Making Money CAN'T Be The Goal

Here is one of my posts from a while back. I was thinking of this today, and instead of rewriting, I just cut and pasted...and fixed some grammar errors.

Monday, July 24, 2006

MAKING MONEY IS NOT THE GOAL OF SUCCESSFUL TRADING, IT'S THE BYPRODUCT

I cannot claim this crazy revelation as my own. I am sure I read it elsewhere and only recently came to understand it as my own. And, I am positive that all those that I read (C.Kirk, Mark Douglas, Marcel Link, et al.) will agree to this:

Making money in trading is hard...especially when you are TRYING to make money. However, if your focus is to make good trades (and THAT truly is your goal) then, AND ONLY THEN, will money be made.

I sit here with a short gold position and I am at least 5 points in the money. I have wanted all morning to add to this position, but there is no good reason to do so..and no good place to re-enter. I simply want to add more to the trade b/c I want to make more money. It's this urge to trade that can kill your account. It has killed my accounts in the past.

A little more....Making the act of making good trades (high probability trades) the goal, makes it easier to make money. When I think..."I just want to make $100 more today.", or "I am adding to my 1 lot and scalping out for 2 more points", it becomes so easy to let money slip away. CHOP CHOP CHOP. But if only I were to wait for good trades to present themselves, I limit my trading to high probability trades. And that's when money comes.

Let's make one thing clear: In a trading day, trades appear dozens of times. If yo are looking at a 5 minute chart, they can appear a hundred times in a day. GOOD TRADES HOWEVER, WILL PRESENT THEMSELVES IN BOLD!!! It's up to you to wait for those trades. Don't take every trade you see, so when the market FINALLY gets to your buy entry point, you are down so much money, or are already leveraged to the hilt, that you can't put the good trade on?!

Good luck, Traders. And remember, just like abstinence (which I am totally against), no one ever got pregnant by NOT trading! You know what I mean.

Andy

and here is a comment from that page, and no, it's not me commenting on my own blog! Notice he logged in as Anonymous, but then signed his name! Funny.

comments:

Anonymous said...

Well said. I've been doing this, off and on, about 20 years and can relate. Remember this is gambling. Don't forget that!!

Also -- a lot of times when you "think" you made a stupid trade - it isn't necessarily stupid -- but rather a casualty of the unpredictable chaos of your chosen markets. It's very very difficult to attain any kind of an edge in this. Do you have one? Also what separates you from the pack? What makes you think you're ultimately going to get rich off of this when everyone else will end up a net loser in the long run? Do you know anyone who makes money consistently trading these stock index futures markets. Not many people do.

I think you're on the right track by limiting your entries to only those with the best chance of success. Less is more. Trading all day long is a losers game as you already know. So is averaging your losers... That's a sure fire way of taking big hits.

phil, nj.

THE PIC: That's Brian in the S&P pit. Bill (BLL under his left arm). You can see Bobby Tee on the right in black, BDO in the center leaning on the cubs machine, and Andy Somethingorother with red hair, and then Matt Morgan (GAN)on the far left. I am guessing that is GEO filling out his trading cards on the left out of the screen shot. The only people who will find this remotely interesting, are the three people writing this blog (me, myself, and I), and possibly another CME trader who stumbles upon this blog.

Scalping

I hate scalping. I am not good at it and it makes me miserable. Scalping contradicts everything I know about my obsessive-compulsive personality. I HAVE made money scalping...but I've lost more! These days, I stick to a much more controlled, long-term trading style. It's what works for me.

Please please please learn from my mistakes. Know your style of trading. Know which style of trading make you happy and balanced, and which makes you go insane.


Good Luck.

Andy

BTW, that's me in the middle of the pic. Just kidding.

Sticking To Your Plan And Your Word

The most common denominator in unsuccessful trading (based on a study conducted inside my own brain, argue if you must) is not sticking to a trading plan. It's the classic, Do as I say, not as I do. Those who do as they say in trading, will succeed. The hard part is, there will be so many teasers and false signs BEGGING you to place just one trade. Double down, add to your losers, trade into economic numbers, leverage yourself silly, don't keep a journal, try to make back your losses. Go ahead...I dare you!

Today is FOMC Tuesday. How many times have I said to myself, "I hate trading FOMC days". The answer is WAY TOO MANY TO KNOW FOR SURE ( I think it's just about every FOMC day that has occurred since 1999, excluding one time in 2003 when I actually made money by picking off an S&P broker who had his hands up at the wrong time and felt obligated to honer the trade...most would not have)

So guess what traders, I will not be trading today!!! Feels great. Except, I am watching the charts and every 3 minutes another PERFECT SET-UP reveals itself. I SWEAR I could make money today....ABSOLUTELY SWEAR I COULD! But I won't even try. Wanna know why? Because most likely, I will make a little...give some away, want to make that little bit back, then end down a little, then try to make it JUST BACK TO EVEN...but then I want to make back my commissions too...then I am in a losing position, I double down..then triple down, then reverse, then reverse my reverse then reverse that...I don't even know which way is up! Forget break-even...I'd kill to just be down a few hundred dollars. Sound familiar?

Instead...

I am breathing....INHALE....EXHALE....BREATHE......OHMMMMMM....

Good luck trading.



Andy

Short Scalp Follow-up...

Here is a great example of why you have to be very careful when you short into a rally (or buy into a sell-off). I shorted the gbp/jpy as you can read in my previous post. Knowing full well that the overall trend in this market has been going up per the longer-term time-frames, I was very cautious in this short scalp. I was not greedy, nor did I keep my shorts on for very long. As you can see, disaster could have struck if I stayed short!

The best way to avoid big mistakes, is to make them once and learn from them! If you have the opportunity to learn from a mentor, or simply from another trader's mistakes, take full advantage (ie, read my blog!)!

Good luck.

Andy

POUND THE YEN (for a second, at least!)

I thought I would post the quick gbp/jpy short I took with a picture of the chart I used to base the trade on. Here you can see the sharp "long-term" 5-minute trend was broken at 6:20 am (8:20 EST) at a price of 228.53 ish. I did not take the trade at that moment, but waited until it bounced back up to that area once again. I took the short @ 2.2849.

Since the overall trend has been up on longer time-frames (see my earlier post on the 60minute chart), I took this as a QUICK and painless short. I used a very close 7 pip 2.2856 stop-loss at 2.2856. I tripled the potential loss of 7 pips to give me a 21 pip profit target of 2.2828. I got out of 80% of the trade there, which took roughly 15 minutes. I have left the remaining 20% of the trade on and will use a break-even stop loss on those minis.

Since it is FOMC Tuesday tomorrow, I am very happy to get anything out of the market. I expect it to be slow today. I will use my discretion to get out of my remaining 20% of this trade during the next few hours.

This is a great example of a good profit/loss ratio. 3/1 is really the minimum you should be going for. Taking a trade against the current major trend is very risky.

That is all for now.

Andy

Confessions of a Trader

This is an excerpt from another blog I write. Sometimes posts are similar. Here is a link to that blog: http://traderconfession.blogspot.com/

Confessions of a Trader

This blog is my outlet.

My name is Andy Geller and I have been in the trading industry since 1997 when I interned for a relative who traded LIVE CATTLE FUTURES (LC) thru a broker at the Chicago Mercantile Exchange (CME). Since the day I walked into my mentors office to see ghostly look on his face as he managed to wipe out over $2 million of profits in one week in the Lean Hogs market, I was hooked. Makes sense, huh?

In this blog, I will give the truth, the whole truth and nothing but the truth...oh yeah..and a ton of opinions too! I "clerked" in just about every futures pit Chicago had to offer, traded in about half a dozen others, and screen traded whatever symbol I could get a good chart linked up to. In the process, I made a lot of money, and lost even more. Thankfully and luckily, most of what I lost was not my own. I am here to let you learn from my experiences, my mistakes and my triumphs.

It is in my losses, and stomach-turning trading mistakes, NOT my winners, that you will hopefull find gold. I cherish every mistake I have made. I own them. They are what give me my winners today!

After trading in the pits for 5 years, I made the transition off the floor and onto the screen. I have tested pretty much every platform out there for stocks, options, futures and forex. I have charted every method available, found the things that work for me, and the ones that continue to boggle my mind. I respectfully fade all fundamental news.

I spend a great deal of time charting various markets, recently the forex markets. I am very strict with my trading rules and have gone from a literally hundreds of trades a day (somtimes dozens within one minute!) when I was in the pit, to at most a handful a month at my desk. It's a lot easier on the soul, the balance of my accounts, and my CHI, in general.

Let's see how much we grow in this blog.

Good luck and happy trading...and reading

Andy Geller


The picture: that's Patrick Duffy in the picture. This is the S&P futures pit, where I spent most of my days split between filling orders as a top-step broker for Wolverine Trading (bade was GLR 824), and as a local, scalping the market for a few dollars. The guy behind him is also a Duffy, but no relation, just coincidence. To his left looks like Matt Jones, whos brother was the director picked in the first Project Greenlight on HBO. I also see Frankie (FAP), SMURF in light blue (SMF) with his little trusty hand-held mini machine. Mario (DBR) is the bigger guy in the black jacket on the right behind the bar, and in front of him is a guy who's name escapes me right now. That's the crazy thing about trading in the pits. You stand next to a guy for 5 years, and all you know is his badge, not his name. You might not even recognize him in the supermarket!



MORE TO COME...!!!

Channukah Candlestick Chart

Channukah Candlestick Charts are very much like regular candlestick charts, just that they occur during Channukah.

Notice that large down move on 12/5 at around 1 a.m. In roughly 3 hours, the GBP/JPY went from the lower 2.2700s to the mid 2.2400s, a move of over 250 pips. It has taken all week to make that move back. Those 2 or 3 large red candlesticks were as strong, or stronger than the next 70 candlesticks!!! That says something about that downward pressure and we have to use the upper level of those 3 red candlesticks as our ceiling.

As you can see, resistance at the 22700 lever was held for about 4 days from the 7th to the 10th, trying many times to close above that level and failing. Finally, at 10pm on Sunday night (Arizona time) the hourly chart closed above this ceiling level for the first time since the drop on the 5th of December. This was a notice to all shorts to get out, and a notice to all bulls, that this might be the time to get long.

I have drawn a small bullish channel from the low of the move to where we are now. It seems that to get short here would be moronic. Never step in front of a moving bus! A good place to join the longs COULD be at the new support level of 22700. However, as you can see in the new channel, if that support is broken, we are still within the bullish channel I have drawn.

What does this mean for taking a trade. Go ahead, get long at 22700 if you wish. Just know, that it can go against you, and you can still be right. What I will do...I will pass up this buying opportunity for now. I DO think it's time to get long, or at least get out of shorts, but I hate being right and losing money. After all, trading isn't about being right and making money...it's about making money.

A better entry point for me would be when the market gets close to, yet still above the 22700 level, ANDat the same time, close to and above my channel support line. It seems that that entry might not happen for a day or so, so I will wait it out. At that point, I will be watching volume, and the stochastic to see what other indicators confirm or dis-confirm my thoughts.

As alwasy, I am just posting my thoughts. Please do not email me asking for a refund to your trading account!

Good luck and happy trading...and reading.

Andy