PipStop

It's a crazy day today. It's been relentless hasn't it?

The Big Three car companies essentially asking for a welfare payout had its CEOs fly private, and I commented on CitiGroup a few days ago.

Well, it's gotten far worse for Citi now. And I'm not a pundit, I'm not a prognosticator, I'm just like you and everyone else right now. But I do have a voice, and I'd like to think it's quite reasonable.

I'm not swayed by mainstream media panic. At the same time, as my partner at Trading Post Douglas Sereda told me today in a conversation, "make sure you keep your head out of the sand." It's a good point to ponder.

Many think they're the exception to whatever craziness goes on around them.

A point to make to all Forex traders, especially with brokers stating record levels of trading volume and record levels of account openings recently, is to not get caught up in it all.

Don't believe the hype. Don't be afraid to take a step back and breathe. DON'T feel that you HAVE to be in the market. We're going through an unprecedented time right now - don't become just another casualty along the way.

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In a deal focused society we'll be seeing unprecedented "deals," this holiday season. And despite the best efforts of many, I'm sure that it's just going to be too irresistible to pass up. At that point it will be a matter of ... which credit card should I put this on?

And again, they will have to be slapped with reality and need to tell themselves to get their head out of the sand!

It's not a secret that Trading Post operates in perhaps the worst trading time zone for currency traders. London opens at midnight, New York opens at 5:30 a.m.

But we do love the West Coast lifestyle and despite the torrential rain in Vancouver today, it's a beautiful place to be.

Since all of what we post is in Pacific time and we operate a business with global clients, recently we added a little widget to our client area that posts the current time in the Pacific time zone as well as the clients time zone.

Pretty cool, and kudos to Ray.

I just talked to a contact of mine at Citigroup and the conversation started off with a somber tone as he mentioned today's announcement by Citigroup CEO Vikram Pandit to eliminate 52,000 jobs over the next year.

My contact's department is relatively untouched, but I have to think of what a humbling experience it must be. Citi's stock is at a 12 year low, its stock lost 1/5 of its value last week alone, and the immediate future isn't too much brighter.

We talked about working together and partnering with Citi is still very much a priority for us, but how crazy of a time are we living in?

This week will continue to be like walking off the economic plank. Lower earnings, layoffs, no bonuses, tumbling markets - Citigroup isn't a perpetrator or a victim, it's just a microcosm of our society's excess.

How's your company doing? Is it one that is canceling a staff Christmas party? Or forgoing staff holiday gifts? Or is it worse? Or, to go against the grain, is everything status quo for your company - or are things better off?

A little internal project of our most recent live workshop in Vancouver. Kudos to Karen for putting this together. Pierre Charlebois and Nikhil Patel are in action.

To start ... Raghee Horner has posted her most recent weekly chartbook which is great material.

Boris Schlossberg mentions that he likes to trade 10 - 40 round turns a day and in his Trade Less Win More (scroll down) article this week he talks about how the practice of rapid trading isn't really conducive to many traders.

It really is crazy trading. Boris doesn't really touch on the time aspect of things, but constantly being in and out of the market keeps your eyes glued and you become transfixed to something you have no control over. Small losses eat at you and big losses drive you to the edge of insanity. All the while you're watching the market. Bad news.

For most, frequency = failure. It doesn't matter what kind of system you have. Below is Boris' most recent video.

Rob Booker authors the weekly GotForex newsletter, and it's too bad it isn't republished on the website. This week I'll republish it and mention that Rob is the chief market strategist at IBFX. It's a great topic "Learning to Stop Trading" and compliments Boris' thoughts for the week well too.

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Learning to stop trading: an introduction

We talk a lot in the trading world about when to trade; we talk about entries and exits and profit targets and stop losses and moving average crossovers.  There are endless threads on massive online discussion boards about trading the news, or whether inside price action "Wicked Fairy" candles are better than "Samurai Warrior Face" inside bars.  The arguments about the best place to get into a trade are so extensive that, by now, it's difficult to tell the difference between the methods.

But we don't talk enough about when it's time to quit.

I found that learrning when to stop trading was just as difficult -- or maybe more difficult -- than knowing when to take a trade in the first place.  For me, one of the real breakthroughs in my trading was when I realized that I didn't have to trade, that not every day (or every hour) was suitable for trading, and a day off could be just as valuable as a day spent staring at the dual-screen setup.

The fact that the currency markets are open nearly 24 hours a day for 5.5 days per week -- and that a holiday in one country doesn't necessarily shut down trading for the rest of the world -- makes it very tempting to open up the trading platform at nearly any time of the day.

You've certainly got to make your own decisions about what's right for you in your trading, but here are some ideas about why it's a good idea to stop, or when the right time might be.

Stopping when you're losing money

This is probably the hardest thing to do, and I've seen hundreds of traders lose more money than they ever thought they could, or wanted to, because they just simply couldn't stop trading when the chips were down.

For example, when we've just lost money, we often react hyper-emotionally.  I know that when I have a losing trade (especially one that happens really quickly), I want the money back right away.  And that desire to get the money back right away leads to a nearly overpowering urge to trade again -- now that I've seen where the market is really going (or at least that's what I am thinking), I want to take advantage immediately.

If I can get that money back right away, then I don't have to suffer any indignity that comes with a losing trade.

The truth is that we rarely recoup all those lost profits back in one big counter-trade, or one big "reaction" trade.  This can be the type of situation where we start spiraling out of control, taking trade after trade and losing a significant amount of money. 

It's sometimes just best to quit for a bit when we have lost.  This might be for an hour, for a day, even for a week or month.  This time away from the market can give us the space we need to think clearly and get ourselves in a productive state of mind again.

Stopping when we are hyper-emotional

One of the worst times to trade is  when we've had a distressing experience.  Ever made a trade after you've had an argument with your spouse or partner about money?  Or when you've had a particurarly tragic event in your life? 

These can be terrible times to trade, because our focus is on the recent emotional experience, and not on what we're doing.  When we're not focused or attentive, we make stupid  mistakes that can cost us a lot of money.

I have seen emotional traders remove stop losses to "prove a point," or get back at someone through their trading.  The trading becomes an expression of their emotions, or an outlet for feelings that they can't say, or didn't say, or can't express in any other way. 

The market, unfortunately, doesn't know us personally and couldn't care less about our individual difficult life experiences.  It's not going to give us a break or go easy on us because we've had a bad day. 

So if you've had a bad experience, consider taking some time to sort out your feelings before you fire up the trading account.

Stopping when we've made money

This might sound strange at first, but it can be one of the most powerful additions to your trading plan: a goal for when you are going to stop trading if you've made money.

Perhaps you set a goal to make 50 pips a week, or a month.  That's a goal, mind  you, and I'm not implying that everyone or anyone can make 50 pips, or that the majority of traders can make that many pips (remember, trading forex is risky, and the majority of traders lose money -- that's a topic for another week) .  The fact is, I don't know what the right number goal-wise is for you.  But if  you look back over your trading history, can you start to get a sense for what you are able to achieve, if you are a profitable trader?

I have seen traders, time after time, start the week off strong, and get to Tuesday or Wednesday with a reasonable amount of profit, only to see them lose the money in reckless trading during the rest of the week.

In fact, some of these traders consistently lose money week after week, even though early in the week -- for most weeks -- they are actually profitable.

We sometimes treat profits as "found money," or money that we can afford to lose.  We have a few winning trades and then we give ourselves room to take an "experimental" trade, or a trade just for the hell of it.  This is tantamount to gambling.

Idea: go back in your account and see if you recognize a pattern of making money during the beginning of the day, week, or month.  Are you more successful at the start of the week or the end of the week?  In what ways are the trades you take different at the start of the day compared to the end of the day?  Or week? Or month?

Question: Does this mean that there's never a good time to trade?
It sounds like it's always time to stop!

Trading is not right for everyone.  And trading all the time is probably not right for many people at all. 

But that doesn't mean that stopping your trading before you start is a good idea. I'm not saying that there are never good times to trade.  Here are some thoughts:

1. Consider having some quiet time at the start of each day before you trade.  My friend Chris McCloughlin has a rule that he never trades unless he's been awake for an hour -- because he realizes (big surprise) that he doesn't trade well if he is super tired.

2. Measure your emotional state.  This doesn't have to be a sit-down with a professional therapist every time you are about to trade.  But it's not so difficult to take a moment and gauge your own emotional state at the start of the day.  If you think you're a complete wreck today, maybe it's a better day to go feed the ducks.  Or see a movie.

3. Have a trading plan, and use it. Make a version of your trading plan that you can keep near you, or keep you focused.  Not every trader needs to have the entire plan in plain sight, but most of us can benefit from a regular reminder of what kind of trades we're looking for.  It's important to allow yourself to be picky with your trades and wait for the setups that you know you like best.

4. Are you a better trader at a certain time?  When you go back through your trade history, do you recognize times that you are more successful?  It doesn't have to be a time of day or day of the week; it could be near the time of some fundamental news.  It could be around the time when the currency pairs you watch consolidate in a specific pattern.  Recognizing when you do best as a trader can help you get more specific about when you are going to dedicate time to take and manage your trades.

Do you really need to do all this analysis, or all this thinking about stopping and starting  your trading?  Maybe that's not your thing.  And it's up to you how deep you go into efforts to learn more about yourself and your trading.  I've found it to be true  that this kind of deep thinking about what you're doing pays personal dividends -- regardless of how useful it is specifically to your trading.  I hope you'll consider some of the things I've mentioned here.

Getting back into the saddle no matter what it is, is always a little difficult. In my case I've been away from the blog for about a week because I wanted to take a break. Getting back into the swing of things isn't really hard - as I have a few things to share.

Getting back into the trading swing of things is harder. I've been through it and I'm sure many of you have to.

I usually play hockey once a week and last night I played for the first time in about 8 weeks for whatever reason. I played goalie and it's especially draining and I outdid myself. It's the stubbornness I guess of wanting to carry on and play through. I threw up once and didn't play that well, but I finished.

When I got home I collapsed into bed after a quick shower with an enormous headache. I went too hard, too quick, and I paid the price.

I actually felt better after I blew out my first trading account. But it's one of life's constant lessons to me and a reminder of the old cliche ... "Learn to walk before you can run." Most want it all now, or as quickly as possible - whatever it is in life. Patience isn't a virtue of many.

Just remember to take it easy, and don't over extend yourself. Life is too short to constantly be bucked out of the saddle.

The November issue of Currency Trader Magazine is out!

This month's issue features:

- Return of the Dollar: Still a Safe Haven?

- Inside Day Patterns: In the Forex Market

- Intraday Trading with Ichimoku

- Aussie Dollar gets Pounded

- Euro/Dollar

- Analyzing the Nordic Currencies