trade better—I was on the right track.
The next day I arrived a full hour early for work, filed my way straightthrough the morning without a break and then skipped lunch to submit aclassified ad (to start the search for my replacement). I was working with-out the help of Scott or interns, but I found that I liked getting things doneby myself. I realized that as a manager of the filing system, I had becomevery lazy.
By 5:00 P.M. I was on a roll. I researched a new computer-based filingmanagement system and took notes on the cost, called the company thatsold the program, and left a message, and organized a huge stack of casefiles that lawyers had probably thought were lost forever. I refiled the dep-ositions, letters, transcripts, and who knows what else from the past fourweeks of the Anderson case and found that Scott had made a lot of mis-takes, or had clumsily returned things where he shouldn’t have, as he was
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selling off information to the news or to the opposing counsel. I didn’t stopto wonder at all where Scott was. He was old news and I was happy thatwe had left on reasonably good terms.
By 7:00 P.M., I had to pull myself away from work and nearly forgot tovisit the 31st floor. As promised, the night security guard had a badge forme when I showed up and it worked perfectly. The floor was just as emptyas it had been the day before, with probably 15 people that I could see, sit-ting at their desks. A few of them were playing cards and the others weresurfing the web. None of them were trading.
Near the back corner of the room, only about 20 feet from Craig’s desk,a computer was set up where there hadn’t been one the day before. Thedesks  to  either  side  were  empty,  without  computers  or  monitors  orphones. A note from Anderson told me that the desk was mine to use, thatI should call the tech support guys if I needed to load software onto themachine, and that I should make myself at home.
Next to the note from Anderson was a note from someone named Alis-
tair Martin. It said:
“Harry: sweet trade on the Euro! Thanks for the idea!”
Who was Alistair Martin? I looked up, toward the desk where I’d satthe night before. Then I realized that I’d left my Post-it note on the desk ofa currency trader named Ellen Hansell, and that she had taken the trade,probably with Anderson’s approval. I immediately punched some keys onthe computer (realizing that I had become very comfortable with a com-puter,  without  having  even  noticed  it  before)  and  pulled  a  chart  to  seewhere the Euro had traded that day (Figure 16.5).
To say that I amazed myself is an understatement. I shocked myself.For five minutes, I just looked at the chart from several different angles.Was I looking at it correctly? Did I really plan that trade? Had I actually an-alyzed  the  charts,  picked  an  entry,  a  stop,  and  a  profit  target?  Withoutblowing up an account? I wondered how much money Alistair Martin hadmade  using  my  idea.  If  Alistair  was  trading  one-million-dollar  positions,then the 120 pips had made him twelve thousand dollars. If he had traded afive-million-dollar  position,  then  he  had  made  sixty  thousand.  The  num-bers amazed me.
I decided that the long-term charts worked better for me, after all. Har-vey was right from the beginning, and I never should have looked at theshorter time frames, which only tempted me to jump into quick positions.The short-term charts appealed to my greed. The long-term charts requiredpatience, rewarded analysis, and produced in one trade more profit thanany of the short-term trades I’d seen.
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FIGURE 16.5 Harry looks at Euro trades.
I thought of Mindy at George Sisler’s hedge fund. It occurred to me thatshe could benefit from switching to a long-term view, if in fact George wasgoing to require more of her, as Harvey suggested. It made sense to me any-way.  Why  trade  over  one  hundred  times  in  one  day,  just  to  achieve  thesame profits in one trade by careful study on the long-term charts?
Next I determined that if the system of support and resistance that I’dtraded worked before, then it would work again. And if I was tempted tolook at a different time frame, I’d select an even longer time frame than thefour-hour charts. But first I had some questions.
The first trader I found sitting about twenty feet in front of me was ac-tively engaged in a game of rolling dice against another trader who was ob-viously working very hard, and not at his desk. Both of them were dressedcasually. Neither one was a day over 30 years old. I supposed, from what Ilearned about traders so far, that their youngish looks and apparent lack ofconcern  for  the  market  had  nothing  to  do  with  their  skills  as  trader.  Istarted to think that the better the trader, the less the person would actu-ally look like a trader. Or what I expected a trader to look like. Or, moreyet, what I expected a trader would be doing. In fact, what did these guysdo all day? Why were they even here? I wondered.
“Hi Harry,” the first trader said. “Watcha doin?” He spoke with a Cana-
dian accent.
“Hi. I have some questions. If you don’t mind. I hope I’m not interrupt-
ing anything important.”
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“Not at all, Mr. Banes,” the other answered. “We’re just here manningsome open positions.” This one spoke forcefully with a British accent. Hisvoice had a tone of confidence, and this impressed me. I wanted to speaklike that. I wanted to be sure of myself like that, especially when trading.Confidence  seemed  to  play  a  big  role  in  trading  success.  After  making  amental note to ask Craig or Anderson or Harvey about it, I asked: “Is thereany  reason  that  switching  from  a  four-hour  chart  to  a  daily  chart  wouldmake a big difference? As long as I am following the same system?”
The Brit didn’t even look up. He shook his head. I think he took me foran amateur (which I could not dispute) and didn’t seem to care one way orthe other if I got my answer. The Canadian seemed completely willing tohelp and replied happily: “Not really. What works on the four-hour ought towork on the daily. But you should go back in time and test it to make sure.”That seemed reasonable to me, although I had no idea how I might goabout  doing  such  testing.  I  was  going  to  ask  another  question,  but  theCanadian beat me to it: “If you’re going to trade from the daily, you’re reallygoing for the bigger moves. That’s where you can get a big piece of the ac-tion, if you can ride along for the swings. A lot of traders here are taking aharder look at the long-term charts for that reason. More profit, less work.And you trade from home, right? Well, it’s obviously much easier since youare only going to have to look at the chart once a day. Or at least, you’regoing to center your planning time around 5:00 P.M. Eastern Time, when theNew York session is completely over and the daily candle closes.”
Once a day? That made sense. If I planned my support and resistancetrades on a daily chart—then I would only really be looking at the chartswhen the daily candle closed. And now I knew that it closed at 5:00 P.M. Iwould later learn that in the 24-hour world of currency trading, 5:00  P.M.Eastern Time represented the end of one day and the beginning of the next.At that time, a new day was starting in Asia and a workday was ending inNew York. So it made sense if I looked at it from a worldwide standpoint.I couldn’t remember any more questions, so I stood and watched themroll the dice a few times. The Brit chimed in: “Want a piece of the action,Harryboy?”
“Not really. What’s at stake here?”The Canadian laughed. “This game is called ‘paycheck,’ Harry. He’s gotme for two paychecks right now. It’s a simple game: I roll three times andadd up the total. Then Roddy here makes a bet. He bets either that he canbeat the total in one roll, in two rolls, or in three rolls. One roll is called a‘one bet,’ two rolls a ‘two bet,’ and three rolls, a ‘three bet,’ or the ‘wussbet,’and you can figure out why we call it that. If he makes a three bet, and hewins,  then  he  owes  me  nothing  and  I  owe  him  nothing  and  I  get  to  rollagain. If he loses the three bet, as we call it here at EW, then he pays mehalf a paycheck. If he makes a 2 bet and wins, he wins half of my next pay-
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check and gets to roll next. Now he would only make a one bet or a two betif the numbers say he can win with those, of course. Follow me?”
“Sure. I get it.” This was madness. It was 8:00 P.M. on a Thursday nightand  they  were  rolling  dice  to  win  more  money  from  each  other  than  Iwould make in two months.
“Now about the one bet,” he continued, in his Canadian accent, “That’swhere  it  gets  interesting.  If  Roddy  wins  a  one  bet,  he  gets  my  next  pay-check and he gets to roll for the next two turns, no matter if I win or lose.If he loses, he owes me his next paycheck and loses a turn.”
I thought: Yes, they’re insane. How much money could they possibly
have?
I started to leave when the Brit spoke up: “Hey, Banes! How about thattrade  today?  How  far  you  think  it  can  go?  You  think  it  can  get  down  to1.2000? The round numeral, as I like to call it?”
“I  don’t  know,”  I  replied.  “My  target  was  1.2080.  Where’s  it  trading
now?”
He leaned over to his keyboard and punched it in. “It’s still hangingout in the high 2000s. But I think it can make a second drop lower. I’mstayin’ in.”
“You took the trade?” I asked.“Yeah, sure I did. I heard all about you. You’re working with Harvey, theWinklemeister.  Everyone  here  took  the  trade.  Just  about  every  desk  yousee here, they all wanted to take the trade—small or large, didn’t matter.Some  of  these  guys  only  trade  the  crosses,  you  know,  the  EUR/JPY,  theGBP/CHF,  and  so  on.  So  they  didn’t  take  it.  But  I  did.  So  did  WinnipegGeorge.”
“Does Anderson know you all took it?” I asked.“Heck yeah,” he shot back, obviously thinking I was a moron for notknowing that already. “Anderson knew about it. He signed off on every oneof us taking it. It was a fine trade, Harry. You made me some excellent cointoday. Cheers!”
“Cheers!” I replied, and then I forgot all my other questions.What? I thought.Whump! It hit me on the head as hard as those bad trades had hit. Butthis time it was a much better whump! It was the whumping that you get inyour heart when you are first kissed. Only I had been kissed by sweet, re-demptive pippage. Who knows how much money I’d made for these peoplehere?  One-million-dollar  positions  times  10,  20  traders?  Or  more?  Multi-plied by a hundred pips or more?
I recollected my brains and then walked back to my temporary tradingdesk. I didn’t try to act nonchalant about it. If I could have skipped back tothe  desk,  I  would  have  done  it.  My  duty  now  was  to  find  more  of  thesetrades. Had it been a one-time-only thing? Had I just been lucky because
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Craig had tipped me off to the idea in the first place, and Harvey had con-firmed it? Could I repeat this?
I opened up the daily chart for the Euro and went to work.
COULD I DO IT AGAIN?
What surprised me more wasn’t that my idea had been used by real WallStreet traders (okay, it was not fully my idea, but it sure felt like it at thetime and I needed a boost in confidence), but rather that something as sim-ple as a support/resistance line was powerful enough to create pips. It wasa drug to me: I wanted more of it. Did other currency pairs act like this?Could  I  do  the  same  thing  on  others?  What  about  those  cross  currencypairs that Roddy had mentioned, like the EUR/JPY?
The  good  news  was  that  I  didn’t  need  to  worry  about  all  that  rightaway. For now, I could focus on the four-hour, and even the daily charts. Icould  start  to  understand  what  Harvey  was  talking  about  when  he  saidtesting: He was asking me to focus and study one thing. I didn’t quite knowhow to start doing that, but I was determined to try. If I didn’t get it right,then I wouldn’t see him again.
The  moves  on  the  daily  chart  were  much  bigger—just  like  WinnipegGeorge said—so I would have to plan for wider stop losses and could gaingreater profits from those moves as well. That must have been why Harveywas so intent on having me concentrate on the long-term stuff. Greater po-tential for more reward, for the same effort. Sounded good to me. The four-hour and the daily and the EUR/USD would do just fine for now.
Then I asked myself a series of questions, inspired by Roddy: How farmight the Euro fall downward? Where was it likely to stall? Could I find anarea, just like 1.2200, only lower? Some area where the currency pair hadexperienced trouble moving higher or lower?
The  four-hour  chart  was  no  help  at  all.  I  could  see  some  areas  thatmight stall the pair above 1.2200, but not below it. And I needed to find agood stopping point on the downside. So I moved to the daily chart andfound something that I really liked (see Figure 16.6).
It  definitely  appeared  that  1.1850  was  a  meaningful  number.  On  theleft-hand part of the chart, back in May and June 2003, the currency pairhad struggled to rise above that level. Then in October of the same year, itcouldn’t break above it at all. Then in November, as it was finally gainingenough  strength  to  pierce  the  level,  it  still  stalled  there  for  several  days,and still surely produced some nice moves back and forth. In all, I foundfive solid examples of the pair bouncing off that level between May and Oc-tober 2003.
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FIGURE 16.6 The daily chart.
I wanted to choose this level for a profit target. But was this enough re-search? I looked back at the current chart. How could I know that is whereit would stop? The night before, my planning had started with a numberthat Craig and Harvey had given me, and then I backed into a reason forjustifying a trade at that number. But this was entirely different. Would I bewilling to write this number down on a Post-it? And leave it on my desk?
More  confirmation.  I  wanted  more  confirmation.  I  needed  another
chart to back me up.
So I looked at the weekly chart, but it was no help at all. It showed thatin October 1998, the pair had some trouble with the 1.1850 mark. But hadthe Euro even existed back then? How could they do charts for a currencypair that didn’t exist?
I deleted the weekly chart and wondered what Harvey would do in asituation like this. I decided that first of all, he most certainly would notrisk losing money on this trade. So I definitely wasn’t going to suggest abuy trade with a stop and a profit target. No way. But would it be appropri-ate  to  express  my  view  that  I  thought  the  EUR/USD  would  stop  movingdown once it hit the 1.1850 mark? Roddy had asked me, after all, where Ithought it would fall to. Why not write that down? It was just paper trading,after all. No one was going to get hurt.
So I wrote down: “EUR/USD Stops: 1.1850” on a Post-it, stuck it to mydesk, gathered my things together, and left. As I shut the door of the trad-ing floor behind me, I heard Roddy scream out.
Somebody had lost a paycheck.
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Testing
The next day I learned that I needed to be far more clear about my cur-
rency analysis, for when I arrived at Wakeman, Butterman, and Baileyat 7:00 A.M. (over two hours early, because I was intent on starting topay  back  stolen  time,  even  if  I  could  never  catch  up),  my  voice  mailchirped that I had received, and I am not making this up, 37 messages.
I peeked around the corner. Herbie’s light was on. He was always inthis early, but it couldn’t be him. He would leave a note, telling me never tocome back. It wasn’t like Herbie to leave 37 voice messages, either. Thiswas something entirely different.
The  first  message  said  it  all.  It  was  Roddy  from  down  on  the  31stfloor, and it had come in two hours earlier: “Harry, you left a bloody notedown  here  and  the  traders  have  all  gone  mad.  They’re  running  aroundwonderin’ if you’re buyin’ or you’re sellin’ the Euro at 1.1850. Call downto 31, don’t be callin’ me. I’m at home and I’m sick of the phone ringin’here  just  because  I  saw  yer  note  first.  Bugger!  Don’t  leave  any  morebloody notes!”
The next messages were from all sorts of traders I’d never met and Ihad  no  idea  how  they  got  my  number  or  why  they  would  care.  I  was  inearly, anyway, so I had a couple of hours to sort all this out and then I couldreturn to Wakeman in time to start the day. Although I didn’t like the ideaof falling behind on the filing, I most certainly didn’t like the idea of havingour receptionist flooded with phone calls as soon as she got in.
Before  I  could  pick  up  the  phone,  my  extension  rang  again.  It  wasCraig. There were loud voices in the background. He must have been sur-
164
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rounded by other traders. He said: “Harry, you had better get down here. Idon’t know what’s gotten into these guys. But they want to talk to you.”
“All right,” I agreed. How had I become so popular, just from one trade?What in the world was happening? Craig’s tone let me know that he wasn’tparticularly amused that he was the representative secretary who had totrack me down. I also rightly assumed that he didn’t much like an inexperi-enced trader like me getting so much attention. When I arrived on the 31stfloor, I waved my badge in front of the door, and walked out onto the trad-ing floor. It was loud. It was chaotic. It almost seemed like something hadgone terribly wrong. Craig seemed out of place in the midst of it all.
When I found him, I first asked him what in the world had happened.“It’s just a bit crazy here right now,” he admitted. “There’s word that one ofour  London  traders  took  a  huge  hit.  Massive.  Like  more  than  a  hundredmillion dollars.”
“A currency trader?”“Right. So it’s sent all the fixed income guys—everyone down here—
into a frenzy.”
“Why would that affect them?”It was so loud in the room that we nearly had to shout to hear eachother. The upside was that no one recognized me and they weren’t payingattention.  Business  television  was  covering  the  story  on  all  the  screensabove  us,  and  between  the  comments  from  the  reporters,  I  heard  everysort of vulgarity imaginable.
“This isn’t the most stable of trading desks in the world,” he told me.“These guys aren’t noted for their adherence to Zen spirituality or peacefulliving. They are like a bunch of sharks. They smell blood in the water. Theysense change. Some of them are already calling headhunters and trying tosee if they can move into other jobs on the Street. Some are wondering ifthere will be cutbacks, and if they will make the cut.”
I wondered if Roddy or George were part of the panicking crowd. “Imet a guy named Roddy last night. And a guy from Canada named George.Are they in trouble? Are you?”
He shook his head. “Roddy, no way. He’s an Asian session expert andhas contacts all over the world. He makes prices for some really large com-panies.  Some  of  them  are  in  London  but  he  doesn’t  want  go  back  there.Having  too  much  fun  here  winning  everyone’s  paychecks.  He’s  gotnowhere to go but up in all this. He might have a chance for a promotion inall this, as long as he’s willing to go back to London. George, he’s fine, too.We call him Winnipeg George, because he’s from the province of Winnipeg.And George is a great trader. He’s been working closely with Roddy for along time.”
“And you?”“Me? I’m fine. I’m having a great month.”
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“That’s  excellent.  It  almost  seems  like  you  don’t  fit  in  here  with  this
crowd.”
He shrugged in a way that told me he agreed but that this wasn’t the
time or place to admit it.
“By the way, Harry,” he said, “I sold Euros at 1.2200, and I’m still in thetrade, too. Why did you tell these guys to make that trade? Anderson toldme he gave you a desk but you’re not working here. What’s going on?”
Now it was my turn to shrug. “I can’t explain it. I am sort of shocked
that a bunch of bank traders would care at all what I said.”
“Ordinarily, they wouldn’t. But Anderson really put you on a pedestal.”“Really?”“Yes, really.” There was a hint of jealousy in Craig’s voice. “What didyou  tell  him?  I  thought  your  trading  was  going  terribly.  I  told  some  guysthat  Harvey  was  teaching  you  and  they  flew  threw  the  roof—that  news,combined with Anderson’s endorsement, it was too much for them. Marchwasn’t easy on the short-term traders here and some of them got bit, mak-ing prices for some clients last month. They wanted to get back on trackand they’re looking to you now.”
“Well,” I replied, “first you need to know that I told Anderson that I wasa terrible trader and that I’d lost all of my trading capital. That, apparently,was not a big deal to him.”
Craig gave me a quizzical look. “It just doesn’t make sense.”That stung a bit. Maybe I had drained my trading account. Maybe I hadnot  been  a  disciplined  individual.  Those  things  were  true.  But  I  wasn’t  acomplete moron. I was facing my challenges and I had been able to plan agood trade with Harvey’s help.
Craig realized what he’d said and tried to backpedal. “Sorry, Harry. Ididn’t mean it like that. I meant to say that it doesn’t make sense that, well,”and then he paused. He looked at me square in the eye: “Okay, I probablydid mean it like that. And I should not have said it. Your trade was actuallyreally good. We got the entry from Harvey, but you planned the stop lossand the profit target.”
“But why would these guys follow someone they’ve never met?”“They do it all the time. Every day they’re talking to each other, swap-ping ideas, talking about rumors. That part isn’t a surprise. And I know thatAnderson  can  be  a  great  judge  of  talent.  So  I’m  not  completely  shockedthat he sees potential in you. But to give you space down here? Give you apass to get in the door? That’s a lot of trust for someone he hardly knows.Something seems odd.”
“I can’t disagree. I’m not sure what to say.”“Coming  here  today  and  yesterday,  and  hearing  all  these  guys  talkabout your trades, made me remember when I first started here and that Ifelt like I was on top of the world after one good trade.”
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I knew where this was going. But I did not interrupt him. He contin-ued: “I’ve already told you this. But it’s like I see some of myself in you.That you have this temptation now to go over the top. To do more of thesame.  That  you  can  do  no  wrong.  You  can  get  into  so  much  trouble  soquickly like that.”
I nodded. He was telling me what I needed to hear. Last night I’d beentempted to plan another full trade. But I hadn’t. I’d stopped when I realizedthat I lacked the confidence to plan another trade. Rather than do that, Isimply started the next idea—with a number at which the Euro was likelyto stop (at least in my opinion). Maybe I was too close to the loss of my en-tire trading account, but I simply didn’t feel like I wanted to go out and con-quer the world. I still felt like I wanted to do my work at Wakeman. That Iwanted to earn back the trust of my wife. That I wanted to make Harveyproud that I could get my emotions under control. And then, most of all, Iwanted to discipline myself so that I could gain the chance to trade again.And trade profitably this time.
I needed to go. I had so much work upstairs and I wasn’t getting paid tosit and shoot the bull with a bunch of wild traders. Already, other tradershad begun to surround us and were asking me questions. They mostly justwanted to know if I was planning to buy Euros at 1.1850. It only took a fewmoments to explain that I was simply offering what might be a good profittarget on the original trade, if I hadn’t already picked a different target. Infact, I sort of wondered why they couldn’t come up with their own profittargets. Didn’t they know more about trading than I did?
RISKING ERNEST WELLINGTON’S MONEY AGAIN
Work raced by. Friday shot past and the only reason I stopped downstairswas  to  say  good  day  to  Roddy  and  Winnipeg  George,  who  weren’t  thereanyway.  The  entire  trading  floor  was  empty.  I  checked  the  price  of  theEUR/USD and it was hovering at 1.2100, hardly having moved at all duringthe entire day. Having opened the charts, I figured I might as well take alook to see if I could justify any type of trade at the 1.1850 level. It didn’tmean much just to say that price would probably stop down at that price. Ifit was going to stop down there, why not buy it for even just a few pips?
I opened up the 4-hour chart again to see the places where 1.1850 hadbeen  hit,  and  then  I  opened  a  15-minute  chart  to  get  the  finer  details  ofwhat happened exactly at those times.
The  most  recent  example  was  November  18,  2003:  at  10:15  on  thatday,  the  pair  rocketed  through  the  1.1850  mark,  never  stopping  for  abreath of air. Perhaps an interest decision had been made that day and it
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overwhelmed the market. In any case, price flew upward 127 pips beyondthe  level,  and  didn’t  fall  back  below  it  for  six  days.  When  it  fell  backthrough, it fell hard, but I had to believe that I would have exited the tradeby then. Taking a loss of 127 pips seemed too great. On a sheet of paper infront of me, I wrote:
November 18, 2003: Loss/127
Then I moved back in time to the next example, from November 16.Price rose upward and came within 5 pips of the mark (to 1.1845) and fellbackward 122 pips, almost immediately, which I confirmed with a shorterterm chart. It never reached higher than 1.1845 before taking this huge re-versal.  Did  this  qualify?  I  said  yes,  since  I  wasn’t  going  to  bicker  with  5pips. From now on, I might