they knewwhat trades to take.
Even the man next to me, who was plotting away on his charts, had asystem that he was working on. He wasn’t reacting immediately to thenews, but he had said that he was going to base some of his trading deci-sions on this report—just not immediately after it was released.
With so much happening at that moment, I decided not to bother anyother traders, but instead make some observations.
Even though I was sure these old men had been successful at somepoint in their lives, I decided that the real trading life for me would resemblethe life of an Ernest Wellington trader. I could see myself with a computer athome, several monitors, the sports section open next to me, televisiontuned into CNBC in the background. That was more like it, and much morelike my personality. The computer was going to be the most difficult part.
I couldn't believe how long I had lasted at the law firm with barelyenough skill to answer my e-mail, pecking on the keyboard one letter at atime. They probably should have fired me long before they did, on the basisof my technological incompetence alone. It was positively going to be thecase that when I started trading for a living, I would receive some kind offormal training on computers. In the meantime, I could get my wife andkids to help me a bit. Maybe I could pay Scott, or at least offer to pay him,to tutor me.
But first, I was going to have to get a whole lot smarter than I was nowabout the basics: the language of trading. I would have to read enough sothat I could at least ask basic questions that could help me start learningthe advanced stuff that everyone I was watching on television—andCraig—knew already.
 
 
Mapping Out aNew Career
 
Just around the corner I'd also find Teuschers, the Swiss Chocolatier. If
Tarrived home with chocolates in one hand and 1,000 new books in theother, Gini would focus on the chocolates and not on how much I’d spent.And I planned on spending a lot of money on books that day—I was goingto stock myself with books about trading, then hole myself up at home dur-ing the day and study my brains out.
It wasn’t hard to find a clerk who was interested in talking to some-one about something other than travel guides to New York City, and hewalked me through the investing section one book at a time. I foundbooks on economics, on options, on forex, on day-trading stocks—youname it, I found it. The clerk also recommended a few books that werejust stories about traders. Although these books were less relevant, Ibought them anyway. As far as I can remember, that day I bought bookson day-trading stocks and futures and commodities, books on economicindicators, books on technical analysis (reading charts), and books thattaught me about the currency market specifically. Then there were somebooks on the psychology of trading, or stories about traders. While theyseemed interesting, I knew that I’d be just passing the time by readingthem and that they would be a waste of time. Those would be my rewardfor making profitable trades. I could only read those after I'd studied allthe other books at least twice.
Iam sure that I bought at least 20 books. I had so many of them that Icould not carry them by myself and had to arrange for them to be delivered
Jisice up at the Barnes & Noble in Rockefeller Center an hour later.
73
 
  
 
74 ADVENTURES OF A CURRENCY TRADER
to my house. They were more than happy to oblige, so I grabbed just one ofthe books—the book about day-trading forex—and I left the store, hoppedon the subway, and headed home.
By the time the subway reached my stop in Queens, I was so wrappedup in the book that I never got off. I stayed on all the way to the end of theline, and although by then I realized what was happening, I stayed on any-way. From what I could tell, the currency market was the most liquid mar-ket on the planet, and trillions of dollars a day changed hands (orcomputer screens) in trading. The book was written for the guy tradingcurrency at home, which was perfect for me—and it had systems, it hadtools, it even had advice about how to keep a log of my trades. I had placeda total of three trades in my entire life but I was determined that it wasn’tgoing to be long before I was trading on a daily basis.
When J arrived home, I had two things waiting for me: a frustrated wifeand a box full of books sitting on the porch so heavy that we could hardlymove it. Gini was wondering how on earth I could justify buying all thosebooks when I had just lost my job. It was funny, because I hadn't thoughtabout my lost job all day long.
Once I ate dinner with my family and put the kids to bed, I rushed tothe computer and fired up the charting program. That was the first thing Iwanted to see: the charts. Mr. Wilson had told me to look at the longer term.charts. So that is what I did (see Figure 9.1).
The daily chart told me nearly everything that I cared to know aboutCraig’s trade. Just the day before, on the first day of April, his trade had
 
GBPUSD - Daily
  
Craig's Profit., Target Reached |"
i. aM | X ae
/] | ieee
yao ) | 2200I Lis
}1.7800
 
Mer apr
FIGURE 9.1 Harry looks at a long-term chart.
 
Mapping Out a New Career 7
closed at his profit target of 1.8600. But I needed to see a chart closer upthat would show what had happened today. So, against the wishes of oldman Wilson, I switched over to a 15-minute chart.
From my book on technical analysis, I learned that each of the candlesI looked at represented the movement of price in a designated period oftime. On a 15-minute chart, each candle showed how far the price movedin, well, 15 minutes. Dark candles meant that price had gone down. Lightcandles meant that price had gone up. Easy enough (see Figure 9.2).
Looking at the chart, I realized that the GBP/USD had moved its entiredistance for the day—200 pips—in the first 15 minutes after the report wasreleased. Then it rose back up 100 pips, and then it fell back down 100 pips.What a wild ride! Surely a lot of money could be made in a very short pe-riod of time. That’s where the money was! In the short-term trading, justlike Craig Taylor was doing. If I could react fast enough, I realized, I couldget in on the first move of a currency pair after the Non-Farm Payroll re-port (ah, the NFP!), or the FOMC (Federal Open Market Committee) inter-est rate decision, and then ride it for a quick profit. And what if I tradedmore than just one currency pair?
While I knew I had made a mistake when I traded after the FOMC inter-est rate decision, I now understood that it was more a mistake of how longit took me to enter the trade and for long how I stayed in. It had nothing todo with whether I bought or sold. There were fast profits—even easy prof-its—to be made when these two reports were released. How many more re-ports were there? When did they come out? Would Craig show me how totrade them? I felt badly for Mr. Wilson. That old man was sitting around
 
GBPUSD - 15 minNon-Farm Payrolls ‘<“
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April 02, 2004 ire
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ima! }Holy Crap! [saa+ 18960himehi sa, Soean Weds pyagrml 7 Ds svazaiat ioe}1.8280
 
[Yas 380 ate eae eas eto sae tons tows tam Tae teao ane Yeo
FIGURE 9.2 A wild ride.
 
  
 
76 ADVENTURES OF A CURRENCY TRADER
waiting for days to trade, while Craig was enjoying freshly baked pips afterjust a few minutes of trading! How on earth was Mr. Wilson going to makemoney by sitting around and not even reacting at all to the economic re-port?
I dove back into the books. I finished the first book that evening, andthen spent the rest of the evening wading through the others. I had four orfive open at a time, and I was sucking in as much information as possible.Although I was learning a lot from them, and the terminology was comingquickly, I couldn’t get the idea about trading after the economic reports outof my head. From the books, I was learning lists of important economic re-ports. Here are the ones that seemed to cause the most movement:
Non-Farm Payroll
Consumer Price Index
Trade Balance
FOMC Interest Rate Decision and Minutes
There were other economic reports listed, but these were supposedlysome of the most important ones.
Together with my new-found understanding of economic reports, I hadthe Amazing Forex software, and I was sure that I could make that expen-sive tool work for me in this system. It seemed perfectly designed to helpme make a decision about what trade to take after an economic report.
By scouting around online, I also taught myself about leverage, ormargin. I learned that forex dealers were willing to offer 100;1, or even200:1 margin. This meant with an initial investment of $1,000, I couldcommand a $100,000 position, or even more, in the currency markets.What got my juices flowing about this was that, apparently, I could keepmy small trading account, and once I started learning to trade like Craig,Icould still make a lot of money on a daily basis. Trading for a living fromhome was now making sense to me. The only reason I had lost so muchso fast was that I had left my trades open while I was doing other things.If I had been paying attention and trading in the short term, I could havecleaned up.
The math I was doing in my head was shocking. My forex dealer of-fered 400:1 margin. That meant that I could put up $100 in margin, andcommand a $400,000 position. That would be worth $40 per pip! I'd have$400 in margin left over still. Just like the woman from the forex dealer hadtold me on the phone—every time the price moved against me by 1 pip, or$40, that would be deducted from my available leftover margin. So, I couldallow an economic report trade to move against me 10 pips before I neededto get out. That was fine, I realized—the market only moved in one direc-
 
Mapping Out a New Career 77
tion after these reports! I could just be ready to go in the direction of themovement after the report, and then bank some quick profits.
I'd seen the GBP/USD move 200 pips in just a few moments. If I just got50 of those pips for every economic report, at $40 each, that was $2,000 ingains. Every day! It was no wonder that those Wall Street guys were mak-ing so much money. They were trading position sizes of probably $10 mil-lion at a time. That would be . . . $1,000 per pip. At 50 pips a day, they wereeasily making hundreds of thousands of dollars per week.
That was when I knew it was my time to shine. I could not wait to starttrading again. I had broken down my wife by losing my job. Ihad raised herhopes high on the plans to become a trader, and now I had to prove myself.She was giving me another chance to make right the bad trade and the lossof $1,200. I decided that I never wanted to talk about that loss again. I wasgoing to focus on the future! What gain could come from miserably dissect-ing the past?
So I mentally stepped into a phone booth and changed myself intoHarry Banes: Supertrader. This was my destiny. I was going to earn backevery cent that I had lost. I might even earn it back on one trade.
I told all this to my wife the next morning.
She was supportive. “You got a nice severance check, and I know itwasn’t easy to get that. Maybe we should put that money in the tradingaccount instead of the bank. You can earn more trading it than we can ininterest.”
“That is not a bad idea,” I agreed. “The severance alone is not going toget us very far.” I did some calculations in my mind. With a $6,000 account,I could use $3,000 for margin, and I’d be able to command a $1.2 million po-sition, which would be worth $120 per pip. Now we were talking about se-rious money. More than enough to live on. On a daily diet of 50 pips offeconomic reports, I could expect to make $5,000 per day. This was nearlytoo great to comprehend. I was going to be rich. It occurred to me that somany people in life never took advantage of their opportunities. The $6,000severance money was a fantastic opportunity.
Because I'd recently lost a big chunk of money, I decided to play itcool. I told Gini, “What I'll do is get the trading account back up to a thou-sand dollars, and then we can put the six thousand in. That way I can getmy new trading plan off the ground, try it out, talk with Craig again. Thatwill be perfect. By the time I talk to him, I'll have lots of good questions,and he can help me maximize the severance money.”
Gini believed this was a good idea. “How are we going to get by in themeantime?”
Thad a plan for this. “I think we should take my retirement money outof the Wakeman 401(k) plan. And we can live on that for at least sixmonths.”
 
  
 
78 ADVENTURES OF A CURRENCY TRADER
Ihad between $15,000 and $20,000, if I was remembering correctly, inaretirement account. We had promised each other that we would nevertouch it except for an absolute emergency. Now seemed like an appropri-ate time.
“Do you think you should trade with that money too?” she asked.
This didn’t feel right to me. Not at all. The severance money felt like agift, like a $20 bill that I'd found on the street. But the retirement savingsseemed completely different. That money had been set aside for a longtime, had been growing slowly and steadily, and I'd taken less pay homeevery two weeks just so we could put more money toward retirement.
“No, I don’t think so. That money was meant for something else. Onlyin a total emergency would I consider taking that money out.”
“Okay,” she agreed. “That money could keep us going for more than sixmonths, if we scale down a bit. We can get by with less. No more hugespending sprees at the bookstore.”
“All right.”
“And we can change the way we eat. I bet we could get by for seven oreight months on that money.”
“What do you mean by scaling down?” I asked. “Do you mean sellingsome of our stuff?” This didn’t sit right with me. I was positive I would bemaking a lot of money very soon. She seemed to be taking the safe route.And what’s more, she didn’t seem bothered by this. It was as if she nowconsidered this to be exciting—even an adventure with her husband, thecurrency trader.
We had no idea what an adventure it would be.
 
 
Charlie FlankMeets HisMatch
 
ferred to selling off all the things that I liked in the house. My wife
canceled the expanded cable television subscription. She auctionedoff our big screen television on eBay, and replaced it with a tiny 17-inch setthat she bought online for $50. She sold my bookcases to a neighbor. Nowthat my book collection no longer had a home, she visited a used book-store in her old Brooklyn neighborhood, and just a few days later theycame and picked up all the books except for the new ones about trading.She sold the high-end stereo components that she’d given me for Christ-mas two years earlier. And she sold my tennis racket.
Lest I only tell one side of the story, I’ll admit that she also gave up hersewing machine and gave a ton of her older clothes and some of our furni-ture to a consignment shop down the road. She was boxing up the mi-crowave one afternoon when I called a halt to the entire operation.
“We gotta eat! We've definitely sold enough of our things.”
She paused. “I just want to make sure we don’t go bankrupt. So far I’veraised a lot of money for us.”
This made me feel like we were trying to raise funds to buy a kidneyfor one of our children. “How much?” I asked.
“Five thousand, give or take a few hundred.”
Thad to admit that it was impressive. I hardly missed the books and ac-tually missed the television far less than I had imagined that I would. Thekids missed it terribly, but they would get over it. If I added my wife's abil-ity to sell things to the retirement money (which turned out to be just over
T= weekend I learned that the words “scaling down” actually re-
79
 
  
 
80 ADVENTURES OF A CURRENCY TRADER
$23,000, which was on the way to our bank account) this brought our sav-ings to $29,000.
“What else?” Gini asked. “What else can we sell, if you don’t want togive up the microwave? What about the car?”
I shook my head. “We are not selling the car. You’ve sold everythingyou need to sell for now. We have almost $30,000 and that’s enough. We'lldo all right with that. We can make a budget and work out the numbers.With trading and that money we are going to be all right.”
“Are you sure?” I noticed that she was worried. That all this selling ofour stuff had more of a reason behind it than she had told me.
“Gini, are you all right?”
She shook her head.
“T promise we’re going to be fine. I promise I can do this.”
“T’ve started to worry that maybe trading is a bit more risky than I firstthought.”
“Why?” Had she talked to someone? Seen something on television?
“Well,” she started. “You did lose over a thousand dollars in one day.”
Oh. She had seen me. That was the source of her doubt. Hearing thiswas mildly depressing, but I determined to face it head on.
“T am not going to do that again. I learned my lesson. It wasn’t reallyeven my fault—I left the account only because Herbie wanted to chewme out.”
“But it’s not just that. I do believe you can do better. But my father’sbest friend lost everything day-trading the stock market. You know EmilioGonzales, right?”
“The guy who carried mail with your dad?”
She nodded, and continued: “He took out something like fifty thousanddollars of their retirement money and bet it on the stock market. Thenwhen he lost that, he mortgaged their home. Then he lost everything afterjust two months or something. They lost the home; they had to sell theircar; they even sold their furniture on eBay, just to survive.”
We were both quiet and uncomfortable for a few moments. I couldhear the traffic outside. Some boys were yelling and playing basketball onthe court down below the apartment building. A pigeon settled down out-side our living room window and cooed. Something tugged at my emo-tions; I could sense that whatever Emilio Gonzales had done wrong, Icould do wrong as well.
I took a deep breath. “I won’t do that. I won’t use our retirementmoney to trade. That is only for us to live on. And we might not even haveto use it all.”
Gini liked this idea. Neither of us wanted to feel negative about trad-ing. After all, it was the only solution we had at this point.
“Maybe you could go talk to Emilio. Learn from what he did wrong.”
 
Charlie Flank Meets His Match 31
‘Td rather talk to Craig. He’s been successful. I don’t know how muchI could learn from someone who lost everything.”
“When are you going to see him again? When are you going to starttrading?” she asked.
“Soon. I want to meet with Craig one more time.”
“When is that?”
“T will call him today.”
“What about the nice old man at the other bank?”
“Mr. Wilson? At U.S. National? I guess I could call him, too.” I didn’t re-mind her that he had invited me to stop by the next day, Monday, to talksome more.
“You guess you'll call him?”
“Okay, I will call him.”
But I had no intention of doing so. In the past two days, Mr. Wilson haddrifted into the background. The more I thought about it, the more I real-ized that the traders at U.S. National Bank didn’t take advantage of whatCraig knew—they were living in the past. No computers! How could atrader succeed without a computer? Everything told me that I wanted tobe Ernest Wellington-esque in my trading. On the forefront of information,of technology. This is how the big boys made money. It was how I wouldmake money, too.
While Gini had been selling our possessions, that weekend I hadhelped watch the kids and read as much as I could on economic indicators.Realizing that Scott was no longer around to help me, I had reread the en-tire user’s manual for my forex trading platform. I’'d learned how to effec-tively use the new charting program. In all, I now had set myself up to beready to trade the economic reports. I didn’t really need Mr. Wilson and de-cided that it would be best if I didn’t bother him again.
Over dinner on Sunday, we continued the conversation. I had one eyeon my currency charts the entire time.
“And you're sure that you can do this trading thing,” my wife remarked.
“Yes,” I promised her. The GBP/USD was moving sideways. Not doinganything. Sunday nights clearly didn’t matter in currency trading. Whowould trade at this time of day, anyway? I turned back to my wife. “Yes, forsure. Especially with all the tools that are out there right now. It’s probablyeasier to make money than ever before. This operation at Ernest Welling-ton was first class. Those guys are making a million dollars per year. Craigis going to show me what he does to make that kind of money. And I’m al-ready learning a ton of stuff on my own.”
“You are sure you can get Craig to teach you what he does?” Thisbrought to mind the subject of Craig’s mentor. I could still meet and learnfrom the person who taught Craig how to trade. I wondered if he was atrader at Ernest Wellington. I wondered again if it was really Anderson, or
 
  
 
82 ADVENTURES OF A CURRENCY TRADER
someone else I had seen on the trading floor at Ernest. For amoment I con-sidered calling Craig that very evening to see if he could set up a meeting.By now I had learned plenty enough to qualify myself for some advancedmentoring.
This emboldened me even more. “I am sure I can learn what I need tolearn. From Craig, from books, from others. Ihave the names of eight moreWall Street banks and haven't even tried to visit them yet.”
The events of the past two weeks had left her understandably unstablein her emotions. What I love about my wife is that even after I'd lost my joband half the trading account, and I had no evidence to prove that I couldduplicate the results of a Wall Street trader, Gini was still willing to goalong with the entire plan. Surely, the knowledge that Craig made $1 mil-lion per year helped to convince her to give the plan a chance.
I wondered what the other currency pairs were doing. I switched pageson my charts. The USD/JPY was moving down fast—my one-minute chartwas showing some serious action! Apparently the traders in Asia could getthings moving even on a Sunday night! Well, of course it was Monday morn-ing for them, I realized. No wonder. I summoned all my willpower to avoidtaking a trade.
HALF A TRILLION
 
I called Craig the next morning. Having seen the action on Sunday night Icould not resist getting back into the game, but I determined to not tradeagain until I received more instruction from someone who knew more thanI did. And from someone like Craig who could teach me to trade the eco-nomic news. I had learned more in 30 minutes with Craig than I had fromreading any of the books so far. The books were good for learning termi-nology. But the practical knowledge I could get from a successful traderwould take me to the next level.
Which is why I dialed Ernest Wellington’s number on Monday morningand asked to speak with Craig Taylor.
He answered immediately.
“Have you started trading again?” was his first question.
“Not yet,” I told him, “I took your advice.”
“Hallelujah!” he cried. “How I wish I'd taken that advice early on.”
“T also plan to put a bit more money into the trading account. That way,Ican actually make some real money.”
This didn’t impress him. “Remember that you don’t need a huge trad-ing account to trade successfully. And that trading doesn’t have to be youronly job. You could do something on the side. Earn some money to put intoyour trading account.”
 
Charlie Flank Meets His Match 83
This was perhaps the dumbest idea I'd ever heard. Of course I didn’tsay that. Instead: “Anyway, did you trade on Friday?”
“Sure did. Did you watch the market?”
“Yeah, I did. I actually sneaked onto the trading floor at U.S. NationalBank.”
“Really! Impressive! You did that? Did you meet any of the traders?”
“Yep. They were a boring bunch. Like a funeral home in there. Woodpaneling.”
“Oh,” he said. This seemed to jar his memory. “Those guys. I don’tknow anyone over there. They are the slow bunch. They take it nice andeasy. No short-term trading for them.”
“Right. I thought I was going to fall asleep there. Obviously, they needsome computers. Maybe they can’t afford them.”
Craig let out a hearty laugh. “Those guys? Oh, they can afford comput-ers. They could afford to buy every last computer on Wall Street if theywanted.”
“Really?”
“Really. They were the most profitable trading floor on Wall Street acouple of years ago.”
A slight twinge of regret fell over me as I realized I was supposed to bemeeting with Mr. Wilson right now. Maybe I had misread him.
“How profitable?” I asked.
“They had something like half a trillion dollars in assets. Their tradingdesk probably made two billion dollars in profits last year alone.”
“Whoa.”
“Right. We did a billion last year. With twice as many traders. Youshould definitely see if you can get in there again. Did you meet HankDoorecker?”
“No.” Doorecker? I was sure I would have remembered a name likethat. “Who’s Hank Doorecker?”
“Hank is probably the best trader on the street right now. He’s older,has been trading for at least three decades. Only trades currencies. Henever gives interviews so you can’t learn anything about his methods. Youshould look him up if you get over there again. He and I have the samementor. Just years apart.”
Inow felt really badly that I’d not shown up at U.S. National Bank thatmorning. There could be a lot of people there worth meeting! Would Mr.Wilson mind if I showed up late? He hadn’t specified a time. I now decidedthat as soon as I hung up with Craig I would race downtown. Hopefully, hewould not have already left for the day. Perhaps if he was gone, I could tryto meet Mr. Dudley Dooright or whatever his name was. If he was anythinglike Mr. Wilson, he wasn’t going to be busy with trading and would surelyhave time to talk.
 
  
 
84 ADVENTURES OF A CURRENCY TRADER
“They trade a lot of currency and bonds futures there,” he said, “Andif you can get them to show you how they use the long-term charts, it’sfascinating.”
Clearly, I was a moron. I had missed a huge opportunity by not learningmore while I'd been there.
“What about short-term trading? I’ve been thinking about doing moreshort-term trading. Like you do.”
“That’s good too,” he answered. “It’s really good. You can make moneyeither way.”
“That sounds like a contradiction.”
“It’s not,” he shot back. “Not at all. It’s a misconception that almostevery trader goes through. We think there’s one best way to do this. Butthere are a zillion ways that can work.”
But it had seemed that short-term trading had huge opportunities tomake money fast. I had already decided it was better for me.
“You know, I did interview there,” he said. “They’ve got an aggressiveoperation over there. Quiet, catatonic, like they’re all sleeping on the job.The reality is that they are wholly unimpressed with anything except mak-ing huge sums of money. And behind that stoic impression, they are hungryto be the very best in the business, and they usually are. They go after prof-its like an animal that stalks its prey for a long time, and then just pounces.And when they pounce, they don’t let go.”
“Sounds cool.”
He laughed and agreed. “There is a story about Hank Doorecker buyingup the Swiss Franc against the British Pound in the late 1990s—slowly, me-thodically, until he held an enormous position on the spot forex market.Rumor is that he actually placed calls to the finance ministers of small coun-tries and talked about how they needed to protect themselves by selling anyBritish government bonds they had and replacing them with Swiss bonds.”
“What would that do? How would that help him?”
“Well, I don’t have time to get into all of it, but what happened was hestarted a free fall. In the next year, the Swiss Franc gained over 1,000points against the Pound. People say he made one hundred million dollarson that trade alone. If you can meet him, it would be awesome to hear thestory firsthand.”
What Craig was describing seemed slightly dishonest, if not outright il-legal. And hugely profitable. I wondered how close I wanted to get to HankDoorecker. And at the same time I hoped I could meet him. There was somuch to learn.
“Do you have traders like that at your firm?” I asked. Maybe I couldmeet them. Getting to meet and learn from Mr. Wilson or Hank Dooreckerseemed more difficult now that I knew how profitable their firm was.
 
Charlie Flank Meets His Match 85
“We have lots of short-term guys. All short-term guys. No one as fa-mous as Doorecker or the other guys at U.S. National.”
Because I wanted to short-term trade, I was happy he had brought upthe subject.
“Do you think I should use the one-minute chart?” I asked.
His tone of voice dampened, like he had been asked this before anddidn’t want to talk about it. “I don’t know. It depends.”
I changed gears. “Did the short-term traders at Ernest Wellington dowell on Friday? It was a big move down for the British Pound at least.”
“Oh, yes. A lot of us jumped on that fast.”
“What did you do?” I asked.
“I sold Pounds, as you can imagine. Sold everything I could for as longas I could that morning. When that report is first released, all the liquiditydries up. Your short-term charts will show the price falling, and that’s ex