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.