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Are you a Fox?

Or a Sheep?

The problem with the FX market is that we are all looking at the same thing. That is fine provided we are prepared to look at it in a different way.

As Einstein said, “education is what remains after one has forgotten what one has learned in school.”

Bank traders  closely guard their positions and will only talk in general terms about their impressions of the market. Their trading style quickly becomes evident and to a certain extent their strengths and weaknesses.

Contrast this with a retail trader sitting in his basement. He is happy to share his positions with anyone who will listen; his ego quickly encroaching on the size of his house...    He will even allow other traders to copy him on social trading sites and will post trade logs on Facebook or Twitter to illuminate his magnificence.

Does this mean anything at all to any new trader looking for an edge? Nope. Verification is impossible and past performance is no guarantee etc, etc.

Let’s accept that the market is impossible to predict and anyone who says they can 100% of the time is at best dreamer, at worst, a bold faced liar, or just the luckiest schmuck on the planet. If you can get it right 60% of the time… you are on your way to successfully beating the market. Does that mean it is better to be a lucky trader than an astute one? Not necessarily.

There are so many imponderables to consider. Rigidity of attitude a sure-fire way to fail. Education continues, trading successfully is, like life, a journey not a destination. Every day is an opportunity. Not just to make money but to learn about so much. Knowledge comes from experience. Education is the ability to take that knowledge and use it in other circumstances.

Trading is not a zero-sum game. There doesn’t have to be a loser for every winner. But, making sure every possible advantage is capitalized upon and every weakness challenged will lead to becoming a sixty-percenter.

Did my twenty-five plus years in banks help me to become a successful retail trader?

No, it didn’t.

It has helped me help others become successful but I have always felt that I was operating behind a curtain not seeing the full picture. For me and my style that didn’t work. Never being much of a technician, I needed order flow, first hand access to brokers information and the ability to see how my market was affected by other asset classes. I suppose what you haven’t had you don’t miss.

The interbank and retail markets are totally different. As an interbank trader, you are facing two opponents, the market and the other traders. To trade, you need a counterparty. That counterparty becomes the market to you if you ask a price and comparing that price to the market he can do two things: know what you are trying to do and enhance his own position.

If you ask a euro price and the market is, say 29/31 and he makes you 30/32 he is “reading you” as a buyer or looking to buy himself. Passing on the price is as much a giveaway as not!

In the retail market, a certain nimbleness is necessary but there is also an opportunity to be more studied. The price is the price because the broker, in a normal market, will have as many buyers as sellers. Imagine sitting, isolated, in the basement with five other traders queuing up to ask you a price. There is huge pressure in putting your own money at risk but having to work under the pressure of “one on one pricing” is a whole different game.

The moral of the headline and the story is; be yourself. There is no Holy Grail and No Ark of the Covenant. No right way or wrong way. It’s not trial and error. It is education, knowledge and experience.

Or a Sheep?

The problem with the FX market is that we are all looking at the same thing. That is fine provided we are prepared to look at it in a different way.

As Einstein said, “education is what remains after one has forgotten what one has learned in school.”

Bank traders  closely guard their positions and will only talk in general terms about their impressions of the market. Their trading style quickly becomes evident and to a certain extent their strengths and weaknesses.

Contrast this with a retail trader sitting in his basement. He is happy to share his positions with anyone who will listen; his ego quickly encroaching on the size of his house...    He will even allow other traders to copy him on social trading sites and will post trade logs on Facebook or Twitter to illuminate his magnificence.

Does this mean anything at all to any new trader looking for an edge? Nope. Verification is impossible and past performance is no guarantee etc, etc.

Let’s accept that the market is impossible to predict and anyone who says they can 100% of the time is at best dreamer, at worst, a bold faced liar, or just the luckiest schmuck on the planet. If you can get it right 60% of the time… you are on your way to successfully beating the market. Does that mean it is better to be a lucky trader than an astute one? Not necessarily.

There are so many imponderables to consider. Rigidity of attitude a sure-fire way to fail. Education continues, trading successfully is, like life, a journey not a destination. Every day is an opportunity. Not just to make money but to learn about so much. Knowledge comes from experience. Education is the ability to take that knowledge and use it in other circumstances.

Trading is not a zero-sum game. There doesn’t have to be a loser for every winner. But, making sure every possible advantage is capitalized upon and every weakness challenged will lead to becoming a sixty-percenter.

Did my twenty-five plus years in banks help me to become a successful retail trader?

No, it didn’t.

It has helped me help others become successful but I have always felt that I was operating behind a curtain not seeing the full picture. For me and my style that didn’t work. Never being much of a technician, I needed order flow, first hand access to brokers information and the ability to see how my market was affected by other asset classes. I suppose what you haven’t had you don’t miss.

The interbank and retail markets are totally different. As an interbank trader, you are facing two opponents, the market and the other traders. To trade, you need a counterparty. That counterparty becomes the market to you if you ask a price and comparing that price to the market he can do two things: know what you are trying to do and enhance his own position.

If you ask a euro price and the market is, say 29/31 and he makes you 30/32 he is “reading you” as a buyer or looking to buy himself. Passing on the price is as much a giveaway as not!

In the retail market, a certain nimbleness is necessary but there is also an opportunity to be more studied. The price is the price because the broker, in a normal market, will have as many buyers as sellers. Imagine sitting, isolated, in the basement with five other traders queuing up to ask you a price. There is huge pressure in putting your own money at risk but having to work under the pressure of “one on one pricing” is a whole different game.

The moral of the headline and the story is; be yourself. There is no Holy Grail and No Ark of the Covenant. No right way or wrong way. It’s not trial and error. It is education, knowledge and experience.

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