I’m tomorton, Tom for short. I started life in sub-polar North West England. The North West is cold and wet but friendly. I’m now in the sub-tropical South West, which is warm and wet and friendly. It’s also roomy and very laid back.
My early employment was in local government. I was one of those cheery inspectors who come to your workplace and tell you you’re breaking ‘ealth and safety rules. I also used to go round to people’s houses and tell them to play their music quieter, and stop their dog from barking, and stop having a smelly house that sickened the neighbours.
Needless to say, my colleagues and I were welcomed wherever we went and afforded the warmest hostility.
As soon as I’d built up a decent pension pot I jacked it in for a game of soldiers (Eng. colloq.: an activity which is a waste of one’s time). Needing gainful activity, I scanned the small ads for business ideas not involving much hard work. I came across an options trading course in Somerset. It sounded very easy, making money from home with just a phone call to the brokers: how nice I thought. I didn’t take the course but the ad coincided with the start of the tech boom in 1998 and……
Trading – the early years
……. I started buying the tech shares that were going up, and selling them 1 or 2 weeks later. I didn’t know about trading systems then, I was the ultimate novice. I could see the markets were strong but believe me, I didn’t realise it was just a bubble. I never looked at any index chart.
Happy times. A company chairman only had to mention the possibility of offering some service via the new website and the shares would rocket.
Then the party was over and “Show Me The Money” was cancelled. I had done alright at school and was regarded in my earlier profession as a clever and steady worker, but nothing of this was of any use in trading. I struggled on with share trading against a declining market and then opened a spread-betting account so I could short the falling shares. My first SB company wrote to me on 12 March 2003 confirming my account – check your FTSE100 index chart for the significance of that date.
About this time I thought I had better learn about TA and take trading seriously so I could gain back all the money I’d lost as the tech bubble relaxed. I got a better TA programme and started serious reading. The most influential authors for me then (and now) were Marc Rivalland and Mark Douglas (later I would add Linda Bradford Raschke, Steve Nison and Thomas Bulkowski to my shortlist). I joined shareholders / traders groups in the area (our T2W friend timsk was very active in one of these). I spent hours on ADVFN and T2W forums.
I mostly swing traded FTSE350 shares (I am rubbish at intra-day, I always end up treating day-trading like a point ’n’ shoot video game). Finding that individual shares were more volatile than their sector and market indices, I thought it would be less risky to swing trade the FTSE100 instead.
I adopted Rivalland’s swing methods and eventually shifted all my activity into FTSE100 SB trades. But ironically, though I could trade long and short, if the FTSE went up I made a profit and if it went down I made a loss.
I also tried interesting variations of trading systems often based on clever TA and fancy indicators – hikkake patterns, pin bars, results trades, 1-2-3’s, some of Alan Farley’s patterns for swing traders, some of Raschke’s – interesting learning experiences but no significant additional profit.
I did eventually make more consistent money Big Ben trading the FTSE – opening range break-outs – but what bugged me was that the losing days were random to my eyes, I couldn’t distinguish their TA from the winning days’ even after the event. One day I might go back to it……
……but in the meantime I have found greater success trend-following the major Forex pairs.
They usually offer pretty easy TA possibilities for trend-followers – less volatile than the FTSE, less news shock risk than shares, longer trading hours and tight spreads. My entries are still pretty conformist with Rivalland’s methods. Holding periods are unlimited, with trailing stops and advancing targets. I don’t use any indicators except MAs, excellent for confirming trend direction and reliability. My TA is firstly from weekly charts, then daily for entry signals and initial stop levels. Intra-day charts are just to post-mortem what happened to a trade.
I don’t do any intra-day trades. I only open trades at the London Close. I’d rather be in cash than ride through news event such as NFPs etc., dependent on the pairs I’m in at the time.
I have been shocked to see the amount of TA and trading knowledge I have had to put back on the shelf in order to be profitable. But I have been very happy to dump a raft of pseudo-diagnostic indicators.
- Focus down ASAP on just 3 or 4 major currency pairs to reduce risk and decrease trading frequency.
- Increase profit with increased stakes.
- Maybe explore some variations on Big Ben trading EUR/USD etc.
- Continue to not trade full-time. Can’t imagine anything worse than screen-watching: I’d rather have a full-time salaried job all week. I do have a part-time job but if not at the office I prefer to put my orders in and get up on Dartmoor.
Tips to pass on
- There is only one way to be a poor trader, and that is to get wiped out while searching for your own “way”.
- Learn everything you can take in about TA, the financial markets and trading, then throw it all out and start again with just price on the chart. Trade on price and work out what additional information you would have needed to make your bad trades better – add this to your analysis one factor at a time.
- The implication of this is that you must make many unsuccessful trades in order to advance your performance. And the job is to stay in the game long enough to achieve this.
- Understand that trading is not like other ‘jobs’. In any other profession, more knowledge, more complex activity and more time input doing the job, together lead to greater reward. Although trading has to be treated seriously and you must absorb infinite information about our chosen ‘job’, trading doesn’t follow this relationship rule.
- Trading is more psychological than technical. Risk and money management are vital and are primarily mental disciplines. We’re all looking at the same chart but your way of trading has to match you as a whole person.
- There are countless ways of trading successfully, what makes it the hardest job in the world is that we each have to find our own.
Finally . . .
I hope the above is encouraging for everyone, especially for traders who are not yet reaching the levels they thought they should have and are perhaps even thinking they must quit. A lot of newbies seem to think they have to be good day-traders, when that’s not the only route to the top of the mountain.
Tom acknowledges the influence that Marc Rivalland has had on his trading. For anyone unfamiliar with Rivalland and his influential book, here’s a link: Marc Rivalland on Swing Trading. Additionally, Tom makes reference to a trading methodology known as ‘Big Ben’. For anyone interested in learning more about this, here’s a link to a bespoke thread about it which Tom started in 2010: Big Ben on the FTSE100