Before you place a single trade.

Read this entire book.

Ok, it’s not really a book, more like a booklet considering it’s mostly pictures and a 12 point font, but great information none-the-less.

I can’t stress enough the idea of trading in small sizes with a lot of reserve capital so you can take advantage of a more attractive price even if you are already in a trade.  Also, take your time when planning and executing a trade, if you “miss” the opportunity, don’t rush the next one, just be ready earlier. Patience will turn into $$’s faster than rushing.

I am constantly surprised by how many traders can gain/lose 30% of their account in 5 pips or less. Such large swings have to stressful or euphoric and will make it nearly impossible to remove emotion from the decision-making.  When I gain or lose 1% on a trade, sure, I am happy or disappointed, but it won’t affect my decision to open or close the next trade.

I have a post in the works that talks about probability and the uselessness of a 3:1 risk/reward ratio, I think it’s brilliant, but then again I also have a degree in Commercial Art and not Statistics and Probability.

Enjoy your weekend everyone! Oh and follow me on Twitter.

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Yes, it is 2011!

Happy New Year!  This is going to be a GREAT year! You have to believe it to achieve it, say it again… “This is going to be a GREAT year!”

Ok, I am done with my super cheesy motivational speak for now.

In all seriousness, I am so happy that it’s 2011 because every year gets better.  There is always something new around the corner and everyday that I wake up is an opportunity to change my life and others lives around me.  The question becomes not “if” there is that opportunity, but when you see it, will you recognize it and how will you capitalize on it?

This is me wishing you the best and hoping you and I can take every chance we get to make this world better.

Talk to you soon!

My take on a decent article…

http://blog.currensee.com/2010/08/five-observations-from-wealthy-traders/

Check this out…then read my commentary below.  I also left this for the author, but it hasn’t been approved yet to go in the comment section.  I want to elaborate on a few of these points so I think I’ll take #4 and #5 and break them down into 2 separate posts.  As for #’s 1, 2, and 3, see below.

Nice article, just some thoughts I’d like to share if you don’t mind. Points 1, 2 and 3 are contradicting. I agree with point 1, but subsequently don’t agree with 2 and 3. I have several ideas I would like to discuss – which I will do over at my blog for any of those interested in reading my ramblings.

#1 is important, don’t trade until you understand this. Otherwise, you might as well play Russian Roulette with 5 rounds instead of one, this is how bad you will get burned…

#2 frustrates me as a successful trader. The statement of “They stopped trying to pick tops and bottoms years ago” is a cop-out for not putting your reputation and money where your expertise as a trader is. Now, I may have stopped picking the exact bottom or top but I do pick an area where there is a better statistical chance it will either go up or down. When you stop picking areas where the market is going to turn or stall, you stop trading effectively. How do you make money in real estate? You buy at a discount and add value, wait for an opportunity and sell at a higher price than you paid (hopefully enough to cover the fees and taxes). You bought that real estate at a level that you thought was the lowest it was going to go, not on its way up (and if you did, you secretly picked a top, just one that wasn’t near your purchase price…). Trading is just like the real estate deal, if you don’t buy at a discount (or sell at inflation when shorting) then you are just waiting to go broke. If after the real estate deal the property values keep dropping do you sell it? Or, do you continue to add value waiting for the market to turn because something in your RESEARCH told you that this was a good investment. The trick here is do your homework, cut your teeth on some tough trades and make a trade…if you’re not sure, don’t take the trade. You have to pick up or down, I don’t pick either one until I see a discount (hint – discounts hang out near the areas of tops or bottoms).

#3 is much simpler, if a trader plans his trade as state in #1 then he has allowed for a certain amount of “Win” and a certain amount of “Loss” or drawdown so the statement of “They are patient with winners – and ridiculously impatient with losers” can not be true. They must be patient with their PLAN and let it work itself out in the event of a loss or gain.

Sorry if this got long, but I am going to elaborate more in a place where I don’t feel guilty for wasting space. Thanks!

Conversation with a New Trader

Below is a conversation from Facebook that I had with a young trader and I felt that the questions he asked are questions that a lot of young traders have…

John Smith May 28 at 12:31pm
sry about the double message. hit enter by mistake. I have been looking for a broker for some time now and I was wondering how you picked yours? every time I look online at reveiws they are all mixed. It seems very few people like their broker and then there are 80% that give a bad reveiw.

How did you go about looking for yours?

My name is john and i would greatly appreciate any insite to what you have to say.

Michael Goldsborough May 28 at 1:00pm
Yeah, no problem. If you ask how long most people have been with their broker, it’s usually the rookies that complain. They have no idea what it used to be like. Today, most brokers are decent (at least the ones you hear about the most). I am with OANDA because I have had really great experiences with their customer service. What you need to look for is easy to withdraw/deposit money, order fills, slippage and availability. If you have over 1 million to invest you are going to want to look for an ECN (they are direct to market brokers). Under that amount a dealer desk like OANDA or FXCM are good choices.

I’d love to help you out where I can, please, ask me any questions you like. I never would have gotten started in the business if it weren’t for someone to answer my questions, so I guess I am paying it forward. Check out my blog if you haven’t yet, as well as all the links on the blog roll – great seasoned traders. See the link below.

John Smith May 28 at 1:27pm
Thank you very much. I was looking at those brokers but they seemed to have the most reviews but the worst reviews mixed in with really great reviews. but I am sure its because of what your saying about new comers. What would you say would be the best way to get started? How much is the least amount you think some one should start with? How was OANDA’s free account differ from the live account?

Thank you very much and I will check your blog out

John Smith May 30 at 2:15am
hi another Q. why does it seem that when im reading or watching live trades they seem to be talking about taking profit in a downward slope. i thought you could only make profit in an up trend.
if you could pls clear this up for me.

Michael Goldsborough June 1 at 4:09pm
The best way to get started is to trade on DEMO until you are consistently profitable for about 3 months. Then, based on what you’re comfortable with, deposit real money with the broker you choose. You’ll have to check with the broker to find out their live account cash minimums. The OANDA platform for Demo and Live are extremely similar- no problems transitioning. In fact, I still use my demo account to test out new trading ideas and strategy’s.

Michael Goldsborough June 1 at 4:13pm
If you are trading currency, there is always a downward AND an upward market. Since you aren’t just trading in one currency, in order for you to buy it, some one has to sell it – and vice versa. Let’s take the Eur/USD for example. If the chart is in a Downward Trend, then the EURO is LOSING value and the DOLLAR is GAINING value. Therefore, the EURO is in the Downtrend and the Dollar is in the Uptrend. What is beautiful about trading in currency is the markets are cyclical, i.e. there is no bottom and there is no top – a currency can NEVER (well rarely) go to ZERO.

Hope this helps.

John Smith June 1 at 4:38pm
if you dont mind me asking. do you do this full time?
“I have the demo open and learning while useing fibonacci tool.

Michael Goldsborough June 1 at 5:13pm
My income is derived mainly from Trading, but my style of trading allows me to carry a full time job that I enjoy. More like a hobby (and it pays the health insurance) then a job.

Keep learning Fibonacci. I use the Fibonacci Retracement and Fibonacci Fan as well as hand drawn Support and Resistance lines.

John Smith June 1 at 5:23pm
im really liking the fib style. I was just wondering how hard it would be to do this full time. I have plans of finishing school in PharmD/mba. I want to open independent pharmacies.

John Smith June 1 at 5:46pm
is it possible to get 10…20 pip trades a day?
if i had 100$ and 100:1 leverage. that would be 1000$ leveraged for a trade.( i wouldnt start with 100$ dont worry)
if i got 1$ per pip profit and made 200 pips a day that would be 200$ a day. times 5 days is 1000$ a week which is 4k a week and 48k a year…… right lol or im i off or unrealistic?
i know the numbers are low but im trying to see if my math is right.

Michael Goldsborough June 3 at 3:55pm
OK, sorry it took me a bit to get back to you…life is just busy sometimes.

I don’t want this to discourage you, but you need to be a bit more realistic with your expectations as to not get disappointed and leave the business of trading prematurely. I will help you as much as I can and let me know if there is anything else I can do.

First, your math is fine, it’s the logic behind it that is flawed. Remember, if it was that easy, everyone would do it and everyone would be successful and we would no longer have a market.

I would be remiss if I didn’t tell you that this very thought (how easy it looks to make money in FOREX) got me into trading. It would be foolish of me to not warn you that it is an extremely hard was to make an easy living. You can make 10 – 20 pips/day on average, but you can’t trade with $1/pip with $100. It is a numbers game, and you need the zero’s to make the necessary amount of money to sustain a living.

Think about what you’re saying, you want to triple your money everyday. People would kill for 15%/year and you want to make 300%/day. I average about 3%-5% each month, I compound my earnings and adjust my position exposure every 6 months.

Not to mention you need to have 6-12 months of expenses in a savings account in case you hit a real bad run…you still need to pay the rent and eat.

New Look

Well, if this is your first time here, welcome…you probably don’t notice anything different.  If you are returning, you’ll notice that this blog has a new look.

I had a spring cleaning/rearranging surge, kinda like when you were a kid and you moved your bed to the other side of the room…it just feels like a new room every time you walk in.  This change has given me a renewed excitement with writing about my trading, so hopefully I’ll do it more often.

On a different note – The Philadelphia Union play their second home match of the season.  The first one they won, however they have lost all of their away games putting them at 1-5-0 and the bottom of the power rankings.  If anyone is in Philly, I’ll be tailgating in the Wachovia Center parking lot out of the back of a big white F-150.  Stop by if you see me!

New Career

If anyone is still out there that might stumble on this blog and read it, I want to let you know that I have started a new career.  I am no longer the owner of a sign company but now I am an Agent with New York Life.  I am proud of my new position and extremely excited at the idea of working with the top Company in this field.  To clarify, YES, I am a Life Insurance (oh noooo, the horrors!!!!) agent, but I want to make sure that people understand it is more than that.  I work in the 3 financial phases of life, protection, accumulation, and distribution.  I do sell life insurance, but it is a tool that helps in all three.  I can help people with protecting their family in the event of the death of the breadwinner, I can help a young family save money to buy a house, and I can help as people reach the retirement age with making sure they will never run out of money. My goal is to help as many people as I can.  The question becomes, can I help you? Please email me @ mdgoldsborough (at) gmail (dot) com.

As this blog continues to evolve, I will be posting still about trading and what I am doing in the markets, but mixed in here will be little financial tidbits that I hope will be of some use to my readers as they plan their financial futures.

As for my trading, it has taken a break due to the rigorous training program NYL has me going through, but it will pick up soon.  I did however take advantage of the Divergence on the E/U and rode it down for a bit…I still have a short in and will add to it as it moves against me.

 

 

More fun…

If you get a chance, check the new page out at the top right – “Trader Community.” It’s an interactive chat room that anyone can use. When I am actively trading I will be logged on and talking to myself or whoever is there with me, calling my trades and what I see. I’d love to see some of you join me, it could turn into something fun.