Trader Talk – March 8, 2012
We were joined by the following guests:
Steve Thompson – www.dtitrader.com
Glenn Thompson – www.ptusa.com
Jason Jankovsky – www.theliononline.net
Tell us a little about your trading strategy and why you have chosen to focus on that particular method?
Glenn – Basically the strategy that I’ve been using for years is looking for conversions based on different relationships or ideas. Trend analysis and various timing elements, I also look at Elliot wave and the generic relationship of simply divergence. If you were to look at natural gas, my pure trend analysis will tell me to go short that market, next I’ll look and see if I have time projections, thirdly, I would then see if I could come up with a wave count for that market. Finally, I would look to see if there is divergence, or a lack thereof. To hedge my debt, I would look at a chart to see if I have anything that will allow me to locate a zone of support. Essentially, my approach is one based on convergence. If I can get three out of those four things to line up, its an indication that I have a higher probability of a positive trade.
Jason – My point of view is vastly different than other people’s point of view. I’m not trying to find fault with other people’s methods by any means. I study psychology and I understand the structure of the markets and I know about zero sum transactions, that most traders aren’t aware of or don’t believe they have an effect on the market. I study the market structure to find what the money is doing. The real money in this business is not made by analyzing price.
Steve – My background is about 25 years of hedging as opposed to trading. I started in the market by trying to figure out how to not lose. I am very much a price person. I look at price points and timing, I also look at intervening events that I know are going to occur. I understand when the jobs reports are coming out, I trade a lot of news and I use that news to manage positions that I’m in.
When you first started trading, what did you pay more attention to: Making money or controlling your losses? What was the result to that? Did that prompt you to make any changes?
Jason – When I first started in the market, I was more interested in women than money, and the only thing I really cared about was making enough money to impress young ladies, like any 28 year old guy. I guess you could say I was more focused in making money. Every individual has a different set of needs, a different set of things that they are operating from. It took me about a year and a half of getting my head kicked in to realize that I was focused on the wrong thing. I had to have an awakening, and understanding, and change in my thinking. There is no distinction in controlling money and making losses. If we’re wrong, just get out. Cutting losses is equally important as holding a winner. When I first started trading, what I was paying attention to was a non-market paradigm. The market wasn’t taking money away from me, my point-of-view was.
Steve – I came in a little differently. I was 53 years old when I started trading. I was a change manager, that was my job. I was the active participant in change management. Unfortunately, I had some successes early, and realized it was fun, then I put aside the reality that I had to face. I was not controlling the market, I was using the market. I had to realize that I was an observer of change. In my background of banking, we always put risk first. Risk is always foremost. The trouble I fell into was over success leading to over trading.
Glenn – Certainly in my case, I started at the age of 24, and my primary incentive was the money. Prior to getting in the trading business, I had a career change, and did a total 180. I started in the medical field, but had no back ground in money or finance. The pure potential open ended profit excited me. My sole purpose and focus was the money. Controlling risk was not an entity in my thinking at all. My first account was $1300 that was borrowed from a friend’s credit card. Within a week, I had a significant return and balance of $23000, within a week after that, it was all gone. For me, we are part of the process, there is an intimate feedback process between us and the market. To be successful, or at least begin to skew the odds in my favor, I read all the books on technical analysis that I could. I would go to any free seminars in town. I read all the trading magazines, the Wall Street Journal, Futures Magazine. I would read things that I didn’t even understand then I would painstakingly contact people to ask them what they meant.
What risk control methods, have been most critical to your consistent success?
Steve – Understanding the risk before you get into the trade. There are great trades that I set up that I think that I want to get into. But I analyze and see that some trades must be passed on because my stop would have to be too far back (emotionally or financially). Its letting good trade analysis pass you by.
Glenn – The primary risk control method is making sure that I have the proper risk reward ratio. That way it integrates with your risk and time management. It doesn’t mean anything in and of itself, it requires real significant meaning. I think of it like if I have enough money in my account, and I know what my performance has to be, If my gains are three times as large as my loss, my rewards only have to be 26% and I make a fortune.
Jason – What I did, in the process of developing my winning approach, I studied my ability to make a good trade. I recorded everything in depth. I wrote down everything, where my stop was, my entry point, if I even had a stop, etc. The probability of ruin matrix can be applied to anything that has a probabilistic income. If I make a dollar for every winner and give away a dollar for every loser, my probability of ruin is 50%.
Jason – What is your favorite time of day to trade currencies and why? My favorite time to trade currencies is 24 hours a day. If the opportunity is there, I’m in and I’m watching it.
Steve – What about trading the early morning market is so appealing to you? I like trading early in the morning pacific time, I firmly believe that we are in a global economy. One of the advantages that traders have is that there is an opportunity at any time of day on any given day. I can capture the impact of Asia as it floats into Europe, then I can trade through the European cash close and how our US markets respond to that.
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