What can happen playing the HIGH RISK game of foreign currency futures....!
 

A few days ago I ran into a FX futures trader, and I met with him again yesterday. In the world of finance, FX stands for "foreign exchange".... This guy trades in futures in overseas currencies, like trading between US dollars, Japanese yen, Mexican Pesos, the Euro, Australian dollars, and other currencies....

On the plus side, this is the sort of thing the well-known fund manager George Soros did (before his retirement), trading billions of dollars worth of overseas currencies, and making, and sometimes losing, billions of dollars for his fund....

It's also how Nick Leeson brought the world's first investment bank, Barings Bank, to bankruptcy, by losing them BILLIONS (if you've seen the movie, "Rogue Trader")....

It is a high risk game, with very big wins and losses.

The guy I know is named Willy.... He's originally from Switzerland, and has been trading FX futures (both professionally, and for himself) for 26 years.... It's interesting to peer into this very high risk area of making money.... I'll tell more about the details of FX Futures later.... first, here's a story Willy told me, which tells you about the risks involved!

Willy was a young man working in Switzerland in FX futures, and his wife was 7 months pregnant at the time. One day as a young trader, he started with $10,000 of his own money and turned it into $187,000 -- in ONE DAY! He felt on top of the world, he was ecstatic! He felt like he knew everything there was to know about trading FX Futures....

He decided that he wanted to show his wife what $187,000 looked like.

This being Switzerland, he went to the bank and withdrew the $187,000. He put it in an ugly brown paper bag, the kind you probably wouldn't even want to keep your lunch in. He did this so that others wouldn't think he was carrying anything valuable, just some disgusting uneaten sandwiches left over from lunch, so that no one would even want to touch it.

He took the train home, which was crowded. Willy was squashed between two people on a seat, partly crouched over the brown paper bag at his side so nobody could take it. He told me he didn't want to take a brief case handcuffed to his wrist, since that would be an INVITATION for someone to take it!

Willy got home, and in front of his wife he took the brown paper bag and poured out $187,000 in bills. He thought his wife was going to go into labor then and there, 2 months early....

The next day, he took the money back to the bank, and did some more trades.

That day, he ended up LOSING $100,000. So he had to go home and tell his wife....

He told his wife, "Honey, I made some BIG losses today...."

She said, "How big? Did we lose the house?"

"No," he said, "Not that bad.... But I lost $100,000...."

But now, many years later, Willy feels good about that loss, because you learn the MOST from your failures.... He learned the lesson of when to cut your losses in highly speculative trading like you find in FX Futures....

Sometimes, you have to go through some pain in order to learn something new.... Or the way he put it to me was more like (forgive the language), "Sometimes you need to be kicked in the balls, HARD, to learn...."

More on the details of FX Futures -- this VERY HIGH RISK opportunity -- later.... :)

Dien Rice

Dien, this is very interesting...
 

Dien,

Yes, please do continue to post on this subject. My husband and I are long a couple of Japanese yen futures contacts right now and we really want to learn more about FX futures trading.

It's not easy to find really good information. So, I am reading all your posts on this subject with great interest.

Looking at the Euro right now. Even after the intervention by the US and Bank of Japan recently, it hit a new low today around of around 83. Just checked the GLOBEX and saw that it is sitting at 84. Wonder how low it will go from here since the U.S. probably won't join in any more planned interventions to help prop it back up, at least not before the election.

Thank you for giving us any tips, info that you can pass on. Does this FX trader have any instructional information to sell?

Ever checked out www.yenman.com? We were just directed to that site by an acquaintance, but can't speak to it's validity yet.

Enjoying your posts on this fascinating subject.
Thanks!
Amber

> A few days ago I ran into a FX futures
> trader, and I met with him again yesterday.
> In the world of finance, FX stands for
> "foreign exchange".... This guy
> trades in futures in overseas currencies,
> like trading between US dollars, Japanese
> yen, Mexican Pesos, the Euro, Australian
> dollars, and other currencies....

> On the plus side, this is the sort of thing
> the well-known fund manager George Soros did
> (before his retirement), trading billions of
> dollars worth of overseas currencies, and
> making, and sometimes losing, billions of
> dollars for his fund....

> It's also how Nick Leeson brought the
> world's first investment bank, Barings Bank,
> to bankruptcy, by losing them BILLIONS (if
> you've seen the movie, "Rogue
> Trader")....

> It is a high risk game, with very big wins
> and losses.

> The guy I know is named Willy.... He's
> originally from Switzerland, and has been
> trading FX futures (both professionally, and
> for himself) for 26 years.... It's
> interesting to peer into this very high risk
> area of making money.... I'll tell more
> about the details of FX Futures later....
> first, here's a story Willy told me, which
> tells you about the risks involved!

> Willy was a young man working in Switzerland
> in FX futures, and his wife was 7 months
> pregnant at the time. One day as a young
> trader, he started with $10,000 of his own
> money and turned it into $187,000 -- in ONE
> DAY! He felt on top of the world, he was
> ecstatic! He felt like he knew everything
> there was to know about trading FX
> Futures....

> He decided that he wanted to show his wife
> what $187,000 looked like.

> This being Switzerland, he went to the bank
> and withdrew the $187,000. He put it in an
> ugly brown paper bag, the kind you probably
> wouldn't even want to keep your lunch in. He
> did this so that others wouldn't think he
> was carrying anything valuable, just some
> disgusting uneaten sandwiches left over from
> lunch, so that no one would even want to
> touch it.

> He took the train home, which was crowded.
> Willy was squashed between two people on a
> seat, partly crouched over the brown paper
> bag at his side so nobody could take it. He
> told me he didn't want to take a brief case
> handcuffed to his wrist, since that would be
> an INVITATION for someone to take it!

> Willy got home, and in front of his wife he
> took the brown paper bag and poured out
> $187,000 in bills. He thought his wife was
> going to go into labor then and there, 2
> months early....

> The next day, he took the money back to the
> bank, and did some more trades.

> That day, he ended up LOSING $100,000. So he
> had to go home and tell his wife....

> He told his wife, "Honey, I made some
> BIG losses today...."

> She said, "How big? Did we lose the
> house?"

> "No," he said, "Not that
> bad.... But I lost $100,000...."

> But now, many years later, Willy feels good
> about that loss, because you learn the MOST
> from your failures.... He learned the lesson
> of when to cut your losses in highly
> speculative trading like you find in FX
> Futures....

> Sometimes, you have to go through some pain
> in order to learn something new.... Or the
> way he put it to me was more like (forgive
> the language), "Sometimes you need to
> be kicked in the balls, HARD, to
> learn...."

> More on the details of FX Futures -- this
> VERY HIGH RISK opportunity -- later.... :)

> Dien Rice

Eventually trading will be one of my income streams [DNO]
 

dno

Dien, now you've really got me interested
 

Dien, I don't know a lot about FX futures but I'd really like to learn more. My husband and I are day traders, but we trade LEAPS (long term equity anticipation securities). For those not used to trading stock options, "I" think of a Leap as an option that buys me time or my insurance policy because of the time decay factor in buying stock options.

I can identify 100% with your friend's story about losing the $100K and learning from one's mistakes. We went through a similar situation two years ago when we started buying options. We were real green, and experienced pure beginners' luck when we bought our first contract in a very volatile stock, and were naieve enough to believe we could continue indefinitely to make in excess of 50% gains flipping options every few days. We were in heaven.

Then of course, we had a bear market for several months this year and we're biting our nails. Fortunately, with LEAPS, many expire in 02 and 03 but we do have some 01 options that may never be profitable by Jan.01.

So, we've been through a real roller coaster of ups and downs and have learnt a lot. But, often when anything comes easy for us, we become greedy. Nothing like learning from one's mistakes.

I am serious about knowing more about the FX futures market. It opened today at something like 90+ points, one of the highest days on record. Have no idea how long this momentum will be sustainable.

Regards,

Elizabeth

Thanks Amber and Boyd.... I'm writing an article
 

Hi Amber and Boyd,

Thanks for your expressions of interest! I found all this quite fascinating.... Amber, from the sounds of it you may know more than I do, since I've only started to discover this quite recently....

However, for anyone thinking of trading foreign exchange futures, remember it is HIGH RISK....

I'm writing an article explaining how it works, which I'll be posting (I'm hoping to make it easy to understand if I can)....

Dien Rice

Re: Dien, now you've really got me interested
 

Thanks Elizabeth for your encouragement!

I'll try to write a nice article explaining what I learned about how it works.... :)

It does seem quite exciting.... The main excitement comes from the very small margins you need (around 3%-5%)....

That means you can have a VERY high amount of leverage! I'll write more about it in the post I'm writing... :)

What that means in normal language is that with just $3,000, you could be buying and selling FX futures contracts worth up to $100,000....

It's this huge leverage which leads to the VERY large potential gains or losses....

Dien Rice

Regarding "paper trading"
 

Hi,

I hope your article won't mention "paper trading" as a way of testing oneself as a trader or as a way of testing a trading system.

I can make simulated millions paper trading, but I have yet to make a profit as a real trader of some years experience and a track record that consists of at least 1500 real money S&P 500 futures trades.

The only relation paper trading has to real trading is a misleading one.

Best,

-Boyd

Re: Regarding "paper trading"
 

Boyd, I have to agree and disagree with you on the 'paper trading issue.'

Personally, I find paper trading boring, but it has been a good learning experience for one reason, especially if you subscribe to a service that gives you real time quotes and you can track a stock.

We have a 'watch list' of those stocks/options that we'd like to own but are perhaps slow movers or are not 'strong buys' right now. But financially, we know they are strong, and just not performing well right now but we 'feel'they'll come around some time.

In hindsight, of course, we should have bought them when they were at their lows, because they have all turned out to be big gainers.

But getting back to the paper trading issue, I like it because it gives me a good idea of how the stock is performing over e.g. a 6-12 month period. Some stocks go into a long consolidation period, and as an amateur trader, often one will panic and sell if a stock is trading sideways or starts to trade down. But if you get to know a stock, you'll just be patient, wait for the volume to build and momentum for it to take off. You seem to be an experienced trader so you'll know that patience is key to gettting in and out at the right time.

I have a very amusing story to tell about 'getting to know your stocks.' When I first started trading, I wanted to have control over my own portfolio, but didn't have enough disposable cash to make it worth my time. So I and my best friend decided to open a joint account and together we started with $6,000, and we also requested that it be set up as a margin account. So, after the a/c was set up, I went online and noticed that the 'cash available' read $23,000. So, not knowing much about how much margin we were eligible for, we thought, great, we could have a field day with $23K.

So, I bought shares in a stock totalling $6K But prior to this, we had also spent $6K. Then I got THE MARGIN CALL. Merciless people that are given this very unpleasantjob. I had to come up with $5K or sell the shares because they had dropped. Naturally, I could not understand what had happened as my cash balance was showing $23K.

What had happened is, there was a systems error. And not giving any thought to how much margin we were eligible for, we just went on a spending spree. Duh!!

So now we were both very nervous as we didn't have $5K readily available, and neither of us wanted to tell our spouses about the incident, as we had promised NEVER to buy on margin. But we figured, we could outsmart the system.

Anyway, by the grace of God, the following morning, the stock gapped up $12.00, giving us a very nice profit and covering our margin call.

I can't tell you how much I prayed. In fact, that day, I never ate a meal and don't recall sleeping that night.

Since that incident, I've watched this stock's trading pattern, and know it very well. Had I done some paper trading before, I would have known that it was not unusual for this stock to trade down for several days, and suddenly gap up after 2 -3 weeks.

So, paper trading can be useful when you want to learn about a stock. And of course, for the most part, the market makers do control this pattern.

Regards,

Eliz.

Eliz.

Re: What can happen playing the HIGH RISK game of foreign currency futures....!
 

Hi Dien

I've been lurking here for awhile now; I must
commend you on your fine board. I find all
the posts highly informative..was surprised
to log on this morning and find that you are
doing an article on investing..something of
which I have a keen interest.

I currently trade options primarily because
of the leverage and supposedly limited risk.

may I kindly offer an opinion? one that hopefully
will save those considering becoming day-traders
from making mistakes that
could cause them have many sleepless nights.

many traders rely soley on indicators, be it
technical analysis, astronomy, elliott wave
etc..these tools work well except when they don't!!
it's when they don't work that the
biggest losses occur..

most of the popular indicators are widely known,
the techniques are used in software that will
automatically trigger a buy/sell order for you..
all you have to do is follow through..
again these too work well except when they don't!!

why is this? I have a theory and of course, I
could be wrong..but anyway here goes..

Our trader is trying to make money by taking money
from professionals who in turn are trying to take
his/her money. The professional has massive
tools by which he can measure every move made
against him..he also has all the technical tools
that the trader uses. He has massive funds at his
disposal to squash you if he so chooses.

Technology makes it a lot easier for one to become
a trader, but it also puts trader at a disadvantage in that
now the professionals have an immediate picture
of every traders position..ie
they know where all the stops are..you might on
occasion develop a severe case of whiplash from
watching him take all the stops out..oops you lose

I would compare being a daytrader to being in a
game of poker where another player knows the hands
of everyone at the table..

A good poker player(aka professional) tries to
get ALL the money on the table before he makes
his play..thus sometimes he'll let you win a hand.

then why be a trader, you wonder..

the rewards of being on the RIGHT side of a trade
can be huge,--imagine being able to profit 187,000
from a 10,000 investment in a few hrs as you
related about your friend trading futures.

unbelievable but quite possible.. On the other
hand I've read where close to 90% of daytraders
lose their socks within 30 days. having 100,000
leverage for as little as 3,000 is pretty heady
stuff.. just keep in mind that you could just as
easily lose 100,000.

Let's hope that we can all stay in that 10% that
still have our heads above water. I think the
only way however, is to remain vigilant & always
stay on top of one's game..you must stay abreast
of everything that's happening around you in
order to maintain an edge, always be aware of the
other players at the table. and lastly you gotta
know when to hold em and know when to fold em..

good trading

Carol

I've been trading Futures since 1995
 

It's a tremendously exciting business to be involved in. Actually, when I first started.... I opened my margin account with a measly 2,500. Today, I'm doing extremely well.

I don't touch the financials. They're too radical for me. I lost money with the Canadian dollar a few years back, and that was enough for me. These days I trade mainly the grains. Right now, I have call options on Cocoa May 2001 and Canola.

Options are a much safer way of trading futures. Especially when you don't have enough cash to re-enter the market after you're "stopped out."

I realize that this isn't a financial discussion board and the terms I'm using may be totally foreign to some or most. To simplify it; suppose you wanted to purchase a piece of property TODAY, because you anticipate its value going up tomorrow.

You're purchasing something at TODAYS PRICES hoping you'll be able to sell it at a profit TOMORROW.

Let's say you plunk down $20,000 on a piece of property that's worth $100,000. In essence, $20,000 allows you to control $100,000 of a particular commodity.

Trading with options reduces the overall risk greatly. They are cheaper to buy and have the same dynamic potential as a futures contract does. The most you can lose with options is the cost of the option itself.

Not so with futures. With a futures contract, things can get ugly fast.

From experience I'll tell you - papertrade first. Don't jump in with real money. Learn the market, learn how to read charts, learn how to work with a broker.

Be sure to ask LOTS of questions.

I love the commodities market! It's exciting, fast-paced and.... with the right approach, you won't have to worry about losing your shirt.

Jim G.

My knowledge about trading is apparently rather narrow-band
 

Hi,

I stand by my earlier message, but after reading Elizabeth's well-reasoned article I now realize that what I wrote may only be true when applied to the kind of trading I did: daytrading the stock index futures.

Not bragging, but I'm an expert chart reader, using the techniques of Joe Ross and Linda B. Raschke.

best,

-Boyd

The most reliable signal I've ever seen
 

Hi,

You wrote:
> many traders rely soley on indicators, be it
> technical analysis, astronomy, elliott wave
> etc..these tools work well except when they
> don't!!

When a usually reliable signal doesn't work, it's a sign that something has changed in the markets, and that it's a pretty big change.

The best way I've ever seen to trade is to paper-trade, and watch for perfect signals that totally don't work. Then watch the chart and take the next setup, applying every chart reading technique you know.

Anyone want to write a book with me about this idea?

best,

-Boyd

Here are more details on how FX Futures work....
 

Trading foreign exchange futures can be very exciting, but remember it is also VERY HIGH RISK....

Here's how it works....

First, what are FUTURES?

Futures refers to buying and selling items at a fixed price in the FUTURE.... Two types of people trade in futures - hedgers, and speculators....

First, the HEDGERS.... These are those who use futures as a protection in their business....

For example, a wheat farmer might be spending the money to produce wheat NOW, but he's worried that when the time comes to sell the wheat, its price will drop ....

In order to protect himself against that possibility, he might take out a CONTRACT to sell the wheat in the future, but at today's price. That way, if the price drops in the future, he has a guaranteed profit margin....

However, if the price of wheat goes up, then he has to PAY the shortfall on the futures contract, so while he still makes a profit, he makes less than what he otherwise would....

However, the farmer reduces his risk, in that he is still guaranteed of locking in a profit either way....

A SPECULATOR does the opposite, and takes on more risk. This is someone who, like the farmer, may take a contract to buy or sell some commodity in the future at a fixed price. Then, if the price goes the way he thinks, he makes money, but if it goes the opposite way, he loses money....

But the key is, all it is is a contract in the future, at a fixed future price, between a price on one hand, and some sort of product on the other hand....

FX (foreign exchange) Futures, or currency futures, works exactly the same way. The only difference is that instead of fixing the price of wheat, you'd be fixing the exchange rate between two currencies (like between the US dollar and the Japanese yen, for example).

If the price goes the way you think it will, you make money. If it goes the other way, you lose money.

Because it is just a contract, you can spend very little money to do this. The company which presented the seminar I attended - Tricom ( www.tricom.com.au ) said you only need a 3% margin. That means, to have a contract to buy or sell $1 million in FX futures only requires $30,000 !

Or, in smaller terms, with just $3,000, you can buy or sell FX futures for $100,000.

Here's how it works to make (or lose) money....

Let's say I believe the Mexican peso will go down compared to the US dollar....

Then I might take a contract to sell 1 million Mexican pesos for the current rate, which (let's say) is 10 US cents per peso, but 6 months in the future.... (That comes to a $100,000 contract.... )

Now, let's say that the exchange rate changes so that 1 Mexican peso is now only worth 9 cents in US currency....

Although the current rate is only 9 cents per peso, I have a fixed contract to sell them at 10 cents per peso. That means, I can buy Mexican pesos for 9 cents each on the open market, and sell them for 10 cents each.

My contract is now worth some money, since I could make a direct profit of 1 cent per peso. It sounds small, but with this 1 million peso contract, I could directly make $10,000 just from my contract.

However, let's say that the peso instead goes to 11 cents per peso. Now, I lose money, because I'm forced (by the contract) to buy pesos on the open market for 11 cents each, and sell them for 10 cents each. That means I lose 1 cent per peso, or I lose $10,000.

Now, here's how so much money is made.... For a $100,000 contract, you only need $3,000 or so. But, as we saw, just a 10% change in price (from 10 cents to 9 cents per peso), means that $3,000 could become worth $10,000 - or more than a 300% win or loss. You can MAKE, and also LOSE, a lot of money.

That's the essence of how futures works....

In practice, you generally don't make the contracts, but other people do, and these contracts are bought and sold.

And you have to keep your 3% margin, which means that if your $100,000 contract becomes worth less money, you would have to put in more money so that you always have at least the minimum 3% of the worth of the contract.

So if you don't keep that 3% margin, your broker will automatically sell the contract. That means you wouldn't lose more money than you put in - however, you could lose it all, or make some great gains.

It is fast-paced, high-stakes, high risk speculation.

Currency futures is also a 24-hour thing - currencies are being traded for 24 hours a day around the world, so the market never closes (except for about a day on the weekends).

The currency market is the biggest market in the world, outstripping the share market in its sheer size.

I wouldn't go into currency futures (or any other kind of futures) without a good advisor at the absolute minimum!

And at the seminar I attended, they recommended putting NO MORE than 10% of your assets into FX futures, because of the high risk involved....

Dien Rice

Day trading vs. long term investing....
 

Hi Carol,

Yes, I agree it is easy to lose a lot in the market if you're not careful....

I have a good friend, we have a kind of weekly "ritual".... every week we meet in a kebab place, and over dinner we talk about our mutual interest in shares, business, academia, physics (he's also a physicist too)....

We are both stock market investors, but our styles are opposites. I'm much more conservative, trying to follow a "Buffett"-style approach (I look for long term growth stocks)....

My friend's a day-trader. I used to dismiss day-trading, but now I think there may be some skill in doing it....

I thought I'd try day-trading once. I bought a stock (One-Tel, listed on the ASX, the Australian Stock Exchange) at $1.12 per share, on my friend's recommendation. A few days later, it started dropping, and I started to worry. I just felt really uncomfortable about it, so I sold it a few days afterwards at $1.08 per share (so I lost about 3.5 %)....

But within about 2 weeks, One-Tel had dropped to around 80 cents! Well....

That's my one experience with trying a day-trading approach.... :) I think it's generally not for me, though it may be for others.... :)

As for FX Futures, I'll probably go into it with some of my money, but only with a good advisor who I trust, and who has good contacts so that s/he has a feel for the "pulse" regarding what's going on in the world regarding currencies....!

But I wouldn't do anything high risk (like futures of any kind, for example) unless I felt willing to possibly lose the money I put into it, since that could happen!

Great message, thanks Carol... :)

Dien Rice

Re: I've been trading Futures since 1995
 

Jim, I couldn't agree with you more on

> Options are a much safer way of trading
> futures. Especially when you don't have
> enough cash to re-enter the market after
> you're "stopped out."

I've always wanted to learn more about options trading on commodities. I trade stock options so understand how options work. But because my discount broker doesn't handle commodities, I never bothered finding one that does. Also, I don't think many DISCOUNT brokers handle commodities, certainly not in Canada?? I'll have to ask around.

Can you refer me to some site where I can learn more? I guess you subscribe to a newsletter or news service? And where do you get the symbols for the commodities? Is it the CBOE? Perhaps we can chat offline on this. I'd be interested in learning more.

Thanks.

Eliz.

Boyd, now we know how you earn a living
 

I always knew the Trick Report was not your only business. (smiles) And now that I know you're an expert at charting, I'll keep this in mind when I've got questions on the subejct matter.

I wish there was a forum where I could share some of my successes and frustrations on stock options, futures, stock indexes, etc.

Boyd, any chance you'd like to start one with others who might be interested. It's such a fascinating topic when you get into it.

We subscribe to The Option Investor Newsletter. There are several options groups in the US, Canada and I 'think' other countries, that meet monthly to discuss their trading. The group that meets in Toronto meet every third Saturday of every month, but there is no real structure and I really don't have the time to give up my Saturday afternoons to meet. So, I've been suggesting a forum for some time, but noone wants to get it started.

It appears there is a lot of interest here. Think about it.

Eliz.

Why paper trading might not work... (here's my guess)....
 

Boyd, those are interesting thoughts regarding paper-trading....

> I hope your article won't mention
> "paper trading" as a way of
> testing oneself as a trader or as a way of
> testing a trading system.

> I can make simulated millions paper trading,
> but I have yet to make a profit as a real
> trader of some years experience and a track
> record that consists of at least 1500 real
> money S&P 500 futures trades.

> The only relation paper trading has to real
> trading is a misleading one.

For the record, I've never done "paper trading" (only trading for real).... But I'm not a day-trader really, I'm more of a growth investor....

Anyhow, why would something work with paper-trading, but not with real money? Here's my guess -- EMOTION.

With paper-trading, there's no emotion there.... What you do won't affect your life positively or negatively....

But with real money, suddenly it's emotional. You're talking about what you're doing affecting your life.... Possibly big gains or losses.... Greed and fear come much more into play, and these emotions can affect our decisions and clarity of thought....

I think it's important to be unemotional, and completely logical, when it comes to stock market investment. At least that's my approach.... :)

When you can make it less emotional, and more logical, I think your chance of succeeding in the stock market is much better....

Well, that's my guess at an answer, for what it's worth!

Dien Rice

Trader's Syndrome
 

Hi,

I agree, when you're paper trading and you paper trade three losses in a row you don't then do what you'd do if you'd taken three real-money losses in a row. The paper trader just keeps paper trading his system, and eventually the wins outweigh the losses. The real trader (in some cases) gets emotionally mind-blown and stops taking signals right before the wins start happening.

Another trader and I invented and described a concept called "Trader's Syndrome" that relates to this. I wrote an hilarious piece about Trader's Syndrome on Gordon's ABC board some years ago, which Amber and others may remember.

Here's Trader's Syndrome (this has happened to me more times than I care to remember). The real trader (and this may only apply to daytraders) sits down at her/his desk, turns on all the data feeds, readies the phone, and starts looking for setups. A signal happens, but the trader emotionally and psychologically is unable to phone in the trading order; remember, taking a trade may mean taking an extraordinarily painful real-money loss. She/he misses the trade. Then another signal happens. Again the trader for whatever reason is blocked from calling in the order. By this time the trader is mad at herself/himself for missing the two signals, which, if she/he'd taken them, would have been big wins. Another signal happens, and this time the trader says "I will take this signal!" She/he phones in the order, and "Oh crud!" this particular trade turns into a big loss. Plus, the trader realizes, too late, that the signal she/he took was really just a marginal one, and that she/he took it primarily to offset her/his failure to take the two earlier excellent signals. At this point, the trader is in a bad way: she/he's taken a big real-money loss, and emotionally and psychologically she/he's a wreck. She/he doesn't have the Mr. Spock-like stance that a trader needs. In this state of mind, can she/he be expected to see and feel the almost three-dimensional price action for what it's telling her?

Contrast this real trader, who is suffering from a typical case of Trader's Syndrome, to the paper trader. The paper trader, with his Mr. Spock-like paper-trading attitude, took all three signals, and with two wins and one loss is doing fine.

To succeed as a trader, and especially to succeed as a daytrader, you have to make real trading just like paper trading.

And that's the truth.

Best,

-Boyd

> Boyd, those are interesting thoughts
> regarding paper-trading....

> For the record, I've never done "paper
> trading" (only trading for real)....
> But I'm not a day-trader really, I'm more of
> a growth investor....

> Anyhow, why would something work with
> paper-trading, but not with real money?
> Here's my guess -- EMOTION.

> With paper-trading, there's no emotion
> there.... What you do won't affect your life
> positively or negatively....

> But with real money, suddenly it's
> emotional. You're talking about what you're
> doing affecting your life.... Possibly big
> gains or losses.... Greed and fear come much
> more into play, and these emotions can
> affect our decisions and clarity of
> thought....

> I think it's important to be unemotional,
> and completely logical, when it comes to
> stock market investment. At least that's my
> approach.... :)

> When you can make it less emotional, and
> more logical, I think your chance of
> succeeding in the stock market is much
> better....

> Well, that's my guess at an answer, for what
> it's worth!

> Dien Rice

Why paper-trading is like a can of Pepsi
 

Because it's not the Real Thing.

Tunay

The truth is...
 

Hi,

The truth is, I'm not earning a living. My wife, who is in engineering at Motorola, is supporting me (and helping out two kids and seven grand-kids), while I inch my way closer and closer to success in business; once Stone Digital Media LLC (our little startup) acheives success in business, then I'll pay my wife back for what she's done for us. We're now in year six of this experiment. Fortunately, we're both highly stable people with, apparently, infinite patience for our mistakes and the mistakes of others.

Have you seen the Usenet newsgroups devoted to various aspects of trading? They're highly active and populated by people who are willing to share their expertise--and equally willing to cut the numerous trading scamsters to shreds when they show up and try to sell their "magic" tading systems.

If a list of Usenet newsgroups and some other trading bookmarks would help you, I'll transmit them to you or make an instant website to post them.

All I really know how to do is to read a chart and make a decision to Buy, Sell Short or Stand Aside. I'm interested in trading options using chart-reading techniques (a la Joe Ross's "Trading Optures and Futions") but I've never done it.

Hope this info was useful in some way.

Best,

-Boyd

> I always knew the Trick Report was not your
> only business. (smiles) And now that I know
> you're an expert at charting, I'll keep this
> in mind when I've got questions on the
> subejct matter.

> I wish there was a forum where I could share
> some of my successes and frustrations on
> stock options, futures, stock indexes, etc.

> Boyd, any chance you'd like to start one
> with others who might be interested. It's
> such a fascinating topic when you get into
> it.

> We subscribe to The Option Investor
> Newsletter. There are several options groups
> in the US, Canada and I 'think' other
> countries, that meet monthly to discuss
> their trading. The group that meets in
> Toronto meet every third Saturday of every
> month, but there is no real structure and I
> really don't have the time to give up my
> Saturday afternoons to meet. So, I've been
> suggesting a forum for some time, but noone
> wants to get it started.

> It appears there is a lot of interest here.
> Think about it.

> Eliz.

LOL! [DNO]
 

> Because it's not the Real Thing.

> Tunay
dno

Hi Boyd! Wow, look at the length of this thread...
 

Yes Boyd, I do remember your posts on Gordon's old board. You always seemed quite knowledgeable and it wouldn't have surprised me if you had written 'that book' by now. :)

By the length of this thread, it really appears that there is a great deal of interest by the visitors to this board.

Cheers!
Amber

>I wrote
> an hilarious piece about Trader's Syndrome
> on Gordon's ABC board some years ago, which
> Amber and others may remember.

Re: Boyd, now we know how you earn a living
 

Thanks Boyd. Years ago, I used to frequent newsgroups, but in recent years haven't done so. I tend to stay away from them for reasons you mentioned. But it can't hurt to check them out to see if I can gain any knowledge on what's going on.

Actually, I'd like to learn more about what 'really' goes on at the big floors of the major exchanges. Probably a great story for a documentary on a show like Investigative Reports on A&E. I actually sent A@E an email some time ago suggesting they do a show on the subject. They wanted me to send my request via snail mail, which I didn't do. Somehow, though, I think the subject is far too sensitive and political
an issue to cover and I doubt what really goes on will ever be revealed.

I often think, based on some of the stories that my husband and his day trading colleagues have told me, which they learnt from the day trading floor is that there is some conspiring and game playing among the market makers to manipulate or artifically inflate/deflate the price of a stock especially in the first hour of trading and during the noon hour. And if you watch the markets as closely as we do and see the trades as they occur, there are some things that just amaze the heck out of us. But I won't get into all the
details here.

If you could send me the names of a couple or any other trading bookmarks, I'd appreciate it.

Many thanks.

Eliz.

Re: Boyd, now we know how you earn a living
 

Hi,

You wrote:
> If you could send me the names of a couple
> or any other trading bookmarks, I'd
> appreciate it.

When I was trading, Waldemar's List of trading links was, I believe, considered to be the most comprehensive. You can check out Waldemar's List at:

http://www.waldemar.ws/wl.html [Link below]

Waldemar lists _everything_, so he's sort of a one-stop shopping center.

You wrote:
> Thanks Boyd. Years ago, I used to frequent
> newsgroups, but in recent years haven't done
> so. I tend to stay away from them for
> reasons you mentioned. But it can't hurt to
> check them out to see if I can gain any
> knowledge on what's going on.

The newsgroups I used to read every day (this was in 1994 and 1995) were:

misc.invest.stocks
misc.invest.futures
misc.invest.technical

You wrote:
> Actually, I'd like to learn more about what
> 'really' goes on at the big floors of the
> major exchanges. Probably a great story for
> a documentary on a show like Investigative
> Reports on A&E.

I'd like to see that, too. Have you seen the Paul Tudor Jones daytrading video-tape, the one that shows him trading, screaming orders into the phone, trading large? It's a good one.

You wrote:
> I often think, based on some of the stories
> that my husband and his day trading
> colleagues have told me, which they learnt
> from the day trading floor is that there is
> some conspiring and game playing among the
> market makers to manipulate or artifically
> inflate/deflate the price of a stock
> especially in the first hour of trading and
> during the noon hour.

That's why daytraders should really only trade when the floor isn't in control, when a strong outside force is moving the price around. When the floor traders are scrambling, they don't have time to engage in their usual tomfoolery.

You wrote:
> And if you watch the
> markets as closely as we do and see the
> trades as they occur, there are some things
> that just amaze the heck out of us. But I
> won't get into all the
> details here.

I know just what you mean!

Best,

-Boyd


Waldemar's List

I did some checking today...
 

Hi,

Talk about a crowded marketplace, the "how to trade" marketplace is standing-room only with vendors.

I'm still hopeful of somehow making trading one of my income streams.

Best,

-Boyd

> Yes Boyd, I do remember your posts on
> Gordon's old board. You always seemed quite
> knowledgeable and it wouldn't have surprised
> me if you had written 'that book' by now. :)

> By the length of this thread, it really
> appears that there is a great deal of
> interest by the visitors to this board.

> Cheers!
> Amber

Boyd, thank you for all those resources (DNO)
 

Tell me about your new venture
 

Boyd, I'm curious to know more about your new venture.

> once Stone Digital Media LLC (our little
> startup) acheives success in business, then

Regards,

Eliz.

Try this site -
 

http://tfc-charts.w2d.com/

On this site, you can personalize your own charts. It's a very good learning tool. I really don't know what books I can recommend because through PAPER TRADING, I've been able to develop a trading strategy that I feel comfortable with.

I've taken various bits and pieces from several trading strategies to create my own style of trading.

Let me know how you like the chart site.

Jim G.

The next one really needs to succeed bigtime
 

Hi,

I think my wife is starting to lose confidence in me, and I can't say I blame her.

I need to be making about $6,000 a month, so I'm starting with that figure and working backward. I'm also trying to make sure I play to my strengths, and to stack the cards in my favor as much as possible before starting.

Sun Tzu said something like "Battles are won or lost before they're fought," and with that in mind I'm trying to set myself up to win.

My strengths are integrity and honesty, devotion to producing quality, wanting to serve others, extreme stubbornness, the desire to build rather than run, and the ability to condense the core truths from a large amount of information.

So whatever I do, it's going to be a battle that will be won, hopefully, before it's even fought.
And I need to decide quickly because my wife just asked me yesterday "What's the first book going to be about?" (I'm not even sure writing a book will be what I do--maybe I'll give local seminars or something.)

Thanks for asking, BTW, I was flattered that you did!

-Boyd

> Boyd, I'm curious to know more about your
> new venture.

> Regards,

> Eliz.

Jim, thanks for the site
 

I had a very brief look and it apperas fairly easy to get around. I'll have to spend a few hours next week trying to understand more.

Thanks again.

Eliz.

The next one really will succeed bigtime!!
 

> So whatever I do, it's going to be a battle
> that will be won, hopefully, before it's
> even fought.

***Hi Boyd! I think it was Steven Covey who said, "Begin with the End in Mind"....so there are many voices who share a similar philosophy. Thats a good thing!

> And I need to decide quickly because my wife
> just asked me yesterday "What's the
> first book going to be about?"

***One thing that struck me in your post, Boyd, is that your wife is your partner in this. Sounds like she is encouraging, inspiring, and truly wanting YOU to be content and true to your own heart, integrity, etc.

Did you see how I changed your headline?

One amazingly significant lesson I have learned is that when we focus on lack or scarcity, we get back more lack and scarcity.....if you are thinking, "I NEED to make money" your NEEDINESS is what shines forth like a beacon.

I rewrote your headline into a statement, powerful and direct....

The next one really will succeed bigtime!!

And you know what, Boyd? I believe it truly will!

With Purpose and Passion,

Julie Jordan Scott




Dare to Discover Your Passion, Decide to Live Your Destiny!

You're right, darn it
 

Hi,

> when we focus on lack or
> scarcity, we get back more lack and
> scarcity.....

They should teach what you just wrote in school, and in fact I'd go so far as to echo the Bible and say "Here is wisdom."

A trader who has any trace of fear or need won't win unless it's through pure luck.

You wrote: When we focus on lack or scarcity, we get back more lack and scarcity. After I post this message if I'm smart I'll make a text file and type your wisdom 100 times to try to make it sink in.

Thank you!

Best,

-Boyd

Thank you, Boyd.....always wanting
 

To see the people who I care about succeed....

Try it out for size, Boyd, when you hear yourself speaking in scarcity or fear based language. Tell yourself to stop!

Sometimes when I go on a negative streak (YES! On occasions it even happens to me!) I will literally put my hand in front of me and speak out loud...."STOP!" Perhaps its the momentum of speaking, hearing and the kinesthetic action of taking my hand and STOPPING myself.....

To Your Success Always,

JULIE

I meant "need or greed" not "fear or need" [DNO]
 

dno dno dno