Becoming a fulltime trader PART I

July 29, 2008 at 2:56 pm Leave a comment

By FX Insights

Becoming a fulltime trader PART I

There’s a lot of things in this market that I’m not an expert on, but I do trade professionally fulltime, so based on what I know and based on my own personal experiences of trading this market 24/6, I’d like to offer a few thoughts for consideration. 

Although I’ve only been trading since October of 2006, I put in about 80 hours a week watching the market, tracking the global markets, researching the market fundamentals, and trading the EUR/USD… 

I have to be honest and say this – I would never recommend or push someone to trade fulltime, especially if you have a young family or you’re a homebody… this life of fulltime trading is not conducive to family life… for me, I love to go out and socialize, but I’ve had to let that go to a great degree in order to pursue my goals as a currency trader in addition to the demands of maintaining this FX community… 

That being said, I would never discourage anyone from trading fulltime… if you have your heart and passions set on trading fulltime, fantastic, I support you 100% and I can promise that the FXI community will do everything in our power to help you succeed. 

First, I think there’s a few questions you need to ask yourself and have solid answers for:

1. Why do I want to trade fulltime?
2. Can I emotionally handle trading in the most volatile market known to mankind?
3. Am I prepared for this pursuit to drastically change my life for better and for worse?
4. Are my family and loved ones supporting me in my endeavors? 

There are probably a few more questions you should ask yourself, but I think those are the important issues to work out in your heart and mind… if you’re at peace with the decision to go fulltime, your next job is to put together a game plan for how you’re going to get started… 

Do you have to quit a job? Do you have to reduce your living expenses? Do you have to payoff debt to get that off your back? You get the idea… you have to mentally and physically prepare your body for the new life you’re about to lead… 

If you’re loaded down with debt, or you’re having trouble making ends meet, or you have to take a home equity loan to fund an account large enough to trade fulltime, you better think twice! 

OK, now that we have all the touchy-feely stuff out of the way, lets get practical…

Risk and money management:

You might be getting tired of hearing us talk about the importance of risk and money management, but that is the #1 key to surviving and profiting in Forex. Risk management is the foundation of trading and it’s the pinnacle of trading – and everything in between! 

Honestly, you could make the stupidest trades ever, you could short range bottoms and long at range tops, and as long as you’re using proper risk management techniques, you’ll likely survive the market until it turns around and goes the other way and your negative entries turn into positive ones… 

Establish strict risk management rules for your trading… some of my risk management rules are:

1. Only making between 1% and 2% entries per trade
2. Keeping my usable margin above 90% at all times and in all market conditions
3. Typically not stacking my entries closer than 20 pips apart (unless market conditions dictate otherwise)
4. Not taking new entries when the market opens on Sunday
5. Not adding new entries in the afternoon on Fridays 

Those are some of my personal risk and money management rules. You have to establish your own. Write them down and commit to following them in all market conditions no matter what – you must stay consistent and organized in all that you do! 

There are several posts in our forums about risk and money management, so I won’t beat this horse to death, because I know you’re smart enough to grasp the concepts and importance of risk management – the key is applying this to your trading and being consistent.

Establishing your personal trading style:

Trading is not an exact science… I cannot tell you the “right” or “wrong” way to trade. But you have to establish a style and system of trading that fits your needs. The only way you’re going to establish your own personal system for trading is by experience. 

Trading styles largely can be established and defined by your personality… for example, my personality is more on the adventure, explorer, risk-taker, act first and think later type level… and that’s put me in trouble before as I would over leverage and over trade my accounts… so, I can’t let that aspect of my personality interfere with my trading style and my management of risk. 

But, the other sides to my personality of attention to detail, hard work, open to knew ideas and knowledge, etc. have worked to benefiting my trading style. 

The other part of establishing your trading style has to do with what “indicators” you use to decide when to enter and when to exit a trade. I use the term indicator simply for lack of a better word, but the point is there has to be something you see in the market to cause you to get into a trade and then to get out of trade, whether it is for profit or loss… 

Most of you know this already, but for my personal trading style, I rely on these indicators:

1. Overall market fundamentals/economics 
2. Price action and price action patterns
3. Following market correlated variables such as gold, oil, equities, securities, and commodities
4. Watching real-time price action 
5. Closely watching and following moves by central banks and central bankers

Those are most of the biggies. I must say that I wasn’t able to fully develop my own trading style until I completely understood how this market works and why the market moves the way it does. And that is one main area that 95% or more of all retail traders never grasp. 

Sadly, most retail traders go the way of using tech indicators and nobody ever teaches them what really causes market movements and nobody teaches them the patterns of the market. That’s why we spend so much time trying to educate traders on the reality of this market and not the fallacy of using techs. 

As far as my trading style goes, I’d have to say the most important thing is price action and tracking the EUR/USD 30-minute price openings. It took me 6 months to learn it, but when the light bulb finally went on, it’s changed my trading for the better and I know this technique will never fail me. 

I believe price action is the best indicator for trading the EUR/USD – it’s what works for me, and it’s what makes me the most money and gives me the most success in the market. The key for you is to establish what works best for you. My benchmark for successful trading is something that gives me 9 wins out of 10. 

If using techs is your key to success, wonderful, more power to you. I can’t trust something that’s lagging, but again, if you win the most using them, beautiful. I prefer predictive indicators which is why I’m also very fundamental and why I try to think like a bank trader and not a retail trader trading off of Fib lines or MACD’s or EMA’s, which have nothing to do with anything in this market. 

Moving on… 

Reaching expert status:

98% of my trades, if not more are EUR/USD. I have put all of my energy, my heart, and my soul into learning every single thing I can about the EUR/USD, about its fundamentals, about its patterns, about its price action, etc. I have learned all of the key fundamental reports and how they could affect the market. I’ve learned to read the body language of Ben Bernanke and Jean-Claude Trichet… I’ve learned how the banks trade the EUR/USD, I’ve spent thousands of hours starring at the EUR/USD prices flash on my trade station…

This is just my opinion, but I believe if you want to trade fulltime, you have to focus on one pair and become an expert on it. The EUR/USD offers me enough trading opportunities to make a living from. The more I’ve focused my attention on just trading that pair, the more success I’ve had in the market. I can tell you just about everything about the EUR/USD’s fundamentals, about how and why it moves, etc. 

I could write a novel on it if somebody put a gun to my head and made me. I don’t want to sound arrogant, but I want to drive the point that I feel the key is becoming an expert on just one pair and sticking to it. 

I probably know enough about the cable, yen, and Swiss to make money on them, and I used to trade them in addition to the euro, but I don’t do that anymore and I’m a much more profitable trader for it. I save my margin for trading the euro. 

Even though I feel like I’m an expert on the EUR/USD doesn’t mean I should try to be an expert on another pair, I don’t even want to, in fact, because I think it would take away from my success trading the euro. Reason being, the market is constantly evolving and changing… market conditions are constantly changing, fundamentals are constantly changing, and market sentiment is constantly changing… so, it’s my job to stay one step ahead of the market and one step ahead of the evolution constantly happening with the EUR/USD and with the market… I haven’t learned it all, and my mind is constantly open to learning new things! 

–END OF PART I–

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Trade Team Call – – 7/29/08 Becoming a fulltime trader PART II

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