TraderInterviews.com: You mentioned not having time on there, but you got to put something on a chart unless you’re just using tick charts or pip charts and taking currency, so what are you watching in terms of are you watching five minutes or ticks or what is it?
Derek: I will get five-pip, eight-pip at 15-pip charts would be my most common structure of my charts. I, also, for a long term analysis use a…we have a point and figure component of our charting. So for the longer term what I call the top down analysis or we refer to it as “Monet”, stepping back and taking a look just like in a fresh domestic art, you got to step back and take a look to see the picture. But it’s nice to get up close and see the detail. Most traders are fixated on one-minute, five-minute charts. They don’t really know what’s really going on. So we use a point figure. I’ve really looked at that as my top down or my Monet approach, and then I go into detail, look at the 15 pip to see the intraday trend, look at the eight to look for what I consider the more ideal entry. And the five pip is going to give me my detail and be my front runner, a pre-runner, and tell me something may be happening. So that’s how I break it down. Moving averages are incorporated in all those charts. My TFXT is incorporated on all those charts and using CCYX, my currency strength index, is a constant component of that.
TraderInterviews.com: In terms of the stop you said you had today was 14 pips, how are you setting that in terms of the profit targets as well?
Derek: Well, now the stop wasn’t 14. OK. You put in a stop. The stop is your worst case scenario. You’re not going to sit there and let it get hit. If you’re wrong, you’re wrong. So typically, depending on the pair and the volatility of that pair like a pound/yen would be more than say Euro/dollar. I’m going to use anywhere from a 20 to maybe 40-pip stop. Forty would be pretty wide for me, typically, 20 to 30. But that doesn’t mean I’m going to let those get hit. Sometimes they do. Sometimes the markets move. A person when they leave their house today, they listen to this and they go out and they’re getting their car to go to the grocery store and get the kids or whatever. They’re taking more risk and then they trade, but each person when they get in their car who’s taken out a stop order because they have insurance and they have a deductible that they’ve set on insurance. That’s the maximum amount they want to be out if they drive in the side of a Rolls-Royce tomorrow. The same thing needs to happen in a trade. There’s got to be a maximum draw down that you’re willing to go down on it per trade, per day, per week. And you hit those, you got to stop. Now, the discipline has becomes managing a winning trade. Fairly simple, it’s a lot of fun, it’s why we trade, handling the mistakes which are in fact inevitable in the key to long term success. So it goes back to my discipline statement. I had a 20-pip stop on this trade, but I was wrong, and I knew I was wrong. If this isn’t doing what it’s supposed to be doing, I’m looking at some other things. I’m looking at that currency. I mean, I’m getting a warning sign that five pips already crossing up. I’m seeing them losing the momentum. It’s not my favor as it was initially. I could’ve capped out with a quick profit but I didn’t, gambling with regret. So it was a one time that trade was positive by at least 15 pips, maybe more. One of my rules is�you can bend your rule�One of my rules is you’re up 15 pips, you don’t let it go naked. I’d rather flap the trade than let it go negative. In this case, I still say, “well it’s a news thing, it’s a little bit more volatile. I gave it a little bit of a run. So if you think I was 15 pips up and now I’m almost 15 pips down, that’s a 30-pip reversal, I’m done. I’m now out the trade. I don’t need to wait for my stop and ultimately it went a lot higher than that, and where I shouldered the second time, it was at a much higher price point. So it actually became a better trade.
TraderInterviews.com: What was it about the second time that said, “OK. Now, I think it’s time.” If I was there at the first time…
Derek: I think the market just flat out to settle down. The market started doing what fundamentally it should have been doing. The dollar did start moving down. You kind of kick yourself sometimes like, “Well, that’s it. I should have been more patient and waited for this.” So it’s not a matter of, “Oh, gosh. I was dumb.” It’s a matter of once, again, get back on the saddle. Get back in there and have the tenacity to stay with it and follow. Then it goes back to what I said, you follow the same pairs of the same financial instrument. Trade it over and over again. You get to know it. I’ve got children. I can tell when my kids lie to me for the most part. I’d like to say I can, but I can. If you have children, and you’re children are in front of me, and I don’t know your kids, and they’re lying to me. Your kids could probably tell me tall tale. I don’t know that. You might be suddenly going, “Oh, my God, Billy. Why are you lying to him?” I don’t know that, but I know when my kids are lying. I can read them like a book. Well, that’s one. I trade the same pairs over and over again. I can tell when they’re lying to me, too. Not always but for the most part, I know when they’re telling me the truth.
Derek: I will get five-pip, eight-pip at 15-pip charts would be my most common structure of my charts. I, also, for a long term analysis use a…we have a point and figure component of our charting. So for the longer term what I call the top down analysis or we refer to it as “Monet”, stepping back and taking a look just like in a fresh domestic art, you got to step back and take a look to see the picture. But it’s nice to get up close and see the detail. Most traders are fixated on one-minute, five-minute charts. They don’t really know what’s really going on. So we use a point figure. I’ve really looked at that as my top down or my Monet approach, and then I go into detail, look at the 15 pip to see the intraday trend, look at the eight to look for what I consider the more ideal entry. And the five pip is going to give me my detail and be my front runner, a pre-runner, and tell me something may be happening. So that’s how I break it down. Moving averages are incorporated in all those charts. My TFXT is incorporated on all those charts and using CCYX, my currency strength index, is a constant component of that.
TraderInterviews.com: In terms of the stop you said you had today was 14 pips, how are you setting that in terms of the profit targets as well?
Derek: Well, now the stop wasn’t 14. OK. You put in a stop. The stop is your worst case scenario. You’re not going to sit there and let it get hit. If you’re wrong, you’re wrong. So typically, depending on the pair and the volatility of that pair like a pound/yen would be more than say Euro/dollar. I’m going to use anywhere from a 20 to maybe 40-pip stop. Forty would be pretty wide for me, typically, 20 to 30. But that doesn’t mean I’m going to let those get hit. Sometimes they do. Sometimes the markets move. A person when they leave their house today, they listen to this and they go out and they’re getting their car to go to the grocery store and get the kids or whatever. They’re taking more risk and then they trade, but each person when they get in their car who’s taken out a stop order because they have insurance and they have a deductible that they’ve set on insurance. That’s the maximum amount they want to be out if they drive in the side of a Rolls-Royce tomorrow. The same thing needs to happen in a trade. There’s got to be a maximum draw down that you’re willing to go down on it per trade, per day, per week. And you hit those, you got to stop. Now, the discipline has becomes managing a winning trade. Fairly simple, it’s a lot of fun, it’s why we trade, handling the mistakes which are in fact inevitable in the key to long term success. So it goes back to my discipline statement. I had a 20-pip stop on this trade, but I was wrong, and I knew I was wrong. If this isn’t doing what it’s supposed to be doing, I’m looking at some other things. I’m looking at that currency. I mean, I’m getting a warning sign that five pips already crossing up. I’m seeing them losing the momentum. It’s not my favor as it was initially. I could’ve capped out with a quick profit but I didn’t, gambling with regret. So it was a one time that trade was positive by at least 15 pips, maybe more. One of my rules is�you can bend your rule�One of my rules is you’re up 15 pips, you don’t let it go naked. I’d rather flap the trade than let it go negative. In this case, I still say, “well it’s a news thing, it’s a little bit more volatile. I gave it a little bit of a run. So if you think I was 15 pips up and now I’m almost 15 pips down, that’s a 30-pip reversal, I’m done. I’m now out the trade. I don’t need to wait for my stop and ultimately it went a lot higher than that, and where I shouldered the second time, it was at a much higher price point. So it actually became a better trade.
TraderInterviews.com: What was it about the second time that said, “OK. Now, I think it’s time.” If I was there at the first time…
Derek: I think the market just flat out to settle down. The market started doing what fundamentally it should have been doing. The dollar did start moving down. You kind of kick yourself sometimes like, “Well, that’s it. I should have been more patient and waited for this.” So it’s not a matter of, “Oh, gosh. I was dumb.” It’s a matter of once, again, get back on the saddle. Get back in there and have the tenacity to stay with it and follow. Then it goes back to what I said, you follow the same pairs of the same financial instrument. Trade it over and over again. You get to know it. I’ve got children. I can tell when my kids lie to me for the most part. I’d like to say I can, but I can. If you have children, and you’re children are in front of me, and I don’t know your kids, and they’re lying to me. Your kids could probably tell me tall tale. I don’t know that. You might be suddenly going, “Oh, my God, Billy. Why are you lying to him?” I don’t know that, but I know when my kids are lying. I can read them like a book. Well, that’s one. I trade the same pairs over and over again. I can tell when they’re lying to me, too. Not always but for the most part, I know when they’re telling me the truth.
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