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Adventuresof aCurrencyTrader
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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.
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Adventuresof aCurrency Trader
A Fable about Trading, Courage, andDoing the Right Thing
ROB BOOKER
John Wiley & Sons, Inc.
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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,(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
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.3. Speculation.HG3851.B62332.4'5--dc22
I. Title.
2007
2. Foreign exchange futures.
Printed in the United States of America.
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2006029332
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For KrisThank you for telling me to go upstairs and write my book.
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Contents
Foreword
Preface
Acknowledgments
About the Author
Introduction
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
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CONTENTS
Chapter 10 Charlie Flank Meets His Match
Chapter 11 Coming Clean
Chapter 12
Looks Can Be Deceiving
Chapter 13
The Story of George Sisler
Chapter 14 Back to Square One
Chapter 15 Breakfast with Harvey
Chapter 16 Back to Where It All Began
Chapter 17
Testing
Chapter 18 Homework
Chapter 19
Team Banes Begins Anew
Chapter 20 Presenting Our Findings
Chapter 21 Back in the Game
Chapter 22 Return to the Thirty-First Floor
Chapter 23
Settling My Tab
Epilogue
Appendix A: The Retail Carry Trade
Appendix B: How I Got Six Hundred Pips
Index
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Foreword
Trading  technology  has  made  exponential  advances  over  the  past
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
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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.
MAXWELL FOX, currency trader
South PacificAugust 2006
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Preface
Trading  can  bring  you  independence.  Trading  currency  has  brought
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.
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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.I now invite you to go on an adventure with Harry.Read on.
ROB BOOKER
Wheeling, West VirginiaDecember 2006
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Acknowledgments
This book took me 20 years to write. Well, not this specific book. But
just the act of finishing a book and getting it to a publisher. While Itrade  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  to
thank 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, in
fact. 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.
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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.
I have 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, Phranq, Paul Kurtz . . .
I could go on for a long time. But these are among the best people I
know. 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.
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About the Author
R ob Booker is an active proprietary forex trader and forex educator.
Mr.  Booker  has  trained  hundreds  of  forex  traders  around  theworld.  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.
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Adventuresof aCurrencyTrader
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Introduction
My name is Harry Banes. I used to be the worst trader in the world.
A real chump. I bought when I should have sold, and sold when Ishould have stayed out of the market completely. Ever do that? Of
course 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  never
looked back.
I want you to do the same. That’s why I am writing this book.
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CHAPTER  1
In Search ofAmazing Profits
Istarted  trading  because  I  saw  a  commercial  on  television  about  how
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
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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.I had 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  P.M. 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 thatI needed his help that night.
“I’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,
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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.I hadn’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!
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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