1. How long have you been trading and how did you get into forex trading?
Years ago (in a previous life), when I worked for a large engineering company, a co-worker introduced me to commodity futures trading. I was hooked from the start. We became best friends, and traded together. Initially, we traded a variety of ag futures. I subsequently branched out into financial futures, and then began to specialize in silver futures on the Comex exchange.
Later I became interested in stock index options, and began trading OEX options almost exclusively.
In 2005, I looked into the forex market for the first time, and was immediately intrigued. Initially, I was all over the lot, trading ten or twelve different pairs, and jumping from one trading style to another, and from one trading strategy to another.
Eventually, I narrowed my trading to just one pair: first it was the GBP/USD, then the GBP/JPY, then the EUR/USD, and finally back to the GBP/USD. For the past year, I’ve traded only the GBP/USD, mostly very short day-trades (or very long scalps, depending on how you want to look at it), during the wee hours of the morning, here on the U.S. east coast.
2. What’s your most memorable trading experience?
In July 2005, when I had been trading forex for only a couple of months, I happened to be watching the GBP/USD when the floor seemed to fall out from under it. I had no idea what was driving the move, but I jumped on it, shorting it again and again as it fell, eventually pyramiding a rather large position.
It was only after I had covered all my shorts at an average profit somewhere north of 80 pips, that I learned about the terrorist bombings that had just occurred in London. Initially, I felt uneasy about profiting from someone else’s disaster. But, after a lot of thought and soul-searching, I realized that, as a speculator, I was simply participating in the price-discovery mechanism of the market — which is precisely the purpose of markets.
3. Was there ever a time when you suffered a huge drawdown and thought of giving up? How did you get through that phase?
Yes. I won’t recount all the gory details, but I will say that for a long while I was mad that “the market took my money”. So, I stopped trading live, and traded only on demo, until I got my head straight.
4. What’s the most challenging part of trading for you?
The most challenging part of trading for me is setting aside the idea of “being right”. It’s in my nature to want to be right — in my analysis of trade set-ups, in my trade management, etc. But, “being right”, like everything else in this market, is a matter of probabilities: you’re “right” only as often as your win-ratio says you are.
The problem with thinking that you’re right is that it easily leads to trading too big. Then when the market rudely shows you that you’re wrong, you can end up taking unacceptably large losses.
5. When would you say a trader is “successful”?
A trader is successful when he or she can keep doing the same thing over and over again, getting the same results, and those results are good. That’s a long-winded way of saying that consistent profitability is the measure of success.
6. Do you think anyone can become a successful trader? Why or why not?
No. Some people are just not temperamentally suited to be successful traders.
Anyone can learn the facts about this market, and anyone can learn the mechanics of trading. But, I think that some people lack the psychological make-up necessary to take decisive action in a market environment where outcomes are uncertain, and where everything is determined by probabilities. Those people who tend to be “control freaks” seem to struggle terribly with the uncertainties associated with trading.
7. How does your personality match your trading style?
I’m a night-owl, so it suits me to trade the Frankfurt opening at 2am my time, and the London opening at 3am my time.
And, I like to actively monitor and manage my trades, so it suits me to hold positions for up to 4 hours. Beyond 4 hours, I start to lose my focus.
Also, I don’t handle true scalping very well (to me, it’s sort of like forex whac-a-mole); so, I don’t intentionally take trades that are going to last only a few minutes.
8. If you could give just one piece of advice to newbie traders, what would it be?
I would urge newbies to learn the power of COMPOUNDING modest, but consistent, daily profits — and, then, letting those profits grow exponentially to build wealth.
There are three elements here:
modest profits — don’t take huge risks swinging for the fences;
consistent profits — this means accurately following a trading method which has a high win-ratio; and
compound profits — let your profits accumulate in your account; and, as your account grows, increase the size of your trades in proportion to the size of your account.
If you can consistently AVERAGE a net profit of just 20 pips each day, you can earn an average 1% increase in the value of your account each day, while trading with no more than 5:1 actual leverage, and limiting your risk to less than 2% on each trade.
A steady 1% increase per day
= a little more than 5% per week (compounded over 5 trading days per week)
= a little more than 24% per month (22 trading days per month)
= almost 1,000% per year (240 trading days per year, allowing for vacations and holidays).
Where else can you legally make 1,000% per year on your initial capital, without taking extraordinary risks?
9. Describe your typical day as a forex trader.
I start about midnight (New York time) studying current price action, and updating charts (I use 9 different GBP/USD charts, displaying various things that I watch).
Between 1:30am and 3:30am, I look for a single high-probability trade. If I find what I’m looking for, I will babysit my trade until it hits my profit target, or I close it manually.
I try to exit the market before dawn, so that I can get a few hours of sleep. If I can get to bed by 6am, I’ll sleep til noon.
Afternoons and evenings are for things other than trading.
10. Who’s your favorite FX-Men?
I have great respect for Phil838, not only for his trading skill, but for his decency as a person. In a business fueled by testosterone, where some of us tend to be impatient and combative, Phil is always polite and considerate. He’s a true gentleman.
We don’t hear much from Phil these days, as he’s gone back to school for another graduate degree; but, I know that he keeps an eye on this forum. Phil is, in every sense, a gentleman and a scholar.