A few years ago when I was at school, I remember we had some retired gent come in from the army talking about the lessons he’d learned for real life.
I don’t know why, but one of those lessons stuck in my head and it might just help you when you begin a session’s trading.
Always begin trading with this essential checklist
He said, before he takes a long car journey he always plans his route, checks his oil, water and tyres. When he was in the army, failing to check equipment or plan a route could mean breaking down or even worse consequences depending on the situation. This was in the days before satnav.
It sounds obvious and something you should be doing anyway, but as a 12 year old lad, five years away from getting into a car and stalling for the first time, that lesson always stayed in my head.
Quite a few years later, I still do the same routine before a long journey and so far (touch wood) it’s served me well with no major problems on my long journeys so far, including a charity rally in an old banger from London to Portugal!
I’m not usually a creature of habit like this, but have found that little checks can make all the difference. I’ve also applied a check list to my trading.
So before I trade I run a few checks every time. A bit like checking the oil and water before going on a long journey. Every morning I check:
* That no trades were mistakenly left open overnight or were opened (it does happen!)
* That I’ve enough margin in my account for the day’s trading.
* I check the news to make sure there’s no major news events that might spike me out of a trade.
* I check I’ve no market orders still running, e.g. old stop losses or limit orders.
* If using manual stops, I also always place an emergency stop, in case of a news surprise.
* When I close a trade I make sure that it is actually closed. A number of times I thought I’d closed a trade only to find that due to a re-quote, I was still in the market. This little check has saved my bacon a number of times.
So what were my mistakes last week?
I was rushing around like a mad person trying to get a number of boring things done like accounts and not leaving enough time to get to a meeting in the city.
I’d left a trade running in the background while I got lost in receipts and bank statements. The trade was slightly in profit and had an emergency stop quite a few pips away. I was planning on exiting the trade manually, but had set a alert to ring if my likely exit level. I was leaving for a meeting shortly so was planning on closing it just before I left to give it more time to develop.
I heard my trade alert ring and look up to my horror to see the price spike up against me on a news event I hadn’t stopped to make note of in the morning.
Big loss
It hadn’t hit my emergency stop yet, but It was fast moving away from where I should have got out. I got a terrible fill (the price I got matched at for entry), but it wasn’t the end of the world. I was out of the trade for a fair loss, but it wasn’t the worst I’ve had.
Muttering under my breath I then had not much time to grab my things for my meeting. I didn’t run my usual checks because I was in such a rush. I didn’t realise it but my emergency stop order was still in the market.
I didn’t check my oil and water!
It depends on your broker/spread betting firm, but my spread betting broker doesn’t automatically cancel stop orders if you close a trade manually. It leaves it in the market. If you forget and it gets triggered, it effectively opens a new trade for you. This is what happens to me.
I went into the city for my meeting and came back a few hours later, turned on my monitor to survey the damage from the earlier loss and was surprised to see that my account was actually in profit.
The spike had taken things higher and carried on going higher until my emergency stop was triggered. Because there was no open trade it was stopping, it opened a new one for me.
By sheer dumb luck, the trade had carried on in the direction of the spike and made me money, but it could have done the complete opposite. At worst it could have wiped out a big chunk of my account.
That’s what you get for not checking your oil and water.
Ninety per cent of the time your oil and water are fine, but once in a while you’ll spot low levels and help avert damaging your car. It’s the same with trading. Those little checks usually won’t come to anything, but it cost of not doing them could be massive.
So I hope this helps you perform your own trading checks each day and avoid stupid mistakes like I made. I added a new check to my trading – Never trade when in a rush!
Our survey said…
Last week I ran a poll to see what readers thought about investment prospects for the next year and beyond. Here’s the scores on the doors.
1. Will the FTSE 100 be higher this time next year?
Yes – 53%
No – 47%
2. Will the FTSE 100 be higher 5 years from now?
Yes – 86%
No – 14%
3. What would you invest in on a 10 year time horizon?
UK Shares – 13%
US Shares – 13%
European Shares – 4%
Keep it in the bank – 2%
Cash ISA – 8%
Inflation linked bonds – 12%
Gold – 24%
Commodities like oil – 24%
4. Do you think now is a good time to get into property?
No – 26%
Yes – 28%
Maybe in a year – 28%
Maybe in 5 years – 19%
Mixed views on property it seems. Interesting to see that oil and gold were favoured so much as a long term investment. I had a chat with an oil trader from the coal industry the other day who was adamant that the moment we come out of the crisis, energy prices in the UK will go through the roof because we are cutting back on capacity, exploration and research. This might save money in the short term but cause trouble in the long term.
System watch
I had a good collection of emails after last week’s request for ideas on what your priorities were for me to investigate. I’ve got a list as long as my arm now, but that’s exactly what I was looking for. I’ve done a quick summary of my ‘to do list’ below, it would be great if you could have a glance through them and seem if you could share any experiences.
It’s time to ask another favour of you. I’ve got a big list of things that people are interested in me reviewing, which is great – better to have more material than not enough. However, there is just one of me so I’m hoping to tap into the power of the people to help me by sharing any experience you have of the following:
* http://www.breakfast-trading.com/ http://www.forexjackal.com/ I’m planning on reviewing this soon and he’s been sending his stuff through for the last couple of months.
* http://www.marketsmastered.com/ – A number of readers have been testing this for me. Report coming soon.
* Systems on ebay sold by ‘piptastic’ – I’ve not come across any of these, have you?
* http://www.missionphoenix.com
* http://www.winningdowsignals.co.uk – According to one member, the performance results are accurate. Has anyone else used this?
* http://www.firsthourtrading.com/
* Anything from Bill Polous
* http://www.forex-trading-made-ez.com/ – A couple of good reports on this from members.
* http://www.forextradeslive.co.uk/results.html – According to one member, the performance results are accurate. Has anyone else used this?
* Trader Tom ( Tom Hougaard)
* More Mega Robots
While we wait for the dust to settle on FAP Turbo, the next set of Forex Mega Robots have been launched.
* http://www.forex-megadroid.com/ – Is the bot getting the hype treatment at the moment. The video is hilarious. Talk about artificial intelligence! I’m not sure about the intelligence part, but it does seem artificial. Needless to say I suggest you don’t take up the early bird promotion.
* http://www.automated-forex-grail.com/ – Is another. Not a jot of evidence from live trading. Do those returns take into account spreads? I doubt it. What have results been like trading live? Nothing like that steady upwards curve I’d wager.
* Pips leader forex robot. http://pipsleader.com
* The last forex robot to get the big push was http://www.fapturbo.com/, which has had a very bad run and is now showing a loss for the year. It’s not disastrous and to be honest, makes the returns more realistic. At least they are showing live results which 99% of these wonder bots do not.
If you can help me out with feedback on any of these, do get in touch at
I look forward to hearing from you.
My trades
Despite my disaster, it hasn’t been a bad week for my trades overall. At the start of the week I got whipped all over the place. I’d get stopped out and the damn thing would turn around and immediately go the other way. To say it was frustrating was an u
nderstatement. It must have happened 5 times on the bounce. The trouble with Trend following systems like FX53 is that they need a trend, but its hard to pick and choose your trades because you don’t know when the next breakout will come. Thankfully I kept my patience (just) and caught a couple of big moves at the end of the week. To be honest I think another day of chop and I would have given up for the week and started over.
This week’s hot trading buttons
As usual with the first week of the month, the hot trading ticket this week is the US Non Farm Payroll report on Friday, preceded by the ADP employment change report on Wednesday. Aside from this, there is the ECB rate decision on Thursday, and US pending home sales on Wednesday. The nationwide House Price Index and Halifax House Price Index are both due sometime throughout the week, and the G20 meeting on Wednesday could spring some surprises.
Trading wisdom
“One important aspect of trading is that one must think in a flexible, guerrilla-like manner. One such way is to never, ever think in certainties. Think in probabilities with several fall back positions, so that if A happens, THEN do B. If B happens, THEN do C, etc. This type of critical thinking requires discipline and eludes most people. They want certainties, and that’s just not the way the market works. Period.” – Teresa Lo
