Jack - An Introduction


jack

Administrator
Staff member
Hello everyone,

I wanted to take a moment and give my own intro, as well as talk a bit about how this site got started.

Firstly, about myself: My very first trade was mid-way though 2007 just as I opened my first brokerage account with an investment house here in Canada. At the time, I was in the first half of my IT career and just starting to make the transition from fixing computers on a bench to network and infrastructure design.

My first trades were all Canadian equities, warrants, and mutual funds. I thought I was being cleaver by timing the market and holding positions for days or weeks... but I spent most of my time just spinning my wheels. I even ventured into small cap penny stocks on the TSX Venture exchange, mostly junior resource exploration companies, but that just added way more volatility to my holdings than it was worth.

I ended that first half year period losing a few grand of my savings and just dumping the rest of my account into short and medium term bond funds.

Funny enough, I probably picked the worst time to open a retail stock account that could only go long, as the credit crisis was in full swing not 6 months from when I opened the account and leading up to that point most daily stock charts would make you believe we were in a huge bull run.

There was a little bit of a silver lining; despite the loss, I out preformed most others since the market itself was falling off a cliff. I don't attribute this to any smarts on my part, I had no idea what was coming by 2008/9... I simply lost much 'less' % wise than the benchmark index.

As a nice surprise, with the market falling, interests rates were being cut drastically, and my bond funds benefited tremendously. I didn't make back all that I had lost from trading equities earlier, but holding onto one of the only asset classes going up in value while the credit crisis was in full swing sure did put a chip on my shoulder. I mean, I had short term bonds up 11-14% while most people in equities were looking at a 40% haircut.

This experience really gave me a greater perspective on how various asset classes were interconnected... not to mention it was wake up call that the markets can be a far more complicated of a place than I had first thought.

I was hooked.

Around this time I got poached by an old manager of mine who moved to another IT firm and offered me a substantial raise if I jumped ship with him...so off I went to a new city and larger paycheck. I didn't know this at the time, but this would be the job and experience that started pushing me away from IT, and toward the world of financial markets as a future career.

While I was working in this new city, isolated from my friends back home in Toronto, I had more free time on my hands (when I wasn't working 60-80 hour weeks.) It was with this free time that I did two things: Discover forex, and take a life insurance license course out of self interest.

The insurance part wasn't my thing, but the investment component of the course (built into some insurance plans) combined with experiencing forex and being able to conceptualize how money flowed around the world, convinced me that I wanted to work in the financial industry. I just thought it was soo neat.. I had to be part of it some way, I had to learn more.

I left the new job about a year after I started, and I returned to school to study business and finance. My degree didn't require an internship, but I wanted some trading floor experience and I didn't like the idea of going through regular channels since the kind of internships being offered by the big banks or firms to my school were far away from where the trades took place (clerical paper pushing BS.)

So I went door-to-door to a few smaller equity firms, just poking about and making contacts, and eventually found a good fit. The place didn't even have an intern program, so I just told the floor manager straight up "I'll be in class most of the time, but can I come in for a few hours a week and do what I can on the floor?" ...He agreed. Soon after I was joining their trainees and learning what they learnt.. I even was given a small amount of firm capital to trade.

Once I got out of school I was asked to come in full time, so I accepted. Since then I've stayed on the institutional side and moved onto another company. But between both companies, I've not only learned a great deal about trading, but I've been able to witness first hand what kind of traits and personality it takes to survive in this game (and what types of people just crash and burn.) The psychology behind success in the markets is almost as interesting as the markets themselves.

And that brings me to this point. A few years running on the institutional side after a few years trading retail on the side, some might think that still makes me a "pup"... but if you count the hours of screen time I have from trading retail, plus being glued to my seat watching the markets every day at the firm, combined with having worked through what it takes to become consistently profitable to the point where I can depend on my trading income and not worry about job security... experience wise, I size up pretty favorably. :p

--

A lot of that experience went into the article I've written on the main page of this site (link here.)

This site started out of wanting a central place to combine my thoughts and posts from forums around the net, and grew into this forum you see now after getting fed up with the administration and owners of other online communities. I figured: "I already have a site, why not just make a forum that doesn't have such issues and run it properly?" And thus, the FXGears trading community was born.

As time goes on, I'll be putting more focus on the forum over any content on the main page, and eventually the site will just be about the forum and community.

I'm excited to see this place take off, and with the momentum we have so far, I think we got something awesome in the making here. :)
 

jack

Administrator
Staff member
(EDIT: I realized i missed part of my history as it relates to Forex, this fits in just after I discovered forex, and rolls through overlapping most of my college years.)

The first year of FX trading (while still in IT, and before going back to college) was pretty brutal, but that's almost to be expected for someone starting out and "going live" way too early. I had a bit of an ego that needed to be crushed out by the market, and in that first year of FX, the market charged me a "tuition" of just over two grand for the lessons in humility.

I considered this significant at the time since most of the losses were all at once and over silly thick headed trades.. the 'small winner, small winner, big loss' trade sequence that plagues new traders.

I even made the mistake of following a "market expert" who wrote some wave theory calls at my first brokerage. The guy promptly deleted the trade I took based on his blog after the trade didn't work out, leaving only the winners or small losers to be seen by the world. I was very much so disenchanted with the whole experience, and learned my lesson not to follow other's calls without my own analysis.

With the first year of FX down, I started college (after leaving the IT world as per the first post.) I took a more structured and methodical approach to forex from this point as I was really focused on not repeating the mistakes of the first year. I required evidence of an edge, tied it in with my own observations (not relying on others,) and used clear stops. I also picked up a few books on trading psychology and technical analysis to get me started in the right direction. This approach showed promise..

I worked away, like a grind, and slowly rebuilt the account from the previous loss over the next year and a bit. I never considered the loss to be a lot of money, but it was important to me that I made it back by following a proper and risk appropriate approach. (As opposed to trying to make it back with more risk.) By midway though college, I had some consistency, and I reached overall net profitability by trading smaller size and smaller risk than I started with (so really, more work than needed but the process was worth it since it helped instill trade discipline.)

Then came two of the most significant trades I had in my early forex track record:

First) The trade that brought my account from 4 to 5 figures for the first time (and took me from net profitable to "paying my college tuition with forex" level profitable.)

I started getting into news plays, and I liked how strong AUD pairs would move on economic news related to their economy (as opposed to USD based news affecting AUD/USD.)

Australia had a sequence of news over the previous few months (at the time) that was positive. Greater non-farm industrial equipment sales, greater economic growth indicators..etc... but the forecast for unemployment claims was way higher than the previous period. I figured it was wrong, since factories don't buy new production equipment unless someone is there to operate it.

The trend was long, I got in a good hour before news was due out, and it drifted ~25 pips in my favour leading into the release. I had my TP about 30 pips higher than that, and my stop 40 pips lower. My size was entirely inappropriate given the news risk, but I didn't quite know it at the time.

..then, POP. News was out, I was right, employment numbers were way up over what was forecast by experts. The AUD/USD pair instantly jumped 87 pips past my take profit, and my TP order filled with positive slippage at the higher rate.. putting my trade over 100 pips in the green by the time I got out. My account swelled into the 5 figure range and I felt like I just won the lottery. I even started jumping on my bed in excitement. (Yeah, I know emotional responses, hallmark of noobs.)

Then in an instant, I froze, as I realized that I could have been wrong and had the news release been worse than expected, the same slippage could have been against me with my stop order. The feeling of joy I had vanished as my thoughts came to terms with just how risky that trade truly was... I resolved to chalk it up to luck, and not trade news releases with such size and tight stops ever again.

Lesson: Coming out on the right side of volatility doesn't excuse the fact that volatility/risk was present.

Second) The trade that flew me around the world, after I had just flown around the world.

I was just finishing off my second to last year of college... it was the Christmas / NYE holidays and I was visiting family in Australia.

I had just started dating a girl form one of my classes back in college, and we were in the thick of the 'sparks, fuzzies and tingles' stage of the new relationship. During the holidays, she flew back to visit family at her tropical island home, and I flew out to Australia to visit family who went aussie-side to work.

I couldn't stop thinking about her... I mean, there I was, in Australia, during their summer, with beaches in all directions and stacked women in bikinis all over the place... and all I could do was think of my new girlfriend and be completely blind to all the eye-candy around me. It was puppy love at its finest.

I wanted to spend the rest of the holidays with her, it didn't feel right to be so far apart, but I didn't exactly have the funds to just up and fly back the other way around the world and then further to rendezvous with her on her home tropical island, and I had just spent a large amount of my own spare dollars getting to Australia so I was pretty tapped out.

New Years Eve in Sydney has one of the best, if not the best, fireworks displays in the world. Sydney harbour lights up and it's quite the sight to behold.. I was about to leave for downtown Sydney on NYE to partake in the show, but the whole event felt wrong, I felt like "she" was missing. I felt like I would hate myself if I didn't even try to be with her sooner..

So I sat down, checked the holiday schedule for my broker at the time, and realized I had exactly 4 hours before banks closed up shop for the holidays on NYE. I didn't have the $3k it would cost to fly out to meet her on her tropical home island, but I did think risking $500-600 trying to raise the rest was worth it. And heck, I figured it was better odds than going to the casino.

In that 4 hours, just before midnight on NYE, missing the Sydney Harbour firework display, dealing with spreads near double their regular size due to the holidays, I fully leveraged myself and compounded my gains.. resulting in a total profit of $3083 and change from my few hundred at risk. If the puppy love wasn't enough, I had just convinced myself that being with her was fate. I booked my ticket the very next morning, wired the money back to my bank, and told her the good news.

Months later, after we both returned to Toronto to continue with college, it was clear our relationship wasn't fate at all, and we broke up. So much for romance. But the island, and trip around the world to follow a girl was fun.. the kind of life experience you need when sorting out matters of the heart. All paid for by forex. :p

--

Since working in the industry (on the equities side) and being exposed to more professional environments, I pretty much never take larger risks like that (even if you don't consider a few hundred or few thousand a large amount of money, the term risk here is more related to chance of success vs what's risked to obtain it.) I focus more on consistency and accuracy now and pride myself on a week that goes by with flawless and consistent execution.
 

Ramy3

May the pips be with you!
Was a pleasure to finally meat you in person my friend. Enjoy the rest of your trip and have a safe trip back from MTL!

Ramy3
 

Stephen

Active Member
It's 1am and I should probably be asleep, but I couldn't stop reading all the threads on this forum. Great read, especially the girl part...sorry it didn't work out.
 

jack

Administrator
Staff member
Stephen said:
It's 1am and I should probably be asleep, but I couldn't stop reading all the threads on this forum. Great read, especially the island girl part...sorry it didn't work out.
Thanks. :)

And no worries about the girl. It was all worth it for the experience and memories.

I wanted to toss up a pic that I felt encapsulates the entire trip, but for the sake of her privacy I'll refrain (I tried censoring out facial details but then the picture ends up looking silly and loses meaning/emotion.. and thus, loses the point.)
 
P

Piper

Guest
Just photoshop in it jessica alba. The emotion will rise,
And the forum's respect will spike trough the roof! :)
Really cool story BTW :)
 

Stephen

Active Member
Jack said:
I wanted to toss up a pic that I felt encapsulates the entire trip, but for the sake of her privacy I'll refrain (I tried censoring out facial details but then the picture ends up looking silly and loses meaning/emotion.. and thus, loses the point.)
She must have been pretty amazing for you to make the trades and flight to see her. At least give us a 1-10 scale of what she looked like. ;) Do you have any pictures of the "tropical island" itself? The last nice island I went to was Tangalooma; that was 10 yrs ago :(

I just finished reading An Island to Oneself. Amazing book about a guy that lives on an island by himself. Free to read here online: http://www.riverbendnelligen.com/tomneale/anislandtooneself1.html

When you were in college, did you learn much about FX trading that you still use today?
 

jack

Administrator
Staff member
The island itself was beautiful and had a very interesting history.

As for the girl, well, at the time I totally thought she was 'pretty amazing', but of course it's harder to see the faults and red flags during the 'sparks and fuzzies' stage of a relationship.

Dug up some images that are more appropriate. Attached.
 

Attachments

jack

Administrator
Staff member
Stephen said:
When you were in college, did you learn much about FX trading that you still use today?
Nothing in college really prepared me for the practical side of FX trading.. I mean, there was a few 'exchange rates and FX trading' sections to various courses I took (Business, finance, the Canadian Securities Course, etc..) and a lot of 'theory' in the economic courses I took.. but when it comes to trading for a speculative profit there wasn't much at all mentioned.

(There was a few derivatives courses that I took, but I did so for the easy A since I already knew the basics of futures and options.)

On the fundamental and theory side, I learned a lot about the forces behind exchange rates.. plenty of macro economics courses covering near countless aspects of the global and intra-country economies. Heck, I even took an international trade class (think shipping, physical products, geo-price arb, etc.. , not financial trading) for a hands on grasp of the ground level interactions that build up over time into the trade balances between countries (you know, instead of just stopping after trade balances were covered in theory during various economics courses.)

.. But.. honestly, I don't think any of it is really required to be a successful trader.

I mean, sure if you're only going to trade on fundamentals and want to be more of an analyst than a pure technical trader, then economic theory would be a start on the right path, but ultimately I've met more successful traders from non-finance/economic backgrounds than ones who went to school to learn finance/economics.

There are a few indirect skills you can learn in college that are very useful in trading though: I highly recommend taking any statistics courses you can get your hands on.. and at least some intro to computer science / programming classes if they are an option. (Again, I don't think they are 'required' for someone to be successful, but they have practical applications in the realm of trading so they are great tools to have handy.)
 

Stephen

Active Member
The island looks uninhabited! Looks like fun, especially with a girl by your side.

It seems like with every profession, most of what's been learned in college can't be used practically...maybe 20% of it is useful.

I agree with you on statistics; it's an entirely different mathematics that really stretched my brain. As for computer science...the only class I took was an overview of HTML; I had to teach myself CSS to make the HTML info useful.

When is programming useful for trading?
 

jack

Administrator
Staff member
Stephen said:
When is programming useful for trading?
It has many uses: For writing or editing indicators (one's you've created yourself after mining data and running stats to find an edge :p) .. or for process (trade) automation (which can be done on many levels, from a computer assisted manual execution, to fully automated strategies.)

HTML doesn't help though :p You'd need to start looking at scripting languages, not markup languages.

At work, I do most of my scripting with Python, but C# and Javascript is popular with most retail platforms (often a platform will have it's own proprietary scripting language, but more often than not they are based on javascript... MQL4 to MT4 for instance, the syntax is 90% javascript.)


I don't think manual trading will ever die, but in the all electronic trading world it can a benefit to be computer assisted to at least some degree. I mean, you can always pay for it though buying into platforms that have such desired feature built in, but sometimes the edge is already gone by the time features make it down to retail platforms.. or at least, when the edge/tool is new/hot, the cost of such 3rd party software is often huge.
 

Stephen

Active Member
I've underestimated how you're trading; sounds like Scottrade can't help me much here.

I know a little Java and C#, but I'm guessing it's not enough to write automation code.

Did you start with manual trading?
 

jack

Administrator
Staff member
Stephen said:
The island looks uninhabited! Looks like fun, especially with a girl by your side.

It seems like with every profession, most of what's been learned in college can't be used practically...maybe 20% of it is useful.
The island is a lot larger than that, and mostly developed/modernized. That pic was just one park area. There's over 1 million people living on the island there in total.. but yes, there are many places around the island that were designated parks or nature preserves, so you could go exploring and pretend/feel like you're alone or shipwrecked quite easily.

--

I agree on the college comment. So little of what i learned can be used practically... but, there's still a lot of skills that students pick up in college that are important: Namely, the ability to research and analyse resources to achieve a goal, and the self/project management required to complete large and complex projects on time.

Stephen said:
I've underestimated how you're trading; sounds like Scottrade can't help me much here.

I know a little Java and C#, but I'm guessing it's not enough to write automation code.

Did you start with manual trading?
Oh.. lol.. Yeah, it's not going to be applicable to a retail account used for swing or position trade. At least not for trade execution or anything like that.

But, in your case, where it can be of use is data mining, analysis, and looking for statistical trends in past history... and portfolio modeling. So this takes your programming skills and uses them to help find edges in longer term positions / trades.

If you're able to suss out some combination of data that gives you decent trading signals, by the time a retail broker/platform makes it as user friendly as adding MACD to a chart, the edge might be gone. So being able to code up your own work to do said analysis, beating other to market in the process, is a huge plus.

Then, there's the world of pairs trading in stocks. That's all stats and cointegration... and using R or Python to work out the numbers saves you thousands in software licenses and data fees to do the same work if you know how to program.

So there's still a lot of merit in learning to program for trading in general..
 

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