Hungry Trading And Fat Trading — Get The Right Trading Mind

by jennifer on October 24, 2012

Hello Trader Friends,

I want to talk to you about trading.

A lot of us are like kids in a candy shop when it comes to finding trades, learning new strategies, and closing a trade with a profit. Making money from your kitchen table is so much more fun than going to work! But, too much candy will make your tummy hurt, and too much trading can hurt your bank account too. For bankers and institutional traders, trading is just a day job, and I think there is some place in between that we, the retail traders, can make a living and enjoy what we do every day.

Not all trading is fun. Not all trading is profitable. It is true to say that while sometimes trading is fun… Trading for a living is always difficult, and you should pat yourself on the back every time you make a profit. Keep track of what went right and do more of that.

It comes down to two types of trading which I call Fat Trading, and Hungry Trading.

In the beginning of the week I am Hungry Trading. I haven’t made any profit yet, and I have a fresh new week ahead of me. I spend my time wisely, don’t blow it on a stupid short-lived thrill-trade. I don’t take 10 standard lots on a whim. “Be smart, Jennifer. You are starving here!” That’s what I tell myself early in the week.

Take advantage of the fact that other market makers know it’s the beginning of the week, and caution might be low. I have noticed there is regular volatility that we can be ready to trade early in the week. It is as if market moving traders are relaxed because the whole week is ahead, plenty of time to get tough later. We are not like that. We are not random. It’s the beginning of the week and our caution is high! Don’t waste time on Monday, and don’t shoot for the sky on Tuesday. Put money in the bank. When you are hungry you will put anything you can find in your mouth. I’ll admit, I am fortunate and I don’t know much about true hunger, (although I did read  The Hunger Games!) What do I know about hunger, really? My only personal experience is after an athletic event when my body is all the way out of fuel, and I’m so hungry and I need food so bad I would eat anything. Most of the time I’m a fairly picky eater. I won’t eat it if it’s fried, processed, not organic, full of artificial sweeteners or if I don’t know who prepared it. After skiing all day or running a 10K, I’m so hungry I will eat anything off the cafeteria line, and that’s disgusting! But that’s exactly how I trade on Monday and Tuesday. If it’s a pip, I’ll take it!

Hungry Trading is my mindset early in the week when I want to bank some pips. Instead of of holding on for 30 pips, I will take 20. Or 10! Instead of holding a trade overnight, I will close it before I go to bed, and take anything that’s on the table. I will take profit as fast as possible. I am hungry to bank some pips, yes, starving to put some pips in the bank on Monday and Tuesday. I’m so hungry for profitable trades, that I will be very cautious! When you are hungry you are urgent, not careless. You are diligent, not anxious. You will be there when the trade opens and you will be there to close it, taking what profit comes quickly.

Fat Trading is my mindset after I have successfully fed my account. I have made some profit and feel like I have a little wiggle room. I don’t want to be careless when I “get fat” but I am willing to take more break-evens in an attempt to hold for something larger. I made some money, the week won’t be a bust, so it’s a good time to move my profit target to 50 or 70 and give the trade a little more time and space to see if it will produce something special. These are the gravy trades. They are not essential to my trading existence  but they will be nice, maybe even fun!  It can be tempting to be careless when I’m no longer “hungry” for profit, but careless is never the right angle in this field. I’m always protective of my bank account, and want to move to break even as quick as possible so no unnecessary loss comes. But it’s a time to hold on for a higher gain. It’s a time to spend a few hours trading a short-term strategy such as The Hopper or even Combo Trading from the 5 minute charts. It’s not my bread any butter anymore, and I have time to give and time to wait it out for other types of profits. (And I have time to write blog posts and share ideas with you!)

This is my trading life. I am very intentional about it, and I plan for my need to make money, I plan for my need to have fun, I plan for my need to stay in control so I don’t become careless or random, but do it all with a plan. At the end of the day, I ask myself, “Am I calm today? Did I do the right thing?” Ask yourself these questions and keep track of your answers in your notebook, and your trading life will prosper.

I got an email from a Yo’s Trader, one of our Combo Trading members. He is a real trader, and he is gaining experience this year that will really set him apart as a trader. You either starve or you thrive. You either learn or your fail. You either make trading work for you, or you take your ball and go home. It’s life. I think it’s a discussion we all have and it’s relevant to the trades we took this week, so I’m sharing with you some clips from our email exchange:

This is what he wrote:

How are you, hope you are well. Its great to see you on TFL tv, I try to watch it when I can but mostly the recordings.
I love how calm you are and Rob as well but you have more patience.
I am starting back up into trading after that big loss earlier this year, I have taken some Hopper trades and some combo trades that are successful but I am having a hard time in the following. Every Sunday night I scan the pairs on the daily and combo 4h charts,( I have a profile in Mt4 that has all the pairs on daily and 4Hcombo, so 26pairs x2) I take snapshots of the interesting charts and make notes in my electronic notebook as you do. Now comes Monday and trading starts and I don’t know how to keep up between the notes I took and the progress each pair is doing, I do not know how to monitor the pairs that I took notes for, so always they end up making the move and I miss it cause the market is moving on many fronts and I lose track of what is doing what. Even If I check your notes of the pairs you are watching I end up missing the trade like yesterday on AUDCAD move down from 1.0236 , USCDAD and today on GBPUSD move up to the resistance.
Please can you in few words guide me on how do you stay on top of the pairs that you took note of and watching to make sure you get on the trade.

WIsh you all the best.

Here is what I wrote back to him:

About your questions, I think I can help. And I want to say everyone feels that way at times.  It’s ok to scan that many charts, but when you find trades setting up you need to narrow your focus to just those charts. As the set up gets closer, decide which ones you really want to take. Then we can use entry orders because we can estimate, “by the time price gets to this point, it’s likely RSI and MACD will be in good position; and I already know I like the day chart.” If you can estimate what point you think you would want to be in the trade, then place an entry order there. A tip is to place a few pips farther away than you think, so the spread doesn’t slip you in sooner than you wanted. Use an initial stop loss of something like -40 to -50, and an initial profit target of +50. I start with 50 during the day because if the market moves quickly, sometimes it will go all the way there or at least get me into the 40s before I have a chance to close it. When I get to my computer, I go ahead and close it with whatever profit is there, usually somewhere between 25 and 45.

If I get to my computer and the position up 15 pips, I always move to BE.

Lastly, if I’m going to bed and I’m not at BE yet, I have to make a choice. Sometimes I just close the trade because I don’t want to risk the -40 or -50 pips loss. Sometimes I’m already to BE and I will set my profit target to 20 if I haven’t won any pips yet for the week, or I will set it to 30 or 40 or 50 if I can afford to risk stopping out at BE. It all depends on if I have had any profit yet in the week. In the beginning of the week I’m quick to take smaller profits, and as the week progresses I’m quicker to take very small losses or Break Evens because I don’t want to give back what I’ve earned, and then I might try to hold for something in the 40s to 70s to boost the week.

Here is an example. I entered that sell on USD/CAD trade yesterday right after I got 40 or so pips on AUDCAD. USDCAD just sat there all day. It seemed to go back and forth from -10 pips to +10 pips a long time. When I went to bed last night it was -6, and I closed it. I just didn’t want to risk losing what I got from the AUD/CAD the day before. When I woke up, of course, the trade had gone in my favor and if I had left it alone I would have +30 pips right now. Do you get the point? We don’t know which ones are going to lose, and it’s as much about protecting what I already made as it is about getting more.

The projections spreadsheet I wanted to share with you is based on 5 wins per month for only 30 pips. I get that many most weeks right? Well, it only takes 5 per month to grow your wealth, and the hard part is reducing exposure to risk and sticking with 5 good trades, knowing we are missing other good trades too. Remind yourself you are missing other bad trades too.

This is NOT a popular trading truth. People want 26 charts to look at every day. And I certainly can analyze that many every day which we do on TFL-TV. I do NOT trade that many pairs live every day.

I wish you a great day. Be calm, trade well. It’s not easy! Great analysis is easy, and we all get better at it every week. Great trading is difficult, but we can do it.

Jennifer

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