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 supposedly
some 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(cid:2)1, or even200(cid:2)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,I could 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(cid:2)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-
book_c09.qxd  12/20/06  2:16 PM  Page 77
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. I had 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 the
meantime?”
I had 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.”
book_c09.qxd  12/20/06  2:16 PM  Page 78
78
ADVENTURES OF A CURRENCY TRADER
I had between $15,000 and $20,000, if I was remembering correctly, in aretirement  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. Only
in 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 or
eight 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.
book_c10.qxd  12/20/06  1:51 PM  Page 79
CHAPTER  10
Charlie FlankMeets HisMatch
That  weekend  I  learned  that  the  words  “scaling  down”  actually  re-
ferred to selling off all the things that I liked in the house. My wifecanceled 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’ve
raised a lot of money for us.”
This made me feel like we were trying to raise funds to buy a kidney
for one of our children. “How much?” I asked.
“Five thousand, give or take a few hundred.”I had 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
79
book_c10.qxd  12/20/06  1:51 PM  Page 80
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 to
give 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 of
our stuff had more of a reason behind it than she had told me.
“Gini, are you all right?”She shook her head.“I promise we’re going to be fine. I promise I can do this.”“I’ve started to worry that maybe trading is a bit more risky than I first
thought.”
“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 this
was mildly depressing, but I determined to face it head on.
“I 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.”
book_c10.qxd  12/20/06  1:51 PM  Page 81
Charlie Flank Meets His Match
81
“I’d rather talk to Craig. He’s been successful. I don’t know how much
I could learn from someone who lost everything.”
“When  are  you  going  to  see  him  again?  When  are  you  going  to  start
trading?” she asked.
“Soon. I want to meet with Craig one more time.”“When is that?”“I 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 eye
on 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
book_c10.qxd  12/20/06  1:51 PM  Page 82
82
ADVENTURES OF A CURRENCY TRADER
someone else I had seen on the trading floor at Ernest. For a moment 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. I have 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 morning
and 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.”“I also plan to put a bit more money into the trading account. That way,
I can 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.”
book_c10.qxd  12/20/06  1:51 PM  Page 83
Charlie Flank Meets His Match
83
This was perhaps the dumbest idea I’d ever heard. Of course I didn’t
say 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. National
Bank.”
“Really! Impressive! You did that? Did you meet any of the traders?”“Yep. They were a boring bunch. Like a funeral home in there. Wood
paneling.”
“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 need
some 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 a
couple of years ago.”
A slight twinge of regret fell over me as I realized I was supposed to be
meeting 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 trading
desk 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  like
that. “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.”
I now 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.
book_c10.qxd  12/20/06  1:51 PM  Page 84
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 learning
more while I’d been there.
“What about short-term trading? I’ve been thinking about doing more
short-term trading. Like you do.”
“That’s good too,” he answered. “It’s really good. You can make money
either 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  to
make 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.
book_c10.qxd  12/20/06  1:51 PM  Page 85
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 up
the 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 and
didn’t want to talk about it. “I don’t know. It depends.”
I changed gears. “Did the short-term traders at Ernest Wellington do
well 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-actly what it is doing. It’s falling hard because there isn’t anyone who wantsto buy it.”
“Supply and demand,” I offered.“Exactly,”  he  continued.  “No  one  wanted  to  buy  Pounds  for  the  firsttwo  or  three  minutes.  Then  when  it  had  fallen  a  good  200  points,  it  re-bounded slightly, as traders who were already short going into the reportclosed their positions by buying back Pounds and selling U.S. Dollars. Youcan  see  this  happening  on  a  short-term  chart,  like  a  five-minute.  Even  aone-minute, like you were talking about. You can see the price fall fast andthen rebound suddenly.”
“And the rebound showed some interest in buying the Pound again.”“And that’s when I sold it. I sold all of it that I could.”“Where did you get out?” I asked.“Oh, I was out fifteen minutes later. That was it for me. I didn’t trade
again that day.”
“This sounds much like what you did on the FOMC interest rate deci-
sion.”
“Yep. I follow a similar method all the time, really. It has worked for me
very well.”
This was the time when it was appropriate to ask Craig how much he
had made.
“How much did you make?”“Well,  I  did  100  points.  Which  was  an  excellent—a  very  excellent—
NFP day for me.”
It  was  odd.  When  he  spoke  about  his  own  gains,  it  wasn’t  about  themoney. It was about the points or pips that he had made. Another flood ofquestions came to mind. This was either going to be a four-hour phone callor I was simply not going to get all the answers I wanted.
book_c10.qxd  12/20/06  1:51 PM  Page 86
86
ADVENTURES OF A CURRENCY TRADER
This was exactly the reason that I wanted to meet with him again inperson, and his mentor, to learn more about short-term trading. So mucheasier. The excitement of trading the economic news appealed to me, ofcourse. But the thought that I could make a pile of money in a half hourand be done for the day—that was overwhelming.
“I’m surprised you kept yourself from trading when you saw the Non-
Farm Payroll reaction,” Craig remarked.
I  grinned  and  said,  “I  didn’t  have  a  computer  or  a  phone  with  me.  I
couldn’t trade.”
“Well, it’s all the same anyway. They’ll have another Non-Farm Payroll
report next month.”
“And I’ll be ready for that one. Did everyone at your firm trade it like
that?” I asked.
“No.  One  guy  got  full  of  himself  and  started  selling  the  U.S.  Dollaragainst the Yen. He was totally out of his mind, talking about how the reac-tion to the jobs report was ridiculous and that he had a tip from a big WallStreet trader that the dollar was going to sell off big time, and that the Non-Farm Payroll reaction was a perfect time to take advantage of the idiotswho were buying dollars. And then he said that the USD/JPY had to fall atleast 200 to 300 points from the high of the day.”
“Did he lose a lot of money?”“Oh, yes,” Craig answered. “In fact, he left his trades open and then left
for the day. He didn’t want to look at the trades any longer.”
“He is allowed to do that?” I asked. “Seems like he could get fired for
doing that.”
“He’s got a leash,” Craig replied with a chuckle. “He can only lose somuch and then the firm closes his trades. He’s allowed a certain amount ofleeway.  They  used  to  call  it  a  Daylight  Limit,  although  around  here  it’scalled a Net Asset Value Calculation, and for short it’s called Net NAV.”
“But shouldn’t someone step in and get him out of the trade before itgets worse?” Talking about this guy made me think about my FOMC trade,and how I wished that someone would have stepped in and ended the tradebefore it got as bad as it did. Imagine if I still had $1,000 instead of $500! Ireally  wanted  that  money  back.  It  hurt  to  think  about  how  stupid  I  hadbeen.
“Good point, Banes. Yes, it would be good if someone could step in andhelp  him.  But  he’s  not  the  kind  of  person  to  accept  help.  Remember,  allthese guys including me are used to being the best at what we do. We madegood grades in school. We played first string. We are meant to be right, tobe  making  money.  It’s  human  nature  to  not  want  to  admit  that  you’rewrong.”
“I know exactly how that works,” I told him. “That pretty much sums
up my disaster trade.”
book_c10.qxd  12/20/06  1:51 PM  Page 87
Charlie Flank Meets His Match
87
“Well,  at  least  you  didn’t  lose  ten  million  dollars  of  your  company’s
trading capital on the trade.”
Speaking  of  a  firm’s  trading  capital  made  me  think  of  Sam