Truth About FX

Often times, sticking with a tested game plan is the best way to win. In this episode of Truth About FX, Walter talks about the possible dangers of drastically changing your trading system vs. mastering the system that you have right now and try to look at the big picture.

Hugh has a great tip on gaining confidence and control in your trading.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP8_What_are_the_Dangers_of_System_Hopping.mp3

Download (Duration: 04:05/ 4.67 MB)

In This Episode:

00:53 – focus on one thing

01:33 – bump in the road

02:28 – wanting to win

03:04 – biggest danger

Tweetables:

There’s a certain power in specializing at using a particular trading system [Click To Tweet].

Are you really gaining with your trading or are you just spinning your wheels with your system? [Click To Tweet].

System hopping is the fastest way to losing for most new traders. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.,

Hugh: Alright, Walter, today’s question is: my number one challenge was, and still, is trading system hopping. I can’t stick to one trading system before I finish and look at another one. Am I doomed or what?

Walter: Well, other than suggesting that you read some books about some of the most famous — and there’s some very famous people who have a huge pile of money, and the reason they have this huge pile of money is because they focus on one thing.

You can find private funds that focus on one thing. There’s power in just getting really good at doing one thing. I’m not saying that you should only trade one system or one currency pair, but in the beginning you certainly should.

You should choose. I’m either going to be a specialist in the GBP or the EUR or whatever it may be or I’m going to be a specialist in this trading system and trade that over multiple market.

The real issue here is, probably — and this is what happens in most cases. This is what happened to me. It probably happened to you. I’m guessing, Hugh, when you start out with the system and you get really excited it goes really well. Hits a bump in the road, you get a little bit of a drawdown. Then, you find yourself wondering and looking for something that’s better.

That’s really the danger; that you’re sort of Jack of All Trades, Master of None. You get to this point where, in my case, to look back and say: “well, it’s been three and a half to four years. Where am I really going with my trading? I’m not really going anywhere, just spinning my wheels.”

The reason why is that I’m looking for a new system when my current system, which is probably pretty good way to trade,

Confidence is a key factor in forex trading. In this episode of Truth About FX, Walter talks about gaining confidence in trading, reward and risk ratio, the danger of getting off-track from your system, and how to cope with a losing streak.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP7_How_do_I_gain_Confidence_in_Trading.mp3

Download (Duration: 04:33/ 5.22 MB)

In This Episode:

01:05 – minimum profits

01:44 – drawdown

02:12 – get off track

03:34 – simply bad luck

04:04 – let go

Tweetables:

Try to have a little bit of long haul perspective.  [Click To Tweet].

Use statistics to construct and predict your likely drawdown.  [Click To Tweet].

Sometimes, having a loser is just simply bad luck. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hey, Walter. How’s it going?

Walter: Good, Hugh. How are you doing today?

Hugh: I’m pretty good. Today’s question is: how do I get confidence? I feel like every trade is a loser and I miss out on all the big winners and I’ve had it before. What do you say to that?

Walter: I’ve definitely had that feeling many, many times. The way that I approach it is, I’m trying to get a little bit of perspective. For example, one way to look at it is to say, “does the casino get upset that someone took five million out of the casino today and won five million”. The answer is no, because the casino is really looking over the long haul.

Even if they have a day when they make very minimal profits or even a loss, they know over the long haul, they’re going to make money.

There’s a couple of tricks that you can do with your money. One is to take a look at your systems. Maybe if you haven’t traded live, you’re trading in forex tester or doing some backtesting and you have your win rate, your average winner, your average loser. With that information right there, what you can do is you can basically construct what you’re future is likely to look like.

In other words, how likely would that win rate and that reward/risk ratio — which is basically what you get when you get your average winner, average loser — you’re able to know what kind of drawdown you should expect.

You can calculate whether you have a 70% chance over the 30%  drawdown or 5% chance over 30% drawdown. Given all of those parameters, those three things, that’s the other way to do it. As you can say “I know, I have 75% chance of having a 30% drawdown given my systems parameters, why should I be so surprised it happened?”

To me, the real concern is that you get off-track by changing your system because you’ve had a few losers in a row. That’s the real danger because then you’d start trading something that you didn’t test in the first place.

To me,

Risk management is one of the key factors any forex trader should take with careful consideration. In this episode of Truth About FX, Walter discusses an efficient way to set your lot sizes even if your account is not yet big enough to trade the weekly charts.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP6_Do_I_need_a_Broker.mp3

Download (Duration: 04:54/ 5.60 MB)

In This Episode:

00:49 – find a broker

01:32 – risking precisely

02:47 – setting the same risks

04:08 – mathematical sense

Tweetables:

Find a broker who will allow you to set your lot sizes [Click To Tweet].

How to trade the weekly charts with a smaller account [Click To Tweet].

Choose a precise amount of risk in every trade that you make for your system. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hey, Walter. Today’s question is: I cannot afford to trade the weekly charts. What should I do? And the underlying question is: my account is not big enough so I can’t afford big stop loss. What do you say to that?

Walter: I appreciate the question, Hugh. This is really a common one. I hear this one a lot as traders who trades daily in the weekly charts. I hear this a lot and my recommendation always is to find a broker, like Oanda, who will allow you to set your lot sizes. It’s not just because it allows you to trade a thousand dollar account with a five hundred and fifty pips stop loss and still risk one percent of your account.

Not just that. That’s obviously the thing that you get by trading for two cents a pip or whatever it is. The other thing is that, over the long haul… I can post this video under the show notes for today’s session. But, basically, what you want to remember is that — and it’s hard to see this — over the long haul, if you were risking precisely the amount at risk that you want, that might be; 1%, 2%, whatever it is for your system. If you risk precisely that amount rather than having to choose — for example, if you have an account where you can’t set your lot sizes — you have to choose: am I gonna risk 2.5% on this trade or am I gonna risk 1.7%. You know what I mean? You can’t risk exactly two.

Hugh: Yeah.

Walter: Well, what happens over the long haul when you’re able to precisely risk 2% — and you’ll see this on the video — you actually will multiply your account by many, many, many percent over the years because you were able to take those 2% risk trades rather than the 1.7%.

If you think about it, it make sense because some of those trades that you’re risking 1.7% — because you can’t go over 2% and risk 2.5 so you have to choose the lower amount — some of those can be winners and those winners aren’t going to be as big as they would have been if you’re riski...

Books help us understand who we are and how we are to behave. In this episode of Truth About FX, Walter shares his top 3 favorites and how these books helped him in finding success in his career as a professional forex trader.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP5_Top_3_Trading_books.mp3

Download (Duration: 02:22/ 2.71 MB)

In This Episode:

00:33 – top three trading books

01:16 – finding success

01:51 – my turning point

Tweetables:

Let your mistakes drive you to success. [Click To Tweet].

It is possible to turn the corner  [Click To Tweet].

It’s a great feeling knowing that profitable trading is possible for you. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly  place to be.  That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hey Walter. Today’s question is: beside your book, what are the top three trading books that new traders should be reading right now?

Walter: Wow, that’s a great one. I would say — and I’ll list these on the show notes for this one. For me, the top books that I got a lot out of were: Alexander Elder’s “Come Into My Trading Room” and there’s the book called “Reminiscences of a Stock Operator” by Edwin Lafévre which was really just Jesse Livermore’s biography. That’s a really good book.

Then definitely  the “Market Wizards” book because in the “Market Wizards” book, the author Jack Schwager does a really good job of pulling out the lesson from each trader and how each trader took a totally different approach to finding success. More than that, almost without exceptions every trader in there, in that book, made a fatal mistake and they learned from their mistakes. And that mistake drove them to success.

New traders who are feeling like it’s not possible to make consistent profits, they can take a lot from that. Knowing that even the most successful traders basically leverage off mistakes early in their careers. I think that’s something. That’s really a good lesson for people to trade.

I remember when I read those books that the “Market Wizards” and  “The New Market Wizards” books that was my turning point because I knew these guys made it and they still made the same mistakes that I’m making right now.

I knew when I was reading those books that it was possible to turn the corner. It’s just really a good feeling knowing that it was possible. For me, that made a big difference. For my trajectory, I guess you should say. Awesome, yeah.

Hugh: Those were my favorite books too so I guess I’ll agree on that.

Walter: Great.

Hugh: Thanks Walter.

Walter: See you Hugh, bye.

Hugh: Bye.

Come Into My Trading Room by Dr. Alexander Elder

In this episode of the Truth about FX, Walter talks about trading pairs, following trend ratios and observing the market, relying on things that you are familiar with, and focusing on what you really want as a trader and using that setup.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP4_Which_Currency_Pair_To_Trade.mp3

Download (Duration: 03:25 / 3.92 MB)

In This Episode:

00:25 – What’s the best pair to trade?

01:13 – Trading against the crowd.

01:56 – What are you familiar with?

02:30 – Focus on what you want to do.

02:56 – Trading set up.

Tweetables:

Watch out for trading opportunities, you never know when they will appear [Click To Tweet].

What do you really want to do as a trader? [Click To Tweet].

Start with what you know [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly  place to be.  That’s why Hugh is here to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hey Walter. Today’s question is: What is the best pair to trade?

Walter: Wow! Hugh what a great question.

Hugh: I know it’s a little loaded.

Walter: Yeah, it’s a little loaded. Here’s the thing: what I would say is it’s going to depend.

There’s a couple of ways to look at this. One is, you can actually look at where are most of the traders on one side of the market rather than the other. Let me explain this, there’s a couple of ways to approach this.

One is, are all the traders – like 85% plus of the traders – going long a certain pair? Recently, two days ago, 85% of the market was buying a silver against the USD. More than 85%; 85.6% I’ll show you how to track this on the show notes. For this, you can click that link and see for yourself.

But what that means is, most of the retail traders were buying silver and I wanted to be short, okay? So that flags for me at the time to be short.

The reason why is because most retail traders aren’t making money. So if you get a huge majority going one direction, you want to get ready to go the other direction and be with the small group of traders making money.

That’s one way to answer that question. Just scan the market and see. Follow what the trade ratios are. Are most people short or are most people long?

Occasionally, this gets out of the whack, where you see 85 plus percent on one side or the other.

The other thing to say about this is: what are you familiar with?

I live in Australia so I know that just being around. I try not to watch the news and things like that. But you see, you know what’s going on in your home country. So if you live in Germany, you might want to trade the EUR right? The EUR/JPY, the EUR/USD something like that. If you live in Australia like I do, maybe it’s the AUD/USD. Maybe that’s your pair because you’re familiar with it.

Now,

Often times, when someone asks a trader “where are you trading?” and he or she answers “I’m into forex”, the most probable follow-up question would be: “why?” or “what’s in it?” In this episode of Truth About FX, Walter talks about the pros — and cons — of trading in the forex market, the temptation of trading around the clock, and counter-productivity.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP3_Why_the_forex_market.mp3

Download (Duration: 03:29 / 4.00 MB)

In This Episode:

00:56 – trading around the clock

01:46 – the only real advantage

02:44 – transaction cost

03:13 – counter-productivity

Tweetables:

Is the forex market “better” than the stock market? [Click To Tweet].

Forex traders pay very little to trade the markets. [Click To Tweet].

Spending too much time in the chart can be very tempting but it can also result to counter-productivity. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly  place to be.  That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Alright Walter, today’s question is: why is forex a better market to trade than other markets?

Walter: Well, that’s a good point. I’m not sure that is, to be honest with you.

Hugh: Okay, cool.

Walter: Here’s the thing – the pluses – about the forex is that it’s basically almost the 24 hour market. It’s like 20-22 hour market. You’ve got that inter-bank period when there’s nothing much going on but basically you can trade around the clock.

The bad news is, you can trade around the clock. The reason why that’s bad news as you know is that if you’ve got a job,  it’s really tempting to work your job for 10 hours then come home and trade for 5 hours. It can lead you to a life of sleep deprivation. You can get cranky if you’re losing money. It’s just not really a nice way to live.

I used to do that from the Pacific time zone. It was really tough because I was trying to watch the London market. If you do that from the west coast time zone, what happens is you’re up in the middle of the night and you sleep during the days. It’s just really a tough way to do it.

In some ways, the market with the distinct open and close is better because you can be there. You know when the volumes are going to come in.

To a lesser degree, you know that in forex you’ve got three opens. You’ve got the Asian, the European and the New York open. That’s kind of nice but the only real advantage I think you have as a forex trader is typically you’re going to get better leverage than you would if you were trading stocks or futures. Typically, you can trade around the clock and you know, you’re not stuck.

If you live and work in New York, it’ll be tough for you to trade in the New York Stock Exchange if you have a job because by the time your job is over,

A lot of traders are probably asking the same question when it comes to trading systems: why would someone share a system when he or she is already making a huge profit out of it? In this episode, Walter answers this question and how lifestyle and beliefs can affect a person’s decision in choosing the right system.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP2_Are_all_education_sites_a_scam.mp3

Download (Duration: 04:16 / 4.90 MB)

In This Episode:

01:01 – why sell a system that makes money

01:38 – finding the best system for you

02:52 – you make the money

03:30 – education to a trader

Tweetables:

The trader makes the money, not the system. [Click To Tweet].

Look for a system that fits your lifestyle and beliefs [Click To Tweet].

Self-discovery. The consistency of your profit depends on you. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be.  That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Today’s question is: are all education sites a scam? I guess the reason behind is that if somebody has a system that works and makes money consistently, then why teach it to somebody else?

Walter: Right. Yeah, that makes perfect sense. Here’s the subtext to this question – the thinking goes that the system makes the money and not the trader. That’s sort of assumed in this question when people ask why on earth would you sell a system when that system makes money? Why don’t you just trade it for yourself and be selfish and make all those profits for yourself? Sort of the old evil empire thing.

Here’s the thing and here’s the reality: the trader makes the money, not the system. In fact, there are very few traders that can take a system out of the box and just trade it as they’ve been taught by the system. Most traders have to tinker with it.

Like for example, Hugh, you have some system that you’ve pulled from other traders right? Now, my thinking is that some of these while you thought, ‘Yeah, that’s probably a pretty good system.’ You didn’t trade them. Now, my question to you would be: why didn’t you trade those systems?

Hugh: Okay. For example, I took this one course, the guy had maybe six systems in that course. All really good, all worked for him. For me, it came down to two systems. I threw away the rest because they were systems that don’t work with my personality.

The other system required too much baby-sitting. I’m not in front of the screens all the time so that was another reason. And then, that just left one system which I could put on and alert for. It worked with my personality. It was good and I’ve been trading that system ever since.

Walter: Yeah. So that’s exactly it. It’s all about the match between your lifestyle, what you believe about the markets and the system. Once you understand that,

Many traders wonder when it may be a good time to leave your job and trade full time. Walter outlines two important considerations for those thinking about making the jump.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP1_When_Can_I_Trade_Full_Time.mp3

Download (Duration: 02:21 / 2.70 MB)

In This Episode:

00:43 – how long before I am trading full time?

01:05 – does your system fit you?

02:14 – the right mindset

Tweetables:

Trade in a system that fits who you are. [Click To Tweet].

Your beliefs create your profit barriers. [Click To Tweet].

Right system + Correct mindset = Profitable Trading. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly  place to be.  That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About Effects Podcast.

Hugh: Hey Walter! How’s it going?

Walter: Good Hugh. How are you today?

Hugh: I’m pretty good. Alright, so the first question is, how long does it realistically take for people to trade full time?

Walter: Boy, that’s a great question. Obviously, it comes up a lot from people who are new to trading. I guess, the real thinking about it from my point of view is, how quickly can I get out of my job basically, right?

Hugh: Yeah.

Walter: To me, it’s going to depend based on whether or not you:

1) Have a system that fits your beliefs as a trader and what you believe about the markets. If you don’t have that, it’s going to take sometime to get there.

But more than that, it’s actually probably:

2) Your beliefs about making money.

That’s gonna do it for you.

In other words, if I believe that I’ve got to have a $50,000 account before I can start pulling in — 1, 2, 3 — $4,000 a month from my trading then that’s where I’m stuck, right?

Whereas: I know another trader, she lost all of the profits that she made on an account. She made profits and then lost all of them. Then from December to April, she tripled her account. For her, the real shift was her thinking -her mindset. So it’s really going to depend on two things the way I see it:

(1) Do you have a system that you’re comfortable with and does it fit your bias about the markets? If so, that’s half the battle. The major part of the battle after that is going to be;

(2) Setting your mindset up correctly so that you know that success is inevitable for you.

And it’s possible to pull profits out of the market and you don’t have these mindset blocks or psychological barriers that are stopping you. So that’s kinda the way that I see it anyway.

Hugh: Okay. Cool, great answer. Thanks