TRADERS´ English I September 2013 - page 78

People
78
09.2013
Arrambide petting Cheetahs in Zambia.
ratios, analyses, and ratios like profit factors. The
only thing that is important to me is to make the right
decision based on market momentum. The focus should
be to make the right decision consistently every day.
Once you are able to do that you are able to make money
every day.
TRADERS´: Many readers would be scared to trade
while travelling – what about suddenly losing an
internet connection, or not even having electricity or a
working cell phone while having open positions?
Wandering Trader:
I have sadly been in this situation
where I lost $80,000 on a bad Internet connection. This
happened at the same time of an erratic spike that came
from a news report. It was a position in crude oil a few
years ago when there were increased tensions with Iran.
It was the perfect storm not only in terms of news but
also in terms of a problem with the Internet connection. I
always carry a cell phone with me with a local SIM card in
order to contact my broker in order to try to avoid these
situations. One thingwemust understand as traders is that
this can happen from time to time. We can do everything
we can in order to try and avoid the unexpected surprise
but at the end of the day things happen. It wasn’t easy,
psychologically, to get over the $80,000 loss but it was
soon recovered and my mental approach to trading was
normal again.
TRADERS´: Do you use options to hedge against worst
case scenarios like losing internet connection?
Wandering Trader:
I have always traded futures and have
never gone into trading options. Because of my approach
of only trading an hour or two a day losing my Internet
connection is not the worst thing in the world. The finance
world lives on this idea that we need the fastest and most
reliable Internet possible in order to day trade. This was
true before the 1990s when there were only corporate
brokerages that were involved in day trading. The rise
of the retail day trader has changed things significantly.
Often times when you have an order in the market and you
lose your Internet the order stays with your broker. This
means that even if you lose your Internet connection your
stop or target will be hit. The scenario mentioned when
I lost $80,000 was a combination of an Internet problem
and an erratic new spike that caused huge slippage.
TRADERS´: Where would you consider a reasonable
point for stops to be located in the chart?
Wandering Trader:
This depends on the kind of market
that I am trading and the personality of that market.
strong? Has the market been moving well? Should I be
aggressive? Once that information is obtained I look at
the rules for trades, rules for opportunities. The most
important thing when it comes to taking trade is to first
follow the strict rules to ensure that all trades taken are
valid. Afterwards, I look at the market in the form of
momentum instead of rules and labels, and then I decide
to trade or not to trade. There’s a lot of discretion in the
end which finally is based on experience.
TRADERS´: Please explain the concepts of Risk
Management and Money Management you apply.
Wandering Trader:
I have a 1 to 2 risk versus reward ratio
for most of my trades. These are based on probabilities
that range between 60 to 80 per cent winners depending
on market movement. As mentioned earlier I risk a
maximum of five ticks (1.25 points) in order to gain two
points. Once I incorporate risk management the losers
average roughly three to four ticks and the winners remain
at two points. Based on the fundamentals of momentum
I also take trades that may be higher probability that have
a lower risk versus reward.
Money management in my eyes is a bit different
than what most people consider. I don’t look at common
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