The Aha! experience
- No one can teach you the one thing that will make you a good trader
- It takes time to mature
- Mentors can provide objective advice
- I’m going to skip a bunch of this chapter - it’s mostly motivational gobbledygook
- Traders often move to lower TF and bigger positions sizes when they should do the opposite
Chapter 2 - a trading system
- DT uses ‘real time' analysis
- His approach is discretionary
- In fact he dismisses mechanical trading as a myth!
Real time
- There are many real time info sources that contribute to the currency markets, like instruments in a symphony orchestra
Practical Aspects
- DT gives us his plan
- Have a business plan
- What-if scenarios
- SWOT (strengths, weaknesses, opportunities, threats)
- Market research
- 4x1 strategy
- One currency
- One lot (a ‘small’ position size
- One direction
- One percent (assuming he means position size?)
- Hopefully it’s clear that DT is a position trader. How much discretion can you need to do this?)
- Median trading
- This is what guides DT’s ‘nitty-gritty’ decisions
- Price always reverts to a median
- Intraday pricing is virtually random
- Instead identify ‘buying and selling price levels’ of ~50 pips
- Depends on account size, gearing (DT’s term for leverage), short-term price behaviour
- This allows flexibility, room-for-error
- DT uses a timeframe that he ‘feels is manageable’ because he can relate ‘cause and effect’ where cause is info and effect is price changes
- If there is no such causal relation DT calls it noise and ignores it.
- “No one can tell you what is happening all the time. Most of the time it’s just randomness”
- Price frames - the most relevant factor is the distance a price moves (yeah, momentum)
- “I can also anticipate price changes based on known future events.” (prove it)
- Relational analysis
- Fundamental analysis
- the more relevant analysis you include in your trading decision-making the better the decision-making is going to be. (the big problem with this is is the word ‘relevant’ how do you define that)
- the meaningful relating, one to the other, and all to one, of Price, Event, and Time (PET).
Simplification
- There are buyers and sellers and sometimes the market moves up and sometimes down
- Too simple
Price depends on perspective
- Prices may seem high for those with a short time frame but low for those with a medium or long horizon
- PET - you must see them as a single entity and you will understand the message the market is sending you (hmmm)
- Relational analysis gives you ‘clues and answers’ that will make you money (bah?)
- With practice you will ‘feel the market
Risk management
- DT focuses on low leverage more than stops
- ‘Cut your losses and let your profits run’ is subscribed to in principle but its often misunderstood (because it’s a meaningless adage without context)
- I have a different approach using, multi entry, low gearing strategies that do not stop future profits by cutting existing temporary losses (good)
The right view
- In science, the larger your perspective, and the more relevant information you incorporate, the better (more accurate) your conclusion (not always)
- To his credit DT admits that too much info is incapacitating - you must strike a balance (a tedious, tenuous balance)