, I told Roddy and Winnipeg Georgethat I wanted to take a million dollars of the fund’s money and put it into aretail carry trade. I couldn’t keep this savage profit taking to myself, espe-cially considering that I felt I owed a great deal to my partners—the peoplewho had made so much of this possible. They told me that under no cir-cumstances would they give me a million dollars.
They gave me two million.Yes, two million bucks. And the No Interest Currency Dealer took thetrade.  No  questions  asked.  Remember:  in  the  no-interest  account,  I  washolding a sell trade on a currency pair that tended to go lower and lower allthe  time,  which  meant  that  they  had  the  opportunity  to  make  a  lot  ofmoney from me because I was letting a losing trade stay open until a mar-gin call in some cases. All they would need to do is to take the other side ofmy trade and not offset it by making a similar trade in the interbank mar-ket. By not offsetting the trade, all of my losses would be their gains.
This two million dollar retail carry trade is still perfectly lodged in mymemory; I can still remember that on January 4, 2005, I put one million dol-lars on the sell side, opening the trade at 196.77. But I got a bad fill on thebuy trade a few moments later, getting in at 196.90.
To make the margin calls less likely, I used a $500,000 slush fund ac-count to wire money to each side of the trade that required an inflow ofcapital.
By February 4, 2005, the trade had gained $98,000 in profit.In March and April, it gained another $220,000. Because I had so muchmore capital now, I then closed the trade and reopened it with the realizedgains. I also got a call from the no-interest dealer—they were wondering ifI wanted to do some more active trading in the no-interest account. I real-ized that they had probably not offset the sell trade, and they didn’t like theexposure to the sell-side trade, and that some active trading would help. Idecided to open a $250,000 account for the hedge fund, and from that pointon, if I took a currency trade of any kind for the hedge fund in the regularaccounts, I also mirrored the trade in the no-interest account. At least theywere earning some spread on the trade and this kept the phone from ring-ing. At least for a while.
By  December  2005,  the  carry  accounts  had  a  combined  balance  ofabout $3.5 million. That represented a better than 50 percent gain for theyear on that original $2 million invested. Roddy was hysterical about it and
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APPENDIX A
wanted to put the entire hedge fund’s capital into the carry trade. Of coursehe  didn’t  mean  that  (I  think),  and  in  any  case,  all  the  other  trading  wasgoing quite well so there was no need to do it anyway.
My  take  from  those  profits?  It  was  30  percent,  just  the  same  as  foreverything else I traded. Four hundred, forty-nine thousand, five hundred,forty-three dollars. And sixty-two cents.
If you’re thinking that the retail carry trade sounds too good to be true,well, you’re right. At least for the time being, it’s no longer possible. In July2006, I had the no-interest side of the trade going in four different accountswith four different currency dealers. The trade had produced a 43 percentgain  for  the  year  up  to  that  point,  but  then  suddenly  all  of  our  dealersturned us off. One by one, in a matter of two weeks, each dealer called meand said that no matter how much regular trading I was willing to do inthose accounts, they could no longer offer me a no-interest account.
We  had  gamed  the  system  for  as  long  as  we  could.  In  total,  we  hadearned  over  three  million  dollars  in  interest  profits,  using  nine  differenttrading accounts.
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APPENDIX  B
How IGot SixHundred Pips
This was a trade from late 2005. For some time I’d been adding the sto-
chastic oscillator to the horizontal line trades, and it had tested verywell. This was one of the first examples when I used the stochastic to
filter the trade.
I looked for times when a currency pair would pause at a level on theway up, and then on the way down. It was okay with me if the pair brokethe level in between, as long as it did indeed pause at support and resist-ance separately.
In August 2005, I noticed that the GBP/USD had paused at about 1.7800on the way up (a month earlier, in July). Then in late August, it had tried tofall lower and stopped near the same number—at 1.7820. In fact, the sup-port had been so strong this time that the pair jumped upward 600 pips injust a few days. This was a good candidate, so I made sure to watch thispair every afternoon to see when it got close to the 1.7820 number again(see Figure B.1).
On  September  23,  the  currency  pair  dropped  all  the  way  to  1.7820.  Ihad  found  that  if  I  checked  the  stochastic  oscillator  first,  I  could  bettertime  the  buy  trades.  As  long  as  the  oscillator  showed  that  the  pair  wasoversold, I had two pieces of information in my favor: It was hitting a linethat was likely to demand respect, and it was oversold.
The stochastic showed the pair at oversold levels, so I bought a starterposition at 1.7810 (it had fallen a bit before I could get in). I determinedthat if the 1.7820 area proved strong enough to reject the currency pair, Iwould  add  another  position.  I  placed  a  stop  loss  100  pips  away,  added  aprofit target at the recent peak that it reached at 1.8500, and left it alone.
211
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APPENDIX B
FIGURE B.1 Monitoring the GBP/USD.
Five  days  later,  the  trade  stopped  out  at  a  100  pip  loss  (see  Figure
B.2).
But this wasn’t the end of the position. Now that the level was broken,I was willing to buy the pair if two conditions could be met: first, that it fellat least 100 pips lower and then rose back upward; second, that when thepair  hit  the  level,  the  stochastic  was  above  80,  showing  an  overbought 
FIGURE B.2 The trade stops out at a 100 pip loss.
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Appendix B
213
FIGURE B.3 Time to buy.
situation. On October 6, the pair rose up as high as 1.7812, but the stochas-tic was stuck near the lower range, not even close to 80.
But October 26, the pair not only rose up to hit the 1.7820 level, but italso found itself in an overbought area. That meant it was time to buy. Isold a starter position exactly at 1.7820, set an order to buy back the posi-tion  at  a  loss  if  it  went  100  pips  against  me,  and  set  a  profit  target  at1.7220, six hundred pips lower and an area that marked a recent low (seeFigure B.3).
This trade was open for about 20 days, and it netted the full six hun-dred pips. Along the way down, I had added several positions onto my win-ning trade so that the total gain from this trade was $240,000.
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Index
A
Account, trading:
account:
funding with credit card, 5–7opening, 5–7protecting balance, 151size, 82–83
Accountability, 187–188, 204Amazing Forex Profits software (infable), 3, 6, 18, 47–48, 58–60, 65
Anderson (in fable), 20, 23–26, 30,
43–45, 49, 51, 66, 89, 150–157, 160,161, 166, 183, 198
Apple, Gerald, 125Auction game, one-hundred-dollar,
133–139
B
Backtesting, 171–174Banes, Gini (in fable), 8–9, 12–15,
31–32, 54, 58–62, 77–78, 97, 127,131–132, 151, 185, 201
Banes, Harold, Sr. (in fable), 16–17Banes, Harry (in fable):broken toy story, 6buying wife iPod, 14, 15, 131fantasies:
Mom catching peeing in Gonzales
yard, 50, 51–53
Priest conducting his funeral, 
91–92
financial debt/scaling down, 11–15,
79–80
job as filing manager (Wakeman,
Butterman, and Bailey), 1, 3–10,16–21, 53, 62, 65
getting fired from, 49–56return to, 146, 147–148, 149–163,
164, 181, 183, 200
lies, 7–8, 22, 52–54, 62, 66, 77–78, 97,
127, 151, 201making amends, 97–103nightmares:his, 57–62his wife’s, 12–15
technological incompetence, 4, 72trader, desire to become:
early overconfidence, 6–10, 27, 
77
getting started, 3–10homework, 175–183lessons learned, 33–44mapping out a new career, 73–78optimism, 11–15recognition of, 21–27, 62, 192sneaking into U.S. National Bank,
63–72
alternate reason for getting fired, 61Attentive Server, 19–20
team Banes begins anew, 
183–188
215
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216
INDEX
Banes, Harry (in fable) (continued)
testing, 164–174trip to 31st floor, 16–27turn for the worse, 45–56two promising conversations, 
28–32trading track record:
accidental profit on first trade, 
8–10
as beginner, 8–10, 22, 24, 26–27,
86–87, 127–132
as disciplined trader, 201, 204,
211–213“first kiss,” 161paper trading, 153–163, 173, 186
Web site (HarryBanes.com), 205worst fear, 145–146Bank of England, 190Bank of Japan, 190Bear Stearns, 109Bloomberg Channel, 58, 59Books about trading, 71, 73–75Borrowing at low interest rates,
108–109. See also Carry trade, onretail platform
long-term, 70–71, 74, 84point and figure, 69short-term, 70–71, 110–113tick, 70time frames, 70–71, 74, 84, 
110–113, 123–124, 158, 160, 162, 171
weekly, 70–71Chart examples:
bad timing, 129, 131big loss, 60Craig’s profit target (GBPUSD—
Daily), 64, 74
currency pair hits 1.2200
(EURUSD—240 minutes), 154
daily (EUR/USD), 163Euro trades (tasty profit), 159EURUSD, 5 minutes (Harry’s bad
timing), 129, 131
EURUSD—four-hour chart (huge 
move on Friday), 123
five-minute chart and 1.2200, 1555-pip-buffer zone rule, 169George and Roddy’s trade, 181GPBJPY spot rate vs. IR differential,
British Pound versus Japanese Yen,
190
176. See also Carry trade, on retailplatform
GPSUSD—15 minutes (Harry’s trade
dies), 59–60
Brokerage firms, 109
Harry chokes (EURUSD—5 minute),
C
Candles, dark/light, 75Carry trade:
defined, 108on retail platform, 109–110, 
120–121, 176–178, 192
CCI (Commodity Channel Index)
oscillator, 172, 179
Chart(s):
backtesting, 171–174candles, dark/light, 75daily, 70–71, 160, 162hand-plotted, 69indispensable, 23
128
Harry’s first chart (EURUSD—240
minutes), 126
interest rate differential, 190, 191long-term chart, 74margin calls, 59–60, 129stops and profit targets, 180stops out at 100-pip loss, 212strength of 1.2200, 155trade example, GBPUSD, 212, 213wild ride, NFP (April 2, 2004), 75
Checklist, trading, 100CNBC, 67, 72Cochrane, Mickey (in fable), 108, 109Cockiness, 44, 45, 55, 115Commodity Channel Index (CCI)
oscillator, 172, 179
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Index
217
Consumer Price Index economic
report, 76Cost cutting, 111Craig. See Taylor, Craig (in fable)Credit card:
debt, 12–13funding trading account with, 
5–7
Currency(ies):
charts (see Chart(s))cross, 170, 189daily trading volume, 74dealers, no-interest, 192Euro (EUR), 5Great Britain Pound (GBP), 5Japanese Yen (JPY), 5liquidity of market, 74major, 5pairs, trading in, 5, 170, 171, 189quote, reading, 5U.S. Dollar (USD), 5Cutoff point, 144–145, 156
D
Daydreams (in fable), 19–20, 50, 51–53,
61, 91–92Daylight Limit:
forced, 86, 115–116, 143Net Asset Value Calculation (Net
NAV) as, 86
personal, 142–147Discipline, 141, 147, 188Doorecker, Hank (in fable), 83, 84, 87,
88, 98, 125–126, 156
Drawdown, 152, 185
Non-Farm Payroll (NPF), 68–69,71–72, 75–76, 85–86, 91
Trade Balance, 76
Emotion, trading and, 185Entry price, logging, 185Ernest Wellington and Company (infable), 21–27, 34–35, 43, 66, 70, 72, 81–82, 143, 149–163, 167–170
Euro (EUR), 5, 88, 91, 93
in charts, 123, 126, 128, 129, 131, 
154, 159, 163
F
Fake trading (paper trading), 153–163,
173, 186
Federal Open Market Committee
(FOMC) interest rate decision,43–46, 51, 54, 58–59, 63–64, 67, 69, 75, 76, 85, 86
FOMC Interest Rate Decision and
Minutes, 76
Fees, 111Fibonacci retracements, 126, 173Flank, Charlie (in fable), 28, 63–72,
79–93
FOMC Interest Rate Decision and
Minutes. See Federal Open MarketCommittee (FOMC) interest ratedecision
Forex (foreign exchange) market, 3, 14. See also Currency(ies)
Francis, Melissa, 67, 68Futures, 178, 182
E
G
Economic reports, 76
Consumer Price Index, 76FOMC Interest Rate Decision andMinutes, 43–46, 51, 54, 58–59,63–64, 67, 69, 75, 76, 85, 86
George. See Sisler, George (in fable);Winnipeg George (in fable)Gini. See Banes, Gini (in fable)Goldman Sachs, 108, 109Gonzales, Emilio (in fable), 80
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INDEX
Gonzales, Father (in fable), 184Great Britain Pound (GBP), 5, 84, 119,
96, 101, 147–148, 149–163, 164,198–199
176
in charts, 59–60, 64, 74, 190, 212, 213
L
H
Hansell, Ellen (in fable), 153Harry. See Banes, Harry (in fable)HarryBanes.com, 205Harvey. See Winklestein, Harvey (in
fable)
Hedge fund (in fable) 3-billion dollar,
103, 104–113
Hedging, 118Ho, Larry (in fable), 141–142, 202Homework, interest rate, 175–183Honesty:
Harry’s refusing Anderson’s request,
198–199trading and, 95–97
Horizontal line trades, 171, 211
I
Indicators, 125, 127Information access, and trading, 119Institute for Supply Management (ISMServices) economic report, 87Insufficient funds notice, 129–130Interest rates and retail carry trade, 170, 175–183, 189–190, 192–193,207–210
Investing with leverage, 109. See also
Carry trade
J
Japanese bank, 108–109, 190Japanese Yen (JPY), 5, 190Jimmy (in fable), 138–139Johnson, Herbert (in fable), 17–20,
23–24, 25–26, 42, 48–56, 61, 89, 92,
Laws/rules, trading:
basic principles, 120Don’t Become Cocky, 44, 45, 55, 
115
5-pip-buffer zone, 168–169I will hold myself accountable,
187–188
most important laws, 203–204Thou Shalt Never Lose More Than 25 Percent of Thine Account, 204
Thou Shalt Stand Accountable to
Another Person for Thy Trades,204
Thou Shalt Test Before Trading, 20425/75 rule, 145, 185, 204
Leverage, 34–35, 76–77, 109, 177Long-term, 70–71, 74, 84. See also
Time frames
Loss cutoff point, 144–145, 156Lot, standard size, 111
M
MACD. See Moving average
convergence-divergence (MACD)
Margin calls, 58–60, 130, 131–132Marianne (in fable), 138–139Martin, Alistair (in fable), 158Mentor, secret, 86Mickey. See Cochrane, Mickey (in
fable)
Mind-set, changing, 144Mindy. See Swanson, Mindy (in fable)Money, meaning of, 41, 42, 85Money management, 119Morgan, John Pierpont, 67Moving average, 125
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Index
219
Moving average convergence-
divergence (MACD), 125–126, 127
Murphy, John (in fable), 7–8, 28–32,
Pounds. See Great Britain Pound (GBP)Price making for clients, 173Price movement, dark/light candles, 75.
40–44, 45–46, 48, 49, 51
Myths about traders, 102–103, 119,
203–204
N
See also Chart(s)
Priest fantasy, 91–92Professional Currency Charting
Software, free trial (in fable),59–60
Profit target, 64, 74, 163, 180
Needleway, Scott (in fable), 3–4, 7–10,17–18, 20, 21, 26–27, 46–50, 53–56,72, 149–150, 157–158
Q
Net Asset Value Calculation (Net NAV),
Quote, currency, 5
86Nightmares:
Gini’s, 12–15Harry’s, 57–62
Non-Farm Payroll (NPF) economic
report, 68–69, 71–72, 75–76, 85–86, 91
Notebook of trades, keeping, 188
O
One-pip system, 110–113Options/futures, 178, 181Oscillators, 125
R
Release form, 54–55Retail carry trade, interest rates and, 170, 174, 176, 178–183,189–190, 192–193, 207–210
Retirement money, 77–78, 80Revenge trading, 145Risk, limiting:
balancing with options or futures,
178Daylight Limit:
CCI (Commodity Channel Index),
172, 179
Stochastic, 126, 211
forced, 86, 115–116, 143Net Asset Value Calculation 
(Net NAV) as, 86
Outsourcing accounting function, 113
personal, 142–147
P
Roddy (in fable), 160, 162, 163, 165,167, 169, 170, 173, 178–180, 188,190, 199, 209–210Rumors, traders and, 166
Paper trading, 153–163, 173, 186Paycheck game, 160–161, 163, 165, 170Paycheck Partners (in fable), 199,
S
200–201, 202, 209
Pip(s):
auction game, 133–137, 138defined, 5logging final result of a trade, in, 182one-pip system, 110–113
Plan. See Trading system
Santelli, Rick, 69Scott. See Needleway, Scott (in fable)Secret that there is no secret, 141Self-direction/responsibility, 14475/25 rule, 145, 185, 204Severance pay, 77, 150
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INDEX
Short dollars, 24Short-term trading, 110–113. See 
also Time frames
Sisler, George (in fable), 105–113,
114–121, 138–140, 143, 159, 170,174, 175–183, 188, 189–193, 202, 205
Size of trades, 111, 186–187Spreads, 18, 110, 192Spreadsheets, 172, 178, 182, 195Standard size lot, 111Stealing time from employee, 96–97Stochastic Oscillator, 126, 211Stops, 180, 185, 212Supermarket deal (in fable), 107–108Supply and demand, 85Support/resistance, 162, 171, 172, 204Sutherland (in fable), 66, 90, 92Swanson, Mindy (in fable), 109–113, 
159
Swap rate, 176, 207Swiss Franc, 84System, trading, 100–101, 112–113, 
144, 185–186
T
Target, profit, 64, 74, 163, 180Taylor, Craig (in fable), 29–32, 33–44,
45–51, 54, 61, 62, 64, 65, 69, 72,75–77, 81–89, 92, 98, 100, 101,116–117, 123–124, 143, 146, 152,156, 158, 160, 163, 164–166, 169
Technical analysis, 75Tens, trading, 111–112Testing, 164–174, 185, 18631st floor. See Ernest Wellington and
Company (in fable)
Tick charts, 70Time frames, 70–71, 74, 84, 110–113,123–124, 158, 160, 162, 171Trade Balance economic report, 76Trading:
account:
protecting balance, 151size, 82–83
charts (see Chart(s))checklist, 100difficulty of, 102on emotion, 185example (“How I got six hundred
pips”), 211–213
income potential of, 41–42, 204information access and, 119laws/rules:
basic principles, 120Don’t