Honorary Member Q&A: MeiHua


###1. Tell us little bit about yourself. Where are you from? What do you do full-time? What are your hobbies?

I am from Chicago, born and raised. Chicago is a city full of traders, it just doesn’t get the recognition it deserves. I am currently a full time trader. Before that I ran my own import/export business. My first exposure to the markets was working in the commodities pits for a company, filling institutional order flow over 10 years ago.

For fun, I enjoy traveling, sailing, snowboarding and martial arts. I think it’s really good to do things outside especially when you are cooped up all day. Honestly, I have a small garden in the back of my house. I like working there too, growing flowers and vegetables.

###2. When/why did you start trading forex? What resources did you use to learn how to trade (websites, books, apps, mentors, etc.)?

Actually it was at my import/export company that I wanted to hedge currency risk. With smaller than standard unit sizing and my contracts having different delivery dates than standard futures expirations it was just a great way to take a little risk off. But eventually I wanted to trade it for profit.

Trading spot forex is totally different animal than trading futures, especially because I was most familiar with floor trading techniques which is not very much applicable anymore. So I used every resource you could get your hands on, websites, books, other professional traders as mentors, doing my own homework, research, and just plain old screen time.

For me a true mentor is one who takes a personal interest in you, and helps you on your personal journey as a trader. This is hard to achieve unless you actually know professional traders personally. Finding help online can be an expensive and misleading place due to all the people peddling snake oil for courses and mentoring.

###3. What do your friends and family think about you trading currencies?

My family and friends are cool with it. I have always been an entrepreneur so they just saw it as an extension of that. Not to mention 10-20 years ago, everyone in Chicago knew a floor trader, a broker, a market maker from CBOT or the CME so trading was a fairly common profession. I think since I had built up my bankroll through my import/export business, they didn’t see why I couldn’t take the plunge. But there always is some skepticism because some people just don’t “understand” what it is you do.

###4. What were your first strategies in forex trading? How are they different from your strategies today?

My first strategies were pretty simple, and highly discretionary. But the element that remains the same was the same concept I learned on the floor, the market is a two sided auction that seeks liquidity. Understand where there are orders to lean against or orders to execute and use them to your advantage. It’s really that simple conceptually, but it’s not easy to identify and execute. How I go about doing it has changed, but the core principles remain the same.

Nowadays I use a lot more quantitative analysis. I like to determine patterns and repeating effects in the market. Also understanding how each market moves by quantifying its “personality” in numbers. This really reduces the learning curve and puts some solid statistics at your back. I think that people take that for granted. That the market works a certain way based on what they read from books or the internet.

But the market is constantly evolving if you’re not constantly updating your research by the time you read it from a book or forum; it’s probably not the same market it was then. I also have begun to develop and trade a basket of proprietary algorithms based on this type of research.

###5. Describe your current daily or weekly trading routine. What do you do before you trade?

Great question, I love this one. It’s going to be extended answer, but I think it’s seriously important. People are going to shy away from it though as its very time consuming. I do the same thing every day and every week for my discretionary trading routine.

For my daily routine, I start my trading day by looking at the news feeds to analyze sentiment, and use the calendar to mark out the economic events for the day. Then I fill out my own worksheet that I have been refining over the years. I write out a few sentences on my psychology and give a score out of 10.

I then come up with a few hypotheses for the day, of what could occur given the current market state and context. This provides the framework for the rest of the day. Now provided that framework, I look for areas of interest where I think I would like to do business and write those down.

I have a mid-day check point which I fill out at lunch. I ask myself 3 fundamental questions. What type of day has evolved so far? What is the market trying to do now? How efficiently is it getting there? I also mark down a trading GPA score, my psych score, current P/L, and trades taken benchmark. End of day I do my end of day debriefing. I cover my psychology, market technical environment and how well did I capitalize on it in real time, sentiment, trades taken, mistakes and their costs, and what should I focus on in the future.

My weekend routine is basically doing all the same stuff but aggregating every day’s journal. I review every trade taken during the week. I have screenshots of the trade at fill and at exit. I think it’s very important that you take a screenshot at the moment of getting filled.

If you just have the post trade picture you can get a lot of hindsight bias in there and are no longer trading the hard right edge. You need to focus on what you saw in the moment you pulled the trigger. I then review my trade stats generated through my own analysis tools and see where I can improve for the next week.

###6. What are some of your most unforgettable trades and trading moments?

My most unforgettable trade was probably my first. Honestly I put the position on and just stared at the bid/ask. My mind was racing and I was all tense, hunched over in my chair. I don’t remember if it was a winner or a loser, I just remember feeling relieved once it was closed. The reason I remember it so well, is because that’s how trading is not supposed to feel. So when I feel like that, I know it’s time to take a break.

###7. Forex trading is not an easy business. What motivates you to continue trading when in a trading slump?

The challenge. I feel it’s kind of like a puzzle or a treasure hunt. It’s a game against yourself on an ever-evolving playing field, but at the same time against everyone else in the financial world. There is treasure out there; people get it all the time. Not everyone who tries to get it gets some, but it’s always possible. I know as long as I do my own homework, manage my risk, record my statistics, and am always honest with myself I can probably pull through. But I think that one of the most powerful things is working out of a previous drawdown to new equity highs. If you did it once, you have the confidence to do it again.

###8. Do you trade during the summer months? If you don’t, how do you usually spend your summers?

I do trade in the summer, volatility is reduced but people overestimate by how much. Over the last 10 years June, July, and August range are still around 88% of the average monthly volatility for Fiber. But I like to take time off during the summer then again during the winter holiday season anyway. During the summer, I do a lot of sailing both for pleasure and competitively.

###9. On a scale of 1 to 10 with 10 being the most important, how important is it to practice flexibility and adaptability in your trades?

Wow this is a hard one. I am going to give it a 5, and here’s why. I trade purely mechanical systems that stay rigidly the same for several quarters when they are up for review. This may go on for several periods of keeping the same settings. So complete rigidity while maintaining profitably is possible using highly robust systems with a stable parameter space.

As for discretionary trading there is a fine line. You want to be flexible in your assessment of the market, your determination of bias, and your understanding of the context of the opportunities the market is giving you at any one time. But you want to be rigid in your trading rules, your risk management, your set ups and your trade management.

If you change your setups, your bias and your trade management, continuously you are just trading randomly. This is in addition to the fact that the market is already changing all the time causing a compounding of randomness. The randomness makes the statistics in your journal meaningless because everything is a sample of one.

Hold everything that you can rigid and let the market be the random variable, decrease as much randomness in your own actions as you can. Collect data then after a certain sample size say 30-50 trades adjust your strategy, but not until then. Even in the face of a losing streak and drawdown, this is when most people are prone to random trading.

###10. Do you have any advice for trading newbies out there?

I can’t over emphasize this enough but DO YOUR OWN HOMEWORK. I am going to be frank here; a lot of people get into trading because they think it’s an easy way out. Trading the markets gives the illusion that it takes less work for higher compensation than any other profession in life. What do I mean by homework? I mean being prepared pre-market, having a written trading plan, journaling your trades and psychology, doing your own research on the markets, back testing your set ups, finding new patterns and edges, and developing the traders mindset.

Take everything with a grain of salt and check everything for yourself. Basically doing all the good work you can to increase your odds of success. That’s all you can really do in this game, stack as many edges big or small in your corner as you can.