Why 2% is better than a poke in the eye.

Sometimes with trading we forget the little things. I’ve written before about how the little things can have a terrible effect on our trading careers.

You know like forgetting your wallet when you head out to the car, or the grocery list you leave on the table. Hopefully I’m not the only one that ever does that. You know the feeling when you are ‘there’ and left ‘it’ at home. Tonight I thought it was time to remind the traders who have been around awhile and to tell the newbies to not forget their 2%.

2% of what you may ask? 2% of your account. You see we traders let greed take over way too often, we let the emotion of the trade effect us to the point that we become blind to the potential that is available with just 2%. Let me prove it to you. Answer me this one question. Have you ever been up in a trade to the point that you have seen double digit returns only to not know what to do when it came time to close the trade? Have you ever chose to let it run just in case you might be able to pull down just a little bit more? I think we have all been there only to see it turn and take back the double digit return and give us a very small return if not fall all the way back to break even or negative.

So what about 2%? Well I use 2% to help you see that with a patient routine, and a true plan it doesn’t take much to build an account into a winner. Look at these numbers:

Starting Account size: $1000
% Increase per day: 2%
Trading Days a Year: 240

What do you think the account would be worth at this pace? It is only 2% just a pittance, nothing, a joke of a return. However, 2% is not a joke it is incredible when you see what compounding this over a full year of trading. You see $1000 becomes $121,025 in 240 trading days. I would tell you what 3% becomes but I don’t want to bore you…. How about $1,327,450. Yeah no joke.

So it is time to step back and realize that you need a plan and a recognition that your 2% return is worth it’s weight in gold. Don’t miss the opportunity to trade consistently and with purpose, by doing so your small account will grow greatly.

PS By the way, all of you that read this and your GREED kicks in high gear, check yourself, for compounding works in reverse too. Don’t start thinking falsely that you should risk higher percentages early on so that your $1000 can become $2000 quicker so that you can get to $1,000,000 even faster. That is a fool’s game. Money management deserves respect, without it you will fail.

Don’t fall victim to greed, allow yourself to recognize that compounding is as powerful as any trade you may execute, that is what will help you manage your losses and celebrate your wins.

TraderCisco

PPS A smart trader commented to me that we are not Goldman Sachs and we don’t make money everyday, and he is correct. (Thanks @fx_13) My point was not that we will never have a losing day, rather if we respect incremental growth, when we do have the double digit gains we will see this for what it is and gladly take the profits, recognizing that these will help propel us in our chosen direction of profitability.. If you have ever looked at a chart the first thing you note is that NOTHING moves in a straight line, however, when we see the value in what may seem to be an insignificant increase we will find growth of our account.

Journaling is for the birds.

OOOO no it ain’t!!! I got a chance to realize how important journaling is while I trained for my first triathlon last year. I took all the steps needed. I got me a coach that taught me the proper way to swim, bike and run. There is a science behind all three and doing them efficiently, and I needed a professional to show me the RIGHT way to do them, so I got one. Wasn’t cheap either, was paying about $400 a month. We met once a month to train together for an hour, I had unlimited email access to her and she scheduled all my training. She was able to look at my JOURNAL that I had to keep online and could see if I worked out at all, where I needed improvement, where I was excelling, etc.

Journaling does a few things. I think the most important thing is that it keeps you honest and on track. You can see exactly where your weaknesses are. In trading, we cannot afford to be weak. We LITERALLY cannot afford it. Every failed trade is a lesson. What did you learn from the mini seminar you just bought in that failed trade? You better have learned something, if not the situation can happen to you again and again and again, and each time you could be sitting scratching your head wondering “What happened?”

The other day I posted the lesson I learned about closing the Eurjpy to soon. I lost money unnecessarily. I wrote about it in blog, in my journal and I even talked about it to my Mentor. (Yes even I have a Mentor/Coach) What did I learn, “Don’t break my own stinking rule!” I know I will remember that lesson because it 1.) Cost me money and 2.) I put it in my journal. I will grow from it, I will TRY not to make that mistake again and I hope someone else has learned from it too.

So what do we have in store for you guys? Coaches, Mentors, Journals and a lot more. Trading is just like a triathlon. Its just you out there on the course, but you have the knowledge of your Coach, your Mentor and your personal Journal in your head the whole time giving you the right information to be an efficient and effective trader (or triathlete).

Yes, I finished the race with a better time then I expected, but I know there was no way I could have done it with out the right help. We all will benefit from this community because “The Right Help” will be at your finger tips. It will be up to you to use them.

PipTee

It’s Good to be the King….

Some of those that know me know that I am a huge blues fan. I’ve visited Memphis a couple of times, I’ve been to Buddy’s Guys joint in Chicago, and I happen to live in St. Louis which has deep roots in blues music too. In the early 90′s I watched a video produced by U2 that was released as a concert movie and included a number of songs with various artist, and the one that stuck with me was a song they wrote specifically for BB King. I still remember what BB said in that movie 20 years later about his guitar playing. Click on Link…. BB King and U2

He said “I’m no good with chords, so you’ll have to get someone else to play them. I’m horrible with chords.” (In the attached video time slot 1:20 to 1:35) I never forgot that because to me there are few that can ‘speak’ to me with a guitar like BB. This man is in the Rock & Roll Hall of Fame, the Blues Hall of Fame and he is horrible with chords… I was always amazed at that, and yet the other day I came to realize the tremendous power those two sentences have to me regarding trading.

Here is a man that is world renowned for his skill, art, style, passion, and yet something that would seem to be so basic as chord playing on a guitar, he isn’t any good at it. I could only wish I was such a horrible guitar player…. It begs a few questions tho. Did it stop him? Did it keep him from making unbelievable music? Did he say I will never make it because I am horrible at playing chords? Funny thought now but I would guess there were a few days that he did have doubts, but he persevered and I for one am so glad he did.

So what about my trading? How does BB King being “horrible at chords” help me and by extension you? Well quite simply, we need to find what we are good at and don’t worry about what some other trader seems to excel at. What works for YOU? I think that all of us want to develop as well rounded traders, and when we start out we look at the whole spectrum of trading setups. Should I scalp, should I swing trade, day trade? Should I trade strictly price action, or maybe Bollinger Bands, Stochastics, Consolidation Breaks? Should I trade the 4 hr compression or maybe the 5 min? Straight technical’s or do I weave in some fundamentals. The list is truly endless, I’m sure I’ve missed the style or set up you use.

Learning from others is highly important, I will go so far as say critical to your success. However, I do think in the end we need to figure out what we are good at and stick to the formula for our success. Our success not someone elses. So what if you can’t trade a trendwall break to save your account. So what if ‘naked’ price action trading scares you to death. So what if you can’t imagine in your wildest dreams staying in a trade overnight much less over the weekend or weeks. What matters is really only one thing. You trade what you love and you make money doing it. I would imagine that BB King loves the sound of his own music, and your style should be no different, it should fit you.

I would love to hear your comments, let me know if this blog and what BB said has any effect on you. Thanks for your time, and I will leave you with one more video of BB King, the man horrible at chords and wonderful at moving me. The Thrill is Gone \’91

All the Best,

TraderCisco
www.euodootrading.com

With Great Power Comes Responsibility.

Yes, that is from Spider Man. My son used to be obsessed with him for 6 years, so needless to say I have watched that movie 100 times. I don’t mind because I learned something pretty important. The Great P0wer that we have is the Euodoo. It allows us to trade semi hands free and will make sure we don’t miss the big moves. It is our responsibility to let it do its thing and trade it the RIGHT WAY. So what do I mean by Right Way?

Well I did something stupid yesterday. Something that I have never done in all my days of trading. Call it a brain fart, rule break, whatever you want. What did I do? I closed a position negative pips. That is something I NEVER do. When I enter a trade, for me that is total commitment, win or lose I do not mess with the entry in anyway. If it stops me out so be it, if it pays me out even better. But for me, to close a position manually negative is unheard of for me.

So why did I do such a stupid thing? Listening to other people, boredom, over thinking it, you name it. Price action doesn’t lie in my opinion. Whatever the reason it was wrong and totally NOT the way I personally trade. Im talking about the EURJPY. Euodoo got us in on a buy and the trade fell back into the channel for awhile. I killed it -30 pips, in stead of cost averaging, and it turns around and pays out 100 pips. It hit our 1:1 return ratio. Some stuck with the trade and were able to take profits. I hope everyone was able to.

AUDJPY stopped me out twice. Once on the original and one on the flipped. Had I stayed with the EURJPY my loss would have been very minimal, possibly break even. But I have to move on now, put the loss behind us, LEARN from it and press forward.

This is how I will press forward. I funded another one of my accounts with $250 and will post the results of that account as Euodoo gets us into trade. Good or bad, you will see the live results of my lil mini. Now I know some of the bigger players are think “$250, that ain’t nothing. Show us your big boy account.” Well, Im not and I got two reasons why.

1. Showing a $500,000 account and the returns it can make might screw up a new trader. A trader that can only afford a mini or a micro for now. Not only that, but it can bring out greed in a trader. If you see I make for example $20k per day, that might mess with some people and their trading can suffer.
2. When I moved to MI I met a trader that comes over my house from time to time and we trade together. He told me the story of how he was kidnapped by his “friends” that knew he was a trader and dollar amounts that he traded. They kidnapped him and held him for ransom for $250,000. Stupidity. Long story short, he lived, they went to jail, wife was pissed and made him stop trading for awhile. I am not going to subject my family to that in the least bit.

If you must know, my home is paid for, my cars are paid for, my wife doesn’t work and the only bill I have is for my internet. That should be enough about my financial abilities. (And yes, I trade full time. Well, part time because Euodoo does the rest)

Now back to the $250 account. I like this amount because those with smaller accounts can see the possibility of how an account can grow. Here is a spreadsheet I like to use to look at possible returns. We are starting with $250, trying to make 2% per day, which works out to be about 40% return per month. As you can see at the end of month 12 we would have about $21,000. (We are looking at the peach colored boxes)

$20k at the end of the year is not a bad return playing REAL safe and only starting with $250. If you need to see a bigger picture, add three more zero’s at the end of the $250 and there you go. As a matter of fact, look, treat and trade the account as such. It will keep you from doing stupid things like what I did. If you want a copy of this excel spreadsheet to play with email me.

Responsibility, sticking to your rules and trading style is the very important. The tools are provided, but its up to us to follow the rules and stick to them. Even I had to re-learn that lesson. One that I will never forget.

Pip Tee