War stories from ForexLive readers

Today we crank up the Guest Trader machine and reader Anand is the one who is being propelled into the public eye for your consumption.

Day one sees him talking about lifestyle choices and their importance, and then he goes on to give his thoughts on the euro, coffee and swordplay. I’m sure you’ll give him a rousing welcome.

anand

Anand

NameAnand

OccupationPart time trader / Lecturer / Flaneur

Trading experience11 years

Why you started trading?

Watched a friend / roommate at university buy a bright red VW polo after punting in (dodgy) penny stocks (mainly on the back of spurious tips in penny stock sheets) … I am embarrassed to admit I was impressed and thought I’d try and give it a shot myself. Suffice to say … making money in the market didn’t turn out to be as easy as I thought (& no I never bought a red polo either).

Time zone you trade in

I trade through UK hours, into US hours and have been known to stay up through Japanese market hours if I’m doing anything over there. I wouldn’t recommend this as a lifestyle choice though (as I will document in a later post on maintaining a healthy mindset).

Trading platforms/chart systems/screen set up you use

The cheapest systems I can get my hands on … Various brokers free platforms along with Trading View.

Methodology (Scalper, short, med, long term)

Medium (weeks) to Long Term (6-9 months)

Trades you are in or looking at

I basically trade everything and anything. I believe that if you concentrate on one market you get a real ‘feel’ for the market on a subconscious level, but I have had to balance this focus with finding high conviction ideas. As a result I watch major FX pairs, Commodities (Energy / Base and Precious Metals / Agricultural markets), as well as major stock indices and individual stocks globally.

chimp

Lifestyle choice is important when trading

Lifestyle Choices

Before I get into throwing out trade ideas, I wanted to talk a little about how I live in a way that helps me to trade most effectively. I don’t want to stand on a soap box and preach about what I think everyone should do. However, I’m conscious of my own human frailties, so I have developed a lifestyle which helps me deal with the emotional strain that comes with trading financial markets.

  1. I always try to get a good sleep (8 hours), this helps me to keep high cognitive functioning and manage stress levels better. I also find that after a good sleep ideas which were floating around in my head in a jumble the previous day come together the next morning (I presume the subconscious mind has arranged information and ideas during that rest period).
  2. I stop trading when I’m not feeling well, if I am suffering from any health issues I suspend my activities. The main protagonist believed to be Jesse Livermore in ‘Reminiscences of a Stock Operator’ (great book by the way) discusses this same issue in the book.
  3. If I’m feeling emotionally unsettled I don’t trade, this could be an emotional disturbance generally, or specifically negative feelings from a previous trade.
  4. I avoid any chemicals which affect my psychological state, this includes coffee, alcohol, cigarettes and drugs of any kind. I drink tea and water through the course of the day (Earl Grey if you are interested).
  5. I exercise for 30 – 45 minutes every day … I run / swim usually, sometimes walk if I want to tone things down to avoid picking up ‘overuse’ injuries.
  6. I try and maintain balance in my life, in other words do not let trading take over my life. I compartmentalise trading to one facet of my life. Not only is there more to life than trading, but this actually helps me to gain perspective when things are not going well.

EUR/USD

The ECB decision seems to have sent fundamental analysts into a tailspin over the implications of the recent policy moves on EURUSD? Did they go too far or not far enough? Was it all priced in, or was some of it ‘priced out’ … & if so how much. Good luck on trying to work out what the fools and charlatans on the sell side have to say on the matter (rant and rave about the business coming up for you all soon).

This is what I’m looking at on EURUSD for what its worth … after going round the merry go round of fanciful techniques (including Elliot Wave Theory, Gann, not to mention various other esoteric schools of technical analysis) I have come to the conclusion that its best to just KISS (Keep It Simple Stupid).

EUR/USD 09 06 2014

EUR/USD 09 06 2014

(The direct chart link is here in case the text is too small)

There is a perfect ‘double top’ pattern created through the early part of 2014. The market made a break of the neckline at 1.367 and now looks to be testing the underside of this neckline again (note; I find it amusing when people call a pattern a ‘double top’, or ‘head and shoulders’, or whatever, when the neckline hasn’t broken. The whole point of these patterns is that you are identifying a support or resistance level. Without a break it isn’t anything at all .. its just a squiggle!).

The market should be sold with a stop placed above 1.367 (rationale being everyone and his wife .. along with their pet algos will have a stop at 1.367 .. these stops may be tested multiple times). I would look to exit the trade when the longer term support line is tested again (it has been tested twice up to now) or alternatively after 10 sessions (a time stop).

Coffee Prices

This is a little ‘off piste’ for FX Live, but I thought I’d bring some of the more esoteric markets which I trade to the table this week … this is a chart which neatly shows why I love agricultural commodities.

Coffee 09 06 2014

Coffee 09 06 2014

Direct chart link

Get on the right side of these markets and you can make a killing … look at the aggressive move higher and then back down (weather related .. these are markets where I believe fundamentals really matter, as there is are short term demand and supply drivers on the physical side which feed into the financial side), get on the wrong side though and you will be carried out of the door in a body bag (Anthony ‘chocfinger’ Ward of Armajaro fame found this out to his cost recently … and this is a guy who supposedly has meteorologists working for him studying global weather patterns and ears on the ground in remote parts of Africa etc. If you are reading this Anthony I would be happy to work for you even if you paid me in chocolate bars .. Cadburys not Nestle please).

Anyway I wanted to highlight the dilemmas faced in trading real markets. There is potentially a ‘double top’ forming, but where is the (bloody .. can I say this Ryan?(Ryan: Yes you can) neckline? Is it at 168 or at 170.5? Depending on which you think is significant determines whether you put a short trade on right now or whether you wait for a break of the lower line. Frankly I would wait for a break of the lower support line, however, markets can gap, especially in agricultural markets which can go limit up/down for several days in a row (one of the most frustrating things in the world must be watching a trade get away which you can’t do a damn thing about).

And now for something completely different

I watch films rarely, but on the occasion that I do I like to get hold of historical epics. I watched ‘Rob Roy’ over the weekend (perhaps the SNP should start free screenings of this in the run up to the Scottish independence vote?) and the final fight scene made me think a lot about trading strategy.

http://youtu.be/SVaslN1NiT0

  1. You can take many small(ish) cuts in the market and still come back and still win the fight
  2. You can deliberately do something which causes short term damage (i.e. grab hold of your opponents sword which means you cut your own hand) in order to take a strategic position in order to gain a large win (in this case cutting the bad guy in half and saving your own life).
  3. Arrogance and hubris (as displayed by Cunningham in his toying with Roy) leads to basic mistakes as your attention is not focused on playing effectively
  4. Don’t wear platform heels to a duel, they make it difficult to get out of the way of an angry Scottish bloke wielding a sword