book_a01ffirs.qxd 12/20/06 3:12 PM Page iii Adventures of a Currency Trader A Fable about Trading, Courage, and Doing the Right Thing ROB BOOKER John Wiley & Sons, Inc. book_a01ffirs.qxd 12/20/06 3:12 PM Page iv 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. 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HG3851.B62 2007 332.4'5--dc22 2006029332 Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 book_a02ftoc.qxd 12/20/06 1:45 PM Page vii Contents Foreword ix Preface xi Acknowledgments xiii About the Author xv Introduction 1 Chapter 1 In Search of Amazing Profits 3 Chapter 2 The Future Looks Bright 11 Chapter 3 A Trip to the Thirty-First Floor 16 Chapter 4 Two Promising Conversations 28 Chapter 5 Lessons Learned 33 Chapter 6 A Turn for the Worse 45 Chapter 7 Trying to Awake from the Nightmare 57 Chapter 8 Charlie Flank Goes to U.S. National Bank 63 Chapter 9 Mapping Out a New Career 73 vii book_a02ftoc.qxd 12/20/06 1:45 PM Page viii viii CONTENTS Chapter 10 Charlie Flank Meets His Match 79 Chapter 11 Coming Clean 94 Chapter 12 Looks Can Be Deceiving 104 Chapter 13 The Story of George Sisler 114 Chapter 14 Back to Square One 122 Chapter 15 Breakfast with Harvey 133 Chapter 16 Back to Where It All Began 149 Chapter 17 Testing 164 Chapter 18 Homework 175 Chapter 19 Team Banes Begins Anew 183 Chapter 20 Presenting Our Findings 189 Chapter 21 Back in the Game 194 Chapter 22 Return to the Thirty-First Floor 197 Chapter 23 Settling My Tab 200 Epilogue 203 Appendix A: The Retail Carry Trade 207 Appendix B: How I Got Six Hundred Pips 211 Index 215 book_a03fbetw.qxd 12/20/06 1:38 PM Page ix Foreword T rading 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 about why Pfizer should be taking off, when all you wanted to do was buy some Intel. These days you can do it all from home on your computer. It is this idea of independence and freedom that is attracting so many of us to the trading marketplace. That old statistic about 90 percent of traders going belly-up within the first year...yeah that still applies, give or take a few percent. But Rob 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 the world and helped them to realize that focus and discipline are all that make a successful trader. Systems are a dime a dozen (or sometimes $3,000 each), but only the disciplined trader who denies distraction will make any money from them. The market is overrun with books, courses, lectures, seminars, and webinars 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 who presents such an offering is out to prove that it is the best and maybe the only good trading system out there. Rob will tell you that the system is not the 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 you really wait) for it to happen, and then jump on it. And repeat. And repeat. Trading can become boring and redundant. But it is about making money, not about excitement. It is about making money, not about being right or smart. And well...trading isn’t even about the act of trading; it is just about making money, to afford the freedom that we all desire. This freedom is where the excitement really comes in. Freedom is the end. Hard work, discipline, and focus are the means. It sounds lame, played out, and cliché, but it is still true. When we lose sight of that truth and start feeling like genius traders, we start screwing up. Many people give up along the ix book_a03fbetw.qxd 12/20/06 1:38 PM Page x x FOREWORD way, perhaps like the fabled gold miner who gives up digging just one inch away 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 nearly demanding that I focus elsewhere. He helped me dust myself off, reassess my commitment to becoming a successful trader, and start over with a proper foundation for success over the long haul. (Thanks Dude.) In Adventures of a Currency Trader,Rob explores—through the story of Harry Banes—the ups and downs of being a trader, the struggles many of 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 to think about: It presents a foundation to trade by and an example we can re- late to. MAXWELLFOX,currency trader South Pacific August 2006 book_a04fpref.qxd 12/20/06 1:48 PM Page xi Preface T rading 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 is Every 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 start trading 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 all begin our trading careers: nervous, excited, unskilled, and unproven. His financial 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 are right now. His challenges and obstacles might remind you of the struggles you 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. Even the chump traders can become champions. Even the indebted can become financially 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 ever known. 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’ll learn how to recover from disastrous losses, how to set yourself up as a full-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. xi book_a04fpref.qxd 12/20/06 1:48 PM Page xii xii PREFACE What is more important, you’ll learn how Harry eventually uses similar techniques to become a profitable trader and reach financial freedom. And most important of all, you’ll learn not only how he made those profits, but how 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 more details about Harry, his mentor, their friends, and everything else about the book, check out Harry’s web site at www.HarryBanes.com. I now invite you to go on an adventure with Harry. Read on. ROBBOOKER Wheeling, West Virginia December 2006 book_a05flast.qxd 12/20/06 1:50 PM Page xiii Acknowledgments T his 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 I trade for a living, I have dreamed of being a writer since I was 10 years 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 easy for 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 have put 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 never have believed in myself. Many times during the writing of this book, I thought of the faith that she had in me when I was still so young, and I was able to write another sentence or page. I owe more to her than I have ever repaid. I met Maxwell Fox in Fort Lauderdale, Florida, at the first seminar I ever did. He is the best trading friend I have ever had; he has helped me overcome plot difficulties and name characters (including Harry); and he was the first person to read the entire manuscript. I am a better person for knowing Max. He leaves people better than he found them. He is also the single greatest trader I’ve ever taught, hands down. He is disciplined, he is dedicated to the science of backtesting, and he wrote the funniest ebook on chart patterns you’ve ever seen. You can get that ebook at http://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 my side for more than 20 years, to help me at every major point in my life. He has endured my ego, my mistakes, my weaknesses, far more than I could ever repay. xiii book_a05flast.qxd 12/20/06 1:50 PM Page xiv xiv ACKNOWLEDGMENTS Emilie Herman and Kevin Commins at Wiley were patient with me and helped 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 even know that I needed it. Jesse Torres introduced me to Betsy from Deutsche Bank, who kindly showed me a trading floor. I have been honored to work with some of the finest currency traders in the world. I would stand any of these people up to any other traders on the planet: I can’t name all of them, but here are some from the past few years: Craig Taylor, David Elliott, Scott Kush, Derek McGuire, Roman Jakubas, Beth McNabb, Nina Hernandez, Louis Cooper, Angela Nitkin, Ben McDonald, Andy Eastabrook, Dan Ziembienski, John Law, Gary Young, Chris Ennico, Thomas Gibbs, Marie-Sophie Blanchet, Todd Bryant, Nona Bates, Nader, Alex Semaan, Elaine Sequeira, Jonathan Warr, Jeff Politis, Irene Beregszaszi, Stephen Nieri, Chuck Smalley, Joseph Burgos, Johnny Ream, Darin Carlyle, Matt Forsyth, George Roy, Damodar Patlolla, Greg Walker, 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 I know. 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 me quit a legal career and follow my dreams. And last of all, I want to thank my son Isaac. You found me at the brink of emotional disaster and you reached out and saved me. You came to us in the very moment when we needed you most. I wrote this book for you, too, even though you are too young to read. R. B.