gets doubled, without you having to spend any more time or work any harder or take on any additional responsibility. (I stress I am still trading with a much smaller account and awaiting evidence of my consistently successful trading over at least 2-3 months before increasing my account size. Evidence being the account actually going up.)

It’s such a weird and unusual work situation it seems too good to be true.  And yet it is true.  Traders do live like this, in reality.  And I realise, as a result of my trading efforts to date, that I can now see and almost touch this reality.  I have found my lyre.

There is a time when every bad assed trader knows they must move to the next stage.

For this bad assed trader that time is Now.

Being in the "Now"...(& avoiding the painful trading trap of Future Think)

Bad Assed Trader: Confession time again.  This is getting to be a bit of a habit, but I like to think it is part of the process of cleansing my trading soul as I strive for trading purity.

This is not to say that trading is anything like religion but probably reflects a conversation my coach Emmanuel and I had about religion, faith and belief systems when we traded together last Wednesday morning.  You may wonder why on earth we spend time talking about such concepts rather than staring at and analysing charts and price action.  Well the reason is that Emmanuel and I share an interest in psychology and both believe that  the key to conquering trading is about understanding - and therefore controlling - yourself better.

So back to that confession.

I've become too hung up on my performance and my need to drive it up, especially in relation to being Up On The Week.

Yesterday (Friday) morning I was too keen to try to turn around my earlier performance of the week (standing at -0.5%) and put pressure on myself to take a trade when MY SET UP HAD NOT OCCURRED.  This is the original sin of trading - playing fast and loose.

Emmanuel tells me that we must stay "in the Now" when trading. He recommended "The Power of Now" by Eckhart Tolle, a book which provides a better understanding of what that means and how to achieve it.  I've been working on this but I can see that with my current approach - developed over a lifetime of some years - it's going to take a little time.

The reason this is so important is that traders do bring their own baggage from the past into their trades - usually in the form of pain or fear of losing because they lost the last trade.  This then influences them to act differently, rather than acting in exactly the same way, which is what trading requires for consistent success (as opposed to sporadic wins).

Traders also often bring the future into their trades.  This is what I do too much.  I know it's one of my biggest issues because as a Faceless Bureaucrat I've had my management style professionally analysed to determine whether I make decisions with reference to the past (experience), present (current evidence and benchmarking against peers) or the future (strategic goals) and I was found to be very future-driven.

Whilst being future-driven has its benefits in management and everyday life - being motivated to plan for the future, anticipating problems and taking action to avoid them etc it simply doesn't cut the mustard with trading.

The effect it has is just what happened to me on Friday.  I was trying to improve my performance for the week - planning an outcome.  I tried too hard to find a trade because I was influenced so heavily by this future aspiration.

So - confession: I broke my rules, I took a pivot short on cable (GBP USD) when price was still above the 50 moving average on the daily chart.  Why oh why.  When I look back today at what happened after I took that trade - price turned around and went up 160 pips.  How much more wrong could I have been??  There goes another tenner.

Only moments before I had been looking for an opportunity to go long on cable and then, because some news somewhere (probably) caused the price to dip, crashing through the 50 moving averages on the four hourly and hourly charts I thought I was justified to jump in and join the crowd who by then were moving on.  What a fool.  I have to share it with you as part of my cleansing process - acknowledging the problem with living in the future rather than the now and sticking to one's rules.

If I had stuck to my rules and continued to watch I would have found my set up occurred two hours later when price broke up through the 50 moving averages again.  I would have set my target at the next point of resistance, about 85 pips higher than my entry and that trade would have come home four hours after entry providing 4%.  This is the difference between failure and success in following one's rules.

Still, I can't be too hard on myself as I'm still learning, it's still early days in trading terms.  But I was kicking myself all morning - oh the error of my ways.

The important thing here is to recognise the mindset I created when I traded whilst being in the future rather than in the now.  Next time that happens - and every time it happens - I must force myself to stop and not to trade.  This is where the discipline comes in.

I've acknowledged my mistake.  I've written it down and shared it.  Now it's time to put it into my past and instead recreate that mindset of the Now, where it doesn't matter whether I take a trade on any given day or not - the only thing that matters is that a set up fully meets my rules and if it does then I take it.

Fresh start next week then.

And I'll be blogging tomorrow on a more optimistic note following an interesting discovery I have made.

A Mad World... and a Fine Line

Bad Assed Trader: It feels trite to be blogging about trading when across the other side of the world people are struggling to survive in the aftermath of two disasters and experiencing a third.  The rim of fire has suffered enormously with the quake in New Zealand, the floods in Australia and now hell unleashed in Japan.

And all the while people in many other countries continue to suffer appalling living conditions, oppression by their states or other sections of their community, violence, poverty and disease.  It is a mad world and although I may be facing redundancy due to public sector cuts and my trading may be a long hard struggle for success these are trifles compared to what others are soldiering through, I have no illusion on that.

But I am here to blog and blog I must, if only to make my own small trials and tribulations public for those who are interested and to make myself act on the commitments I know I need to make.  Getting the hang of this level of discipline is not easy for someone of my rather rebellious and wayward nature and I need all the help I can get.

It's been a tricky week to trade.  I clocked on last Friday morning at about 6.15am to see some violent movement on everything related to the Japanese yen which sent alarm bells ringing.  I went straight to forexfactory.com to check for expected news from Japan, there was nothing.  I checked on my trading platform for live news and spotted some feeds about a quake.  So on went the TV - it was amazing how little there was on the mainstream channels and it wasn't until my husband came down an hour later with his superior ability to wrestle additional channels from our TV set that I really got the measure of what was unfolding.  Pure horror.

I don't trade news so I was off to work then to earn my increasingly stale crust.  I sat out Monday to give things time to settle and Tuesday I was back at my trading desk ready to take set ups that didn't involve the yen.  Like many novice traders I had assumed that the yen would drop in value due to the uncertain economic health of a country under so much stress.  It did, initially, but then of course the Japanese started liquidating their assets (ie selling their investments in shares and other currencies) around the world to free up cash to start rebuilding the disaster zones.

Cashing in their investments led to the Nikkei (Tokyo's stock index) dropping like a stone, wiping away value accumulated over 8 months over the course of just 3 days.  But the extent of Japanese investment across the world also becomes apparent when they start to cash it in over the period of a few days.  Buying the yen meant selling the other currencies and the drop in value of the Aussie dollar, Euro and US dollar compared to the yen was spectacular.  For example, the picture below shows starkly how 10% was wiped off the value of the Aussie dollar compared to the yen from Friday morning to Wednesday evening.

As I write it has recovered about a third of that drop.

Perhaps I should have stayed out of trading until today, but I like to stay "in the zone" and up to speed with the movements as much as possible, if only to train my brain to start to understand the way price acts and to spot repetitions and patterns.  So although I stayed away on Monday I was back in on Tuesday looking for my usual set ups.

As a result, I've had choppy performance as currencies have behaved somewhat oddly.  Three trades on Tuesday left me with a net loss of 1% (still a tenner).  Wednesday was the same with two losers and one winner.  I was on my Q run (my 17th attempt to spot and manage 30 perfect trades) on Tuesday and Wednesday but unfortunately I broke my rules on Wednesday afternoon when I took a Euro trade that did not have "sharp shoulders" on its W shape and so I've had to move onto R.  That rule breaker took my performance on Wednesday from break even to 1% down.

This morning I've been trading too much I suspect.  My first trade was great, I caught a fast moving sniper short on Euro Swissy (EUR CHF) that hit my target 20 pips in 4 minutes.

But as is often the way with trading, in my excitement I then spotted a short trade on Aussie against the US dollar (AUD USD) and accidentally clicked into the trade before checking whether it had properly retraced on the hourly chart to be bouncing off the 50 moving average as per my rules.  Oooops.  Why am I not surprised that 40 minutes later I was out of that trade 1% down.  Keep those itchy fingers under control girl!

This was then followed by a long sniper on Euro pound (EUR GBP) which technically followed my rules but which failed when the pound changed its mind about its direction of travel and started to head right back up again after what seemed to be an emerging down trend.  I remind myself that cable, as we call it, is an erratic, choppy currency which can be unpredictable and is not my currency of first choice.

Which brings me neatly to my final trade of today - my trading currency of choice, the good old Euro against the dollar.  When it moves it really moves and today I caught a lovely move.  But if I hadn't been greedy I would have done much better out of the trade.

I took the trade as a long sniper at 07:12am and initially set a good target which was 94 pips away from my entry (nearly 5%) but justifiable based on price action.  There was then a good move up and price pushed through an earlier possible line of resistance with no difficulty and started to move even more quickly.  At that point I got excited - yes, the alarm bells should have started ringing right then - and thought that as price was moving so fast I could move my target to an even higher technical point, 124 pips away from my entry (over 6%).

Confession time.  That was greed kicking in.  And they say you should plan your trade and then trade your plan.  If I had stuck to my plan those 94 pips would now be mine - £47.  Instead, I set the new target and moved my stop loss up.  To be fair, I moved it up to a reasonable technical point but after a couple of hours of fuffling around price dropped to my stop loss and took me out.  I netted 50 pips (2.5%) which was not bad and wiped out almost all my losses for the week.  I'm now just 0.5% down, or a fiver in layman's terms.

I confess to this greed publicly as a way of punishing myself for moving my target when it was a good target anyway.  I am still learning.  About myself as well as this dark art.  Next time, I tell myself, I will stick to my plan.

My coach Emmanuel tells me it's a Fine Line between profit and loss in trading.
That Fine Line between me being 0.5% down or 1.7% up on the week was purely down to greed today...

Wow

Bad Assed Trader: There’s no other word for this phenomenon but Wow.

I’ve just reviewed my last 3 weeks’ trading.  I chose 3 weeks as in that time I have been attempting to stick to my sniper rules – the previous week I had been at a boot camp and trying other strategies.

My review has hit home the lessons I’ve been struggling to come to terms with the last few weeks in a really resounding fashion.  Seeing the evidence there can be no doubt about the importance of sticking, with cast iron discipline to my rules.

My last blog showed my optimistic opinion that I am finally turning the corner on my performance and my review showed evidence that this is correct.  But it showed that I would have come sweeping out of that corner at much greater speed if I had shown the discipline of a professional trader – my aspiration.

My review showed the following results.

Between February 21 and March 10 I took 20 trades.

Losers: 11 trades amounting to -212 pips

Winners: 9 trades amounting to +258 pips

Net gain: +36 pips (nearly 2%)

Verdict: Getting better but not good enough.

When I looked with all honesty at which losers were my fault for not following my rules (including trading around expected news on one of the currency pairs I was trading) and took out those trades the result would have been as follows:

Losers: 4 trades amounting to -80 pips

Winners: 8 trades amounting to +193 pips (yes I admit I got lucky with the news on one trade)

Net gain would have been: +113 pips (nearly 6%)

Verdict:  This is what I would have achieved if I’d not been such a weak willed sloppy trader.

Better to have placed just 12 trades in those 15 working days and won 8/12 than placed 20 trades and won 9/20.  Those 7 losses which were completely my own fault made a huge difference to my outcome (ie cut the profit by nearly two thirds).

And those messages that the professional traders keep giving me such as:

“The key to success is to know when to stay out of a trade”

“Less is more with trading”

“It’s all about discipline and consistency”

“Just follow your rules”

“It’s a fine line between making a profit and making a loss”

“Trading is 90% psychology and the rest is in your head”

Suddenly those messages mean something to me in a very real and very concrete way.  I’ve been hearing them for months but not really appreciated the true meaning.  I thought I was disciplined, I thought I was following the rules, but this is a different order of discipline and rule following to what I had thought and expected.  We are talking perfectionism here and cast iron will.

The challenge now is can I, with my long history of faceless bureaucracy and the wheeling and dealing, ducking and diving I’ve deployed to survive as a Faceless Bureaucrat now transform my mind set into that of such discipline and consistency that I can know when to stay out as well as when to go in?

What a challenge.  Wow…

My Performance and The Cusp

Bad Assed Trader: I've decided to come clean today.  Part of the process of rehabilitation is acknowledging that one has a problem and I have, for the past couple of months, been coming to terms with my problem.  When I first started trading I was trying all sorts of strategies and all sorts of currency pairs.  Things were a bit haphazard to say the least.

In January, though, I started to take stock and realised that I wasn't really improving.  I had learnt how to place and manage trades - but not in a way that was making me money...

At this point my coach, Emmanuel, stepped in with the wise strategy of getting me to just do the sniper trade following a strict strategy with clear criteria the same way until I'd managed to do it 30 times perfectly.  I thought that it might take me a couple of attempts to do this and am now on my 17th go.  I am on the Q run as I make my way through the alphabet.  And I thought I was a disciplined sort of person.  Hm.

The beauty of Emmanuel's plan is that it has forced me to see what I'm doing wrong and you can really only see that clearly when you know exactly how it should look for a comparison.  And although I have made some errors repeatedly (hence making my way to Q) each time I see the error I'm becoming more averse to it until eventually, so my theory goes, I will be repelled by it.

For anyone who knows Pavlov's dog - how the dog got trained to salivate at a particular sign after repeatedly being show that sign and then being given food - I am that dog right now.  I am using the same technique on my own dog like brain to force it into proper trading mentality and behaviour.

So what is the result of this repetitive training?  Is it generating results?

I hate to say it's too early to tell, because here I am telling you all about it.  But strictly speaking it is.  However.  I do monitor my progress and chart it so I get visual feed back (I'm a visual learner after all) of how I am doing.

Now to be painfully honest, the chart does not yet show an upward trend in any normal sense of the word.  But I am an optimist.  I have also played about with Excel and managed to find a curve to apply to my results which actually shows I have turned a corner on my performance.  Here it is:



 The trend line I found which produced this optimistic result (ie the right answer - as far as I'm concerned) is called a polynomial curve.  If anyone out there knows what that is then do please let me know.  I've wiki-ed it and don't understand a word of the mathematical concepts explained therein.

All the straight trend lines I put in were depressingly downward pointing but this lovely little jobby hints at an upward look from now on.  All I have to do now is place the trades that make it a true prediction.

And now it's all out in the open, the pressure is on.  In a months' time I will put the chart back up and let's see how it looks.

I'm about to get incredibly fussy about the trades I place to try to make sure that curve carries on in a heavenly direction.  I'm done with tarting around with all the strategies in the book and currency pairs under the sun.  Now it's just me and that curve.

Now is this Luck?

Bad Assed Trader:  This evening I blog from my trading desk in Watford.  Yes, I know it doesn't carry the same panache as the south of France, but hey the sun has been shining all day and spring seems to be on its way.

Perhaps you detect a note of cheerful optimism in my blog?  Indeed, ever the One With Hope I am again believing that I am turning the corner on my trading performance.  Faceless Bureaucrat WILL become a Bad Assed Trader and this morning brought more evidence to support my hopes and dreams.

Sometimes when I write this blog I get flashbacks of Sex and the City and the sort of little stories Carrie recounts as she takes us through the whirlwind of posh frocks, wild sex and designer lunches with the girls (but not all, I think, at the same time) that seems to be her life.  Then I remember that I am but a simple Faceless Bureaucrat trying to become a Bad Assed Trader sitting in front of my laptop blogging about currency pairs, moving averages, price action and redundancy notices.  And then it seems the distance between Watford and New York has never been greater.

One day maybe I'll be blogging about posh frocks and designer lunches.  I'll leave the rest to someone better qualified - younger and more athletic even - than I.

In the meantime what happened this morning?  Well!

I think I was in a fairly cool frame of mind and started off perhaps a little prematurely (when I look back at it) with a pivot trade long on the Euro (EUR USD).  It was chuntering along in my direction when those nasty Moodys downgraded poor old Greece from B1 to Ba1.  Now do I really give a monkey's about the difference between B1 to Ba1?  Do I buffalo!  The problem is that this little whisper of confidence depletion in Greece's rather dubious financial affairs sent the Euro tanking nearly 50 pips in 25 minutes and took my trade out for a loss of 1%.  For some reason I'd traded 50p a pip rather than 30p so this time I gave a tenner back to the market.

But, once the dust had settled on good old Greece the Euro started to pick up again and so did Bad Assed Trader.  As my coach Emmanuel tells me firmly and fairly "Get back on that bucking horse" and so I did.  The horse stopped bucking for a minute so I climbed on.  Another pivot long set up which also coincided with a sniper long set up with all the classic chart patterns of a nice big W and we were away. Just over an hour and a half later I closed that trade for a 33 pip move, 1.65% profit.  I had stuck with the 50p a pip risk size and so netted £16.50.

Not only that, but when Euro moves often Cable (the pound - GBP USD) likes to move too.  The same set up presented and within 2 hours I'd caught almost all of the entire morning's move,  full 50 pips  which earned me 2.5% or £25 in cash.  The pound didn't manage to get much higher and about an hour later turned on its heels and dropped like a stone, losing over 100 pips during the afternoon.  I saw it turn and toyed with the idea of taking it short but I don't trade against the trend, which is up, and I don't like to "over trade" - that's when you keep trading even after you've hit your target for the day.  My target was 2% and I had happened to make 3.15% (we have to deduct the first unfortunate trade of the day, thanks to Moodys and the Greeks) so I called it quits and allowed myself to enjoy the warm and unusual feeling of being a winner, all day.

The big question for Bad Assed Trader is, was this luck or skill?  I like to think it was skill, particularly the bit where I managed to wring a total of 4.15% from two trades running simultaneously and didn't get stressed in the process at all.  Looking back on the chart patterns I did the right thing in entering and managing the trades so perhaps I am learning after all.

Before I sign off for the day Faceless Bureaucrat has complained that she's not getting a look in these days and would like to mention a couple of things.  Firstly she's now had her official letter warning her of her post being deleted (as they so poetically put it) at the end of this month and her own ass being on the redundancy line (her words, not those of the Human Resources Department) once her 16 weeks' notice period has passed.  Secondly, she says she's had an unofficial offer of a six month secondment some distance from home which can serve as "back up" if she can't find anything closer to home.  Bad Assed Trader sums this whole situation up with one word.  Scored.

Crazy Day's Trading

Bad Assed Trader:  Yesterday I started to live up to my name.  But not in a good way.  Gaining 3.25% on one trade is not bad in itself, but it is if you preceded it by losing 4% and if you only made the 3+% by accidentally trading the news.


Oh dear.  I am now on my 16th attempt to take 30 perfect trades.  Only two days' ago I was on my K alphabetic run but am now on P.  P for Pathetic!  What happened to L, M, N and O in the intervening days?  I traded EUR GBP short twice on March 2 and made an error on the second one so those were the last two K trades.  They took me down for nearly a tenner between them.


Then yesterday.  Well what can I say.  I knew there was news on Swissy so why on Earth did I take two trades on Swissy Yen (CHF JPY)??  The first was before the news - the news being the retail sales in Switzerland, defined as "Change in the total value of inflation-adjusted sales at the retail level, excluding automobiles and gas stations" which had been anticipated at 1.7% but turned out to be -2.6%.  This led to a drop in the value of the Swiss franc against the Japanese Yen by over 40 points in about an hour when the underlying trend for this currency pair is up and I was optimistically looking at long set ups.


I also knew there was news on the pound, but did that stop me from taking a long sniper on the pound against the dollar at 08:42 only to watch price plummet by nearly 60 points over the course of 15 minutes?  Hm.


I also lost the plot on the Euro and jumped into a trade using the one minute chart rather than the 5 minute chart and before checking the hourly chart to make sure price was bouncing on a significant level.  That one stopped me out half an hour later, so another six quid to the other side.


I would have been 4% down on those 4 crap trades but I also pitched myself into a second Euro trade which I was unable to name because it wasn't clearly following any specific strategy (broke my rules then...).  I let it run all morning and sneaked a peek at my trading platform during my lunch break at work, just as Monsieur Trichet, President of the European Central Bank was announcing that they may have to raise interest rates.


It was quite bizarre as at the same time (1.30pm) good news came out on the American economy - unemployment claims had been expected to be at 394,000 but had gone down to 368,000.  Usually this would give the dollar strength at the expense of the Euro but Trichet stole the dollar's thunder and my trade leapt through the roof, within 5 minutes handing me my target 3.25%.


But this is not the way to trade.  I have slapped my wrists and spoken to myself firmly.  I had lost the plot and that is not the way on which to base one's future career.


Today I've checked things out and nothing is in the right place for me to trade.  Also, it's Non Farm Pay Roll day (US employment data) which almost always means an odd, unpredictable and often boring morning as people hold onto their positions ahead of the release at 1.30pm.  At 1.30pm everyone piles in on the back of the news and things go crazy.  We're not supposed to trade on this news but I know a lot of worse ass traders than myself who love to trade at this time as it's high octane.


As for myself, I am hanging my head in shame for now on yesterday's shannanigans. Faceless Bureaucrat is kicking back in and I'm off to do a day's work for the NHS, whilst it lasts....


PS That bloomin Swissy Yen pair has only gone and shot up this morning now, hasn't it??!

Fair Trade

Bad Assed Trader:  Having traded and blogged from our place in France this morning I'm now back at my English Trading Desk - doesn't sound exotic but instead rather briefcase-and-bowler-hattish - and am obliged to report progress on my earlier trade with the Aussie dollar.

In case I didn't mention it previously, this Aussie dollar trade was my 11th - yes 11th - attempt at spotting and executing 30 perfect trades in a row, which is my current mission. This does not mean it was my 11th perfect trade.  It means I have tried 11 times to do 30 perfect trades and had to stop each time I made an error and am now on my 11th run.  I have probably taken over 60 trades in the quest for the string of 30 perfect trades.  Sometimes I've only managed a run of 5 or 3 (and on a couple of occasions a solitary trade) before I make an error and have to start again. Such is the life of a newbie trader.  I am learning the art of discipline and it's a tough nut to crack - tougher than you'd imagine (well certainly tougher than I imagined).

I have been working my way through the alphabet with each attempt at 30 perfect trades and am now on K.  Aussie (AUD USD) was the first K trade and I took another this morning on the Euro (EUR USD) so this was 2K.  I was taking both long - so betting that these currencies would strengthen against the US dollar.

I am pleased to report that both my K trades met my rules so my K run is still running and I am ever hopeful that on this occasion I will make it to 30.   This is my most important objective achieved for the day - more important than the actual outcome of the trades as this can be relatively random.

However, I am also pleased to report that I ended up 1% in profit following the two trades.  Neither went wildly up, they were a bit damp squibbish, but I managed to squeeze 0.75% out of the Aussie - a fair trade I felt - and 0.25% out of the Euro.  At one point I could have closed the deals 2.5% up but I had set targets for them both and like to let them run until it is clear they are not going anywhere by price action showing evidence of moving in the opposite direction.  That is when I closed the deals and I have the satisfaction of seeing subsequently that I came out at about the right time in that things did not really get much better for either currency pair.

So far this week then I'm 1% up which is nothing to shout about to be sure but is better than where I often am by Tuesday evening!

I plan to blog again in the next few days hopefully with positive progress on the K run and hopefully news about a possible secondment which could save Faceless Bureaucrat from the prospect of empty handed redundancy in July which is currently 95% certain unless she secures NHS work of some description.  With that level of probability I would be trading on that bet if it existed on my broker's platform but I guess I have insider knowledge given my close proximity to Faceless Bureaucrat.  She's itching to get out and tell all but I'm making her wait until things are clearer and in the meantime there's always something to share about the trading which is, of course, much more interesting. N'est-ce pas?

Riding the Aussie Wave

Bad Assed Trader:  This morning I blog from France.  Although technically speaking I'm on holiday, I was up at 6am French time (5am English time) all the same, to get on with the trading.  I didn't set the alarm, my brain just woke me up then - still excited about trading I suppose.

I'm not sure why I'm so alert when I was up until gone midnight last night playing cards (Canasta) with friends after sharing a fabulous duck dinner with plenty of red wine - much of which was Spanish although we concede that there is much good red wine from down the road in this part of France (south west).

So here I am at my trading desk in France - sounds exotic - and currently attempting to ride an Aussie wave.  Although at present I confess it's more of a ripple.

I've been working hard to maintain the relaxed mindset which seemed to do me well last week and have a new mantra to run through every morning which includes "It does not matter one jot if I do not place a trade today". I followed this mantra assiduously yesterday and was proud with myself for not actually placing a trade as my perfect set up did not occur.  This was the right thing to do and will hopefully help to reinforce the attitude that staying out is a positive position to take.

Also included on my mantra is that I would rather place 5 trades a week and win 4 than place 10 and lose 6.  I think this sums up neatly the reason one has to really be very fussy when trading (something it's taken me some time to finesse) and if in doubt, stay out.

This morning the only set up that occurred for me has been on the Aussie dollar (AUD USD).  It's one of my "sniper" trades but also a pivot which I hope makes it more potent.  I took the trade using the 5 minute chart as price crossed the pivot point on its way back up following a retracement to the 50 moving average on the hourly chart.  Essentially this means that the price is generally going up (on the daily and four hourly charts this looks to be the case) but has had what I hope will be a temporary dip as  is normal with price as it bounces off moving average lines.

The pivot point is a line that the charting software calculates and sits at the same value all day (unlike the moving averages which, er, move) and it is said that this point acts as a magnet to price action, drawing it in and then repelling it.

So far it has drawn the Aussie dollar price to it from below but I'm still waiting for the repelling bit upwards.  It really should have repelled it by now as I took the trade about half an hour ago but unfortunately is just sitting there on top of it and the 50 moving average, just bobbling along (I don't think that's a term many traders use but you get the drift I'm sure).

Some traders kill their trade if price hasn't done what they expect after four bars (in this case four 5 minute bars) but I'm not one of them.  I set my stop loss and my target and let the trade move whichever way in its own time.  Life is exciting enough when you're trading on 5 minute charts when your average trade is over with in about an hour without having to add another decision about price action when you're actually in the trade.  Once you're in it is more difficult to stay objective and your personality (optimistic, pessimistic...) starts influencing your actions more.

Well I'll post the blog and let you know next time whether the fuffling (another term I don't find many other traders using) converted to decisive momentum movement (terms other traders do very much like to use) or whether the usually strong, macho Aussie flumped out on me.

By the way, Faceless Bureaucrat has asked me to share with you that she thinks good news is in the offing on the job front and a 6 month secondment might be setting itself up a little more effectively than this Aussie dollar is.  More soon.....