Here are my notes from the webinar this afternoon. I’ll post a link when it becomes available.

Intro:
Spent 12 years in interbank market starting at the very bottom of the ladder, working my way up from junior trader before ending my banking career as a prop trader. I’ve spent the 12 years as a market analyst, the first ten mostly for institutional clients. I recognized about 10 years ago that the internet was a game-changing technology that democratized the forex market and tried to steer my employer in that direction, with modest success. Boris’s former employer was a very large customer of ours. For the last two and a half years I have been focused on making markets information more accessible and easier to understand for the private trader.

The most remarkable aspect of my banking career, in hindsight, working at some very large international banks, was how little training traders got. It was mostly a matter of watching and learning along with a fair amount of trial and error. The lack of training was far more expensive for the banks than had they spent a few weeks of extensive mentorship, but they were making money and if individual traders did not perform, they were pushed out and fresh blood was brought in.

What I think ForexLive has to offer is the fact that we are all ex-traders and we’ve have made every mistake in the book, many more than once. With the benefit of hindsight, we try and help my readers avoid the pitfalls and pratfalls that traders typically suffer through on their way to success.

Based on what the community is doing, what you guys said and what the people who registered are doing, what do you think of sentiment? Is the crowd really wise?
Usually not. In retail sentiment surveys, the crowd is almost uniformly wrong, fading trends until they reach extreme levels, then getting in when the trend shifts or dies.
Traders are always looking for ways to determine volume in Forex, which has always be difficult to compute. Some people use the COT data, others use futures or commodity data to get close. When trying to determine volume, how do you define it? What indicators do you pay attention to?
Volume is very difficult to grasp. Futures can be a window into volume, but they are only a sliver of the market and most would rather trade without commissions, so it is a rough guide. I speak with interbank participants at big banks who can get some sense of volume from their internal flow as well as from the interbank platforms.

There’s been much talk about the G-20 discussions over the past week. What impact do you see these discussions having on Forex? On particular currencies?
These forums, in recent years, have had little impact on forex markets. Back in the 80s. G5 and then G7 meetings sometimes produced pacts like the Plaza accord which were followed up with forex intervention. In recent years, specific forex comments are few and far between. The last meeting with much currency impact at all was the September 2006 meeting in Singapore where the ECB and BOJ tried to talk down EUR/JPY from close to 150 with little success. The focus tends to be on macro issues like pushing China to allow more exchange rate flexibility, usually for naught.

More importantly, you can often get a sense of the market’s position ahead of these meetings as there is always a bit of trepidation that the G-whatever will actually make some currency pronouncement. EUR/USD saw some weakness late last week ahead of the meeting.

In a world of EAs, robots, automated trading and other indicators, how much does psychology really play a factor in trading behavior?

My expertise is elsewhere, but in general, systems are programmed by humans. They rely of technical analysis. Technical analysis merely graphically represents psychology. Algos tend to think less, and thus they don’t out-smart themselves. They are not afraid to buy high and sell higher, while the rest of us are happy to sell low and end up buying higher later…from the algo…

What do you think is one of the biggest mistake new Forex traders make?New traders, no matter what instrument make mistakes.
o Part of the learning process and difficult to avoid…but those mistakes, if the damage is limited, can be valuable learning experiences.
o The number one mistake new traders make is booking profits too soon and letting losses run too long.

What do you see as the trend with the price of gold and how will it affect certain currencies? The gold trend is higher but we are near an inflection point.
o EUR/USD recently stalled ahead of crucial 1.4865 resistance (the post Lehman/AIG high) and the DXY bounced from the key area of support at 76 cents. Gold did not retest its $1030 high, and have been retracing. The $960/970 level is crucial support in the days ahead if the trend is to be sustained.
o AUD, ZAR and CAD are the most correlated with gold but since oil and gold and the dollar have all moved together, the emerging markets currencies are all highly levered to continued commodities strength, global growth

What economic news do you see looming ahead? I see a very sluggish economic recovery in the US and Europe. Q3 and Q4 will rebound but that is a stimulus-led bounce that is likely to stall early next year.
o Unemployment will stay stubbornly high and consumption will be lower than normal.
o Emerging markets will suffer as demand from the other emerging markets will not be sufficient to keep the high levels of growth presently built into market prices without the usual high level of demand from the US. China has added capacity during the downturn and there will very likely be insufficient demand to absorb that output. No emerging markets miracle.

Can you talk a bit about the emotion of trading? I tend to hold on too long and wait to get out. Emotion is by far the most difficult for traders to control, both new and old.
o I spent years in dealing rooms with all kinds of traders and I can truly say I can remember one, out of the hundred or so pros I worked with having the cold-blooded approach that every trader would kill for. It helps to have years of experience, loads of money to fall back on and a devil-may-care attitude. Needless to say, I learned more from him than all the others combined.
o Today, I don’t take forex positions. I find I have still not been able to view the markets without seeing through the prism of my position. With no skin in the game, I have only my reputation at stake, but I am able to view the market with minimal bias (everyone has built-in biases).

What’s your opinion on collaboration in Forex trading? Could traders working together really move the market? To an extent, but beware of group-think.
o We use market contacts to pick up flows, find out what central banks are doing from day to day, where orders are placed above and below the market. These factors can help you plot your trading plan. If you know where a cluster of stop-loss orders are place, you may want to take advantage of that information to take advantage of the market’s in exhaustive attraction to stops to take a fresh position at an attractive entry level. (Market overshoots level on stops and then reverses…)