rule, I am auto-matically going to cut myself off earlier than that—I am not going to letit get that far. Because when it gets that far . . . well . . . what would I do?Stop trading, for sure. But then what? Call you?
HARVEY: Heck no!ME: Right. You don’t want to be a part of those situations. You don’t wantto force me into anything. Instead of calling you, I’d take a break. That’swhat I would do.
HARVEY: For how long? How would you know you are ready to return to
the world of trading?
ME: I don’t know. Seems like if I just stopped for an arbitrary period of time,it wouldn’t prove anything. I’d have to do something. Like punishment. Orsomething to ensure that I didn’t do it again. Otherwise—
HARVEY: Otherwise, you’d just be planning out the slow bleeding to death
of your trading account in chunks of 25 percent.
ME: I don’t want to do that. There’s got to be something else you want me
to say here.
HARVEY: In terms of trading, what is the worst punishment you can think
of?
ME: Telling my wife I lost five thousand dollars.
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HARVEY: If that was the worst punishment, then you wouldn’t have lost it.
Right? So that’s not the right answer. What do you fear the most?
ME: Going back to my job. Working for someone else.HARVEY: Right!ME: Oh, no. I shouldn’t have said that.HARVEY: Yes, you should have said that. Because it’s true. You don’t wantto work for Wakeman, Butterball, and Bonehead ever again. Having togo back there and ask for your job back—
ME: No way. There is no way I am going back there.HARVEY: You  can  deliver  pizza  instead.  I’ll  let  you  borrow  my  1925
Schwinn.
ME: Thanks.  But  no  thanks.  I  am  not  going  back  to  the  law  firm,  and  I
would in fact rather deliver pizza on your old bicycle.
HARVEY: So I’ve reached the innermost part of your brain where you storeyour most sensitive buttons. I am pushing the “go back to work for otherpeople” button right now and you don’t like it.
ME: No. I want to trade for a living.HARVEY: You haven’t earned the right to trade for a living! Every day, I re-fuse to work with traders who are even willing to pay me tens of thou-sands  of  dollars.  You  know  why?  Because  they  believe  that  it’s  theirright to trade for a living. But it’s not. It’s not a right. It’s a privilege thatyou earn through discipline. And I will not work with a trader who is notdisciplined. Including you, Harry Banes.
ME: All right.HARVEY: And you know what is going to happen tomorrow when you goback  to  Wayfarer,  Sunshine,  and  Doodlebug,  or  whatever  the  name  ofthat  law  firm  is?  You  know  what?  You  are  going  to  think  to  yourself,“Gosh,  Harry,  you  could  be  trading  the  Euro  right  now,  shorting  it  at1.2200, but you’re not. You’re not because you have to earn more moneyto put into your trading account.” That is what you are going to say toyourself.
ME: And I am going to realize that the money I lost trading actually repre-
sents something that I have to work for.
HARVEY: It will change the way you think about the money in your trading
account.
ME: You’re forcing me into this, you know.HARVEY: No, I’m not. You don’t have to go back to work. You can take yourremaining savings and you can trade it. You can start trading it right nowif  you  want.  You  can  trade  the  Euro  short  with  me,  you  can  go  see  ifCraig will talk to you, or if you can get someone else to help you. Youdon’t have to ever do anything that I tell you to do. I am not going toforce you. But I will promise you something.
ME: What?
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HARVEY: I promise you that if you do this, if you take this first step, that I’llnever  threaten  to  stop  helping  you  again.  I  promise  you  that  you  willmake a huge step forward in your discipline. And that before you knowit, we’ll be working together again.
ME: This is really hard for me.HARVEY: It’s hard for me to see you in this spot, too. But I am not going to
let you off the hook. So what’s your answer?
ME: I’ll do it. I will. I will go back to Mr. Johnson tomorrow and I’ll ask formy job back. I can’t believe that he would ever let me have it back, but Iwill ask. And if he says no, I’ll find something else.
HARVEY: Anything else?ME: Right. I will deliver pizzas if I have to. But I will earn back the $5,000
that I lost.
HARVEY: Agreed. Assuming you shape up this week, I want you to start onthe  next  law  of  trading  by  yourself—it’s  the  law  of  testing,  and  I  amgoing to leave you to figure out the details. If you can get that done, thenwe’ll be seeing each other again. Now I have to go.
I SEE HERBIE AGAIN
Harvey left me sitting in the booth with a lot to think about. Mostly, I wasthinking about Herbie Johnson tearing my head off and throwing it acrossthe office. I considered checking my passport to make sure it was still validand then leaving the country, rather than facing Herbie or my wife.
I also realized that losing the $5,000 could have been something totallyinconsequential.  Without  Harvey’s  help,  I  probably  would  have  waited  aweek and deposited more money. I wouldn’t have told my wife about theloss. I could see that without Harvey, I would have seriously depleted allour savings very quickly.
So I decided to show my gratitude to Harvey by not wasting any timeasking for my job back. I hadn’t paid Harvey anything for his time or effortwith me, and I had been nothing but a problem to him so far. By followinghis instructions, at least I showed that I valued and appreciated his help.And I did appreciate the help. Choosing now to ask for my job back, in-stead of waiting another day, proved my commitment to do the right thing.And  getting  a  job  now  was  the  only  right  answer  to  the  quandary  Ifaced. I did not want to tell my wife that I needed to trade more of our sav-ings. We had a limited amount of money and I planned to keep it safe for aslong as possible. My plan was to regain the losses from that morning, evenif it took me two or three months, then start trading again with the moneyI earned, and this time protect it instead of flushing it away. We didn’t have
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to dip into the savings that way. I had to return to working for other people,I had to face the people who had fired me, and I had to admit that I hadcarelessly squandered a great opportunity to make a lot of progress in mytrading.  Honestly  acknowledging  this  missed  opportunity  was  nearly  themost difficult thing that I’d ever done.
Traffic  was  light  so  I  hailed  a  cab,  which  got  me  to  the  office  muchmore quickly, where I could experience the wrath of Herbie more quickly,and then I could forget about that job and instead go to work deliveringpizzas  for  Bleeker  Street  Pizza  in  the  West  Village.  At  least  I  liked  theirpizza.
I didn’t have a plan. Or a good reason that they should hire me back.Maybe I could start off by talking to the office receptionist, and find out ifthey had hired someone to replace me. By the time I started up the eleva-tor, I planned to first speak to Christy Matthewsen, the office administra-tor. She’d fire me a second time, or explain to me how very uninterestedthe firm was in my services, thus saving Herbie Johnson the effort and tor-ment of screaming at me.
Fat chance.As I exited the elevator on Floor 44, Herbie Johnson was standing right
at the reception desk.
“Banes!”  he  cried.  “Just  the  man  I  wanted  to  see.  Get  in  my  office.
Now.”
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Herbie  didn’t  look  as  angry  as  the  last  time  that  we  had  spoken.  In
fact,  he  seemed  almost  happy  to  see  me.  I  hadn’t  ever  seen  himhappy before, so this was a total surprise and I didn’t know how toact. Walking back toward his office, with him walking behind me, I had thefeeling that I still worked there and that not much had changed.
On the way down the hall, I peered over to the central work area out-side the filing room. There were stacks upon stacks of files to be organ-ized, sitting on my old desk. It was more than I’d ever seen before, evenmore than I had seen after returning from vacation.
“Banes,” he told me when he got me into his office and closed the door.“Let’s get something out of the way right from the start. Did you know any-thing about that dirtbag Scott Needleway selling the Anderson files? Didyou know anything about that at all?”
“No, definitely not,” I told him. “Of course not. If I’d known somethingabout  that,  I  would  have  fired  him  myself.  Is  that  what  happened  to  themissing file? Is that why I was fired?”
He nodded. He then said something nasty about Scott that I won’t re-peat here. He also seemed pleased to find me completely unaware of whathad  happened.  “It’s  why  you  were  fired,  yes.  It’s  why  we  fired  Scott  lastweek, too. He was selling letters and depositions from the file to the busi-ness press. We caught him on the phone with a reporter from television.Too  bold  for  his  own  good  at  the  end.  Not  too  bold  after  I  finished  withhim. Now I figure that’s why you’re back. You heard that we caught himand now you want some revenge.”
149
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I shook my head. “I haven’t heard anything about it until right now,sir. And I certainly don’t care to get any revenge. In fact, I came here toapologize.”
He grunted. “Apologize? For what?” He motioned for me to sit down infront of his desk, and then he sat on the corner of it, just a few feet fromme, much too close for comfort. At least he wasn’t yelling.
Then I let him know, with his phone chirping in the background, whata terrible employee I’d been for so many years. I explained that I hadn’t al-ways given him an honest hour’s work for an honest hour’s pay. That I hadtaken a few hundred extra 15 minutes at the end of lunch. That I had leftearly and come in late far too many times. That near the end, I had donesome trading on company time. That I had lied to him on occasion. Andthat I was sorry. And then I surprised him and myself by what I said next:“And I want to pay that time back. I owe it to the firm.”
I learned later that, in all of his years as a partner in a law firm, he’dnever heard a staff member say such a thing. He hadn’t ever heard of any-thing like it at all. And he didn’t want to hear it again.
“Don’t  ever  want  to  hear  that  again,  Banes,”  he  told  me.  His  phonebuzzed again. Surprisingly, he didn’t reach for it. He hadn’t taken his eyesoff  me  for  the  entire  time.  He  spoke:  “In  fact,  I  don’t  have  much  time  tocare about your past indiscretions on the job. I’ve got seven associates outthere right now who I ought to fire for overbilling, but I’m not going to do itbecause we have more work than we can handle right now. The Andersoncase has ten attorneys now and it’s a thorn in my side and a mountain offiles.  And  no  one  around  here  has  time  to  hire  a  replacement.  We’ve  gotstackloads of paper out there for you to file.”
I didn’t hesitate. “I’d like to come back and help out. I don’t know forhow  long  I  can  stay,  maybe  a  month,  maybe  two.  I’ve  got  to  earn  somemoney fast, and if you need the help, I need the money.”
He  didn’t  mention  the  severance  pay.  I  didn’t  either.  He  grunted:  “Idon’t know how much we were paying you, but if you can start right now,I’m sure we can work it out. How much do you want? How much is thisgoing to cost me?”
His phone rang again. This was the longest period I’d ever seen him doonly one thing at one time. He was buckling under the pressure to multitask.“I can work as a contractor. I can help you find a replacement for me in
two months. You can pay me five thousand dollars a month.”
“Done,” he said, and this time, when the phone rang, he picked it up.
“Now get out of here.”
I went straight back to my desk and moved the heap of files over toone side, and found my old phone. There was no longer a computer on thedesk, and I sort of liked that. I didn’t want any distractions. I lifted the re-ceiver and dialed home.
My wife answered on the first ring.
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MEANWHILE, BACK IN THE CUBICLE . . .
I  explained  everything  to  her.  I  originally  intended  to  tell  her  about  thetrading losses in person, but I didn’t want to hold anything back. Better toget all the apologies out at one time and in one place. She was shocked thatI had asked for my job back, and she was encouraged that I was willing toearn back the money I’d lost, even though I would have to work at a job Ididn’t much like. I told her that in the evenings I was going to dedicate my-self  to  figuring  out  where  I  went  wrong,  to  developing  the  right  attitudeabout trading, so that I never made the same mistakes again. She under-stood. If I hadn’t gone back to work, this conversation would have ended alot differently.
After I hung up, I went straight to work. I got a lot done in the next fivehours, staying later than I ordinarily would have. It would take me at leasttwo weeks to catch up with this material alone. But it actually felt good to beworking again, to be actively engaged in supporting my family and earningback the money that I had lost. Harvey was right. This was the only course ofaction that I could take to salvage my trading career. Saving my trading bynot trading at all didn’t seem to make much sense at first, but now that I wasworking, I realized how important it had been to protect my account.
At  7:00  P.M., I  stopped  working  for  the  day.  I  pulled  a  piece  of  blank
paper from my desk and wrote on it in capital letters:
YOU MUST PROTECT YOUR ACCOUNT BALANCE
Then I thumbtacked it to the board and headed for the elevators. But Ididn’t go all the way down. I stopped at the 31st floor, the trading floor ofErnest Wellington & Company. I wrote a note to Craig explaining that I hadtaken my old job back to earn some money to cover my losses, that I hadmade a boneheaded trading decision, and that I would like to talk with himwhen he had a chance. I planned on working through lunch for the comingweeks, but I hoped we could find some time after work. I left the note atthe receptionist’s desk, and started to leave when a voice called out to me.
“Harry Banes? Is that you?”It was Anderson.
ANDERSON LOSES HIS MIND
Anderson wanted to talk and I for sure wasn’t going to refuse. He led meback onto the trading floor, still staffed with a few people who, he told me,were watching the Asian markets.
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“We have people in Japan and other parts of the world, of course,” he
said, “but we like to keep most of the folks close to home.”
“Sounds reasonable.”“Craig  tells  me  you’ve  been  doing  some  trading.  How’s  it  comingalong?” He found a place for us to sit at two empty workstations. In front ofeach of us were four flat-panel monitors, and when my elbow bumped thekeyboard,  the  monitors  lit  up  and  showed  charts,  current  quotes  on  themajor currencies, and some web pages. Anderson looked over. “Looks likethe EUR/USD is trading higher again.” I glanced at the quotes.
It  was  trading  at  1.2160.  All  day  it  had  tried  to  approach  the  1.2200
mark but hadn’t been able to reach it.
“Yes, I traded the Euro this morning,” I told him. “I lost. I am going to
take some time off trading for a week or two.”
“Reached a drawdown limit?”I nodded. I wondered why he was talking to me. He didn’t even seem toknow that I’d been fired. From what I’d learned about Anderson so far, hewasn’t the type of person to engage in idle chat. There had to be a purposebehind this.
“Yes,” I admitted. “I lost just about all of my trading capital this morn-ing.” Ordinarily a confession like this would make me feel horrible. InsteadI felt great. Why lie to him? He didn’t have any plans to hire me. I had noreason to impress him.
“We all have those experiences starting out. All of us. I sure did.”He then looked off into the distance and proceeded to tell me a long-winded story about how he had been out of college for six months, thenwas hired into a major bank, and how he did the working tour, like all therecent graduates, of the different parts of the bank. At the end of his six-month tour, he started working at the equities trading desk. Then he lost abunch of money, almost got himself fired, and ended up with a story farmore  boring  and  far  less  informational  than  everything  I  had  alreadylearned.
When  he  was  finished,  he  patted  the  desk  in  front  of  him.  “Harry,  ifyou’d like to come down here after work and talk with some of the traders,that would be fine with me. When you’re ready to start trading again, we’vecan put a computer down here for you and you can access your accountfrom here.”
What was he talking about? I wondered. Why had he offered this? Had
he lost his mind?
It  had  to  be  that  he  knew  Harvey  Winklestein,  and  I  was  getting  theroyal treatment because of it. But I thought I had remembered that Harveyhadn’t ever met, or didn’t know, or didn’t like, Anderson. Maybe Craig hadtalked with him. Certainly I wasn’t going to spend all day thinking about it,though. I readily accepted.
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“I appreciate the offer. I will usually finish in the late afternoons andmaybe in a week or so, when I catch up with some work, I will start com-ing down here.”
“Sounds good. I won’t be here tomorrow but if you stop by, I’ll have abadge made for you so you can at least get in the door. A computer shouldbe ready for you in a few days. The IT guys are fast. If you have any prob-lems, just call me on my cell,” and then he handed me his card. Then hestood up, shook my hand, and looked me in the eye.
“I  can  see  a  good  budding  trader  a  mile  away,  Harry,”  he  told  me.“I  think  we  might  be  able  to  do  some  business  together  in  the  long  run.Shake off those losses. Get back on the horse. Don’t let the losses get thebest of you.”I nodded.“You can sit around here for a while if you’d like,” he added. “I’m goingto run now, but you’re already logged into Ellen Hansell’s computer. If youwant to look at some charts, be my guest. The door will lock automaticallybehind you. Dial 9 to get an outside line.”
Then he walked away to check up on some traders a few desks away.He pointed back at me, obviously introducing me to them and making surethey knew I’d be there.
Stunned,  I  sat  motionless  for  at  least  five  minutes.  I  didn’t  know  if  Ishould really touch the computer. What if I screwed up and made a trade?What if he intended for me to trade? Was this some kind of job inter-view, like Craig had when he sneaked in? Did Anderson want to see what Icould do?
I  called  my  wife  and  told  her  where  I  was,  and  that  I  was  going  tocheck some things out so that when I came home I wouldn’t be tempted toopen  anything  up.  It  would  be  smart  to  do  my  research  here,  because  Iwouldn’t have access to any of my own trading accounts. That was a goodthing.
The first thing I did when I gathered my senses was to open a chart onthe EUR/USD. It was the short-term chart, and it only reminded me of theexperience I’d had earlier that morning. That’s when I realized that I shouldhave been looking at the longer term charts anyway—that’s what Harveywanted me to do in the first place. So I switched over to the four-hour chartagain, and drew a horizontal line across the 1.2200 mark. Without any otherthoughts, I started to mark on the chart all the points at which the currencypair had hit the 1.2200 level. The chart looked like Figure 16.1.
I started to feel excited. Not to trade, which I knew I couldn’t do, butbecause I finally might have done some actual, real, valuable, not worth-less, analysis. And on my own!
Had the 1.2200 price, for some unknown reason, simply been a hardnumber to break? Was that it? Could it be that simple? I remembered that
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FIGURE 16.1 The currency pair hits 1.2200.
some of the books I’d read had said that sometimes round numbers weregood barriers for currencies. I had also read that once a resistance line (aprice level above the current price) was broken, it would tend to becomesupport, or a strong floor. This made sense to me. Once a currency pair didall that work to break above a level, some emotional and financial invest-ment would be put toward keeping it above that level.
Likewise,  if  the  currency  pair  could  break  below  a  certain  supportlevel, then that level would tend to become strong resistance, or a ceiling.Once again, this immediately made sense to me. And it seemed to be hap-pening on the chart in front of me.
I  noticed  that  three  times  in  early  March,  the  EUR/USD  had  tried  tobreak below the 1.2200 level. Then on March 24, it finally broke throughand  closed  below  1.2200.  And  what  happened  when  it  tried  to  rise  backabove that mark? It couldn’t do it. It was stopped cold at least two timesthat I could see on the chart. Those would have been nice times to sell.
Perfect times, in fact. Just like now?On March 30, it had broken above and below and shot upward. Then ithad smashed through the line on April 2. Did that ruin my support/resist-ance theory? Was the strength of the 1.2200 number diminished because ofthat (see Figure 16.2)?
It seemed to me that the line still retained some strength. A four-hourcandle had broken the line. But what about the five-minute chart? Maybe itlooked like the four-hour candle had an easy time of breaking the level—but it could have bounced on the shorter time frames.
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FIGURE 16.2 The strength of 1.2200.
I  decided  to  switch  down  and  look  at  a  shorter  time  frame  chart.  Itmight sound lame to you, but when I saw the five-minute chart, chills ranup my spine (see Figure 16.3).
The  five-minute  chart  showed  me  exactly  what  I  needed  to  see:  thatthe 1.2200 level, overall, had retained its strength. Even though a four-hour
FIGURE 16.3 The five-minute chart and 1.2200.
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candle passed through the number, it wasn’t as if all the traders had forgot-ten  about  the  importance  of  the  number.  The  five-minute  candle  hadbriefly  traveled  lower  than  1.2200,  but  then  snapped  back  upward.  Thismeant  that  the  number  could  still  have  importance  now,  for  the  presenttime, and that if the price rose up to hit that level in the next few hours ordays, it was very likely to stall and fall back down.
Was this the system that Hank Doorecker had used? All I had on the chartwas a simple line. It seemed so sparse, so . . . easy. I imagined that Hanksurely looked for supporting information before he traded—a quick horizon-tal line would never be enough. But maybe it would be enough for me.
I  grabbed  a  Post-it  note  from  the  desk  and  wrote  down,  “SellEUR/USD, 1.2200.” If I wasn’t going to trade it in my own account, at leastI could declare my intention to trade it. I had my entry; but what was goingto be the cutoff point, at which I knew I’d been wrong? How far did the pairhave to go before I would need to jump out?
The  farthest  I  could  see  that  the  pair  had  ever  traveled  beyond  the1.2200 line before snapping back had been about 40 pips. That was acrosseight recent examples. I felt comfortable saying that if the price went 50pips beyond the line, then I had been wrong. So next to the “Sell EUR/USD,1.2200,” I wrote, “Stop: 1.2250.” This mean that if the price rose up and shotthrough the line, I would get out with a loss of 50 pips. But I would havethat as a buffer. I had recent history on my side.
It felt good and right to have a cutoff point. At least I wasn’t risking ahuge amount. This was all fake trading, of course. But just writing it downon a piece of paper helped me feel more responsible. I knew Harvey wouldapprove of the way I was doing this.
But what of a profit target? What would be a profit target?I looked over all the other examples on the four-hour chart of when theprice had been rejected by the 1.2200 mark. The March 11 bounce yieldeda maximum of 186 pips before it turned around and returned to the 1.2200level. The March 12 gave 172 pips, and on the 17th, 234 pips. March 24 pro-duced 30 pips, March 25 did 131 pips, and March 26 gave 153. On March 30,it had bounced off the line and fallen back 40 pips. And going back to thatfive-minute chart, from April 2, it had hit the support level and then risenback up 20 pips. It had never failed to at least bounce enough to give someprofit. The average move was 120 pips. I decided that would be my profittarget. Figure 16.4 shows how the Post-it note now read.
I stuck it on the desk in front of me, intending to keep it there as a re-minder for the next day. Then I left. This was the best I had felt in a longtime. I was working to support my family. And finally, at the very least, Iknew  that  I  had  discovered  the  beginnings  of  a  system.  It  needed  morework; I still wanted to test a lot more trades and talk to Craig and Harveyand anyone else who would listen to me. I hoped they would listen to me.
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FIGURE 16.4 Harry’s reminder.
ON A ROLL
My wife was satisfied that I had returned to work to make right what I haddone wrong. She had never felt great about me leaving a stable job in thefirst  place.  Now  that  I  was  going  to  earn  back  the  money  I  had  lost  andwould have instruction not only from Harvey, but maybe from Andersonand the people at Ernest Wellington, we both knew that that I would learnhow to