PRACTICAL ASPECTS

Let's take a very brief look at some of the practical aspects of my approach to trading. Remember, it's mine, you can use it, but adapt it, personalize it to fit you. 1. Business plan - My trading system starts with proper goal setting and a well-defined business plan. Understand that you have embarked on a business venture. Unrealistic expectations can be one of your biggest enemies. What is it that you want? Not what you think you want or think you ought to want. What is it that you really want? You will be surprised how, after a little examination, you may come up with goals that are different, even very different from what you thought. I want to make money is not a goal. A goal is I want to make money because….or I want to make money in order to….and that ‘because' or that ‘in order to' is critical to your trading success. It is about being realistic and honest with yourself. Whatever your goals are, make sure you keep your feet on the ground. Always ask yourself this simple question: Am I trying to achieve the impossible? You cannot make returns of 100% on capital per month. Yet there are service providers selling this absurdity to the public. You may be lucky and do it once using high gearing but I guarantee you this: you will not do it month after month. Unscrupulous service providers are after your money. Don't believe their promises or stories. "Open an account with just $500.00. It gives you buying power of $100,000!" This is a business - your business, don't confuse it with buying a lottery ticket while running errands. Your business plan is an organized process to work towards those goals. Both the setting of realistic long-term goals and the concept of a business plan should place you in a frame of mind that will increase your chances of making a success of your trading. The business plan should include certain "what if" scenarios, the usual "S-W-O-T" (strengths-weaknesses- opportunities-threats) analysis, market research and several other aspects peculiar to a trading business. Reading this book will contribute to your general market research and the development of a profitable business plan you can implement. It even gives some strategic guidelines and methodological pointers. It is not a 1-2-3-you're-a-millionaire-if-you-do- exactly-this-or-your-money-back-guaranteed-guide. 2. 4x1 strategy - To implement my business plan, I have a 4x1 strategy, one currency, one lot, one direction, one percent One currency Concentrate on one currency. Get to know it. Don't jump back and forth. One lot Low gearing. Small position size. One direction Trade in the direction of the "fundamental" trend. Be disciplined and patient. One Percent (1%) Understand profit – what it is and when to take money off the table 3. Median trading - The specific methodology I use to make the nitty-gritty trading decisions I call "median trading". Those of you who may have been around the block a few times, will immediately recognise that the parameters of this methodology are neither original nor new and are used by other successful traders. It remains an interesting, and perhaps instructive fact, that many successful traders use much the same basic principles. My 4x1 strategy is deployed within a comfort zone I get by ‘snapping' a static picture of the market and fixing it in my ‘median grid' based on the principle that price always reverts to a median. My median grid is divided into price levels. This is an important concept. Exactly because intra day pricing is virtually random I substitute fretting about entries and exits at specific prices with a system of identifying ever changing buying and selling price levels of 20 – 50 pips, depending on relevant factors such as account size, gearing and so on. This provides a comfort zone because there is a high probability that immediate future price action will occur within this demarcated zone. It provides flexibility and room-for-error (another very important concept in discretionary trading), in which both discretionary and non-discretionary technical trading produces good results. Price levels, rather than specific prices at specific moments in time are buying and selling zones. This also determines the time frame I use. I use a time frame that I feel is "manageable". This means I can relate cause and effect (information and resulting price action / price changes). When I can't I can't. I call it noise and ignore it, rather than find a reason just in order to say I have one. I accept it. The market moved. That's it, let's get on with things. No one can tell you what is happening all the time. I can also anticipate price changes based on known future events. I can gauge the size of the price move based on the impact of the event. I can also discern between noise (meaningless price changes), trend following / supporting / enhancing price changes or trend changing price changes. 4. Relational analysis - Unlike many other good, successful traders who rely solely on technical analysis, I make a lot of use of fundamental analysis (anything that is not technical or psychological). I believe in a holistic approach, the more relevant analysis you include in your trading decision- making the better the decision-making is going to be. Relational analysis is what brings it all together, the meaningful relating, one to the other, and all to one, of Price, Event, and Time (PET). You must learn to ‘see' connections which are not obvious. This applies especially to major fundamental trends. What are the factors at play today that will cause us to look back in three months' time and with the perfect science of hindsight see the obvious trend. If you can see the trend developing with that type of foresight today you are 90% of the way there.