Institutional Equivalent Education?

Didn't convince me because he would rage for ages in the free webinars, about indicators (but have an indicator ridden chart on show) and about the use and abuse of MACD indicators, oscillators and moving averages but totally misunderstood or misrepresented their use by professionals (and we know they are used by professionals).

We know that if you just trade moving average crossovers you will loose money in the long run! Also on the charts were 'IMA's' or Institutional Moving Averages. when I asked what they are I was told I would have to sign up for the class! Sounded like 'snake oil' nonsense to me.

Boris is a real person. I don't agree with every thing he says and in many respect is Ray's competition. We know who Boris is, we can criticise on forums like this. "Ray" hides behind his fanboys in the Compass Institutional prop room and non disclosure agreements. I don't think that is even good for Ray in the long run, really.

Futex will shortly be offering Price Ladder training, from their offices in London

http://www.futexlive.com/futexlive

I disagree, you get yourself a shitty little micro account and learn the ropes that way, repetition, reinforce the right behaviours, then build the account slowly. Learning doesn't mean copying an educator exactly -impossible, it's learning the language of the market, you use and modify what feels right for you -(which could be wrong of course but you'll find out from the well kept stats that you will be keeping and modify as you move along).

I agree actually and unless Ray etc are getting 'students' to create and submit trading journals then they are perhaps not getting an education. And to do this you have to get involved whether demo's or micro lot accounts.

I would like to be able to sit behind Ray and watch him actually trade, whether it be price ladder, or charts. That I think I would pay for.

You can also google past and former members of the prop room, and not always get favourable results!

Hi, thx Ian for your answer, and I want to reinforce the hostwey idea.... If I could, if I would granted the CHANCE to sit behind someone like Ray, and to be a chatty type guy, which like to talk and explain the thought process, I would be so so happy, and I would thank to all the gods in this world.

It is quite funny that Hostwey talks about indicators on Ray's charts in the Webinars. I don't know where Ray got the idea from, but he thought that that would make people more comfortable. He has designed several mini-methods with indicators for people who can't read the price action or suffer from paralysis without an indicator telling them to enter.
I have always been against them since A). It gives a false impression
B). It doesn't help people break away from indicators
and C). Those mini-methods don't work as well as the ones he primarily teaches.

Hi Christy,
Sorry, but sitting behind/beside somebody only works if :
A). You have had some training so you speak the same language. The vast majority of retail traders don't understand the language of institutional traders like Ray.

B). You have similar personalities so that your preferred trading style is similar. I could sit beside Eusebio and still not be able to improve my trading. His style just does not work for me - I wish it did! At least Ray teaches many different styles, even some that use indicators for those who can't give them up.

All sounds very odd.

Back in early February I said I was reading a book on psychology and trading. Since then I have taken what is considered to be the most accurate psychological test and got my scores back.
I really didn't understand how differently I think and feel compared to the average person (I prefer the term average rather than normal in this case). I have been thinking back at notable episodes in my life where I completely misunderstood people and now I see why.

When I get time I will work on a short document about how my personality affects my trading. Because I score very low in both 'Warmth' and 'Feelings' yet average in 'Vulnerability', I am probably just the right sort of person to be able to analyse themselves from objective data. Unfortunately my lack of feelings means I don't empathise with other traders when I see a chart, thus I don't feel their pain when they are trapped (or feel that much pain when I am trapped). Thus I miss out on some good trades exploiting trapped Traders and also stay in some bad trades because I don't feel the pain that strongly.

I strongly believe that knowing my weak spots and natural (for me) tendencies will help to improve my trading, though I accept that this may not be the case for everybody. Certainly if you are a little like 'Mr Spock' of Star Trek, or extreme in other areas of personality then I think reading the book and taking the NEO-AC (otherwise known as NEO PI-R) test will be of great help.

The book is The Mental Edge in Trading by Jason Williams MD (Psychology).

The author is the son of Larry Williams (several times champion Futures Trader) and the book contains specific descriptions of how personality affects trading with suggestions and case studies of Larry and some other high profile Futures Traders.

I usually only post something from Boris Schlossberg when I disagree with it, but here is one thing we both agree on:

"When it comes to trading, the ability to recover is far, far, far more important than the ability to win. No matter how hard you try, no matter how good you are, no matter how robust your strategy -- you will lose. And it's at that point that true success will be determined.

........ I've learned over time that recovery from your trading losses depends far less on you being "right" and far more on you being "small". Smaller trades lead to smaller absolute losses which give you time to assess the markets with a much cooler head. You don't rush into the same trade, you don't try to win it all back at once and you don't carry the burden of your losses for days on end. ......you realize that the darkness passes and tomorrow brings another day of opportunity to go toe to toe with the market."

I would like to remind readers, that because FF classify me as Commercial, I am unable to reply to any Private Messages.
If you want to contact me, use my email or my Skype.
ianf0ster at aim.com or ianf0ster both of those have a zero in my name.

Boris Schlossberg is being sensible this week. Guilt is sometimes a problem for traders including myself. I sometimes find myself taking a trade that I know, before I take it, that I should not take it - it doesn't fit my trade plan, I have not researched it, it is nowhere near the levels where I am looking for trades etc.
Here is Boris's take on it , he calls it the Chocolate Chip Cookie trade:
"
The Chocolate Chip Cookie Day Trade

If you are a red blooded American male of a certain age eventually your metabolism will simply stop working. It doesn't matter that you bench press 350 pounds every week. It doesn't matter that you take 20,000 steps each day. It doesn't matter that you eat only boiled eggs for breakfast. You will start getting fat. The belly will expand, the suit pants will be a little tighter and you will look nostalgically at those high school photos of yourself when you could swallow a whole pizza for a snack and still maintain body fat of less than 5%.

Such is life. If you want to stay anywhere near your fighting weight you will have to become much more disciplined about your diet. You will eat only two meals a day. You will avoid desserts like the plague and carbs will now become your enemy number one, even though without them you turn into a raging maniac at work and home.

But no matter how well you diet. No matter how healthy you eat. No matter how committed you are to your daily regimen you will come across the magic smell of a chocolate chip cookie sooner or later and unless you have the willpower of Gandhi you will take a bite of it and wolf it down like the red blooded American male that you are.
If you day trade 20 hours a day like I do than this is what to do.

You keep your size small. You always honor your stop. You keep an ear out for news and have one eye on price action at all times. And most importantly you trade your setup. Over and over again.

But sometimes the markets are slow. There are no setups to trade. You get restless. Antsy. You become bored and you need to connect with the market to keep your focus sharp. So you start playing the "what if" game. What if I went long here? What if I went short the cross to offset it? Looks good -- let me just give it a try...

There is no day trader in the world that hasn't done the "bored trade" at least once every few days or weeks. The "bored trade" is the chocolate chip cookie of day trading. You know it's bad for you. You know you will just pay for it with empty calories or lost dollars but in the end you don't care. You need to do it. You need that small hit of guilty pleasure.

And you know what?

That's ok.

In trading as in life you should never let the perfect become the enemy of the good. We are not robots and don't have to be in order to succeed. As long you eat just one or two cookies, or make just one or two dumb trades a week you'll still maintain your fighting shape and will be ready to tackle both life and markets no worse for the wear."

There have bee 2 out of the ordinary interesting things Ray has said recently:

1. It seems that Ray is not a robot, and does actually have some psych problems (deep down):
His bosses asked him to rescue a position of another trader which was 4 million in the hole.
He did so, but he took a cost of 26million to get the trade set up the way he wanted, plus it was now totally directional - no hedge whatsoever.
Naturally when he is that confident, the trade worked out and his bosses will get a nice boost to their Profit participation, however Ray was in deep trouble. The Risk Manager told him off because of the huge risk he took (I guess he is lucky he was not fired - he has told us about winning traders getting fired for taking too much risk or for disobeying rules). He told us it was a sort of almost certainty, but bet your job trade!
However he was told he would get no Bonus (I'm not sure if this means for the month or for the year). Strangely he didn't seem too unhappy about it (perhaps he is confident he can trade his way into their good books again), but nor did he seem at all repentant about it (obviously his ego is bigger than the influence of a Risk Manager).

2. Although Ray didn't specifically mention it - just that he had see an educational webinar, he must have viewed or even attended Troy Epperson's webinar this week. Although Ray does use 'Footprint charts' (both NOFT and OFA) to show us Order Flow, he was at pains to point out to us that A). Troy's claim that OrderFlow Sequence Volume precedes price was quite impossible and B). That a trader just using the tools shown on the webinar would almost certainly be losing moneyand C). That a trader just using Price and Volume could get almost as good a trade entry in most cases - so 'Footprint Charts' although useful are not absolutely required.

Having watched a part of Troy's webinar, I can see for myself (any Ray student can) how ignorant he is. In that he doesn't understand the difference between Exhaustion and a withdrawal of Market Maker Liquidity, much less what Ray teaches is required to be seen before you can be confident that a Withdrawal of Liquidity has ended. I was quite pleased about this, since I find Troy very annoying to listen to.

It just shows that although there are now a few people out there teaching how to use various 'professional grade' tools. There are very few (if any) other than Ray who actually understand how the Market works and thus what the tools are actually showing.

The latest nonsense from Boris Schlossberg (I don't understand how somebody who at least appears so very ignorant can make money trading, much less that people would actually pay money for him to teach them):
"
What's Better - Technicals or Fundamentals?

If you are a diehard fundamentalist like I once was, than this recent piece by Morgan Housel from Motley Fool really makes you think twice. In a column published this week Mr. Housel noted a few inconvenient facts about investing.

"1. Coca-Cola is fighting 12 consecutive years of soda consumption decline. Its stock is at an all-time high.
2. Tesla is changing the world, and orders for its new car are off the charts. Its stock is lower than it was 18 months ago.
3. Cigarette consumption has dropped 44% since 1981. Altria stock is up 71,000% since 1981.
4. WalMart net income has tripled since 2000. Its stock has lost 1.5% since 2000.
5. Apple has earned almost a quarter trillion dollars of profit since 2012. Its stock has barely budged.
6. Amazon's profits round to zero since 2012. Its stock has tripled.
7. 2009 was one of the worst years for the economy in a century. The market rose 27%.
8. 2015 was a good year for the economy. The market rose 1%.
9. Brazil's economy is a disaster. Its stock market is flat over the last two years."
To which I can add my own little tidbit.
The US economy is leading G-3 in growth, rates and monetary bias and yet the US dollar is down more than 1200 pips against the yen and 800 pips against the euro this year.

So much for the forecasting power of fundamentals.
But technicals are of course no better. How many failed Head and Shoulders, how many failed moving average breakouts, how many busted Fibonacci retrace patterns have you seen in your life? And if Elliot Wave was so great, name me one, just one money manager that runs a $1 billion dollar book using that technical philosophy alone. I will wait another hundred years and you still won't be able to provide me with an example.

Technicals are just a shade better than astrology in their ability to predict anything with accuracy.

The reason both disciplines fail so miserably is that context is everything. Investing is not logical -- it's psychological and once you understand that you can make much more intelligent decisions.

While in and of themselves fundamentals and technicals are often worse than worthless, taken together they can become trading magic because they can provide that most elusive and valuable property of the markets -- context.

The classic good trade is often described as one where technicals and fundamentals confirm each other -- and that is indeed a good set up. But such combinations are rare, precisely because markets are forward discounting mechanisms and reasons for the rally or the selloff are rarely evident at the time of occurrence.

Instead my favorite setup is when the fundamentals go one way and technicals do not confirm the move. This week's action in USD/JPY is a prime example. The data from US Retails Sales was horrid and the change of posture to dovishness from Lockhart one of Fed's most hawkish stalwarts should have been good for 100 point sell off in the pair. But the pair did not budge, instead it rallied in face of all this negative news. When price action runs counter to the prevailing narrative -- pay attention. That is often a great signal for a move against the consensus view. That is when you often get the best possible glimpse of "context" in action.

So next time someone tells you that they only trade on technical or that they have never looked at chart in their life -- run the other way from those people -- because those type of traders have basically completely misunderstood the game that they are trying to play."

Do I need to point out the flaws in this supposed critique of using Fundamentals for Trading?
- Well to start with some of the'facts' are untrue e.g Worldwide cigarette consumption has NOT dropped 44% since 1981. But even if it had what matters to a cigarette manufacturer/Brand owner is the net profit margin times the sales, less court settlements for customers killed. It was well known back in 1981 and long before that cigarette makers were deliberately killing their customers ( or at least aiding those customers to kill themselves). This caused many investors to shun such stocks which in turn meant that for the profits they produced they were way undervalued - which is no longer the case because people are like Turkeys before Thanksgiving and Xmas in thinking things will just go on as usual.

My main point is that you Can trade profitably using just Fundamentals - but only if trading in the longer term timeframes.
You Can trade profitably just using technicals and ignoring all Fundamentals - but only if trading in the shorter term timeframes.

But why would yo do either of those when you can make more money in any timeframe by combining a knowledge of both Fundamentals and Technicals?
For example when Trading the Crude Oil Inventories (my most successful trade almost every week). There are usually at least 2 trades offered, A short term one based purely upon the reaction to the figures (i.e. not a fundamental), then a longer term one where the Technicals are combined with Fundamentals such as Intrinsic Value, plus Liquidity Levels etc.
Which makes most money? - Well almost always the 2nd one does because the move tends to last longer/further and the trade is more precise so that I can use a smaller SL which in turn means larger Size.

The most common wish amongst would-be traders with a scientific background is to have a defined cookie-cutter system where they just have to follow the rules. Unfortunately the vast majority of such systems don't work (for anybody), and even those that do work only do so for particular personalities!

So we are left with the daunting task of adopting or developing a discretionary trading methodology. I believe that a discretionary methodology has to be almost unique to each trader as does Peter Davies (of Jigsaw), in the video link below he shows why this is so and explains a great amount about how to go about it.
The good news for those reading this, is that you don't need to worry about education - Ray is probably unique in that he teaches ALL the potential skills you would need to choose from. Peter Davies explains why it is that you should ONLY choose to implement some of Ray's teachings - which addresses the most common complaint about Ray - that he teaches too many different techniques so it would take decades to master them all.

Here is a link to the Peter's webinar recording on 'Developing Your Own Trading Style' : https://www.youtube.com/watch?v=D-lRMSILlU0

Hi Ian this was very interesting... I'll look more into Peter Davis.

Boris Schlossberg poses more interesting thoughts this week.

"Spray and Pray

When it comes to trading tactics there are only two moves you can make. You can stick to the single entry/single exit strategy or you can do multiple entries into a position until you get a better blended price that helps you turn a profit. I like to call that method "spray and pray".

Price action by its very essence is probabilistic. It never follows a clear and steady path. That's why the multiple entry method is so compelling because in theory that is exactly how you should respond to probabilistic opportunities. You can never know the absolute bottom or absolute top of a move so it's better to spread your bets, to cast your net wide so as to increase the chance of catching the right price for the turn.

As seductive and as rational as that sounds, the multiple entry tactic is a gateway to trading hell not because of the math involved but because of the ever present psychology of the trader. Whether you like it or not, the more you allocate to a position the more attached to it you become. It doesn't matter whether you are a seasoned hedge fund manager or a rookie trader we are all subject to the sunk cost bias. Sunk cost bias is simply the impulse to avert recognizing losses. It is perhaps the strongest human behavior pattern in behavioral economics and is primary reason why all classical economic models fail so miserably in predicting outcomes.

This week brings the news of Crispin Odey, one of the more colorful and well known UK hedge fund managers who, in the past four months, lost a decade's worth of profits betting against the Australian dollar. A prime example of sunk cost bias as Mr. Odey becomes the newest poster boy for the "spray and pray" disaster.

Multiple entry tactic is a perfectly valid way to trade. If you are a fully programmatic trader, it may even be superior to the single entry/single exit approach because of the probabilistic nature of the markets. But if you are trading on a discretionary basis you simply cannot use that method no matter how many times you tell yourself that you have it under control. There will come a point when you will pull a stop and the multiple entry strategy will turn into yet another massive average down pile of losses that will end in a margin call. That will always happen. Believe me. That's why the single biggest reason to never use "spray and pray" is to make sure that you are never in the position of turning the gun on yourself."


If Boris is right or wrong really depends upon the personality and actual accountability of the trader, which is why according to Ray most institutional Trend Following and Prop style traders actually trade in the way he advises against i.e. Multi-entry.
Now Boris and probably most retail traders would not actually do it the institutional way: set a maximum risk for the whole reverse pyramid of entries and a single exit point if "wrong" and stick to it. But obviously this is easier for institutional traders who have a risk manager breathing down their necks.

So if you can duplicate that environment, or if you have an absolutely iron discipline, then there is no reason to forego the advantages that the reverse Pyramid entry brings. But it certainly isn't for me - at least not at present !

"You can never know the absolute bottom or absolute top of a move so it's better to spread your bets, to cast your net wide so as to increase the chance of catching the right price for the turn."
That sentence encapsulates perfectly the mentality of the retail trader!

Here’s latest ramblings from Boris Schlossberg plus my comments in blue – please do not take this guy seriously!

“How To Double Your Money with Reasonable Risk

First things first. If you haven't been able to make 1% per month for at least 6 months running on no leverage then your prospect of doubling your money is slim to none. In order to really "gun it" in FX you need to have well designed day trading system that has stood the test of time under real market conditions.

But if you can upload your results to myfxbook and can show to yourself that you managed to eke out 1% a month for 6 months or more then you have a chance to take your trading to the next level. But not before you do, you need accept a very important fact. In your quest to double your money you must be fully prepared to lose 50% as part of the process. That's simply the basic math of trading. The best traders in the world have a runup to drawdown ratio of 2 to 1 so that if you realistically look to make 100% on you money then you have to prepare to lose 50% in the pursuit of that target. In short doubling your money is a strategy to employ only with high risk capital, but since many of us in FX are comfortable with such risks here is a couple of ways to make it happen.

Theoretically it may be possible to achieve these results via swing trading, but since I focus squarely on day trading let's just use that approach in our discussion. Day trading first, foremost and always means small profits and short stops. It's all about controlling risk, which is why if you haven't been able to prove to yourself that you can consistently cut your losses you will never be able to double your money. If you managed to produce 1% per month on a non levered basis (meaning that every trade you make is no greater than the value of your account i.e. a 10,000 unit trade in a 10,000 USD account) then the path towards 100% is relatively straightforward. You simply increase your lever factor to 10:1 and if you can replicate your prior success then you will achieve 10%/month or more 100% per year.

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Ian’s comments: Boris is confusing Leverage with Risk (and not for the first time): If you take him at face value then he is saying you need a $100,000 account in order to trade a single standard Lot of Forex (assuming it is a USD based pair). Well good luck making any money with that!
Later on in this piece he ditches Leverage and focusses on max % of account at risk – which is what he should have done in the first place.

The other problem with his paragraph above is that as you increase your risk and/or your account size, then if you are a human being (i.e. have emotions), you start to hit psychological problems. It is never as easy as he portrays. In fact the easiest way to leverage your profits is to learn to ‘moonshot’ (as Ray calls it) - that way you can have some really big winning trades >20% of account, without increasing the initial or maximum risk and just ‘investing’ a portion of your open profit in the trade at suitable points.
Both Ray and Eusebio Nanni are masters of this technique.

Back to Boris:
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Of course that's easier said than done. First and foremost such high leverage approach should be done in what I call one shot/one kill manner. Ideally you should trade only one currency pair, no more than two times per day with a single entry/single exit approach. Let's say you make 20 trades per month and each trade has a -20 pip stop and a +10 pip target and 80% win factor. Basically every time you trade in this manner you risk 2% loss to win 1% and if you are successful 8 out of 10 times at the end of the month you made 8% which will get you very close to doubling your money by the end of the year. If you were even more aggressive you could increase the lever factor to 15:1 risking 3% on each trade with 1.5% payoff on each win for a target of making 12% a month. But that would be the absolute maximum level of prudent leverage. At 3% risk per trade you would be down by 15% after 5 consecutive losers -- something that can easily occur several times a year even in the highest probability strategies.
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Ian’s comments: Notice that he is now talking about %of account at risk and is now posing a situation where if trading a standard Forex Lot you would have a $10,000 account size (based on 20pips = 2%).

Back to Boris:
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If you simply can't trade in the one shot/one kill manner, if you have to approach each trade in a more probabilistic fashion doing multiple entries in order to achieve a better price for an exit (what I facetiously call the "spray and pray" method) then you have to use a very different leverage scheme. Suppose you use a system that averages into a trade a maximum of three times. Under such conditions you really can't level more than 1:1 on each trade. That's because your total lever factor on each full position is actually 3:1 and your total risk reward becomes much more negatively skewed. In the same -20 Stop +10 Target structure with a 3 point entry at 5 pip interval your loss is always a max loss of -45 pips while the gains vary between +10 and +15 pips creating a risk reward skew that is 3:1 rather than the 2:1 of the single entry/exit method. Still some traders swear by the "spray and pray" approach, but if they want to use it to double their money they have to be extra vigilant about leverage and stops.
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Ian’s comments: Oh Boris, please don’t bamboozle us with dodgy arithmetic!

Ray would never advocate this particular trade management, because it cuts the winners, however let’s just correct the arithmetic:
Potential Entries at P, P-5 and P-10
Stop Loss (all entries) at P-20 so max total risk = 20 +15 +10 = 45 pips (so far so good!).
Profit Take (all entries) at P+10 so max total profit = 10 + 15 + 20 = 45pips (i.e. R:R improves!)

Potential Reward to Risk : A). If only 1st unit entry is hit (which is the same as the ‘one shot’ method) = 1:2
B). If 1st and 2nd entries are hit, risk = 35pips, potential reward = 25 pips = 5:7
C). If all 3 entries are hit, = 1:1

So in fact the ‘Spray and Pray’ approach (actually almost an institutional approach) increases the aggregate payout without increasing the max %risk.

Back to Boris:
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In the end like all things trading the goal of doubling your money is simple but not easy. First and foremost you need to develop a strategy on low leverage that actually proves its mettle under real market conditions. Then you can ramp up the lever factor in a judicious fashion and make a play for the 100% return but you must always take your stops and be willing to lose 50% of your account in the process.”

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Ian’s comments: I have no idea where Boris got his ‘runup to drawdown ratio’ from. It is obviously not from traders like Ray, Eusebio or their successful students. There should never be a need to risk losing 50% of your account when you have a successful methodology. When you can ‘moonshot’ a 2% risk into a 20% even a few times per year (both Ray and Eusebio show that such a trade is available even in a single market on better than a monthly basis), why would you ever want to risk a 50% drawdown? - It is just crazy!
Perhaps I should start calling him ‘crazy Boris’.