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ROB BOOKER
 
 
 
AdventuresofaCurrencyTrader
 
 
 
 
 
  
 
Founded in 1807, John Wiley & Sons is the oldest independent publishingcompany in the United States. With offices in North America, Europe, Aus-tralia, and Asia, Wiley is globally committed to developing and marketingprint and electronic products and services for our customers’ professionaland personal knowledge and understanding.
The Wiley Trading series features books by traders who have survivedthe market’s ever changing temperament and have prospered—some byreinventing systems, others by getting back to basics. Whether you are anovice trader, professional, or somewhere in-between, these books willprovide the advice and strategies needed to prosper today and well into thefuture.
For a list of available titles, visit our web site at www. WileyFinance.com.
 
 
 
AdventuresofaCurrencyTrader
A Fable about Trading,Courage, andDoing the Right Thing
 
ROB BOOKER
 
John Wiley & Sons, Inc.
 
 
 
 
  
 
Copyright © 2007 by Rob Booker. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
Wiley Bicentennial logo: Richard J. Pacifico.
Financial charts throughout this book created using TradeStation software. Copyright ©TradeStation Technologies, Inc., 1992-2006.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form or by any means, electronic, mechanical, photocopying, recording, scanning, orotherwise, except as permitted under Section 107 or 108 of the 1976 United States CopyrightAct, without either the prior written permission of the Publisher, or authorization throughpayment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web atwww.copyright.com. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,
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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used theirbest efforts in preparing this book, they make no representations or warranties with respectto the accuracy or completeness of the contents of this book and specifically disclaim anyimplied warranties of merchantability or fitness for a particular purpose. No warranty maybe created or extended by sales representatives or written sales materials. The advice andstrategies contained herein may not be suitable for your situation. You should consult with aprofessional where appropriate. Neither the publisher nor author shall be liable for any lossof profit or any other commercial damages, including but not limited to special, incidental,consequential, or other damages.
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Library of Congress Cataloging-in-Publication Data:
Booker, Rob, 1971-Adventures of a currency trader: a fable about trading, courage,and doing the right thing / Rob Booker.p. cm.— (Wiley trading series)Includes index.ISBN-13 978-0-470-04948-8 (cloth)1. Foreign exchange market. 2. Foreign exchange futures.
3. Speculation. 1. Title.
HG3851.B62 2007
332.4'5—de22
2006029332
Printed in the United States of America.
109876543 21
 
For KrisThank you for telling me to go upstairs and write my book.
 
  
 
 
 
Contents
 
 
 
Foreword
PrefaceAcknowledgmentsAbout the AuthorIntroduction
Chapter 1 In Search of Amazing Profits
Chapter 2 The Future Looks Bright
Chapter 3 A Trip to the Thirty-First Floor
Chapter 4 Two Promising Conversations
Chapter 5 Lessons Learned
Chapter 6 A Turn for the Worse
Chapter 7 Trying to Awake from the Nightmare
Chapter 8 Charlie Flank Goes to U.S. National Bank
Chapter 9 Mapping Out a New Career
ix
xiii
XV
16
238
33
45
63
73
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viii
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Epilogue
Charlie Flank Meets His Match
Coming Clean
Looks Can Be Deceiving
The Story of George Sisler
Back to Square One
Breakfast with Harvey
Back to Where It All Began
Testing
Homework
Team Banes Begins Anew
Presenting Our Findings
Back in the Game
Return to the Thirty-First Floor
Settling My Tab
Appendix A: The Retail Carry Trade
Appendix B: How I Got Six Hundred Pips
Index
CONTENTS
79
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104
114
122
133
149
164
175
183
189
194
197
200
203
207
211
215
 
 
Foreword
 
 
 
decade. It is no longer necessary to work at a bank to trade cur-
rency, nor is it necessary to have a broker talk your ear off aboutwhy Pfizer should be taking off, when all you wanted to do was buy someIntel. These days you can do it all from home on your computer. It is thisidea of independence and freedom that is attracting so many of us to thetrading marketplace.
That old statistic about 90 percent of traders going belly-up withinthe first year... yeah that still applies, give or take a few percent. ButRob Booker has made it a personal mission to prove that it needn’t al-ways be the case. He has built a network of trading students all over theworld and helped them to realize that focus and discipline are all thatmake a successful trader. Systems are a dime a dozen (or sometimes$3,000 each), but only the disciplined trader who denies distraction willmake any money from them.
The market is overrun with books, courses, lectures, seminars, andwebinars designed to teach us all how to trade for a living and perhaps ac-quire a sense of freedom by doing so. The problem is that each expert whopresents such an offering is out to prove that it is the best and maybe theonly good trading system out there. Rob will tell you that the system is notthe most important piece of the trading puzzle. It is the ability to know ex-actly what you are looking for, wait patiently (or frantically, as long as youreally wait) for it to happen, and then jump on it. And repeat. And repeat.
Trading can become boring and redundant. But it is about makingmoney, not about excitement. It is about making money, not about beingright or smart. And well . . . trading isn’t even about the act of trading; it isjust about making money, to afford the freedom that we all desire. Thisfreedom is where the excitement really comes in. Freedom is the end. Hardwork, discipline, and focus are the means. It sounds lame, played out, andcliché, but it is still true. When we lose sight of that truth and start feelinglike genius traders, we start screwing up. Many people give up along the
[acest technology has made exponential advances over the past
ix
 
  
 
x FOREWORD
way, perhaps like the fabled gold miner who gives up digging just one inchaway from the vein of gold.
One of the top five most important things Rob ever helped me with,was to not give up when I was losing and my financial situation was nearlydemanding that I focus elsewhere. He helped me dust myself off, reassessmy commitment to becoming a successful trader, and start over with aproper foundation for success over the long haul. (Thanks Dude.)
In Adventures of a Currency Trader, Rob explores—through the storyof Harry Banes—the ups and downs of being a trader, the struggles manyof us must face to obtain the freedom that we are reaching for, and the lib-erating sense of finally making it.
This book, which is unique in its format, gives traders deep ideas tothink about: It presents a foundation to trade by and an example we can re-late to.
MAxweELt Fox, currency traderSouth PacificAugust 2006
 
 
Preface
 
 
 
that to me, and I hope that it can do the same for you.It’s not easy. It takes time and discipline.
It’s an adventure. But you can do it.
I will show you how, with the help of my friend Harry Banes.
The story you are holding in your hands is told through his eyes—he isEvery Trader. There’s a little bit of each one of us in Harry. And as you read,you'll follow Harry as he learns from some of the best traders in the world,alongside his friend and mentor.
As you get to know Harry, I think you will like him. He doesn’t starttrading with a huge sum of money, and his ambition is larger than his abil-ity. Knowing where Harry came from can help us appreciate how we allbegin our trading careers: nervous, excited, unskilled, and unproven. Hisfinancial situation, his day job, his life as a new trader, and his relation-ships with those around him, are much like mine were, or maybe yours areright now. His challenges and obstacles might remind you of the strugglesyou are facing right now. But he is determined to become a trader no mat-ter what gets in the way.
Even the humblest among us can go on to become great traders. Eventhe chump traders can become champions. Even the indebted can becomefinancially independent.
Harry admits early on that he’s a rookie trader, which doesn’t ade-quately prepare you for how bad he is. He’s the worst trader I’ve everknown. But we’ll stand next to Harry as he picks himself up from the side-walk on Wall Street and begins to implement the wise counsel of an expe-rienced trader who agrees to mentor him. From Harry’s experiences, you'lllearn how to recover from disastrous losses, how to set yourself up as afull-time trader, how to talk to your loved ones about what you're doing.But that’s not all.
You'll learn with Harry how some of his mentor’s best and worst for-mer students set up their charts, do their analysis, and take their trades.
Tin can bring you independence. Trading currency has brought
xi
 
  
 
xii PREFACE
What is more important, you'll learn how Harry eventually uses similartechniques to become a profitable trader and reach financial freedom. Andmost important of all, you'll learn not only how he made those profits, buthow he was able to keep them.
I need to stress two more things: Every character in this book is fic-tional, although you might see a bit of yourself in some of them. For moredetails about Harry, his mentor, their friends, and everything else about thebook, check out Harry’s web site at www.HarryBanes.com.
Inow invite you to go on an adventure with Harry.
Read on.
Ros BOOKER
Wheeling, West VirginiaDecember 2006
 
 
Acknowledgments
 
 
 
just the act of finishing a book and getting it to a publisher. While I
trade for a living, I have dreamed of being a writer since I was 10years old and sat in the back of Mrs. Holmes'’s fifth-grade class in La Verne,California. But just because I had the dream didn’t mean that I made it easyfor myself. In the past two decades, I have allowed some people and expe-riences to get in the way of my dreams.
Other people have helped me clear away those obstacles. I want tothank them.
Mrs. Holmes was my first and greatest inspiration. I would never haveput pencil to paper in my small yellow notebook if not for her. She encour-aged me and started me on the path to writing; without her, I could neverhave believed in myself. Many times during the writing of this book, Ithought of the faith that she had in me when I was still so young, and I wasable to write another sentence or page. I owe more to her than I have everrepaid.
I met Maxwell Fox in Fort Lauderdale, Florida, at the first seminar Iever did. He is the best trading friend I have ever had; he has helped meovercome plot difficulties and name characters (including Harry); and hewas the first person to read the entire manuscript. I am a better personfor knowing Max. He leaves people better than he found them. He is alsothe single greatest trader I’ve ever taught, hands down. He is disciplined,he is dedicated to the science of backtesting, and he wrote the funniestebook on chart patterns you’ve ever seen. You can get that ebook athttp://www.HarryBanes.com.
Eric Beutler helped in a moment of need. At just the right moment, infact. And then he helped again and again and again.
I could have dedicated this book to David Murphy. He has been by myside for more than 20 years, to help me at every major point in my life. Hehas endured my ego, my mistakes, my weaknesses, far more than I couldever repay.
Tis book took me 20 years to write. Well, not this specific book. But
xiii
 
  
 
xiv ACKNOWLEDGMENTS
Emilie Herman and Kevin Commins at Wiley were patient with me andhelped me every step of the way. Kathy Lien and Boris Schlossberg intro-duced me to Kevin and generally cheered me on when they didn’t evenknow that I needed it. Jesse Torres introduced me to Betsy from DeutscheBank, who kindly showed me a trading floor.
Thave been honored to work with some of the finest currency tradersin the world. I would stand any of these people up to any other traders onthe planet: I can’t name all of them, but here are some from the past fewyears: Craig Taylor, David Elliott, Scott Kush, Derek McGuire, RomanJakubas, Beth McNabb, Nina Hernandez, Louis Cooper, Angela Nitkin, BenMcDonald, Andy Eastabrook, Dan Ziembienski, John Law, Gary Young,Chris Ennico, Thomas Gibbs, Marie-Sophie Blanchet, Todd Bryant, NonaBates, Nader, Alex Semaan, Elaine Sequeira, Jonathan Warr, Jeff Politis,Irene Beregszaszi, Stephen Nieri, Chuck Smalley, Joseph Burgos, JohnnyReam, Darin Carlyle, Matt Forsyth, George Roy, Damodar Patlolla, GregWalker, Guita Al-Boudoor, Napaporn Nozawa, Darryl Martins, Chris Pyor,Carlos Angel, Steve and Dave Trehan, the Pip Brothers Szymon and Jerry,Gene Miller, Craig Brinton, Wasyl Szeremeta, Phrangq, Paul Kurtz...
I could go on for a long time. But these are among the best people Iknow. I am lucky to know them. They all helped me to write this book.
Any success I have in life is possible because I married my best friend.Kris is the best example of courage in the face of opposition and trial that Iknow. And she has supported me more than I have ever been able to sup-port her. Thank you for putting me through law school, and for helping mequit a legal career and follow my dreams.
And last of all, I want to thank my son Isaac. You found me at the brinkof emotional disaster and you reached out and saved me. You came to us inthe very moment when we needed you most. I wrote this book for you, too,even though you are too young to read.
R.B.
 
 
About the Author
 
 
 
Mr. Booker has trained hundreds of forex traders around the
world. He speaks about currency trading at conferences, expos,street corners, first class and coach seats, weddings, funerals, mornings,evenings, and pretty much whenever anyone will or will not listen to him.Rob focuses on helping traders deal with the mental, psychological, anddiscipline issues related to trading. Mr. Booker has authored a numberof ebooks, including Strategy:10, which has been downloaded over200,000 times.
Rob can be reached at rob@robbooker.com.
R= Booker is an active proprietary forex trader and forex educator.
XV
 
  
 
 
 
AdventuresofaCurrencyTrader
 
 
 
 
 
  
 
 
 
Introduction
 
A real chump. I bought when I should have sold, and sold when Ishould have stayed out of the market completely. Ever do that? Ofcourse not.
I was an expert at exiting my trades at just the exact moment whenthey would go from staggering loss to hugely profitable. Convinced thatthe trading gods wanted me to suffer, I nearly gave up on many occasions.When I say that I was a chump trader, I mean Super Chump. I lost thou-sands of dollars that my wife and I could not afford to lose.
It’s a good thing that I never gave up. With the help of an amazingfriend that you are going to meet in this book, I became a superprofitabletrader. I traded my way out of the mess I was in.
If it were not for trading, I'd still be working in the filing room of thelaw firm Wakeman, Butterman, and Bailey, on 59th Street in Manhattan.That was the crummiest job I’ve ever had in my whole life. For 11 years, Iworked there like a dog on a leash. Two years ago, I broke the leash andwalked away, and I became human again.
You see, I reached my trading Independence Day. And I have neverlooked back.
I want you to do the same. That’s why I am writing this book.
ME name is Harry Banes. I used to be the worst trader in the world.
 
  
 
 
 
In Search ofAmazing Profits
 
simple it was to make money trading currency. A company called Amaz-
ing Forex Profits, supposedly based in New York City, the financialcapital of the world, had agreed to unleash the powerful secrets of profes-sional traders to the common man (me) for an unbelievable price. Makingthe decision to buy the software was easy: I needed money fast, and the ad-vertisement seemed to promise that all I had to do was buy an easy systemfor making loads of cash every day. I called the toll-free number and rightthere, in the middle of the night, I spent $2,000 on that software. Now I onlyhad to wait for the package to come in the mail. The road to riches waslined with profits from the forex (foreign exchange) market, and I was on it.
I didn’t say a thing about this to my wife. I knew that the best way tohandle this situation would be to get the software, have Scott, my assis-tant, install it on my computer at work, and start making a boatload ofmoney; then I would buy something really nice for my wife and announcethat I was going to be a full-time forex trader, a millionaire, and a hero toour family. The plan was foolproof!
Waiting for the software was agonizing. At the age of 35, I found myselfracing home to see what had come in the mail that day. (Why had I notopted to spend an extra $49.95 for expedited shipping? The kind sales op-erator from India had insisted I would want to get started as soon as possi-ble, so why didn’t I listen?) It seemed as if an eternity passed before thepackage arrived, but arrive it did. So eager was I to start (and havinglearned from the infomercial that the forex market was open 24 hours a
Jame trading because I saw a commercial on television about how
3
 
  
 
4 ADVENTURES OF A CURRENCY TRADER
day), I called Scott and asked him to meet me downtown that very evening.I told my wife that I had some important matters to discuss at the office,kissed her and my kids goodbye, and hopped on the subway to 59th Street.
Everything seemed to be coming together. Although we had a lot ofdebt, I figured that with this new trading venture, I could make some seri-ous profits. Some of the people on the commercial were making thousandsof dollars a day—and this was not some fraudulent get-rich-quick scheme.Ihad met people who day-traded the stock market. They did their home-work, they treated it like a job, and they were making real money. Some ofthem had made a lot of money in the late 1990s and although the markethad fallen, they were still in the game. I liked the thought that I was goingto join the ranks of people who could make money for a few moments ofwork per day.
When I arrived at the office, it was past 9:00 pM. and everyone hadlong since gone home. Waiting at my cubicle was Scott Needleway, a jun-ior filing clerk who had attended the same high school that I did (only hegraduated seven years after me). He had long hair. He was brilliant withtechnology. He also won the “most likely to go to jail” award in his highschool yearbook.
“So what’re we doin’ tonight?” he asked. I could tell that he had eitherbeen drinking or smoking something stronger than cigarettes. His days atthe firm were numbered already, so I let it pass. Especially considering thatIneeded his help that night.
“T’ve got the software. I need you to show me how to get it running.”
Scott had essentially run my computer for me for the past five years.Thank goodness, my job didn’t require much work on the computer, and anattorney who needed to contact me would simply e-mail Scott. He, in turn,would tell me what was going on. Now I was excited to do some of my owncomputer work.
He took the CDs and quickly installed the software without a hitch. Aspromised on the commercial, the software was fairly straightforward. Itwas like a news feed—with headlines popping up on the screen, telling meto either buy or sell a particular currency pair. On another section of thescreen, it showed all the current open positions. Most were colored green,showing me that they were making money.
All this had only taken 10 minutes, but I could tell that Scott wanted togo home, or go wherever he went when he wasn’t at the office. I told himthat I would see him tomorrow and he darted out of the office without an-other word. He hadn't even asked what the software did! Right there, hehad walked away from an opportunity to improve his financial situation.Well, he could stay and work at Wakeman, Butterman, and Bailey for therest of his life. Not me.
Instead of going home, I dove right into the software. I took my timegetting used to clicking around the screens. I read the help manual twice,
 
In Search of Amazing Profits 5
I clicked through every screen in the software to learn about the differenttrades I could take, and I read an article about how currency pairs werequoted. I learned that currencies traded in pairs, meaning when youtraded currency you were always buying one currency and selling an-other, or selling one currency and buying another. You could not trade cur-rency just as a stand-alone financial instrument—and that made sense.Here is what I read:
If you think the U.S. Dollar is going up, you have to ask yourself:going up against what? Obviously, another currency. So you choosea currency that it is going up against, and you buy that other cur-rency. And because you buy it with U.S. Dollars, you are selling Dol-lars and buying that other currency.
It took a while to sink in, but within a couple of hours, I was a formerfiling clerk turned currency guru. I knew the major currencies were theEuro (EUR), the Great Britain Pound (GBP), the Japanese Yen (JPY), andof course, the U.S. Dollar (USD). I figured out how to read a currencyquote. This is what one looks like:
GBP/USD 1.8000/1.8005
This meant that the Great Britain Pound against the U.S. Dollar couldbe sold for 1.8000, and could be bought for 1.8005. Simple enough. I alsolearned that if the Pound moved from 1.8000 to 1.8001, just one point, thatwould be called a one pip move—a pip, in other words, referred to a Per-centage in Point in the world of foreign exchange. And the software wasgoing to tell me how to do all this stuff.
The next morning I submitted all the necessary documents to open atrading account at a firm suggested by the Amazing Forex people. Within24 hours, I was promised that I could fund my account with a credit card.More waiting, and this time it would be even more excruciating. Imaginethe profits I was missing out on! All night, I had watched as the softwarecalled for buys and sells on currency pairs. Trade after trade was prof-itable. On a sheet of paper next to my computer, I calculated the pointgains I could have made just by following along: over 110. It was going tobe difficult to concentrate on my job that day knowing that I was lettingmore of the same profits go by. The challenge was not going to be makingthe money—it was going to be finding a way to trade as much as possible.
Thadn't slept that night, but it had been worth it. More motivated thanever to start trading, I felt invigorated and determined that during my lunchbreak that day I would schedule out all the times of day that I could trade.Although it would require me to get less sleep and steal some time from myemployer, the payoff would be huge. Definitely worth any sacrifice!
 
  
 
6 ADVENTURES OF A CURRENCY TRADER
THE ANSWER TO MY FINANCIAL PROBLEMS
 
Most people never do anything about their problems. When I was 10, Ibroke my “Tommy Baseball Home Run Challenge” electronic handheldgame. After realizing that I could not fix it by shaking the game, or reinsert-ing the batteries backwards, or praying to God, I hid the device away deepin my closet, behind the winter blankets and underneath my T-ball uni-form. I put it there for two reasons. First, so my parents would not discoverthat I had broken an expensive toy when I celebrated a home run by spik-ing the game to the floor as if it were a football. The second reason? I knewthat underneath the protective and magical cloth of my T-ball uniform,there was a chance that the baseball gods would heal the toy and bring itback to life.
I learned soon enough that this was not a useful method for fixing myproblems. When my parents divorced later on that year, it became clearthat simply hiding my father underneath my T-ball uniform was not goingto keep my parents from yelling at each other (and in any case, the gamewas still using that space under the uniform). But hiding my problems, orstoring my biggest challenges away in a closet, became one of my most fre-quently utilized methods for approaching difficulties in my life.
But when I purchased the Amazing Forex Profits software, I took con-trol of my financial situation. I was doing something. This felt really good.Iknew that my wife would be skeptical, so it was important to hide my de-cision from her at first. This small deception would turn out to be an in-consequential necessity on the road to riches. When she understood howmuch money I could make, it would seem less like a lie and more like asurprise.
Surprise is actually a good word to describe how we both felt aboutthe results.
I BECOME CONVINCED OF MY GENIUS
 
A week passed; it was far more difficult to open the trading account than Ihad imagined, especially considering that I needed to fax the forex brokercopies of my passport, utility bills, and everything except the results of aprostate exam. During this time, I watched as the Amazing Forex softwarelived up to its name. During the hours at work alone (as I stayed late everyevening and kept an eye on it during the day), it was racking up hundredsof point gains every day. This was nearly too much for me to bear, as I real-ized how much in dollar terms this could mean.
Knowing that the forex broker (Universal Currency Brokers, based inFlorida) would alert me by e-mail when the account was opened, I decided
 
In Search of Amazing Profits 7
to dedicate this unintended downtime to becoming more capable with mye-mail so that I would know immediately when I could fund my account.Scott even took an entire day to teach me to use a BlackBerry, so that Icould receive the e-mail no matter where I was. The more I used e-mail, thecomputer, the Amazing Forex software, and the BlackBerry, the more I re-alized how powerful all this technology was. Perhaps I could run the soft-ware on the BlackBerry and trade no matter where I was. The possibilitieswere endless. This claim of reaching financial freedom through trading didnot seem unrealistic at all.
Tuesday, March 16, 2004, at precisely 12:06 pm. Eastern StandardTime, I received the e-mail. I was in the conference room with the insur-ance litigation team, who were debating the merits of charging Wakemanclients in 6-minute increments versus 15 minutes. I was thrilled to be inthe meeting, because it was easy to keep an eye on the BlackBerry, avoiddoing any real work in the office, and then make a short presentationabout how it was possible for our attorneys to bill a bit extra for adminis-trative time by classifying “filing” as “research.” I was near the end of mypresentation when my BlackBerry buzzed and I knew that the momenthad arrived.
‘Tm sorry, I’ve got to take this,” I said, excusing myself, “our daughteris in the emergency room and I've got to check on her.”
Every attorney, especially the ones with small children at home, wasquick to excuse me for this important break. Of course I had told a whop-ping lie, but once again, this was a minor indiscretion on the way to a moreimportant goal: my own enrichment.
Outside the conference room, I read the blissful news: The tradingaccount was open and I could fund it with my credit card at any time.I dropped into my cubicle, took out my credit card, and called the forexdealer.
It only took a few moments, but I was so wrapped up in funding the ac-count with $1,000, that I didn’t realize that I was being watched. John Mur-phy, a young attorney who did lots of work with contracts, stood near theentrance to my cubicle.
“I heard you reading out your credit card