FEELING LUCKY? BY LOUISE BEDFORD W H Y S I Z E R E A L LY M A T T E R S !

TRADING IN THE BIG LEAGUES NO BULL

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CONTENTS
JUL/AUG 2019 VOLUME 24, NO.4
COVER STORY
54. 3 Effective Ways to Deal
with Distractions When
Trading
By Eva Diaz
MARKET COMMENTARY
7. Market Report
With Dale Gillham
8. Commodities Corner
With Gary Burton
20
14. Currency Corner
With Chris Weston
SHARES AND TRADING
20. How your investment horizon
might affect your portfolio
risk capacity
by Sam Green
22. Trump frames his re-election
campaign
by Michael Cornips
2 YOURTRADINGEDGE JUL/AUG 2019
24. Short Selling Stocks to
Increase Your Profits
By Janine Cox
28. Know your online
investment provider
By Pat Garrett
TECHNICAL ANALYSIS
32. Why Size Really Matters!
By Van K. Tharp, Ph.D.
34. W.D Gann Squaring
Time and Price
By D.K.Burton
38. Where to for the ASX-200?
By Mary McNamara
44. Fibonacci for All Beginners
Part 2
By Lachlan Elsworth
TRADER'S MINDSET
50. Getting Really Clear
On Why We Trade
By Dani McLeod
ONE WOMAN’S STRUGGLE:
How a corporate
58. Feeling Lucky?
executive lost the
By Louise Bedford
use of her arms and
achieved financial
freedom by trading
60
with a pen in her
60. Trader's Story
Get to know your fellow traders. YTE
speaks to trader Rae Delai
mouth...
64. Trading Life
Gary Fraser
66. Staying Calm at the Coal Face
...And you know her!
By Doug Dew.
72. Many faces of fear
By Sinan Koray
75. Marketplace
Yes, that was me. Louise Bedford. It restored my income, and gave me back time
Sure, now I’m a full-time trader, a best-selling so I could return to full health. I dread to think
sharemarket author, and you’ve been reading my where I’d be if I hadn’t worked out a sound
articles in Your Trading Edge for around 15 years – trading plan. And now it’s your turn.
but it wasn’t always so rosy. I'm on a quest to create as many happy,
Years ago I had a corporate position, and independent, skilled and wealthy traders as
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 W OTK BI IV
2016 E
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Y O U R ADING
B R A INTRADER AUD
8.95
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TO TH
’S ST GBP 4.95

E GORY
YM
USD 8.95

EDITORIAL
NZD
9.95
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20.00
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21,No.
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TA KTEWAVE TR S YOU
Y O U R ADING
B R A INTRADER
TO TH
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E GORY
YM

JUL/AUG 2019 VOLUME 24, NO.4

FEELING LUCKY? BY LOUISE BEDFORD

TRADING IN THE BIG LEAGUES
W H Y S I Z E R E A L LY M A T T E R S !
NO BULL
YourTradingEdge
SHORT SELLING STOCKS
Jul/Aug 2019
Jan/Feb 2015
www.YTEmagazine.com
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THE RENMINBI
TO INCREASE YOUR PROFITS
EDUCATION: WHY YOU
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W H Y S I Z E R E A L LY M A T T E R S !
NO BULL management in today’s world
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 Market Report
Commodities Corner MARKET REPORT
Currency Corner Dale Gillham

W
hat does the latest rate cut mean The decline in the financial sector is likely to due to a
for the stock market? slowing in their momentum given that the banks have risen
The RBA announced another interest consistently since the start of the year. There was not a lot
rate cut in July, which appears to be a Hail of support for the selloff, so it is likely investors were just
Mary attempt to stimulate the economy. locking in profits with concerns about the future implications
Successive interest rate cuts within of more rate cuts effecting the banks’ bottom line.
months of each other in an already very
low interest rate environment is, in my opinion, like trying to So what do we expect in the market?
do something in the hope it might work. The All Ordinaries Index is now making its move to break
As we know, rate cuts are designed to stimulate the the all-time high set around 140 months or 4,261 days ago.
economy and increase growth via investment, as it is cheaper I expect the Australian market to move up over the next
for both consumers and businesses to borrow so they can few weeks into August with my target around 7200 points
spend more. But when rates are already low, and things are before making a new high and falling into its yearly low in
not moving, you have to ask whether interest rates are really September or October. Medium to longer term, I believe our
the issue or is it something else. market is bullish, and if we can get the economy moving this
Maybe it’s the fact we have had a new prime minister will support the rise.
every 18 months with a new direction and new policies that For now investors should be sitting tight and waiting for
has caused the issue. Business and consumers have lost the right opportunities to arise, rather than getting out of the
confidence and they are making short term decisions rather market as some have started doing.
than risking getting caught in the shifting sands of Australian
politics. Dale Gillham is the Chief Analyst at Wealth Within
That said, I am not saying that a drop in the RBA rate is
not good for our economy, as all rates cuts can be good
and bad for Australian companies, as it effects our currency.
Companies who export and deal in US dollars, such as
the banks, biotechs, miners and other material companies
will benefit from the rate cut. Those importing goods and
services, however, will find it harder, as it becomes more
expensive to do business abroad, and a lower interest rate is
likely to affect manufacturers and consumer stocks.
America is a good example of what very low interest rates
can do to an economy, particularly as we saw the momentum
of the US economy was slow to take off. Right now, I don’t

MARKET
think lower interest rates will do much, instead we need a
stable government who has a solid direction that we can
trust will do more. In short, we need a change of attitude not
a change in interest rates.

So, what’s been happening in the markets?

The All Ordinaries Index opened at 6699.2 points in the first
week of July and moved up, breaking out of the sideways
move that unfolded over the last 2 weeks of June. The miners

COMMENTARY
kept the All Ordinaries Index afloat as iron ore broke US$120
a tonne and BHP, RIO and FMG were all up in early July.
The banks pulled back following their strong rise over the
past couple of months with the financial sector flat. CBA was
hit hardest down around 1.5% followed by Westpac and ANZ
who were slightly in the red.

COMMODITIES CORNER
Gary Burton CFTe
T
he trade war drags on as China slowly turns up the
heat on the US over rare earth supplies. Although
not unexpected, but the longer it impacts global
growth, the harder it will be to reach a resolution.
China is the world’s dominant producer of rare
earths - a group of 17 prized minerals used in
everything from consumer electronics to military equipment such
as jet engines, missile guidance systems, satellites and lasers.
Australia to the rescue! Rare earth developers in Australia say
they are edging closer to signing deals with new customers that
would drive forward their projects amid mounting global supply
concerns over the minerals that are crucial to high-tech industries.
In the oil space, US refiners have lined up larger supplies from
Canada, Iraq and Colombia since Washington in January began
choking off the flow of dollars to Venezuela’s socialist government
by barring transactions with PDVSA, Venezuela’s state oil company.
With PDVSA once being the top three providers of heavy crude to
US refiners, the United States went from importing 561,000 barrels
per day (bpd) of Venezuelan oil in January to zero barrels in May.
In June, more than 130,000 bpd of heavy Canadian crude was
scheduled to depart from Texas, four times the average exported
in 2018. From January to May, US Gulf Coast imports of Mexico’s
heavy Maya crude increased 12% to 459,000 barrels per day (bpd).
Copper inventories at warehouses tracked by the LME jumped to
248,550 tonnes as of mid-June, the highest since September 2018.
Other metals sectors seem to be dealing with weather events
Oil
The Organization of the Petroleum Exporting Countries plus
Russia and other producers, an alliance known as OPEC+, had
a deal to cut output by 1.2 million barrels per day (bpd) from Jan.
1. This pact ends in the month of June.
The outlook for oil demand growth in 2019 has dimmed due
to worsening prospects for world trade, the International Energy
Agency (IEA) recently stated. However, stimulus packages and
developing countries should boost growth going into 2020.
The Paris-based IEA, which coordinates the energy policies of
industrial nations, revised its 2019 demand growth estimate by
100,000 barrels to 1.2 million barrels per day (bpd), but said it
would climb to 1.4 million bpd for 2020.
8 YOURTRADINGEDGE JUL/AUG 2019
along with the soft commodities sector.
Widespread flooding in Indonesia’s nickel hub on the island of
Sulawesi has halted some mining operations in Indonesia during June.
Heavy crudes have poured into the United States this spring, offsetting
the loss of Venezuelan oil and producing a mini-surplus, with Canadian
heavy crude now being exported from the US Gulf Coast.
Chicago corn futures continue to climb to a five-year top as more
rains and flooding in parts of the Midwest are likely to curb output
in the world’s biggest producer of the grain during the summer
season.
The Trump administration unveiled a $16 billion farm aid package
to offset losses from a 10-month trade war with China and said
payment rates to farmers would be determined by where they farm
rather than what crops they grow.
The package, the bulk of which will be spent on direct payments,
surprised growers and traders who had expected payment rates for
soybeans, hogs, corn and other crops.
In May, US removed tariffs on imports of steel and aluminium from
Canada and Mexico. A stroke of the presidential pen has liberated
the largest supplier of aluminium to the US market from the 10%
duty that was imposed in the middle of last year.
JUL/AUG 2019 YOURTRADINGEDGE
COMMODITIES CORNER
Oil West Texas Weekly chart
To remain in a bullish primary up trend, a closing price over the
$65 and $70 is required in the coming quarter. However, with
selling entering the market during this Q2 period, WTI had failed
to close over the $65.0 level, leading to a decisive break down
below the $60.0 level and the recent $55.38 level and into low
testing the $50 level.
Currently the bullish hammer is holding price above this strong
support level of $50.0. Going forward this will be the level to
hold. Relative strength remains subdued as momentum slows in
this consolidation area.
Iron Ore Continuous Contract
Chinese Port inventories have declined as iron ore shipments
have slowed. Nevertheless, top iron ore miner Vale expects to
soon restore 20 million tonnes of yearly capacity at its Brucutu
mine in Brazil.
Safety concerns following a mine tailings dam collapse in January
prompted closures of some of Vale’s mines, reducing supply to top
buyer China, which makes about half of the world’s steel.
Vale needs court approval to resume production at Brucutu,
which is operating at only a third of its 30 million tonnes yearly
capacity.
Iron ore remains in a primary up trend, the current breakout
above the USD$92 level at first tested this level as support
during the April-May period.
The current large weekly range could simply be considered
exhaustion, if no immediate follow through take place. The
developing trend line should be viewed as an important support
point on any weakness. A breakdown from this level should see
the USD$92 tested again.
Relative strength remains high reflecting the strong momentum
in current prices.
The underlying primary trend remains up.
Facebook.com/Your Trading Edge Magazine
9
COMMODITIES CORNER
Zinc Weekly
China’s May 2019 zinc output was +7.4% y/y at 480,000 tonnes.
However, the base metal complex will need to see an end to the
trade stand-off between the US and China.
The premium of LME cash zinc over the three-month contract
was at $161 a tonne during mid-June, a 22-year high, indicating
near-term shortages in the LME system. This may lead to
higher prices in the short term, but industries are facing slowing
momentum in manufacturing.
The weekly chart for zinc shows key resistance at 25,000
CNY and support at 20,600 CNY.
This trading range at best is set to continue as a reflection of
inventory data and trade woes.
The weekly primary trend for zinc remains down with a
further breakdown below the lows of Q4 2018 and the recent
retest level 20230 CNY.
Copper
Analysts at BofA Merrill Lynch said the US-China trade dispute
overshadowed strong copper fundamentals, with steady
Chinese demand and falling treatment and refining charges.
In general, the market participants have forecast a deficit
of 260,000 tonnes this year in the 24-million tonne market.
However, the London Metal Exchange had copper sinking to an
intraday low of $5,776 / tonne during the June period.
China’s refined copper output fell by 5.2% year-on-year and
3.9% month-on-month to 711,000 tonnes in the May – June
period. But prices have been cushioned by expectation of an
interest rate cut by the US Federal Reserve in the backdrop
of slowing growth. A rate cut could weaken the US dollar and
make dollar-denominated metals cheaper for importers using
other currencies.
Electric cars will be the driver of copper for 2019
and beyond. While conventional cars contain about 9 to 22
kilograms of copper, a hybrid electric vehicle typically contains
35 kilograms of copper, while the plug-in hybrid electric vehicle
uses about 59 kilograms of copper. And finally the battery
electric vehicles typically contain more than 81 kilograms of
copper.
The weekly chart of copper shows rejection at the $2.98lb
level with a strong move lower below the $2.85 support to
10 YOURTRADINGEDGE JUL/AUG 2019
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COMMODITIES CORNER

EQUIS GROUP WEALTH MANAGEMENT

F I N AN C I A L A DV IC E
Gold Continuous Weekly

Gold has been the standout performer of the gold $ crosses.

With a falling Australian dollar and falling interest rates, the
result for gold prices in AUD is at a 7-year-high currently trading SME Coaching & Financial Education
around $2000 oz.
Tensions in the middle east and potential rate cuts from the
Financial Commentator &
US Federal reserve (FOMC) at this point have placed gold into a Best Selling Author Popular RICHMum
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The overwhelming factor is the US dollar and the benchmark
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down, the opportunity cost of holding a zero-interest rate asset
such as gold diminishes, and that’s a positive for gold.
With a significant trend line developing from the Q3 2018
lows, the recent 5th touch has held with a break higher above any breakout higher. This commodity will need a strong close Assess ALL your options - no cookie
the key $1306 level. The following strong range breakout has over this level to maintain a target of $1410oz. Price weakness
been halted by the retest of the $1367 level. The fake out sell from these levels may see the trend line retested at $1300.0
signal as a closing price remains inside the ‘shooting star’ high Relative strength Indicator (14) has now moved above the key
cutter advice.
of $1346.73. Significant resistance at $1367 will be the key for ‘50’ level indicating an increase of positive price momentum.
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According to the US Department of Agriculture, winter wheat Book a Financial Chat to discuss a
ratings remained relatively strong with 64% of the winter wheat
seen as good-to-excellent, up from 39% a year ago. But winter situation without ongoing pressure to
wheat harvesting was just 8% complete, behind the five-year
average of 20%, amid the soggy conditions in major US grain obtain advice.
belts. Jodie Nolan MBA (App Fin),
The Australian Bureau of Agricultural and Resource Economics
and Sciences (ABARES) has indicated that wheat exports would Licensed Financial Adviser
total 11.7 million tonnes in the crop year beginning in July, down
from its previous estimate in March of 14.2 million tonnes.
Lower Australian exports will support global benchmark Design a life you love so you No obligation FREE first
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exports are also likely to hit Australia’s stuttering economy.
Wheat is the country’s most lucrative rural export from an
agricultural sector worth about A$50 billion ($34.39 billion).
Australian end-users of wheat have been forced into rare
imports. Australia’s Department of Agriculture has said that the
first shipment of the commodity into the country in more than
a decade has arrived, with ABARES saying more imports are
likely.
More permits are expected to be issued for imports of wheat
and other grains, ABARES said.
Much of Australia’s east coast has recorded less than 40%
of typical rainfall levels over the last six months, data from the
country’s bureau of meteorology shows.
Last Comments: The low OPu (outside period up close) has a
very high statistic for showing major turning points. In May 2019,
a retest of the $420 level set during March 2019 has resulted in or In Person
wishful thinking.
a strong rally back to the trading range highs to retest $550.
This early resistance is shown with a small price decline.
With a breakout over $550, traders would look for the highs at
$580 to be retested. But for now, wheat remains within a trading
range between $400 and $555.0
Gary Burton CFTe Gary is Director of The Australian
School of Technical Analysis. Gary provides research analysis
for Thomson Reuters and is an AR for Mplus Markets. www.
theaustralianschooloftechnicalanalysis.com.au For those who
choose to start in the right direction. garyburton@mplusmarkets.
com.au Nodie Nolan is Authorised Representative no. 001258785 of Australian
Capital Financial Planning AFSL no. 380552
www.equisgroup.com.au

12 YOURTRADINGEDGE JUL/AUG 2019

 CURRENCY CORNER

CURRENCY CORNER TA
L I V E T R A DI
N

ID

G
by Chris Weston

RO
OM
OM
W

RO

ID
e can look back at FIGURE 1

T
IN A
recent themes in E TRAD
LIV
global markets to
set a platform and
a stage 2H19 in FX
markets. And, there
is merit in that. When we consider what
is clearly brewing and then consider the
massive implications for global markets,
then, we can assess the trigger points and
what to look out for, and, ultimately design
a holistic playbook on how to trade it.

Rates and front-end bonds leading

the charge
I touched on this pivotal thematic in my
last YTE piece. But, as the year has rolled
on, the divergence between the aggressive
easing priced into the interest rate markets
(and the short-end of the bond curve), FIGURE 2
and the narrative from central banks, and
what they feel is the correct policy path,
has become ever more apparent. We are
finally seeing signs that central banks are
about to play catch-up
Consider that in theory, when it comes
to absolute insights on the economy,
market participants and central banks
have exactly the same information.
Granted, central banks have an army of
PHD research analysts who stress test
every scenario, and set policy based on
their economic forecasts, and we are all
taught that their actions guide and define
the price of money.
However, despite what central banks
have portrayed in their forward guidance,
financial market participants have been
two steps ahead throughout all of 2019, the Fed’s balance sheet (of accumulated
holding a consistent view that future US Treasury’s and mortgage-backed
economic fragility would require a global Liquidity dynamics an economic securities) reduced by close to $600b, in-
central bank response. Of course, Mr headwind turn, starving the world of USD liquidity
Trump and his use of tariffs to achieve an What I feel gets overlooked is the liquidity and excess reserves. We can blame
economic, social or political objective has dynamic and the idea that the Fed, tasked Trump all we want about the turn in global
caught the headlines and we can’t deny with the insurmountable challenge of trade and manufacturing, but I’d argue
this level of unpredictability has had a normalising the excesses of eight years balance sheet normalisation, and a strong
profound effect on the psyche of the US of quantitative easing years, have a USD have had a far greater influence, and
and even global corporate landscape, challenge that is simply too problematic. in reality, the world now needs a weaker
with supply chains radically altered. So, while we have now seen nine rate hikes USD. Moreover, as we can see from the
since 2015, we have importantly seen weekly chart of the USD index, a weaker

14 YOURTRADINGEDGE JUL/AUG 2019

CURRENCY CORNER

Subscribe Now
USD is no certainty despite the Fed looking
like it will ease in July by even 50bp.
FIGURE 3 FEELING LUCKY? BY LOUISE BEDFORD
TRADING IN THE BIG LEAGUES
W H Y S I Z E R E A L LY M A T T E R S !
NO BULL
Read Your
any
In fact, a break of the double-top could
just re-enforce my view that the main
reason the Fed needs to cut rates is
actually because as strong USD will be Jul/Aug 2019
their biggest problem. While we watch SHORT SELLING STOCKS Jan/Feb 2015
www.YTEmagazine.com

THE RENMINBI
any
USDCNH as our guide on trade tensions,
the weekly chart of the USD index (DXY)
TO INCREASE YOUR PROFITS
EDUCATION: WHY YOU

ON THE VERGE BIGGEST

WANT TO BE INVESTED

3 EFFECTIVE WAYS
offers a rhythm and feel to the greenback IN AUSTRALIA’S
more broadly. NEW EXPORT
OF A MAJOR
TO DEAL WITH
INDUSTRY.

BREAKDOWN
Setting the scene for increased
currency wars in 2019
So for 2019, it’s really been the rates
and bond show, with investment funds
DISTRACTIONS
weighting portfolios to shorter-duration
assets. This has clearly resonated, with FIGURE 4 WHEN TRADING
WHERE TO FOR
flatter yields curves and an ever-increasing AUD 8.95
EUR 8.00

pool of global negative yielding debt. The

WHY VOLATILITY
GBP 4.95
USD 8.95
NZD 9.95

THE
IS AASX-200?
total USD value of global bonds traded SGD 12.90

GOOD THING
MYR 20.00
HKD 79.00
in the secondary market, commanding a Volume 24,
Volume 20, No.4
No.1

negative yield, currently sits at a staggering

$12.3t. Therefore, it’s no surprise that gold
resides at $1350, and also explains why
crypto-currencies have performed well.
Given the markets’ belief that the bond
market is one of, if not the best predictor
of future recessionary conditions out there,
the inversion between the 3-month and
10-year US Treasury, or 2s and 5s, show
the market knows Fed policy is just too
tight. Now, whether the 100bp (four cuts)
of the policy easing over the coming 12
months, portrayed by markets is correct,
I guess we’ll likely need to revisit later in
the year. One suspects a certain Mr Trump
holds a few cards here, with the Federal
Reserve and other influential central banks
all watching proceedings on trade closely,
and all expressing a view that they will
react appropriately to keep the economic
expansion in place.
On the far right column youll see the
implied rate cuts/hikes priced over 12
months. (Source Bloomberg)
The need for a weaker exchange
rate
I focus specifically on the Fed, but that is
because they are just that important to the
global economy. When global economics
are looking shaky, oil is in a bear market,
and inflation expectations (we look at
instruments called ‘5-year inflation swaps’
here) are trending lower, and in the case of
Europe are at record low, the desire for a
weaker currency should be paramount. It
is a macro theme I feel should absolutely
be on the radar, especially if the rates
market is proved correct and we do see
these major central banks embarking on
an easing cycle. We’ve already seen action
from the RBNZ and RBA, with Fed opening
the door to cut in the near-term, as well as
ending its QT program.
FOR OPTIONS
GETTING REALLY CLEAR
TRADERS?
ON WHY WE TRADE
S TAY I N G CALM AT THE COAL FACE MANY FACES OF FEAR
RIS K M ANAG EMENT IS A C OP OU T T A K E YO UR B R A I N T O T H E GYM
The ECB will ease again, most likely in Read YTE on the go with our digital edition. Not only will you have instant Read Y
September, and this could be married with access to the latest issue of YTE, but also our back issues collection when you ha
the recommencing of QE, as is the case you purchase a digital subscription from http://ytemagazine.com/subscribe/
. issue c
in Japan, with the BoJ potentially doing www.e
Or download our free iPad, iPhone and Android compatible YTE iTunes app
more. Now I know fear sells and I am not Or dow
– simply visit the iTunes store and search for YourTradingEdge.
predicting a doomsday affair, I am merely YourTr
detailing what is priced. But, if the rates for You
market is correct and then the need for a
weaker currency becomes a preeminent
goal of an easier monetary policy regime,
then traders need to consider that if
every central bank is easing, how do we
determine how each currency may fare in
this environment?
Now, there are many countries, mostly

16 YOURTRADINGEDGE JUL/AUG 2019

CURRENCY CORNER
classed as ‘emerging’, who have
issued government bonds in USDs
(and therefore in a currency they don’t
control), and as such, have racked up
incredible USD liabilities. For them, a
weaker USD is clearly advantageous
and this is why the Fed is considered the
‘world’s central bank’, and, on balance,
why the world needs a weaker USD.
But, if it really is a race to the bottom,
then we could be revisiting this notion
of ‘currency wars’, and this is where FX
volatility could really pick-up as we hit
what causes lasting trends in FX markets
– divergence at a central bank policy
level. It’s where I’d imagine gold to trade
north of $1500.
The AUD a key loser in a backdrop
of currency wars
It may take some time to play out, but
it’s for this reason that once the RBA’s
cash rate moves sub-1%, that I feel we
will be talking about starting point for the
RBA to start radically expanding base
money and undertaking quantitative
easing (QE). While this is a consideration
for later in the year, the time when this
becomes a mainstream view and is
portrayed by perhaps even one or two
trigger words in a RBA speech is when
the bid completely comes out of the AUD,
AUD implied volatility ramps up and the
biggest consideration for discretionary
and non-systematic players is actually
how long you hold onto shorts for. The
fact that real money funds get positive
carry to be short AUD is now key, and
it cannot be emphasised enough how
important this is.
The set up in AUDUSD, on the daily or
weekly timeframe, looks heavy and that
will enthuse the RBA, especially and a
break of the 2016 low (the purple dashed
line in figure 4) would take the currency
18 YOURTRADINGEDGE JUL/AUG 2019
into mid-65’s. When it goes, add to
shorts here.
GBP affected by politics not
central bank actions
One currency I had identified as being
a potential superstar for 2019 was GBP,
on the notion that the BoE wanted to
hike, and at the time, the probability
was that the risk was for agreement
in the UK Commons. Obviously, that
hasn’t happened, and while I can look
at implied volatility in GBPUSD or GBP
crosses over different periods, and see
this at surpassingly subdued levels,
it feels as though we are going to see
materially higher volatility here. So, while
the USD is pivotal for all markets, and
while other G10 central banks may start
indirectly targeting its exchange rate
later this year, if not early 2020, GBP
is firmly entrenched as the stand-alone
political currency in G10 FX.
By the time this publication is released
we should have a new Tory leader, and
as I write Boris Johnson is the clear
favourite. My base case is that the EU
will not change its negotiating stance,
although we should see a “technical
extension” to the current 31 October
deadline, taking this out to end-January
2020 to prepare for a “controlled no-
deal”. That said, in the absence of
(potential) PM Johnson securing changes
to the Withdrawal Agreement, which
seems very unlikely, then we should see
a vote of no-confidence pulled on the
Tory government resulting in a general
election.
With the Tories taking inspiration from
Nigel Farage’s newly formed Brexit party,
and representing the ‘no-deal’ Brexit
camp, Labour should align its mandate
to that of the re-emerged Lib Dems and
represent the ‘remain’ camp, one thing
How your investment horizon might affect your
portfolio risk capacity
Trump frames his re-election campaign
Short Selling Stocks to Increase Your Profits
Know your online investment provider
is brewing. That being, the mother of
political showdowns, with the public set
to choose in one last binary event. How
GBP volatility doesn’t ramp up into this
possible scenario is beyond me, with
most roads seemingly leading to a lower
GBP.
The ability to read volatility, harness
expectations and adapt will be key,
as I can imagine a volatile GBP will be
magnate to retail traders.
So, the stage is set for what could be
a very telling 2H19, and while the dovish
rates pricing maybe wholly incorrect,
if it is on the money then FX markets,
gold and Bitcoin could offer incredible
opportunities.
Chris is the head researcher at
Pepperstone, having previously worked
at Morgan Stanley, Credit Suisse and
Merrill Lynch, gaining exposure to both
institutional equity and fixed income
trading. After accruing 16 years’
experience in financial markets in both
London and Melbourne, Chris now
heads up the research team, using his
extensive knowledge of capital markets
and trading strategies to provide real-
time insights. Chris also worked on
SHARES
IG’s premium client desk. Chris is
an established figure in the media,
discussing global macroeconomic trends
and the impact on financial markets
across a range of global television and
radio channels, including Sky News
Business and Bloomberg TV. He also
writes regular articles for a number of
daily newspapers. Sign up for Chris
AND TRADING
Weston’s Daily FX commentary here:
https://cloud.go.pepperstone.com/join-
daily-fix
HOW YOUR INVESTMENT HORIZON MIGHT AFFECT YOUR PORTFOLIO RISK CAPACITY
20 YOURTRADINGEDGE JUL/AUG 2019
HOW YOUR INVESTMENT HORIZON MIGHT AFFECT YOUR PORTFOLIO RISK CAPACITY
How your investment
horizon might affect your
portfolio risk capacity
By Sam Green
M
any portfolio managers break down their investment
options into classes of risk appetites, such as
‘conservative’, ‘balanced’, ‘growth, or ‘aggressive’.
But what do these classes mean? Who are each of
the classes tailored towards?
Each of the classes is likely targeting a different
level of risk, reward, and investment horizon; the different
investment classes are therefore targeting investors at different
stages of their investment journeys.
Shorter-term investments
A shorter-term investment horizon might be a period of 1-3 years.
Due to the shorter investment period, a ‘conservative’ portfolio
balance is most suitable – this is because a bad period (such as a
declining year) could do a lot of damage to your portfolio. The assets
in a conservative, shorter-term portfolio are therefore predominantly
lower risk, lower volatility assets, such as cash, and bonds.
Typically, a conservative portfolio would be composed of around
75% cash, bonds, or like assets, with the remainder in shares,
property, and other riskier assets. According to ASIC, such a
portfolio might expect a loss once every twenty years invested.
Medium-term investments
A medium-term investment horizon might be a period of 4-6
years. A suitable option for this investment horizon might be the
‘balanced’ option – which aims to find the middle ground when
weighing up risk and reward.
JUL/AUG 2019 YOURTRADINGEDGE
A ‘balanced’ portfolio option might hold around 70% of its assets
in property and share exposure, whilst keeping 30 percent in cash
or fixed interest assets. According to ASIC, such a portfolio might
expect three losing years for every 20 years invested.
Longer-term investments
A longer-term investment horizon might be a period of 7 years
or more. Given the greater period of time invested, you may wish
to be more aggressive with your asset selection, as the longer
you’re invested, the greater chance that periods of bad returns are
averaged out by periods of good returns. You may therefore wish
to go with an ‘aggressive’ or ‘growth’ portfolio option, which would
usually be constructed of 85% or more exposure to property or
shares, with the rest in cash or fixed interest. However, you may
still wish to go for the balanced option, if there is a chance that you
may need to withdraw the money during the investment horizon, or
if you have a lower risk tolerance in general.
According to ASIC, you could expect about four or five losing
years every twenty years invested.
Taking into account, your investment horizon is just one of the
important questions you must ask yourself when considering a
portfolio investment decision.
Sam Green is an advisor at TradersCircle
21
TRUMP FRAMES HIS RE-ELECTION CAMPAIGN
22 YOURTRADINGEDGE JUL/AUG 2019
Trump frames his
re-election campaign
by Michael Cornips
T
rump’s tough talk on Tariffs
and sanctions are a very blunt
instrument of negotiation, that
will naturally appeal to his elector
base.
Trump tweet: “When you are the “Piggy
Bank” Nation that foreign countries have
been robbing and deceiving for years, the
word TARIFF is a beautiful word indeed!
Others must treat the United States fairly
and with respect – We are no longer the
“fools” of the past!”
China
Trump tweet: “The US is charging 25%
against 250 Billion Dollars of goods shipped
from China, not 200 BD. Also, China is
paying a heavy cost in that they will subsidize
goods to keep them coming, devalue their
currency, yet companies are moving to US in
order to avoid paying the 25% Tariff.”
Donald Trump added Huawei to the
US government’s Entity List last month
over concerns that the company’s close
relationship to the Chinese government could
mean that its telecoms equipment is used for
espionage. Huawei has reportedly stopped
production on several of its smartphone
models following strict sanctions introduced
by the US government last month.
Mexico
Trump tweet: “On June 10th, the United
States will impose a 5% Tariff on all goods
coming into our Country from Mexico, until
such time as illegal migrants coming through
Mexico, and into our Country, STOP. The
Tariff will gradually increase until the Illegal
Immigration problem is remedied at which
time the Tariffs will be removed.”
“Like Mexican companies will move back
to the United States once the Tariff reaches
the higher levels. They took many of our
companies & jobs, the foolish Pols let it
JUL/AUG 2019 YOURTRADINGEDGE
happen, and now they will come back unless
Mexico stops the travesty that is taking
place in allowing millions of people to easily
meander through their country and INVADE
the US, not to mention the Drugs & Human
Trafficking pouring in through Mexico. Are
the Drug Lords, Cartels & Coyotes really
running Mexico? We will soon find out!”
“In order not to pay Tariffs, if they start
rising, companies will leave Mexico, which
has taken 30% of our Auto Industry, and
come back home to the USA. Mexico must
take back their country from the drug lords
and cartels. The Tariff is about stopping drugs
as well as illegals!”
India and Turkey
US Trade Representative Robert Lighthizer
announced that India and Turkey will within
60 days no longer qualify for a zero-tariffs
status that is given to some poor countries
to help them grow. The decision came at US
President Donald Trump’s direction.
Trump Proclamation:
•1. In Executive Order 11888 of
November 24, 1975, the President
designated India as a beneficiary
developing country for purposes of
the Generalized System of Preferences
(GSP) (19 U.S.C. 2461 et seq.).
•4. Consistent with section 502(d)(1) of
the 1974 Act and having considered
the factors set forth in sections 501 and
502(c), I have determined that India has
not assured the United States that India
will provide equitable and reasonable
access to its markets. Accordingly,
it is appropriate to terminate India’s
designation as a beneficiary developing
country effective June 5, 2019.
Under the decades-old program – known
as the Generalized System of Preferences –
Indian companies were able to avoid some
$5.7 billion in duties back in 2017.
TRUMP FRAMES HIS RE-ELECTION CAMPAIGN
Oil imports and Iran conflict
New Delhi and Washington are also at odds
over Iranian oil imports. In April, the US
announced it would not extend sanction
exemptions to countries importing oil from
Iran when they expired in early May. It meant
countries and companies trading with Iran
without Washington’s consent would risk
US sanctions and getting cut off from the
American financial system. US government
officials have warned China and specifically
Hong Kong, to avoid violating sanctions
against Iran, according to news reports.
India is one of the countries likely to be
the hardest hit by the US decision. India is
the world’s third-biggest oil consumer, but
its energy needs are primarily met through
imports.
Japan
Trump tweet: “Great progress being made
in our Trade Negotiations with Japan.
Agriculture and beef heavily in play. Much
will wait until after their July elections where
I anticipate big numbers!”
Trump re-tweet: “The president is working
hard to strengthen our relationship with
Japan, and that includes negotiating a new,
fairer trade deal.” Obviously, if a deal can’t
be reached you would expect beautiful
Tariffs to be imposed.
With Trump set to formally announce his
2020 re-election campaign on June 18, you
would expect Trump to continue to appeal
to his base, with little likelihood of any back
down on tough trade talk, imposing tariffs
and sanctions, building a wall, and stopping
illegal immigration.
Michael Cornips is the Director at
TradersCircle.
23
SHORT SELLING STOCKS TO INCREASE YOUR PROFITS SHORT SELLING STOCKS TO INCREASE YOUR PROFITS

Short Selling
Stocks to
Increase Your
Profits
S
hort selling is definitely a strategy you can utilise to
make a lot of money to boost your bank balance.
But it is also very easy to empty your bank account
By Janine Cox if you attempt to short sell without the right
knowledge and experience.
So how can you apply short selling strategies
to achieve your financial goals much sooner? And
what do you need to be aware of to avoid the costly mistakes?

FIGURE 1

What is short selling?

Commonly referred to as shorting, short selling is a technique that
can be used to generate profits from a fall in the value of a stock,
market, currency or commodity. So unlike trading long, where the
aim is to profit from price rising, when trading short your aim is to
profit from price falling.
When trading long, the intention is buy low and sell high,
whereas when you trade short you want to sell high and buy low
as shown in Figure 1. Some people struggle with this concept
because it can seem absurd to sell something you don’t own.
If you take a long position, you are anticipating a rise in the

24 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 25

SHORT SELLING STOCKS TO INCREASE YOUR PROFITS SHORT SELLING STOCKS TO INCREASE YOUR PROFITS

value of the instrument and you would experience a loss if the
value falls. On the other hand, if you take a short position, you are
anticipating a fall in the value of the instrument but if it actually
rises, you would experience a loss, as shown in Figure 2.
FIGURE 2
Trade Profitable Unprofitable
Long Buy low – Sell high Buy high – Sell low
Short Sell high – Buy low Sell low – Buy high
Now let’s take a look at some examples of how short selling
works.
How do you sell something you don’t own?
The action of selling something you don’t own is facilitated
through the use of margin, which requires you to put up collateral
to purchase the asset from a broker.
Let’s say you decide you want to use Contracts for Difference
(CFDs) to trade short, you would put up an initial margin to open
the contract based on the associated risk of the CFD, which is
determined by the broker. CFDs allow you to gain full exposure to
the price movement of the underlying instrument without having
to pay full price.
For example, if you wanted to short sell AMP by purchasing
10,000 contracts at a price of $2.11 with a margin of 10%, you
would be required to put up an initial margin of $2,110.
(10,000 * $2.11) = $21,100 (the total value of the position) x
10% = $2,110 (initial margin).
Now let’s consider what happens when you short sell a
position.
When you open a position, you will be required to put up the
initial margin as security, as well as meet your daily obligations
following the revaluation of the position each day. If the CFD rises
you will be required to pay additional margin into your account but
if it falls, you will receive a margin equal to the positive movement
in the value of the position.
That said, because your potential losses are not limited by the
collateral you provide, the CFD provider will require you to put up
additional collateral to cover your margin obligations.
Unlike other derivatives, cash flows, such as interest and
dividends, are paid while the CFD position is open, allowing the
CFD price to track the underlying instrument rather than trade at a
discount or premium, as is the case with options, for example.
Therefore, when you open a short CFD position, you will receive
interest each day and pay any dividends on the ex-dividend date.
Let’s look at another example
Let’s say you decide to short CBA because it has been in a
downtrend and you believe it will continue to fall away. You decide
to purchase 1,500 contracts at an entry price of $80.86, which
equates to a position size of $121,290 but as you are trading
a CFD, you are only required to put up 5% as margin or the
equivalent of $6,064.50.
You discover you were right in your analysis and the stock
continues to fall, and you decide to exit the position at $77.01.
Now let’s assume that you have paid approximately $100 in
brokerage to hold the position, then your net profit equates to
approximately $5,765 ($80.86 - $77.01 = $3.85 x 1,500 = $5,775 -
$100 = $5,765), which is a return of around 95% on your margin.
While this is exciting, let’s consider what would happen if the
stock traded in the opposite direction.
Remember, short selling involves using leverage, therefore,
your losses can be amplified. Put simply, if CBA had risen instead
of continuing to fall away, then you would be in an unprofitable
trade because you would have been required to pay the $5,765 in
collateral to the broker.
It is for this reason why it is so important that you understand
how to trade the underlying stock and to ensure you are profitable
in trading this instrument before you introduce leveraged trading
or trading on margin as part of your trading strategy.
Why would you short sell?
There are two reasons you would consider short selling: the first
is to profit from an asset that is falling, as we just discussed, and
the second is to hedge your portfolio or position when the market
is weak or the shares you hold are falling, and you want to protect
your capital or profits. In this scenario, the aim is to continue
to hold your shares as price falls to create a neutral position
between the shares and the hedged position.
In other words, hedging involves offsetting the value of
the shares you hold in your portfolio with the rising value of
the hedged position. While this strategy is not guaranteed,
as mistakes can be made when hedging given that you need
to know the right time to unwind the hedge, it can be used to
protect the downside. If you do decide to apply this strategy, it is
important as a trader that you have experience and an in depth
knowledge of technical analysis.
What do you do if you hold the physical stock and it is
being heavily shorted?
First and foremost, the important thing is not to panic. While it is
not uncommon to hear about a stock being heavily shorted in the
media, this doesn’t always mean that the stock price is going to
plummet.
Remember, it’s important to be rational when trading the stock
market, therefore, irrespective of what is reported, you must
always trade on what you know rather than what might unfold.
Given this, it’s wise to apply your trading rules, rather than
speculate if you want to be successful in the long run.
It is critical as a trader that you are always aware of the
potential downside risks of any position you take, and if a stock
you own has an increase in the number of short sellers, this could
indicate that any fall may occur at a faster rate than normal. That
said, it does not mean you need to change your stop loss or other
rules.
If a stock you own is sold off heavily because it is being
shorted, that may trigger your trading rules to exit. That said,
short sellers are usually short term in their thinking, therefore,
a stock that is heavily shorted can stop falling in a very short
period of time. As most of the market trades long, any stock that
is shorted can run out of sellers quite quickly, and start to rise as
buyers come back in to grab a bargain.
When the fall in price stops, short sellers get nervous and cover
their positions by closing the short trade, which means they buy
the stock causing price to rise even faster. In turn, this causes
even more short sellers to cover their positions. Therefore, it is
incumbent upon you to understand what is happening when a
stock is heavily shorted, so you know how to handle yourself and
your psychology.
Should you short sell?
While short selling can be a great strategy to generate profits
from the market or to hedge long positions against any potential
downside risk, what most people don’t really appreciate is that
prices generally fall faster than they rise. When trading short,
being intelligent or having a quick wit is not enough to make you
successful. It is imperative that you have the right knowledge and
experience given that shorting a stock or market will cost you
dearly if you get it wrong.
I strongly recommend that you prove to yourself you can trade
stocks long over a two to three year period before using margin
to trade short. That’s because short selling is not for everyone,
as you do need to have a different mindset, which can be the
difference between success and failure when applying short
selling strategies.
While anyone can place a trade to buy or sell, this does not
make you a trader or indicate you will be profitable. All profitable
traders are consistent in their application of their rules and they
understand the right course of action to take in any market
condition.
If you do want to use leverage in your trading, then there are
many factors you must be aware of including the timing of the
trade, proven rules for entry and exit, money management, risk
and the list goes on. You also need to understand how the margin
interest is applied and what happens to price when a company
goes ex-dividend, and the impact that quarterly company
reporting can have on your trade. This is because when a
company reports it can increase volatility on the underlying asset,
the probability of this impacting any leveraged trades you hold
increases significantly.
Learn to manage your risk like a professional and you
will succeed
If you truly want to be successful trading long or short, it pays to
be realistic about the preparation and planning you need, and the
knowledge you require. Shorting a stock or the market can be a
very powerful strategy when applied properly and having the right
knowledge and education will ensure your success.
If you are not properly prepared for any market condition
because you have chosen to take short cuts in your education,
you are setting yourself up for failure, and in doing so, you will
be repeating the mistakes that the masses make. While you
may believe you can work it out for yourself and somehow it
will all be roses, I have seen many intelligent people with lots
of qualifications make plenty of poor decisions in the market
because of over confidence or ignorance.
It is wise to remember, the greater the rewards you seek from
the market, the higher the risk you are taking. So it goes hand
in hand: the higher the risk, the higher the level of knowledge
and experience you need to succeed. We all have an ego and
while some of us recognise when it is not serving us, others are
oblivious to the role their ego plays in their decision making.
If you are not consistently profitable, then you might like to
have an honest think about what it is that is causing you to be
inconsistent.
Remember, gaining the right knowledge by undertaking
structured education ensures you develop the processes and
strategies to be consistently profitable long term. Get that right
and your leveraged trades will generate quick returns in the order
of 50% plus, as the example above demonstrated. Profiting
regardless of whether the market is rising or falling is not hard if
you have the right formula. As Warren Buffet once said, “The best
investment you can make is an investment in yourself…the more
you learn, the more you’ll earn”.
If you can appreciate the importance of this point, no matter
how long you have been trading, you will dramatically increase
your wealth and the opportunity to achieve your financial goals
much sooner. Ignore this and your journey will be longer, harder,
costlier and more stressful than it needs to be.
Janine Cox is Senior Investment Analyst at Wealth Within. www.
wealthwithin.com.au A highly regarded investment analyst, Janine
is a respected stock market and finance commentator that has
supported thousands of clients to achieve their financial goals in
the stock market. Janine is currently the Senior Analyst at Wealth
Within responsible for managing tens of millions through the
individually managed account service known as Direct Equity.

26 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 27

KNOW YOUR ONLINE INVESTMENT PROVIDER
28 YOURTRADINGEDGE JUL/AUG 2019
Know
your online
investment
provider
By Pat Garrett
G
one are the days of online
investment being referred
to as a new disruptor on the
block that may or may not
have longevity in the Australian
market. Online investment is
here to stay. Millions of Australians are already
using it to grow wealth and, since the dust of
the Banking Royal Commission has settled,
even the banks admit that online investment
has a solid place in the future of financial
services in Australia.
These days, many investors are turning to
online investment services because they’ve
previously been unable to afford professional
investment advice or haven’t felt confident
with the advice they’ve received, especially
at a time when trust in the financial services
industry is very low. Others are looking for
alternatives to cash in the bank that will give
a better return over time. Some investors are
using online investment simply because they
don’t want the anxiety and time commitment
of choosing and monitoring their own
investments while even savvy DIY investors
use it as part of their overall diversifcation
strategy.
Now that online investment is more
established, the conversation is moving from
‘what is it?’ and ‘who provides the service’ to a
much more detailed discussion about how the
services differ and what will best suit different
JUL/AUG 2019 YOURTRADINGEDGE
KNOW YOUR ONLINE INVESTMENT PROVIDER
investors. In March, the term ‘robo advice’ was
googled in Australia more times than it has
been over the last 12 months as people look in
more detail at what they could offer.
Not all online investment services are
identical - they differ in many ways that
can affect the experience and return for an
investor. If you’re considering your options,
here are some of the key differentiating
characteristics you can use to compare
providers and key questions you should be
asking upfront before making your selection:
Asset allocation
The asset classes you will get with each
online investment service (and the number of
asset allocations) will depend on what that
provider believes their clients need exposure
to, and in what proportions.
To do this, we start with a mean-variance
optimisation model, which in simple terms is
a data-driven process designed to determine
the best asset mix for a given level of volatility
or risk.
It is best to look out for an optimiser model
that examines historical and projected asset
returns and volatility and then generates
recommendations on the most efficient asset
allocations for each portfolio.
That’s one data point - it’s a key one,
but as with any mathematical exercise, the
inputs can affect the output significantly, so it
29
KNOW YOUR ONLINE INVESTMENT PROVIDER

Why Size Really Matters!

The pros and cons of online investment
The pros
• Highly accessible for people who’ve previously been unable
to access or afford investment management.
• Reduces time spent on ETF research, monitoring the market
and rebalancing.
• Provides global diversification easily and at a low cost,
allowing you to access markets you may not feel confident
investing in directly.
• Removes any biases that may affect decisions about your
investments.
W.D Gann Squaring Time and Price
Where to for the ASX-200?
Fibonacci for All Beginners - Part 2
The cons:
• Only uses a select number of ETFs so you can’t select
specific shares or products.
• Online investment services make evidence-based decisions,
so they may never be the absolute best performer on offer
(but that’s ok, because I believe the benefits of never being
the worst far outweigh the benefits of being the best!).
• Some people prefer a face-to-face relationship - an online
investment services isn’t going to take you out for lunch
because they deliver advice online at a low cost.

requires interpretation and oversight.
Questions to ask an online investment
service: What is your investment
philosophy?
The ETFs chosen
Online investment services use ETFs to
build well-diversified portfolios quickly and
cost-effectively – but not all ETFs are created
equal. The ETF marketplace is becoming
more crowded. At the end of March 2019,
there were almost 200 exchange-traded
products listed on the ASX, representing
more than $45 billion of assets under
management. That’s twice as many options
as there were just five years ago.
That means, it’s becoming harder to
spreads, underlying liquidity, the number
of market-makers and fund size and
reputation. This happens in the initial
stage when the ETF is chosen and then
it’s continually reviewed over time as new
products join the ETF universe.
Remember to regularly review and
assess the marketplace to identify the
best available options, but also be mindful
of not chopping and changing selections
frequently as this can trigger unnecessary
cost and tax implications.
Questions to ask: How have the
available portfolios performed over time?
Human overlay
There should be an important human
Fees, admin and minimum
investment amount
It’s definitely worth looking at the fine print
in detail. Most providers scale their fees,
so the amount you invest will affect how
much you pay. Some have higher minimum
investment amounts than others.
Before investing, you should also find
out what tax information the provider will
give you each year, as this can differ. Make
sure you get a consolidated tax statement
to assist you at tax time. Underlying ETF
issuers also issue individual tax statements
that list the various components of income
and capital gains relating to clients’
investments.
Questions to ask: How much will I be

evaluate the products you’re thinking
about investing in.
I am seeing more ETF providers
competing with each other to service an
asset class or area that they discover
may be unserviced or underserviced, so
the landscape is much more extensive.
That’s great in some ways because it helps
element to what an online investment
service does including a great team
accessible to clients at any time. Not
all of the decisions can be made using
technology, so you need to take a look at
who is actually behind the business and
who is making the investment strategy
decisions.
TECHNICAL
paying for my investment management
and what do those fees include?
Pat Garrett is the CEO of Six Park
(www.sixpark.com.au), one of Australia’s
leading providers of automated investment
management using ASX-listed ETFs.
He co-founded Six Park in 2014 after a

put pressure on fees, but it’s also more
complicated because there’s more choice.
It is important to consider a range
of factors – the suitability of the ETF’s
strategy and chosen benchmark, relative
costs, tracking error and error and
Questions to ask: Who is involved in the
asset allocation decisions and what sort
of track record do they have in investment
management? How is client support
provided?
ANALYSIS
25-year career in the financial services
industry, including 15 years at JP
Morgan in New York, San Francisco and
Melbourne.

30 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 31

WHY SIZE REALLY MATTERS!
Why Size
Really
Matters!
By Van K. Tharp, Ph.D.
P
osition sizing strategies are the parts of your trading
system that answers this question. They tell you
‘how much’ for each and every trade. Whatever
your objectives happen to be, your position sizing™
strategy achieves them. Poor position sizing
strategies are the reason behind almost every instance of
account blowouts.
Position sizing is the part of your trading system that tells you
‘how much.’
Once a trader has established the discipline to keep their stop
loss on every trade, without question the most important area of
trading is position sizing. Most people in mainstream Wall Street
totally ignore this concept, but I believe that position sizing and
psychology count for more than 90% of total performance (or
100% if every aspect of trading is deemed to be psychological).
Position sizing is the part of your trading system that tells you
how many shares or contracts to take per trade. Poor position
sizing is the reason behind almost every instance of account
blowouts. Preservation of capital is the most important concept
for those who want to stay in the trading game for the long haul.
Why is Position Sizing So Important?
Imagine that you had $100,000 to trade. Many traders (or
32 YOURTRADINGEDGE JUL/AUG 2019
investors, or gamblers) would just jump right in and decide to
invest a substantial amount of this equity ($25,000 maybe?) on
one particular stock because they were told about it by a friend,
or because it sounded like a great buy. Perhaps they decide to
buy 10,000 shares of a single stock because the price is only
$4.00 a share (or $40,000).
They have no pre-planned exit or idea about when they are
going to get out of the trade if it happens to go against them
and they are subsequently risking a LOT of their initial $100,000
unnecessarily.
To prove this point, we’ve done many simulated games
in which everyone gets the same trades. At the end of the
simulation, 100 different people will have 100 different final
equities, with the exception of those who go bankrupt. And after
50 trades, we’ve seen final equities that range from bankrupt to
$13 million—yet everyone started with $100,000, and they all
got the same trades.
Position sizing and individual psychology were the only two
factors involved—which shows just how important position
sizing really is.
How Does it Work?
Suppose you have a portfolio of $100,000 and you decide to
JUL/AUG 2019 YOURTRADINGEDGE
only risk 1% on a trading idea that you have. You are risking
$1,000.
This is the amount RISKED on the trading idea (trade) and
should not be confused with the amount that you actually
INVESTED in the trading idea (trade).
So that’s your limit. You decide to RISK only $1,000 on any
given idea (trade). You can risk more as your portfolio gets
bigger, but you only risk 1% of your total portfolio on any one
idea.
Now suppose you decide to buy a stock that was priced at
$23.00 per share and you place a protective stop at 25% away,
which means that if the price drops to $17.25, you are out of the
trade. Your risk per share in dollar terms is $5.75. Since your risk
is $5.75, you divide this value into your 1% allocation ($1,000)
and find that you are able to purchase 173 shares, rounded
down to the nearest share.
Work it out for yourself so you understand that if you get
stopped out of this stock (i.e. the stock drops 25%), you will
only lose $1,000, or 1% of your portfolio. No one likes to lose,
but if you didn’t have the stop and the stock dropped to $10.00
per share, your capital would begin to vanish quickly.
Another thing to notice is that you will be purchasing about
$4,000 worth of stock. Again, work it out for yourself. Multiply
173 shares by the purchase price of $23.00 per share and you’ll
get $3,979. Add commissions and that number ends up being
about $4,000.
Thus, you are purchasing $4,000 worth of stock, but you are
only risking $1,000, or 1% of your portfolio.
And since you are using 4% of your portfolio to buy the stock
($4,000), you can buy a total of 25 stocks without using any
borrowing power or margin, as the stockbrokers call it.
This may not sound as ‘sexy’ as putting a substantial amount
of money in one stock that ‘takes off,’ but that strategy is a
recipe for disaster and rarely happens. You should leave it on
the gambling tables in Las Vegas where it belongs.
Protecting your initial capital by employing effective position
sizing strategies is vital if you want to trade and stay in the
markets over the long term.
People who understand position sizing and have a reasonably
good system can usually meet their objectives through
developing the right position sizing strategy.
Position Sizing—How Much is Enough?
Start small. So many traders who trade a new strategy start by
immediately risking the full amount. The most frequent reason
given is that they don’t want to ‘miss out’ on that big trade or
long winning streak that could be just around the corner. The
problem is that most traders have a much greater chance of
losing than they do of winning while they learn the intricacies of
trading the new strategy. It’s best to start small (very small) and
minimize the ‘tuition paid’ to learn the new strategy. Don’t worry
about transaction costs (such as commissions), just worry about
learning to trade the strategy and follow the process. Once
you’ve proven that you can consistently and profitably trade the
strategy over a meaningful period of time (months, not days),
WHY SIZE REALLY MATTERS!
you can begin to ramp up your position sizing strategies.
Here’s what our friend and colleague D.R. Barton said about
it: “I’ve talked to many folks who have blown up their accounts.
I don’t think I’ve heard one person say that he or she took
small loss after small loss until the account went down to
zero. Without fail, the story of the blown-up account involved
inappropriately large position sizes or huge price moves, and
sometimes a combination of the two”.
Manage losing streaks. Make sure that your position sizing
algorithm helps you reduce the position size when your account
equity is dropping. You need to have objective and systematic
ways of avoiding the ‘gambler’s fallacy.’ The gambler’s fallacy
can be paraphrased like this: after a losing streak, the next bet
has a better chance of being a winner. If that’s your belief, you’ll
be tempted to increase your position size when you shouldn’t.
Don’t meet time-based profit goals by increasing your
position size. All too often, traders approach the end of the
month or the end of the quarter and say, “I promised myself that
I would make ‘X’ dollars by the end of this period. The only way
I can make my goal is to double (or triple, or worse) my position
size”. This thought process has led to many huge losses. Stick
to your position sizing plan!
This information will help guide you toward a mindset that
values capital preservation. This article comes from my Tharp’s
Concepts material and though many have read it before, it is
information that bears repeating.
Van K. Tharp, Ph.D, has written 11 books, each one making
profound advances in the understanding of what creates
trading success. His research and modeling work with
successful traders has made his training programs among the
most well-respected in the world. His Super Trader program
offers the most advanced material at the Van Tharp Institute
(vantharp.com). Take the short quiz he developed to learn your
trading personality type and if you have the characteristics of a
great trader. Go to www.TharpTraderTest.com.
Be sure to check out Dr. Tharp’s Definitive Guide To Position
Sizing Strategies book for very detailed information on how to
use positon sizing as your market edge.
33
THE NATURAL CYCLE OF CLIMATE CHANGE THE NATURAL CYCLE OF CLIMATE CHANGE

W.D Gann Squaring W

.D Gann squared ‘time’ and ‘price’
from highs, lows and ranges. We
know everything works in squares
and circles. I don’t think he was
just taking the squares of highs,

Time and Price

lows and ranges without taking
into account the planet squares, which is
called ‘Inverse Square Law’.
The planets are the strongest when
closet to the sun, which is called Perihelion.
When they are furthest away, it is called
Aphelion. Each planet has its own part in
the circle where this happens, which also
By D.K.Burton moves slightly over time. Remember, Gann
thought astrology was rubbish. So, what
the astrologers are doing in relationship to
Gann wouldn’t be on the right track. Inigo
Jones was using astronomy and fixed stars

34 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 35

THE NATURAL CYCLE OF CLIMATE CHANGE THE NATURAL CYCLE OF CLIMATE CHANGE

in his long-term weather forecasting in FIGURE 2 FIGURE 3 FIGURE 4

Australia.
Figure 2 is his ad showing he was
doing more astronomy. This is why the
housewife astrologers can’t work it out.
Some think his cotton charts are coffee.
They can’t even get the basics right. All
his works are code like the address in
figure 2. 1206 x 120 is 144,720. 144 x 5
= 720.
When W.D Gann counted square on
his chart, he was well aware of ‘Inverse
Square Law’, as the books on his reading
list such as Popular Astronomy by Camille
Flammarion explain this. This was one of
his main books.
I have shown you that the cover of
TTTTA was coded with the square of
144, which I written many articles on.
I was the first one to discover this and
write on it, I discovered this more than 20
years ago. Jupiter is at Aphelion on 17th
February 2017, so it’s falling towards the
sun in 765.87 days. It takes 4332 days
to go around the sun and works in the
square root of 32. The square root of 32
is 5.656856, 765.87 days x 5.6568 = 4332
days.
On page 392 of TTTTA chapter 34
is missing. He has written chapter 39,
there’s only 36 chapters. Using ‘Inverse
Square Law’ you can find his code,
subtract 34 from a day count from two
important dates (which you have to find),
divide it by the square of 12 and it equals
32. On page 392, it’s called ‘Robert
Gordon’s seven days’, 34 x 7 = 238, 418
(pages in the book) – 238 = 180, page 179
he writes about Marie Stanton’s birthday
being 6th October 1908.
34 x 2 = 68, 68 squared is 4608, 34
squared is 1156, 39 squared is 1521, 39 x
2 =78, 78 squared is 6084.
Looking back from 1940 can give you a
clue: 1940 to 1927 is 13 years. From when
Robert Gordon was born in 1906 to 1940
is 34 years. 68 years is 1974 - great crash
in the stock market and commodities. 34
is an interesting number, 3 + 4 = 7 x 3 x 4
= 84 / 12
(3 x 4) = 7. From the first cotton trade
in TTTTA on 24th January 1927, + 34 x 4
= 9th June 1927 (Robert Gordon was 21
years old (3 x 7), 28 ( 4 x 7) x 34 days =
2nd September 1929, top of stock market
was 3rd September 1929. The last day in
the book is 30th August 1932. Everyone
has worked out that’s there’s 1940 days
between this date and the date the book
was written on 9th May 1927.1940 x 13
added to 30th August 1932 is the 17th
September 2001. Gann wrote about war in
the air over New York. That’s 6 days out
from 9/11.
This is out of Gann favourite book,
When you look
at his cotton chart
or any other chart,
he has squares
of lows, highs
and ranges right
up until he died.
Therefore, the
natural squares
were extremely
important.
You would have
seen where it’s
written on cotton
from the top in
Popular Astronomy by Camille Flammarion. 1927 down to
No one doing Gann is looking at this stuff; 1932 was 64 months, the square of 8. 64
they are all doing housewife astrology. months is 2.25 of 144.
On Gann’s book TTTTA is 16 planes, Gann always said, “time is more
notice that’s half of the square root of 32 important than price”.
used in multiplying the fall of the planets
to give there cycles. Natural squares are: - David has been studying the methods of
2 = 4, 3 = 9, 5 = 25, 6 = 36, 7 = 49, 8 = W.D. Gann since 1983. He has also studied
64, 9 = 81, 10 = 100, 11 = 121, 12 = 144 weather methods of Inigo Jones. W.D. Gann
etc. also studied sunspots cycles and their
He also added half square of numbers. effects on commodity markets. W.D. Gann
Like on his Soybean Square of nine charts also went to India with Sepharial, so he
he wrote 38.5 squares in weeks, which is clearly knows a lot about Hindu astrology.
1482.25 weeks. He has been using the Hindu methods
for weather, markets and horse racing as
written about in previous articles.
GANN SOFTWARE IS READY.
W.D. Gann Trader Software is now
available. This is the purest and cheapest
Gann software in the world at $180 US
per annum. Additional functionality will
be added to Stage One, then to a further
three or four stages.
Most people will never have to go past
Stage One as a charting tool, as it covers
virtually all you need.
In the next year or so I will include
functionality around Gann’s horse racing
and weather work.
Website:
www.wdganntrader.com
Facebook
www.facebook.com/wdgann360/
www.facebook.com/inigo360/
www.facebook/hedge360/

36 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 37

WHERE TO FOR THE ASX-200? WHERE TO FOR THE ASX-200?

WHERE TO FOR THE ASX-200? By Mary McNamara

38 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 39

WHERE TO FOR THE ASX-200?
I
ntroduction:
The ASX-200 Australian stock
market index is closing in on its
previous all-time high value and
in this article, I review technical
levels worth monitoring as the
index continues on its current climb. The
ASX-200 stands quite separately from
other global indices in relation to its current
trading levels in that it has some catching
up to do if it is to join its peers.
Bullish breakout and bearish pullback
levels are considered in the technical
analysis of this index and are noted
on accompanying charts. I have used
Fibonacci Retracement and Elliott Wave
Extension tools to help identify potential
targets for both potential bullish and
bearish scenarios.
ASX-200: Context with other market
indices:
The S&P/ASX 200 index is a market-
capitalization weighted stock market index
of the largest 200 stocks listed on the
Australian Securities Exchange. The ticker
for the ASX-200 index is XJO and an up-to-
date listing of components of the index can
be found through the following link: https://
www.asx200list.com/
Other popular Australian stock market
indices include the ASX-300, ASX-100,
ASX-50 and the All Ords, but the ASX-200
is the one most frequently used as a metric
of Australian stock market performance.
The Global Financial Crisis (GFC) evolved
in late 2007 and was followed by a global
economic downturn throughout 2008
that is widely considered to be the worst
financial crisis since the Great Depression
of the 1930s. None of the ASX stock market
indices have reclaimed their 2007 pre-GFC
high levels and this is at odds with most
other global stock market indices. The
USA’s S&P500, DJIA and NASDAQ, the
German DAX, Hong Kong’s Hang Seng
and Canada’s TSX indices are just some
that have reclaimed their pre GFC highs
with many now trading well above these
levels. Figure 1 through to Figure 6 shows
the monthly charts of these indices and you
can inspect how all have reclaimed their
40 YOURTRADINGEDGE JUL/AUG 2019
FIGURE 1 S&P500 MONTHLY
FIGURE 2 DJIA MONTHLY
FIGURE 3 NASDAQ MONTHLY
JUL/AUG 2019 YOURTRADINGEDGE
WHERE TO FOR THE ASX-200?
2007 pre-GFC high levels. The Hang Seng FIGURE 4 DAX MONTHLY
is the only index to have peaked above its
pre-GFC high but to now be trading lower.
The monthly chart of the ASX-200 / XJO
is shown in Figure 7 and it is clear how
price action remains trading below the
all-time high that evolved just prior to the
2007 GFC. The nearest whole-number level
to this high is 6,800 and is marked on the
chart.
ASX-200: a closer look:
Zooming in on the price action since 2000,
the chart in Figure 8 shows that price action
peaked in late 2007 under the 6,800 level.
Price then fell heavily throughout 2008 and
only stabilised at the start of 2009. The
index has been in an uptrend since 2009
but has not recovered its pre-GFC high, FIGURE 5 HANG SENG MONTHLY
circa 6,800, unlike so many other global
stock market indices.
There has been a support trend line
in play since the 2009 recovery and this
shows almost four touches. The index is
printing higher highs and higher lows and
so, for the time being, can be considered
to be in an uptrend.
The other phenomenon worth noting
on the monthly XJO chart in Figure 8 is
how momentum has been declining and
converging since the 2007-2008 GFC
period. Note how the ADX momentum
indicator has been converging within a
symmetrical triangle since the GFC. Traders
should watch for any new close above or
rejection of the 6,800 level that evolves
FIGURE 6 TSX MONTHLY
with any ADX momentum breakout, as this
would be added confluence for any new
price action directional breakout move.
41
WHERE TO FOR THE ASX-200?
ASX-200: Bearish Pullback
The chart in Figure 9 shows the weekly
chart of the ASX-200 and this has been
applied with Fibonacci retracement levels.
The Fibonacci retracement tool is placed
so as to capture the span of the last major
low to the most recent major high. This
article was prepared on June 17th and so
the Fibonacci tool spans from the 2009
low to the high of current price action;
however, any continued push up to the
6,800 level would have me dragging this
indicator along to match any new highs.
This upward move is revered to as a swing
high and the Fibonacci retracement tool
captures this and, then, looks at different
percentage level steps back down from
the current high to the 2009 low. There are
certain percentage levels that are more
popular than others and the 61.8% level is
one of these. For those of you who may
be interested I have documented numerous
examples of Fibonacci retracement and
these can be found online:
http://www.tradecharting.com/fibonacci-
anlysis/
http://www.tradecharting.com/fibonacci-
examples/
There are three main items to watch for
with any new rejection of current levels
or of 6,800 and potential pullback. Firstly,
traders should watch to see if price pulls
back to the support trend line and then
bounces back off this support. This would
help to develop a bullish Ascending
Triangle pattern, considered to be bullish
continuation pattern, and this would
therefore keep the 6,800 level in focus.
Secondly, should price action break below
the support trend line, traders need to watch
for any developing sideways price action
that develops into a consolidation-style Bull
Flag. Traders can sometimes be trapped,
after seeing a trend line breakdown, into
thinking bearish follow-through is coming
only to find that price stutters sideways for
a while before resuming higher. The chart
in Figure 10 shows an example of this type
of price action with the recent activity on
the S&P500. The index broke down through
a support trend line, chopped sideways to
lower forming up into a flag pattern and,
then, broke out to the upside confirming the
Bull Flag nature of this flag pattern.
42 YOURTRADINGEDGE JUL/AUG 2019
WHERE TO FOR THE ASX-200?
FIGURE 7 XJO MONTHLY Finally, should price action break below FIGURE 10 SPX DAILY: SHOWING BULL FLAG BREAKOUT
the support trend line and continue lower,
then traders should watch for any push
down to the 61.8% Fibonacci level, near
4,400. The 61.8% Fibonacci level is a
popular level with traders and so is a
reasonable target should ASX-200 price
continue lower. Other levels to monitor
on any push lower include whole-number
levels and the 6,000 level, which can be
seen back in Figure 9, to cause a price
reaction. The 5,600, 4,800 and 4,000 levels
stand out as horizontal areas where price
has reacted previously as well.
ASX-200: Bullish Extension levels:
Any close and hold above 6,800 would
be a rather bullish signal for the ASX-200
index and would support a thesis that the
FIGURE 8 XJO MONTHLY index could be embarking on a new upward FIGURE 11 XJO WEEKLY + ELLIOTT WAVE EXTENSION
trajectory; as have many other global
stock market indices. In the same way that
Fibonacci retracement was used to measure
targets for any pullback, a complementary
bullish extension tool, the Elliott Wave
Extension, can be used to identify potential
target areas for any push higher.
The Elliott Wave Extension tool maps
the same swing high move as with the
Fibonacci retracement but, in this case,
it casts percentage step levels above the
breakout 6,800 region, rather than below.
The chart in Figure 11 shows the Elliott
Wave Extension tool applied to the weekly
chart of the ASX-200. The first Elliott Wave
Extension of major interest would be the
61.8% Fib level, circa 9,100, followed by levels that I consider worth monitoring have
FIGURE 9 XJO WEEKLY + FIBONACCI RETRACEMENT
the 100% level, circa 10,500 and then been identified with the help of Fibonacci Mary is a technical analyst and private
the 161.8% level, circa 12,800. However, retracement and Elliott Wave Extension trader based In Sydney, Australia and a
I would expect the whole-number levels, tools and are summarised below: member of the Australian Technical Analysts
7,000, 8,000, 9,000 and 10,000, to also Association (ATAA). More information about
feature strongly. ASX-200: Bearish Pullback levels her analysis and trading style can be found
below 6,800: at Tradecharting.com.
Summary: •
Whole number levels such as 6,000,
In this article I noted how the ASX-200 5,600, 4,800 and 4,000
index stands apart from many of its •
The weekly 61.8% Fibonacci level,
global peers in failing to have reclaimed circa 4,400
pre-Global Financial Crisis high levels,
circa 6,800. The index is closing in on the ASX-200: Bullish Extension levels
whole-number 6,800 high level though above 6,800:
and traders and investors alike will be • The whole-number 7,000, 8,000, 9,000
watching as price closes in on this level to and 10,000 levels
see whether the index breaks through or • The 61.8% Fib extension, circa 9,100
retreats from this key psychological region. • The 100% Fib level, circa 10,500
Bullish breakout and bearish retracement • The 161.8% level, circa 12,800
JUL/AUG 2019 YOURTRADINGEDGE 43
FIBONACCI FOR ALL BEGINNERS – PART 2 TRADING APPROACH OF THE MOST PROFITABLE ELLIOT WAVE FIBONACCI FOR ALL BEGINNERS – PART 2

Fibonacci for
All Beginners
Part 2 By Lachlan Elsworth

In this article, Part Two of a Two Part Series, Lachlan explains how the
use of Fibonacci Extensions work well in predicting trading targets
regardless of the market you choose to trade. The accuracy of these
Fibonacci’s may inspire you to get very good at trading, so we look
forward to your feedback on this article as well!

44 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 45

FIBONACCI FOR ALL BEGINNERS – PART 2
Introduction
Every day that I trade the markets I am
fascinated by the power of Fibonacci.
In this article, I would like to introduce
you to the power of Fibonacci and also
teach you how to apply Fibonacci to your
trading. The beauty of Fibonacci is that it
applies to all forms of trading, from forex
to stocks to ETFs and even the brilliant
world of futures trading, where I do all my
trading.
As a full-time trader and trading
coach, one of the best lessons I have
ever learned in trading is the power
of Fibonacci and how to use it to your
advantage in trading. In this article, I’m
going to target Fibonacci Extensions and
teach you how to use the extensions to
set targets and likely stall points in the
market. Just like my previous article
from YTE May/June 2019, I can use the
very predictable movement of the gold
markets as a platform for this teaching,
so let’s get into it.
 
Fibonacci Extensions
One of the most widely recognised and
hence most powerful Fibonacci grids you
can use in trading is a Fibonacci Extension.
As the name suggests, a Fibonacci
Extension is designed to indicate where a
market is likely to ‘extend to’ after a trend
has commenced. Ideally, where is the
trend likely to go? There are three steps
to setting a Fibonacci Extension correctly
so let’s run through those in detail using
live chart examples.
Step One: Mark the Stair Step that
initiates the trend.
To mark a trend correctly, it is imperative
that you can identify the stairstep in the
market created by both the buyers and
the sellers. The buyers will always be
creating higher highs and the sellers will
always be creating lower lows, so use this
as the basis for your stair step.
When you connect these extremes of
price movement, as I have done in Image
One, you can see the buyers and sellers
46 YOURTRADINGEDGE JUL/AUG 2019
TRADING APPROACH OF THE MOST PROFITABLE ELLIOT WAVE
IMAGE 1: LIVE GOLD MONTHLY CHART – MARK THE STAIR STEP.
have created a stair step in the market
that you want to use for your Fibonacci
Extension. In Image One, imagine
drawing an arrow from ‘High Point 1’ to
‘Low Point 1’. Then draw a second arrow
from ‘Low Point 1’ to ‘High Point 2’. We
are starting to create a step in the market
that is owned by the sellers. How do we
know this? Simple. High Point 2 is lower
than High Point One. This means that the
sellers are denying the buyers the chance
to push up. Hence, the sellers are getting
stronger. This also means that we may
seek to project where the sellers may go
using a Fibonacci Extension.
Please remember that the stairstep
in the market must be easy for you to
see if it is going to produce an accurate
Fibonacci Extension. Why? The easier
the stair step is to see, the more other
traders, globally, are likely to use the
same stair step. This means they are also
likely to draw the same conclusions about
the best Fibonacci Extension to use,
hence set their targets according to this
Extension.
Please also note that self-fulfilling
prophecies are particularly profound in
JUL/AUG 2019 YOURTRADINGEDGE
IMAGE 2: FIBONACCI EXTENSION DRAWN OVER THE MONTHLY GOLD STAIR STEP.
the futures markets. Why so profound in
futures? As a futures trader I do not use
OTC (over the counter) brokers when I
trade. Instead, I trade directly to and from
the CME (Chicago Mercantile Exchange).
This means that my data is 100% pure
(direct from the CME) and further, my
data cannot be manipulated by an OTC
broker, as I simply do not use them.
This means that the targets I establish
using the Fibonacci Extension can be
profoundly accurate, which is clearly to
my advantage in trading.
Step Two: Set your Fibonacci
Extension in place.
In Image Two I have set the Fibonacci
Extension over the stair step we have
already marked in Image One. To do this
I have simply drawn the Fibonacci from
the top (High Point 1), to the bottom
(Low Point 1), then back to the lower top
(High Point 2), of the ‘stair step’ we have
already marked.
By drawing the Extension over the
step, I have identified the key Extension
levels the market is likely to ‘extend to’ if
the selling trend initiates. This Extension
allows me to set very accurate targets for
the potential move down. Selling gold in
this manner can be very lucrative if you
are a talented trader who knows where to
place your targets for maximum accuracy.
Further, as a futures trader, I can define
my selling targets down to the ‘cent’,
potentially maximising my available profit
every time the market moves. Based on
this alone, I would encourage you to use
FIBONACCI FOR ALL BEGINNERS – PART 2
this Fibonacci Extension technique and
use futures as the foundation for all your
trading.
Each of the ‘Extension Levels’ that
we have established in Figure 2 can now
be used as potential targets for your sell
trade on gold.
Step Three. Set your Targets for the
sell-off.
The Fibonacci Extension allows you
to set very accurate targets for the
potential sell-off in the gold market.
Each level of the Fibonacci will act as
both support and resistance as the
price of Gold starts to weaken and also
a great guide as to how far you want to
be selling gold down.
The levels loved by the gold market
traders globally include the 133% Fib
Extension (yellow circle), the 233% Fib
Extension (green circle) and the 300%
Fib Extension (red circle). As you may
note in Image 3, each of these levels
were honoured by the market in the
2018 sell down, proving how powerful
these levels really are for both setting
targets and estimating potential market
stall points.
If you had have sold gold just after the
break down of Low Point 1, a breach
trade very popular with my clients
globally, you would have had exactly 120
Tics or $1200.00 AUD at risk on this gold
short trade. Sounds a little scary at first,
sure, unless you are targeting the 300%
Fib Extension for a $12000.00 AUD
target.
More exciting still, is that you could
have ‘zeroed your risk’ after 1 month in
the trade and literally carried little if any
risk for the rest of the run down. Every
time the market stalled at your ‘Fib
Extension’, you could have moved your
stop-loss into more profit until the trade
had finished. Sounds good to me!
Where is Gold going from here?
Based on Fibonacci, at the time I write
this article, the answer is simple.
If you use the same ‘Fibonacci
47
FIBONACCI FOR ALL BEGINNERS – PART 2 TRADING APPROACH OF THE MOST PROFITABLE ELLIOT WAVE

Getting Really Clear On Why We Trade

3 Effective Ways to Deal with Distractions When Trading
Feeling Lucky?
Trader’s Story - Rae Delai
Extension Principle’ in the current up
Trading Life - Gary Fraser
trend, gold is likely to climb to 1429 USD IMAGE 3: SET YOUR TARGETS USING YOUR FIBONACCI EXTENSION.
per ounce, the 100% Fib Extension,
before the end of July 2019. After July,
Staying Calm at the Coal Face
if gold breaks this 100% level, it will
continue its move up to 1480 USD per Many Faces of Fear
ounce by the end of September 2019.
I would suggest gold may stall at this
price, dependent of course on the
potential geopolitical issue that may
arise between Iran and the US. Gold is
the ‘global currency of fear’ and fear is
currently rising quickly, so we may have
a long way to go in the current up trend.

Conclusion
As a full-time trader and educator, I use
Fibonacci every day I trade. When used
well, in a CME backed (pure) market
environment (not manipulated by OTC
brokers), Fibonacci is priceless in my
opinion.
I am sure you can appreciate the
power of using Fibonacci to set targets
in your own trading. The advantages this
gives you, as you seek to be very good
at trading, can never be underestimated.
Lachlan Elsworth is the Founder
and Trading System Architect at the
International Day Trading Academy,
based on the Gold Coast of Australia.
Lachlan is a global advocate for Futures Only. Neither your personal objectives or financial situation
trading and is globally recognised as an emerging force in or needs have been taken into consideration. Accordingly,
trading and trading education. you should consider how appropriate the advice (if any) is to

Lachlan Elsworth is the Founder and Trading System Architect
at the International Day Trading Academy, based on the Gold
Coast of Australia. Lachlan is a global advocate for honesty
and transparency in trading and is globally recognised as an
emerging force in trading and trading coaching.
To watch an ‘On-Demand’ 90 Minute Trading Lesson with
IDTA simply visit: https://www.idta.com.au/on-demand
TRADER'S
those objectives, financial situation and needs, before acting
on the advice. All content if this article is the opinion of the
individual writer and constitutes General Advice only. The past
performance of this product is not and should not be taken as an
indication of future performance. Caution should be exercised in
assessing past performance. This product, like all other financial
products, is subject to market forces and unpredictable events
that may adversely affect future performance.

MINDSET
Authorisation. The International Day Trading Academy (ACN
165 005 550) is a Corporate Authorized Representative (CAR
Number 001250922) of Beyond Capital Asset Management P/L
(ACN 610 259 179) (AFSL 484045) for the purpose of FUTURES
Trading Education. The information in this article is General
Information Only. Any advice given or implied is General Advice

48 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 49

GETTING REALLY CLEAR ON WHY WE TRADE GETTING REALLY CLEAR ON WHY WE TRADE

Getting Really
Clear On
Why We Trade
By Dani McLeod

50 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 51

GETTING REALLY CLEAR ON WHY WE TRADE
F
or those who do not know me, my name
is Danielle and I am from Perth, WA. I am
a mum by day and my alter ego is ‘Day
Trader Mum’, as I like to trade the largest
market in the world - the S&P 500 when my
little cherubs (4 and 7) have gone to sleep.
I haven’t met many other mums who trade.
I’ve met lots of dads with little kids, but
not many mothers and I am on a mission
to help tip the balance. I do seem to very
much be in the minority as a female Day
Trader under 40 (only just!) with little children.
Many Mums I speak to think I’m a little crazy and don’t
understand where I get the energy at the end of a full day to trade
the futures markets as most mums I know crash on the couch
to binge watch Netflix with a few glasses of wine. And there’s
absolutely nothing wrong with that! Believe me - many nights I
absolutely feel like doing the same but there’s something in me
which I’ve realised the average person doesn’t seem to have.
A burning desire.
A burning desire to make a difference not only in my own family,
but outside of ourselves as well.
I was introduced to the idea of earning an income from home in
late 2012 after I went on maternity leave with our first child. I am
a qualified Medical Imaging Technologist and up until that point
all I knew was the 40/40/40 plan i.e. to work 40 hours a week
WHAT IS THE LEGACY YOU WOULD LOVE TO LEAVE FOR
YOUR FAMILY? PEOPLE OFTEN THINK OF A LEGACY AS HOW
MUCH MONEY THEY WILL LEAVE WHEN THEY PASS, BUT
A LEGACY IS ALSO EDUCATION. WHAT WILL YOU TEACH
YOUNGER GENERATIONS ABOUT HOW TO CREATE WEALTH?
for 40 years of my life and to retire on 40% of my pre-retirement
income. I decided that same year that my family and I would have
a different future to that plan and I worked hard to build up a
direct sales business working from home. It’s been an incredible
and very profitable journey; one I feel very blessed for, however,
after many years I needed another life challenge. When I was
introduced to Day Trading in early 2016, I was hooked! I started
working through an online course and by August 2016 I started
sim (demo) trading. I loved the challenge of learning something
so foreign to me as I had zero finance background prior to this.
52 YOURTRADINGEDGE JUL/AUG 2019
I was very honoured a few months ago to be asked by the
lovely Kritika to be a regular columnist for YTE. At first, I was really
excited about the opportunity and couldn’t wait to get started,
but then I felt a cold, sinking feeling in my stomach. I thought
- how can I write a regular column on being a trading mum and
exploring trading psychology alongside the likes of these amazing
pro-traders with years, often decades of experience!?
The answer is, I can’t.
And I won’t even try to.
My ‘thing’ is why I trade, how I fit trading into my life with
little kids and a husband, why I think Day Trading is an amazing
opportunity for parents (and grandparents) and how I’ve overcome
many trading psychology blocks over the past couple of years.
Kind of like ‘The Real Housewives of Trading’.... well, except
actually real and with far less drama!
My audience (those who won’t just keep flicking through...) are
the average mum and dad (and grandparents!) who are wanting a
different life for their family. The average mum or dad who is sick
of the 9-5 grind and just wants a flexible lifestyle that works for
them. That is who will read my column and those people are who
I will ‘speak’ to.
My intention is to write from the heart and to stay authentic. At
times it may be raw and emotive but that’s trading right? There
are times when we ride the highs and then there are the really
low moments where we want to just throw the computer out the
window … I know you’ve felt the same at one time or the other!
So why do I think trading is a great opportunity for parents and
grandparents?
Let’s first imagine I have a magic wand... If time and money
were no issue what would you be doing?
Where in the world would you like to be living? Would you prefer
to have a few places dotted around or do you really just want to
live the laptop lifestyle; having the freedom to travel the world
and funding your travels working a couple of hours a day trading.
If we earn more, we can give more so is there a charity or cause
you are especially passionate about? Who can you help if you
JUL/AUG 2019 YOURTRADINGEDGE
GETTING REALLY CLEAR ON WHY WE TRADE
were more financially abundant?
We can’t pour from empty cups.
What places will you travel to? Where have you always wanted
to go to but just never had the chance? What’s on your bucket
list?
If you’re into luxury items - what will you own? What car will
you be driving? What ‘toys’ will you have to play with?
What is the legacy you would love to leave for your family?
People often think of a legacy as how much money they will
leave when they pass, but a legacy is also education.
What will you teach younger generations about how to create
wealth?
I think the old saying is, ‘give a man a fish and he will eat for a
day. Teach a man to fish and he will eat for a lifetime’.
If you’re a parent of school children you will have the freedom
to take them to school, go into their classrooms and see what
they’ve been doing. Later in the day, you pick them up from
school without having to rely on expensive before and after
school care or other people. Imagine the smiles on your little
ones’ faces when they see you at the end of the day!
If you want to be a stay at home mum or dad, with this lifestyle
you will never have to worry about who will look after the kids
for 13 weeks of the year over school holidays and you will have
the freedom to travel with your children in order for them to also
experience the wonders of the world.
All this and more is exactly why I trade.
Have I made a huge amount of money trading and are we living
our dream life? … Not yet.
Am I on my way?... Most certainly.
So let me ask you this...
Do you have a burning desire?
Do you have something that gets you out of bed in the morning
or is trading just something you do for fun? Something just to
pass time?
Are you clear on your goals and why you trade?
I have learned over the years that without clear direction and
without clear intentions, the journey isn’t an easy one; it’s a bit
like driving a car to a destination without a road map just hoping
you are going in the general vicinity of where you want to be.
I challenge you to also ponder over some of these questions.
You never know, it may actually help your trading results!
Dani Mcleod is a private trader from Perth, WA. When she’s
not spending time with family and friends or trading, she loves
practicing martial arts, yoga and qi gong. You can view how she
trades futures here:www.daytradermum.com
53
3 EFFECTIVE WAYS TO DEAL WITH DISTRACTIONS WHEN TRADING 3 EFFECTIVE
MY INSIGHTS
WAYS TO DEAL
INTO WITH
THE MINDSET
DISTRACTIONS
OF A MARKET
WHEN TRADING
WIZARD

3 Effective Ways to
Deal with Distractions
When Trading
By Eva Diaz

54 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 55

3 EFFECTIVE WAYS TO DEAL WITH DISTRACTIONS WHEN TRADING
I
n his book Digital Minimalism,
Cal Newport talked about the
negative impact of social media
and many of the smart gadgets
we’ve come to rely on for most of
the days.
Whether at work, or in the office
or the trading room, there’s no question
about the ubiquity of technology and
social media in today’s society.
And traders are not immune to this
phenomenon of social media distraction
and technology invasion.
Like other industry professionals who
are bombarded with continuous stimuli,
traders can also be subjected to other
distractions that may affect their trading
performance on a day-to-day basis.
In his book ‘High Performance Trading’,
author and trading coach Steve Ward
said distractions are part of a trader’s life.
As humans, we all get distracted at
some stage, what with all the stimuli
around us. Even our own thoughts can
sometime serve as distractions.
For traders, Ward said it is important
to have a technique or strategy for
refocusing.
The need to refocus is particularly
important for traders after a loss, a series
56 YOURTRADINGEDGE JUL/AUG 2019
of losses, making an error/fat finger,
talking with other people, being on the
phone, becoming emotional.
There is no doubt that after a big loss
or after making a mistake some traders
can go through a mixture of emotions
that can range from fear, anxiety, shame
and greed. And we all know that these
emotions can have a negative effect on
trading performance.
So, how does a trader re-focus after
being distracted from a trade?
Three ways to refocus
1. F ocus on what needs to be done, not
on the outcome. Focus on the now.
Take everything trade by trade.
This brings to mind what Linda Bradford
Raschke, a well-known commodities and
futures trader and author of the new
book ‘Trading Sardines’ said about being
focused and prepared for every trading
day.
In one of her presentations at a traders’
conference, Rashcke shared her strategy
and daily ritual on how to get ready for
the markets.
The way she does this is to have
predetermined position sizes for her
trades. This means if she’s trading several
instruments, she will trade the same
number of contracts -e.g. 5 contracts of
oil, 5 futures contracts.
According to Raschke, determining
and setting your position size cuts out
the need to make too much analysis
during a trade. From her point of view,
the more analysis and thinking you make
during a trade, the more likely you are to
over-analyse and make mistakes.
She said it is important to make as few
decisions during the trading day. The less
decision you make, the more focused
you can be.
Consistency and preparation are key
so that you don’t get distracted or side-
tracked during the trading day.
And this is where the importance of
having a trading plan becomes critical.
There’s no doubt you must have heard or
read the market adage ‘if you fail to plan,
you plan to fail’.
Having a trading plan that spells
out your entry and exit levels, risk
management tactics and every step that
will help you become an efficient trader
is critical. Particular in this day of digital
technology and social media distractions,
a robust trading plan that you can execute
step-by-step is an important trading tool.
JUL/AUG 2019 YOURTRADINGEDGE
2. O
 n another practical level, you can
get rid or lessen distractions while
trading by physically putting away
items that can distract you.
Switch your mobile phone off or put it
on mute so that you won’t get distracted
by alarms and notifications.
In ‘Digital Minimalism’, Newport
suggested a drastic approach to
reduce the impact of social media and
technology. He talked about digital de-
cluttering, akin to taking out all the
gadgets, apps and technologies that
play havoc on your daily routine.
While traders may not be able to totally
de-clutter from technology as we still
need access to price feeds, charts and
market information, the key is to focus
on the essential things.
Focus only on the markets – charts
and price feeds during market hours.
Watch or read any market related data
or news before the trading day begins,
not when you are in the middle of trading
already.
Ward advised that whatever can
be reduced or removed to eliminate
distractions should be removed and
reduced (e.g. emails, phone calls,
internet surfing).
3 EFFECTIVE
While checking and posting regular
updates on social media – Twitter,
Facebook, Instagram – seem to be part
of everyone’s daily routine nowadays,
for traders it will be helpful to limit social
media activities to certain times of the
day. Definitely not during trading hours.
3. Recovery strategy – this is the most
important factor you need to work
on and put in place.
Based on his work with traders and
top performing athletes, Ward said ‘one
of the key performance differentiator
between the best sports people and the
rest, and the best traders and the rest,
is not so much in whether they make
mistakes or lose focus, but in how quickly
they can recover that focus and get back
in the game effectively.’
While each trader may have different
ways and techniques to refocus and
regroup, Ward shared some techniques
that have worked for some high-
performance athletes. See if they will
work for you.
• Present Moment Technique based on
Jeffrey Hodges (Sportsmind)
• Stop and focus your attention to
external factors.
• Look around you. Become aware of
MY INSIGHTS
WAYS TO DEAL
INTO WITH
THE MINDSET
DISTRACTIONS
OF A MARKET
WHEN TRADING
WIZARD
any external sounds.
• Notice the room temperature
•Breathe in and out slowly for 10
seconds
•Spend 10 seconds visualising
yourself doing whatever you are
going to be doing next well.
Distractions – social media, gadgets,
wandering thoughts – are all part of our
daily lives, but as traders we need to
have a re-focusing strategy to get back
on track. The sooner we can get focused
on trading and what needs to be done,
the better it is for our trading.
Eva Diaz is the author of Real Traders,
Real Lives, Real Money (Books 1 & 2) –
which tell the stories of top Australian
retail traders in the CFD and FX
markets. She is also a co-founder of
Profile Booster, a consulting and digital
marketing company that specialises in
the financial services industry.
57

FEELING LUCKY?
Louise Bedford
I
t’s a fact. Your level of income will rarely exceed your
level of self-development.
But most of us are going to retire broke.
Don’t believe me?
Listen to these chilling facts:
• The average Superannuation balance in Australia is
only $70,000 (Cooper Review into Superannuation).
• Only 7% of retirees are financially secure. (Association of
Superannuation Funds).
• Just 35% of Australians will have any superannuation left at
age 75. (RBA).
• We’re likely to live into our mid-eighties, and women are
outlasting the blokes by around four years.
So, your self-worth had better be measured in cold hard
dollars and cents unless you’re planning on a long, poor old
age. Those that excel don’t get there through luck. They put in
the right level of work in the right vehicle, and let compounding
do the rest.
Next time someone tries to convince you that money isn’t
important, you’ve now got some ammunition. You are different
from the majority. You know that to truly value yourself, you
must also value your finances. You are the hedge fund manager
of your own family’s net worth, and they’re trusting you not to
stuff it up.
That’s why this edition of YTE is so important. It might just
turn the key that makes you realise you have to take control of
your financial future.
If you feel you’re worth more – then you’ll do everything you
can to alter your financial circumstances.
You don’t have to conquer it all in one day. It’s OK to make
mistakes and to feel your way slowly. But be determined to
move forward, learn more about making money outside your
main source of income, and value yourself enough to realise that
the future won’t just take care of itself.
Genius is not innate. Find a mentor to help you progress, and
to tell you what to ignore and what to focus on. Don’t think that
this game is beyond your skills. Focus on yourself, and realise
that you are worthy of success. If we don’t make continuous
improvement a priority, we will ultimately fail.
What are you going to do to set yourself apart from these
scary stats, and excel into old age? You can’t just rely on
winning Tattslotto, that’s for sure.
Lotto Woes
In 2004, a lucky single mother won $10.5 million in the Ontario
lottery. Her name was Candy Adams.
What did that windfall do for her life, her goals, and her values?
Surely she parlayed that into incredible success?
Well… no.
58 YOURTRADINGEDGE JUL/AUG 2019
After becoming a millionaire overnight, she spent all that
lovely money on designer clothes, parties, vacations, and luxury
cars. She lived the high life - for a while.
It gave her a few fun years, that’s for sure.
After less than a decade, the fun was over. Candy got back to
living in a rented house and riding the bus to her part-time job.
No cent left to show.
Candy’s story teaches us that wealth is about mindset and not
the money you earn.
Improve your mindset, and your wealth will elevate.
And that’s why I’m so intent on bringing you this essential
information in my YTE articles. I want you to immerse yourself in
good mindset habits to adjust your wealth thermostat.
I know that without constant reminders about how to grow...
you’ll shrink. And for some of us, we began pushing the
boundaries when we were just kids.
A trader in the making...
A secret hand-written message goes out to each student. “20c
for toasted sandwiches. 12.30pm - room 2A. Bring your own
sandwich.”
And before I knew it, I was in business.
Toasting sandwiches on a fork, connected to a ruler, held up
to the industrial school heater. Around 15 girls, aged 12 became
my regular clients. I constructed a 2-fork holding ruler, and with
one in each hand, I toasted four sandwiches at a time. Warmth
during winter. I was onto a winner.
Then... I got sprung.
The clients scattered. I was left holding the forks. And I got a
detention.
However, the bug had bitten. I really liked money.
I ransacked my dad’s storage boxes from his old stationery
business and held a little ‘before school sale’ behind the
shelter shed. I made out like a bandit with selling liquid paper,
highlighters and glittery pens.
That business lasted four days before I got caught. And I got
a detention.
Then... I managed to ‘extract’ a key from a music teacher’s
pocket. To my surprise, it opened up a locked room that no
student had ever entered. With a quick shimmy through a
jammed shut window, I was in the school tower. I took tours up
that dilapidated tower for $1.00 per girl and $2.00 if you wanted
a photo at the top. They never caught me with that one.
I guess I’ve always been hungry.
I’ve always hunted the dollar.
I’ve always assessed the risk and then milked the crud out of
an opportunity if there was a big enough reward.
I think my early forays into making money provided the
scaffolding required for the rest of my life.
JUL/AUG 2019 YOURTRADINGEDGE
What were your early jobs? Did you chase? Did you scheme?
Did you strive?
That little kid is still in you – even if they’ve been buried by the
weight of ‘adulting’.
Get in the hunt again.
There are opportunities.
It’s a matter of seeking them out, in the biggest playground of
all... the markets.
But even as I succeeded in the markets, I felt guilty.
The Guilt of a Trader
I felt guilty that I wasn’t using my degrees.
I felt guilty that I hadn’t made my parents proud because I’d
quit corporate life.
I felt guilty that I was allowing my prime career-building years
to escape me while I traded full-time.
I felt like I’d let so many people down.
People feel guilty for wanting more out of life, even though it
takes the unusual surge forward for many of us to feel fulfilled.
We’re the outliers. The strange ones. The ones who demand
more out of life than the mediocre 9 – 5.
That surge... the adrenaline you feel as you decide to make
your precious leap... it defines you as a leader.
Every trader alive has been plagued by self-doubt in one form
or another.
To trade well though, you have to realise this, and then release
it. It can just take a little bit of rewiring to realise that this is all
possible for you.
Money Hang-ups
Even after I started to make money in the markets, I still had
some hang-ups:
• In my pantry, you’ll find around 20 boxes of cereal. After
eating Homebrand cardboard-tasting cereal for so many
years, having yummy cereal somehow represents prosperity.
• I don’t mind earning the money in the household, but I have
an aversion to seeing how much money we’re forking out on
school fees. I make my husband pay those accounts.
• It took me a long time to be comfortable going on an
expensive holiday. It used to seem like a waste of money. I
remember reading how Phil Knight (the guy behind Nike) and
his wife shopped for massive amounts of toilet paper and
toothpaste once their company made them into billionaires.
They stocked up on ‘staples’ in case someone took all of
their money away – so at least they’d have something to
show for it. I sort of relate.
What are your money hang-ups?
The more aware you become, the less your hang-ups will have
a hold over you.
You? A Genius?
You can increase your intelligence.
“The fact is, intelligence can be increased–and quite
dramatically,” writes behavior-analytic psychologist Bryan
Roche of the National University of Ireland in Psychology Today.
FEELING LUCKY?
“Those who claim that IQ is fixed for life are in fact referring
to our IQ test scores, which are relatively stable–not to our
intelligence levels, which is constantly increasing.”
From Mozart to Bill Gates, genius’s diverse journeys
toward peak performance in their respective fields shared a
common trait: an unwavering dedication to their crafts and the
commitment to developing their skills.
Keep pushing. Keep learning. Aspire to be a better trader.
Know that the odds are against you, and use this to drive
momentum into your efforts. A large proportion of retirees will
have to live on less than 40% of their pre-retirement income
(Australian Investment Institute). Don’t let that be you!
The fact is to achieve a reasonable standard of living in
retirement; retirees require 70% of their pre-retirement after-tax
income (Association of Superannuation Funds). Don’t let that
depress you. Let it goad you into action.
And don’t think you can just trust a clever fund manager to
save you. Australian Prudential Regulation Authority (APRA)
analysed the returns of the nation’s 200 largest superannuation
funds and found that the average return for the past ten years
was 3.9% pa. Hardly enough to float your boat, hey.
Don’t let the set-backs wipe you out of this game, or you’ll
never know what could have been.
Some people just easily click into what we can show them
about trading. Others need a complete overhaul from roots to
branches, before they can grow their equity.
Whatever your level, I’m here for you.
Some people have had things go far worse than your excuses
as to why your life isn’t on target. And - they are running happily
towards their goals, often bringing a lot of other enthusiastic
people with them at the same time. There is no such thing as a
‘rich victim’.
There are dumber, less organised, less educated and less
attractive people than you making money right now. I can tell
you one quality they share. They aren’t prepared to accept what
you may be accepting right now. They aren’t happy to trust
their financial future to a hope and a prayer. They took steps,
sometimes baby steps, in the direction of their education.
They got angry. They became intolerant. They succeeded.
And you can too.
In our land of incredible opportunity, it’s disgraceful not to
do well. There is no honour in being poor over the medium
term. There’s no shame if it’s only temporary. However, if it’s a
permanent way of life for you, something needs to change.
You deserve to be living your life’s purpose. You need to
embody your purpose with all of your senses and dump your
excuses before they take hold of your life.
Louise Bedford (www.tradinggame.com.au) is a full-time
private trader and author of The Secret of Writing Options, The
Secret of Candlestick Charting, Charting Secrets and Trading
Secrets. Download her free trading plan template from her
website now, and you’ll get her bonus 5-part audio course called
‘Trading Made Simple’.
59

TRADER'S STORY
Get to know your fellow traders. YTE speaks to trader Rae Delai
R
ae Delai is a full-time trader who works part-
time as an educational assessor. She’s an avid
traveller who proudly owns a pottery and ceramics
business. Currently residing in Atherton, Rae used
to be a full-time nurse.
How and when did you first become interested in the
markets?
We had very little money when I was a child. My dad’s business
went broke when I was four and mum often says they didn’t
know where their next meal was coming from in those days. This
left an impression and I was determined to set myself up to be
independent and financially secure. I read every book I could
find on wealth creation like ‘Think and Grow Rich’; the ‘Rich Dad,
Poor Dad’ series and many others.
In the book Rich Dad, Poor Dad, the author states that he has
absolutely no faith in the 401(k) system in the US, which made
me think I had better not rely on Australian superannuation in
retirement. I have always seen my Super Fund as a bonus, not
a given.
When I was about 23 years old, I went to a lighting store in
Cairns. The most spectacular chandelier I had ever seen was
hanging from the ceiling almost to the floor. I stood there admiring
it and soon a shop assistant came over and in the course of
conversation told me that a young man about my age had just
ordered three of them. They were over $3000 each!
I had just bought my first house for $50,000, so the idea of
spending that amount on three light fixtures just blew me away.
She then told me he was a share trader and was buying them
because “he could afford it”. This was the beginning of my
interest in trading.
The other big reason I wanted to learn to trade derives from
my desire to beat a core belief that I was not good enough.
So, as well as the books on wealth creation, I was obsessed
with self-help topics. I have tried everything from hypnosis,
homeopathy through to past life regression and kinesiology, to
try to battle subconscious blocks and sabotaging patterns. I
knew all consistently profitable traders have clear trading minds,
so my trading journey would ultimately assist me in my mission
to dissolve negative thought patterns.
Also, one of the midwives I worked with in 1987 was very
wealthy and she would often talk about her investments. She
used to sit in her car for 15 minutes before a shift and read the
paper and research stocks. So, I tried reading the paper and did
not have a clue what it all meant. But, I desperately wanted to. It
was around this time the chandelier incident happened.
And then what happened?
Then life happened for a number of years. One day I woke up and
had a husband, three children and chaos reigned. Getting to bed
60 YOURTRADINGEDGE JUL/AUG 2019
TRADER'S STORY
before midnight with all family members still alive was the only
achievable goal I could manage. Around that time my trading
portfolio was in the hands of an Accounting Wealth Management
and Capital advisory firm.
How have you been able to learn and educate yourself
about the markets?
After the GFC I made the decision to take full responsibility for
trading myself. I began to seriously research some education by
scouring the internet. I found a website called “Home Trader”,
which had a brilliant graphical representation of how a stop loss
works. I remember thinking, wow that one technique would have
prevented the huge losses I suffered in the GFC, and this is on
their front page. I wonder what else I could learn. I kept looking
until I found Wealth Within. Two things really stood out for me
when I looked at their website. The first was the name which I
really understood, having a self-help background, and the other
was having the Diploma status. I was a Nurse Educator at the
time and I was familiar with the standard necessary to maintain
that status. Having a Diploma is not about getting a certificate, it
is about ensuring you get outcomes. So, this course was a safe
bet. I called and spoke to a dynamic and personable young man
and signed up on the spot.
Did you make mistakes when first starting out?
All of them! The hardest thing for me was following the rules.
I did not realise how strong my desire to break the rules had
been and now Wealth Within were telling me that following solid
rules is how you trade successfully. So, what did I do? I made
up my own rules, none of which worked very well. I battled with
my psychology and lost until I found a blog by Cathy Eck called
Gateway to Gold. This has literally changed my life and I am now
able to let go of the negative chatter I was experiencing and the
need to rebel against rules. I went back to the course rules, and
my trading has improved greatly since then.
Would you define yourself as a discretionary trader, a
mechanical trader or a combination of both?
My aim is to be a mechanical trader and trade with very little
emotion. As I grow as a trader, I am finding that following my
trading rules is becoming easier. I am also learning how to step
up from being completely mechanical and incorporating the ‘art
of trading’ into my trading approach, which I have found makes
the rules more effective. This is a real skill and calls for a lot of
reflection on past trades.
Who have been some of your mentors and role models?
What impact have these people made on you personally
as well as on your trading style?
My mentors have all belonged to the Wealth Within family.
JUL/AUG 2019 YOURTRADINGEDGE 61
TRADERS STORY
TRADING HAS CHANGED MY LIFE. I HAVE QUIT MY 30
YEAR PLUS CAREER WHICH WAS DEFINITELY IMPACTING
ON MY FREEDOM. I HAVE COMMITMENTS TO SUPPORTING
OTHERS, MY OWN TRADING AND MY POTTERY BUSINESS,
WHICH ARE A JOY TO ME AND ALLOW ME A LOT OF
FLEXIBILITY. I NOW GET TO SPEND A LOT MORE TIME IN MY
POTTERY STUDIO BEING CREATIVE.
Dale Gilham, Janine Cox and Kay Rutkis have been wonderful
role models and patient mentors. I am blessed to have other
graduates of Wealth Within courses to talk to about trades and
also wonderful friends who completed their studies with me and
live close by in Far North Queensland.
Can you give us a brief overview of your trading style?
I am a technical analyst. I am working towards being very
disciplined in my trading, with a system for everything. What I
mean is that I make regular time to look at the market, sectors
and stocks and I drill down to develop or modify my watch list.
I like being organised and having checklists. For example, one
of my checklists ensures that I have documented each trade
completely before placing an another. I have found that as my
systems develop, I am far less impulsive and more aware of the
risks involved with each trade.
Is there any one trade (win or loss) that had a profound
effect on your development as a trader? If so, what did
you learn from the trade?
I bought Fortescue Metals Group (FMG) back in January 2019
just before it took off. That was the very first time I had ever been
in the right place at the right time. That trade has done wonders
for my confidence and now my lofty trading goals seem possible.
Can you tell us about your best and worst trades?
I learnt a lot from a trade in Brambles BXB. I entered in 2016 and
then didn’t follow my exit rules when it fell. Then it gapped down
so I bought some more, thinking it would come back to fill the
gap. You know the old theory of dollar cost averaging? But then
it gapped down again. This theory actually increased my risk. I
told myself it was not a trade, it was an investment and still hold
the stock today. Lots of big lessons there.
62 YOURTRADINGEDGE JUL/AUG 2019
Would you classify yourself as a short-term or a long-term
trader? What advice would you offer to people getting
started as traders on the relative merits or otherwise of
each?
I am a medium-term trader, so a trade can go for a few weeks
up to 18 months. I trust Dale Gilham’s experience when he says
(over and over) that short term traders are often not as profitable
as longer-term traders. I believe traders starting out will find it
easier with a longer time-frame. This gives you more time to
make decisions about your trades.
What markets do you trade, and which markets do you
prefer? Do you have a favourite, and why?
I am happy to stick with Australian stocks. There are hundreds to
look at, all with different personalities. I can always find enough
that will suit my portfolio goals. I would like to trade gold at some
stage in the future. This has been a long-term desire.
What makes your trading style different from others?
What sets you apart from other traders?
My “Big Hairy Audacious Goal” (BHAG) is a bit different. I
attended an “Art of Trading” workshop some years ago and
was encouraged to set a BHAG. Although I set myself a very
big picture goal at that time, it has taken until this year for me to
have the confidence to say that I will achieve it.
Do you have a favourite trading rule?
My most important trading rule is ‘follow your trading rules’! My
favourite rule changes as my skills improve. I loved learning about
and applying Dow Theory to start with. Lately, I am enjoying the
power of counter-trends.
JUL/AUG 2019 YOURTRADINGEDGE
Ed Seykota says, “Everybody gets what they want from
the markets.” What do you ‘get’ from the markets?
During high school I believed my ultimate goal in life was to be
independent. I now realise what I really want is freedom. The
markets give me the opportunity to be the master of my own
destiny. I have learned the hard way that if I don’t put in the work
to properly back test and analyse stocks, as I have been taught,
then I don’t do as well with my trading. The market demands
respect and reminds me if I get off track.
How has trading affected your lifestyle?
Trading has changed my life. I have quit my 30 year plus
career which was definitely impacting on my freedom. I have
commitments to supporting others, my own trading and my
pottery business, which are a joy to me and allow me a lot of
flexibility. I now get to spend a lot more time in my pottery studio
being creative.
What books, seminars and courses have you read or
attended, and which would you recommend?
I strongly recommend gaining a trading education before testing
yourself against the market. I completed the Diploma of Share
Trading and Investment and the Advanced Trading Strategies
Course with Wealth Within. This knowledge has given me a solid
grounding and a lot of confidence.
I suggest the Gateway to Gold blog may be very helpful for
your psychology. I no longer follow any self-help or new age
practices since discovering this very sensible, down to earth
approach that actually works.
What does the future hold for you?
Oh freedom! That is the ultimate prize. Realising my BHAG will
give me enough financial security to help my kids and travel the
world if and when I want. I see myself developing as a trader
and also as a ceramic artist, and probably in ways that I can’t
imagine today. I also have no plans to retire ever! I will always be
working – trading and making pottery.
63

TRADING LIFE
Trading Life with Gary Fraser
G
ary Fraser works as a trading coach, mentor and
trader in addition to providing technical analysis
services to private clients. With a background in
education, he has been involved in the markets
for over 30 years and has a special interest in
risk management, psychology and candlestick
price action. Gary has tutored and lectured in
technical analysis and has presented at traders’ workshops
throughout Australia and Asia.
How did you get into trading?
I first became active in the stock market in 1986. Whilst I was
fascinated by markets, I possessed no real knowledge of them
as most of my early trades were based on the recommendations
of others. Following the 1987 stock market crash, I realised that
I had no idea how markets moved. The events of 1987 instilled
in me the desire to understand this. After reading an article on
technical analysis I began to appreciate what I needed to learn.
Most of what I use in my trading today is pure technical analysis
although it is fair to say that some changing fundamentals will
direct my attention to the price action of a share.
What do you trade: for example shares, indexes or
currencies, and why?
Having studied most markets, I choose to trade long-only
Australian shares. What had become clear to me from looking
at countless charts of good movers was that the emerging price
structures were predominantly what determined the success of
a move. This meant that I could gain all the leverage I wanted by
selecting low priced shares that possessed excellent structures
and high dollar value turnover. I’m a swing trader who uses
intraday charts to assess the integrity of price structures during
set-up analysis. I also appreciate that many of the best price
moves occur when traders are least expecting such moves. I
have identified a number of these structures that I refer to as
‘surprise’ structures. An example of a surprise structure is a
high close against a series of rejection candles. Traders often
dismiss these structures and apply their attention elsewhere,
as they have already made assumptions about the subsequent
price movement.
Do you think that everyday person on the street has
a chance?
I’d like to say yes, they do … but why would they want to? More
people have a chance of being a competent investor rather than
being a competent trader. You have to be really committed
and passionate about trading to succeed and I often remind
my clients during coaching sessions that they don’t have to be
traders.
64 YOURTRADINGEDGE JUL/AUG 2019
TRADING LIFE
I have a better appreciation of just how responsible I am for
What were some of the mistakes you made when you my behaviour as a trader, knowing full well that the market
started out? can behave irrationally. Accepting that I am responsible for
I’m certain I’ve made every mistake possible and I work hard my actions is a part of the mindset that helps me in my daily
not to repeat them. A few major mistakes come to mind: approach to the market. Today I realise that the market is a
• Overtrading generous provider of opportunities and I need to be patient and
• Relying on others for trades wait for these to arrive. Being patient is the biggest challenge.
• Treating trading as entertainment rather than as a business
• Not taking the opportunity to learn from my mistakes What are some of your golden rules?
• Not having a stop loss
• Failing to think in terms of probabilities • Start small and learn from your mistakes
• Develop a trading plan that suits you
When it comes to being a successful trader, how • Use a stop loss
important is mindset? • Learn from charts – most of what you need to know is
I believe that the confidence to act is derived from having the staring you in the face
right mindset. Traders must have good reason to be confident • Emphasise trade management in your trading plan
and this confidence can only be developed from having done • Work with and learn from other traders with similar trading
the work and from being aware of their ‘edge’ and its limitations. interests
If you truly understand why you do the things you do, it allows • If you are not succeeding, change what you are doing
for a calmer headspace - no matter what the trade outcome. • Remain actively involved with the world outside of trading
Traders who understand and believe in every aspect of their
trade selection and subsequent trade management will achieve What’s the number one thing that traders can do to
a state of mind that helps set them at ease. To trade well, improve their performance?
you must be prepared, and you need to have a comfortable Learn how to enter, manage and exit trades from the study of
workspace. historical charts
How have you changed your mindset from the time Finally, what is core to a trader’s success?
you started trading? Determination and humility.
I’m far more accepting of the outcome of any trade. I believe
How have you been able to learn and educate yourself
about the market?
In addition to reading extensively, the most valuable step I ever
took was to join the Perth Chapter of the Australian Technical
Analysts Association (ATAA). Learning from other traders was to
make the world of difference to my trading. One of my light-bulb
moments occurred during a presentation at a conference of the
ATAA by Chicago-based trader Dan Gramza. Dan’s approach
to reading candlesticks had me seeing what was really going
Facebook.com/Your Trading Edge Magazine
on with price. What was also pivotal in my development was
a growing understanding of the importance of retracements.
When a share retraces it offers the observer a unique opportunity
to see what is really happening with the imbalance between
buyers and sellers. I often say to clients that the riches are in
the retracement. By studying retracements, we don’t have to
catch the first price move. The initial move alerts us to the price
break. By analysing the subsequent price retracement, we are
offered a huge clue as to whether the buyers and sellers are
serious in their intent.
JUL/AUG 2019 YOURTRADINGEDGE 65
STAYING CALM AT THE COAL FACE MY INSIGHTS INTO THESTAYING
MINDSETCALM
OF AATMARKET
THE COAL
WIZARD
FACE

Staying Calm
at the Coal Face
Doug Dew talks to traders who use their mindfulness
to regulate their trading emotions.

66 YOURTRADINGEDGE JUL/AUG 2019 JUL/AUG 2019 YOURTRADINGEDGE 67

STAYING CALM AT THE COAL FACE
A
few months ago,
I wrote an article
in YTE, which
proposed that
traders could benefit
from the practice of
mindfulness. In that
article, I promised to
talk to some mindful traders and report
back.
I was lucky to find some mindful folk
who were willing to share intimate details
of their emotional life as it related to their
trading and to the roller-coaster rides
which we all know so well.
One minute, we can do no wrong and
limitless riches await. Our life-partner
boasts to all his or her friends about our
financial genius and carries out detailed
surveys at the famed ‘label’ shops at the
local giant shopping plaza.
The next minute, the market has
chosen us, and only us, for a long slow
death grip and perpetual poverty. Our
partner confides that he or she has
always known we were a dud, and looks
for divorce lawyer recommendations.
People will dismiss mindfulness and
say it is a fad. This is true. It’s a fad that
lasted two and a half thousand years. No
wonder the Dalai Lama has that smile
on his face. If you want to know more,
google ‘ABC Catalyst Mindfulness’
Here are the mindful people I
interviewed….
Martin’s Story
I interviewed Martin in the shade of Lunar
Park at St Kilda. Come to think of it, the
roller coaster was in plain view. Martin,
in his early forties, is a school teacher
by trade. He is a keen runner, surfer and
snowboarder.
He described his twenties as a period
68 YOURTRADINGEDGE JUL/AUG 2019
of emotional turmoil and too many
parties. A friend recommended that
he might find peace via the practice
of Vipassana meditation. You learn
it by attending a residential ten-day
course. The course involves a code of
discipline where you meditate for long
periods every day, you do not speak at
all (apart from brief conversations with
your teacher), and you consume only
simple vegetarian food. It is not for the
faint-hearted. Martin has attended ten
such courses over the years. Despite its
Buddhist origins, it is a secular course.
Martin describes this practice as
having made an enormous difference to
his life. It gave him the tools with which to
bring peace and calmness in place of the
emotional turmoil he used to experience.
He started trading a few years ago
with the purchase of a few blue chips
to hold long-term. As his interest grew,
he stumbled upon some lithium-based
stocks which began a path of rapid
price rise. He committed the fatal error
of holding them all the way to the top
and then all the way back to the bottom.
He remembers the contempt he had for
the sellers during the price crash period,
thinking they were cowardly. Luckily, he
got out before he lost his capital as well
as his profits and decided on a re-think.
He looked around at the various
sources of trading education and was
smart enough to dodge the charlatans
that abound in this market. He found
an Australian teacher who emphasised
the need to control risk, to avoid
giving profits back to the market, and
emphasised the paramount importance
of trading psychology. This all rang very
loud mindfulness bells for Martin and he
continues these studies to this day.
He is currently trading in a fairly
modest way while he works on getting
his mind in the right place. He is taking a
three-pronged approach.
Firstly, after a lapse, he is restabilising
his daily meditation practice.
Secondly, his teacher encouraged
him to write a daily journal where he can
record his thoughts and feelings both
generally and in relation to his trading.
He has found this to be an excellent way
of clarifying what is happening inside his
head.
Thirdly, he has applied the mental
discipline learned from mindfulness to
his running. He has created a running
plan and is sticking to it. He is seeing
improvements in his times as a result
and figures that if he can apply this to
running, then trading discipline will
follow.
How does mindfulness help Martin?
He calls it “Bringing You Back to the
Now”. This is an important concept in
mindfulness. Endless mithering on what
has already happened, or fantasising
on what might happen in the future is
a waste of energy. The prudent trader
concentrates on their plan and executes
it. This type of action is absolutely central
to mindfulness.
He finds that mindfulness gives you a
tool to accept the ‘now’ with calmness
rather than being overwhelmed by
emotion, whether manic or depressive.
You no longer are taken away by
unreasonable optimism or pessimism. By
example, as I write, my positions happen
to be growing like crazy. Mindfulness
helps me accept that this will end…
maybe in the next five minutes or six
months from now. I am not about to do
anything outside my plan but continue
quietly and calmly.
Martin told a story about how he was
JUL/AUG 2019 YOURTRADINGEDGE
as angry about something his next-door
neighbour was doing that might affect
the value of his house. Mindfulness
helped him understand how destructive
this anger was. There was nothing he
could do to change his neighbour’s
behaviour, which was perfectly within
his rights, and, in any case, Martin was
renting, so the value of the house was
not his concern.
Mindfulness also helps Martin get
HER MINDFULNESS PERMEATES ALL HER TRADING PRACTICE.
IT ENABLES HER TO CLEARLY IDENTIFY THE EMOTIONS SHE
FEELS WHILE TRADING. SHE IDENTIFIES FEAR AS PERHAPS
THE MOST SIGNIFICANT TRADING EMOTION
insights into his own emotions. Men are
well known to be experts in masking
their own emotions from themselves.
The famous Stiff Upper Lip was handy
for building the British Empire, when
only your Bombay Bloomers and your
Lee-Enfield stood between you and the
cooking pot, but mindfulness gives you
license to sit down quietly and assess
what is really going on. It helps you tune
into your own body which will be reacting
to emotions that you have hidden from
yourself. Martin finds that this helps him
every day when his emotions might take
control and upset the apple cart.
Margaret’s Story
Margaret is a nurse who works with
acutely ill patients. She is one of those
people who we instinctively admire
and who we hope will be caring for us
if the worst happens. She has diverse
MY INSIGHTS INTO THESTAYING
interests; mother of two boys, horse
rider, guitar player, gardener.
She came to mindfulness while
studying philosophy and comparative
religion. Buddhism and its practice
of meditation was the starting point
for her journey. Meditation now forms
an important element in her life, both
personally and in her work as a nurse
and as a trader.
Her father has been an active trader
for many years and this sparked her
interest in the topic. She had to wait a
while to get the capital to start trading.
Raising two small children does not
leave much spare cash. She and her
husband started growing tomatoes
hydroponically to raise the cash to start
trading.
She studied technical trading and
developed a weekly trading plan which
has been successful for her over the
last few years, without the need for
structural modification in that period.
Mindfulness gave the inner resources to
resist tinkering with its success.
Her mindfulness permeates all her
trading practice. It enables her to clearly
identify the emotions she feels while
trading. She identifies fear as perhaps
the most significant trading emotion.
She identifies in four flavours:
•
Fear of being wrong… e.g.
MINDSETCALM
OF AATMARKET
THE COAL
WIZARD
FACE
procrastinating on a trade when you
have a clear signal.
• Fear of missing out… e.g. spending
hours ruminating endlessly on
possible trades without making
decisions.
• Fear of leaving money on the table…
exiting early on successful trades.
• Fear of losing money… e.g. not
following your position sizing rules.
This is a Pandora’s box. A hundred
other fears are lurking there.
Mindfulness helps Margaret regard these
dispassionately and not be panicked by
them into doing the stupid things we
have all done.
In her work as a nurse and as a trader,
she understands the connection between
mind and body as emotions play out.
When she sits down to trade, she scans
the feelings in her body, to ascertain
whether or not she is fully mentally
present to give pure undivided attention
to the trade. She also knows that her
stomach will involuntarily tighten if she
is tempted to divert from her trading
plan rules. When this happens, she gets
up, moves away from the computer and
does something else.
These practices are important
because, as traders, we are inherently
pre-disposed to take risks. No one takes
up trading if they are totally risk-averse.
69
STAYING CALM AT THE COAL FACE

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FEELING LUCKY? BY LOUISE BEDFORD
TRADING IN THE BIG LEAGUES
W H Y S I Z E R E A L LY M A T T E R S !
NO BULL
Read Your
SHORT SELLING STOCKS Jan/Feb 2015
Jul/Aug 2019
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any
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any
TO INCREASE YOUR PROFITS
EDUCATION: WHY YOU

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3 EFFECTIVE WAYS
We need to recognise this predisposition. their transcendence. establishing good habits when trading. IN AUSTRALIA’S
Margaret uses mindfulness to be super- Greg is emphatic that mindfulness You must come to do the right thing NEW EXPORT
OF A MAJOR
TO DEAL WITH
conscious of how she is feeling and how gave him the ability to be absolutely in automatically, or exercise ‘unconscious INDUSTRY.

that might lead her to take unplanned
risks. This spills over into the need to
carefully follow daily or weekly trading
habits and accept that this can be very
boring. The habit of daily meditation,
which can also be boring at times,
supports the discipline needed to be
BREAKDOWN
the here and now; not making irrational competency’ as it is sometimes called.
decisions based on past events or in He believes his mindfulness has helped
anticipation of what might happen in the
future. Your behaviour should simply be
him follow his trading plan without
question.
DISTRACTIONS
‘a signal is given and you take it’.
These are examples of mistakes that Mindfulness and You
WHEN TRADING
WHERE TO FOR
mindfulness helps you guard against: I am hoping that you might now be AUD 8.95
EUR 8.00

successful. It is not easy to do, and all • Missing an obvious trade by looking provoked into seriously considering a
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GBP 4.95
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THE
IS AASX-200?
people who meditate are conscious of at the chart through a prism of what mindful practice of your own. If you need SGD 12.90

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this challenge. happened in the past, more convincing, read “TraderMind” by Volume 24,
Volume 20, No.4
No.1

Greg’s story
Greg is a full-time trader. He has an
unusual background. Along-side a
previous career as an IT consultant, he
spent seven years as a male stripper.
During this period of his life, he felt a
malaise and lacked a sense of who the
‘real’ Greg was. He sought an answer
to this question via a program called
“Dialectic Behaviour Therapy”. One of
its basic ideas is to use mindfulness to:
“learn how to focus your awareness on
the present moment, and to acknowledge
and accept your thoughts, feelings
behaviours and bodily sensations as they
occur, without the need to control or
manipulate them.”
Greg found that mindfulness was a
key to discovering himself and healing
his emotional landscape. He practices
mindful meditation for about 40 minutes
six or seven times per week. His process
is to contemplate the natural world and
reaches a state where he is separated
from his thoughts and in a state of
peace. In case you think this is all too
airy-fairy, think where Greg came from,
IT and stripping, careers not known for
• Getting out of a market because of a
long series of losses, which are really
just part of normal price behaviour,
• Conversely, taking stupid trades
because the market has had lots of
recent highs.
Mindfulness enables Greg to see his
emotions more clearly. He was once
fearful about taking up ever increasing
position sizes even though he was
protected by guaranteed trailing stops.
Mindfulness has helped him overcome
that fear. He lists other emotions that
affect traders:
• Frustration
• Anger
• Boredom
• Resignation
• Complacency
• Hopelessness
He finds that mindfulness helps him
recognise when these emotions occur
and damage his effectiveness. Boredom
is an interesting one. Could anything
be more boring than sitting in front of
a screen all day? The glamorous image
of the aggressive whiz-kid trader soon
disappears once reality sets in.
Greg sees the importance of
Steve Ward.
Then, find a teacher who conducts the FOR OPTIONS
GETTING REALLY CLEAR
eight-week MBSR course in mindfulness TRADERS?
ON WHY WE TRADE
designed by Jon Kabat-Zinn of the
University of Massachusetts Medical
S TAY I N G CALM AT THE COAL FACE MANY FACES OF FEAR
School. Kabat-Zinn is really the father RIS K M ANAG EMENT IS A C OP OU T T A K E YO UR B R A I N T O T H E GYM
of modern scientific mindfulness. You
attend eight weekly sessions of about
2½hours and a day-long retreat. This
will set you up to continue on your own.
If you can find a local meditation group
to attend once a week or more, so much
the better.
I looked for a quote from the Dali Lama
to end on… Read YTE on the go with our digital edition. Not only will you have instant Read Y
“We can never obtain peace in the access to the latest issue of YTE, but also our back issues collection when you ha
outer world until we make peace with you purchase a digital subscription from http://ytemagazine.com/subscribe/
. issue c
ourselves”. www.e
Or download our free iPad, iPhone and Android compatible YTE iTunes app
Or dow
– simply visit the iTunes store and search for YourTradingEdge.
Doug is a private trader and has a YourTr
special interest in trading psychology. for You
He holds a Master’s degree in Mindful
Leadership. You can contact Doug at
dougdewtrading@yahoo.com.

70 YOURTRADINGEDGE JUL/AUG 2019


MANY FACES OF FEAR Joking at every opportunity even in the face of serious matters
Sinan Koray
I
f you ask a trader: “What are some of your fears? What are
you most scared of?”, they are likely to deflect the question
with an off-hand answer like: “Fears? I don’t have any. I am
not scared of anything.” This is an answer from the intellect,
the thinking side of us. Then there is the side of us that is far
more powerful than the intellect: the feeling side.
The feeling side is controlled by emotions and often gets us
to do things we later regret. Worse still it stops us from doing
things which we regret not doing. One of the strongest feelings
is fear. What is fear? It is a thought that says we will have more
pain in the future and less pleasure. We will have less money, less
love, less status, less connections, less security; or none at all.
Often this future based pessimism is unfounded, what we fear will
happen does not happen. But we continue being fearful anyway.
Fear comes in many forms with many labels. Why? It likes to
hide, because admitting fear is not ‘cool’. So, we call it many
names. Before we look at what we can do about fear, see if you
recognise any of the many faces fear hides behind!
Procrastination is the fear of making the wrong decision or
failing. What if there is a better choice? What if the path we
choose is not the best? What will they say? Where will we be?
Fear of missing out, is the fear that they know something that
we do not. They will benefit, and we will not. They will make
money and we will not. They will get the credit, the position, the
status, the office and we will not.
Jealousy is the fear that we are not good enough, or what we
have is not good enough. This applies to romance, sibling rivalry,
politics, corporate dynamics, trading and more. If we knew that
we are as good as the other party, we would feel OK, even if
momentarily they may seem ahead.
By the way, who are “They”? Anyone and everyone! Other
traders, our colleagues, friends, neighbours, cousins, parents,
politicians, rule makers, rule enforcers, rebels, judges and juries…
Greed is based on the false belief that there is not enough. So, we
might as well grab this opportunity. Take a huge position size, put
it all in, forget the rules and systems. This is a unique opportunity,
a unique set-up and we fear it will never happen again.
Sadness is based on the fear that we are not OK, what we are
doing is not OK. What we did was not OK. What we will be doing
is not OK. We are less than them. They have taken from us. They
have let us down. We fear that we are the only one experiencing
this.
72 YOURTRADINGEDGE JUL/AUG 2019
Apathy is the fear that we will always make bad choices. It is
an exaggerated version of procrastination where we are not even
looking at what is available to us. We do not care. Why? Because
we are fearful that if we did care, if we did take some action, there
is going to be more pain.
Anger is fear of losing our power, fear that we have less power.
If we are able to achieve what we want or get what we want, in
other words, have power to make things happen, our anger would
dissolve instantly.
Guilt is based on the fear that we did something wrong. Of
course, ‘wrong’ is relative. Another person who does the same
thing may not feel any guilt or fear at all. The ‘wrong’ is based
on our values, our organisation’s values, our society’s values, our
religion’s values, our family’s values, our friend’s values. In other
words, it is based on someone else’s view of what we ‘should’
have done or not done.
Shame is more toxic than guilt. Guilt refers to our actions. Shame
refers to us and is fear that we are wrong. Everything about us is
wrong. We are not enough and what we do Is not enough. Once
again, the criteria is external, it is imposed on us by someone or
some group.
Resentment is based on fear that we were dealt an unfair hand,
fear that others got a better deal than us. We cry out “it is not fair,
why them, why not me?” We are entitled as much as them. We
fear that they got more, unfairly and unnecessarily.
Grief is triggered by loss and is the fear that we will never be the
same, have the same. “What is going to happen to me?” we ask.
“How am I going to cope without him, her, the money, the job, the
house…?”
Victim mentality is fuelled by the fear that they did it to us. We
are innocent. We had nothing to do with what happened. It is all
their fault. We are at the effect. While it is true that external events
are not totally under our control, how we react and respond is (in
our control).
Dishonesty is based on fear that if we told the truth we would
not be loved, accepted, promoted, praised. Why else would we
lie, not tell the truth, the whole truth? Children are often very
honest, until they are punished and are hurt by speaking the truth.
Then starts a never-ending guessing game. What do I have to say
or do, or not do to not have that pain again. Fear? Absolutely!
JUL/AUG 2019 YOURTRADINGEDGE
is based on the fear that if we were serious, there would be some
significant consequences, repercussions. It is an avoidance
mechanism, a form of defence. If we didn’t make a mockery
of the situation or the person, we may have to face the difficult
situation right in front of us!
I already know this. If we know it and we are not doing it, then
we do not know it! If we are often saying “I know” but not doing
anything about what we ‘know’, we are fearing that we are not
good enough, and that if we did take action, we would make a
mess.
Overwhelm is the fear we cannot handle what is on our plate. The
more trading (and life) demands of us, the more challenged we
are. It is easier to give into the fears and say: “I am overwhelmed,
this is too much.”
People Pleasing is based on the fear that if we honoured and
valued ourselves, they would leave us, shame us, blame us, hurt
us. So, we guess or find out what they want and over-deliver.
Because we fear their wrath.
Low Self Worth is fear that if we played big, we would not be
liked, loved, appreciated. We would be left alone. We do not treat
ourselves with the respect that we treat others. We shy away from
success and make sure we do not achieve much. Just so we are
safe!
Pretending, wearing a mask is when we are scared that what
is confronting us will show a weakness we have. We pretend to
have it all, to be skilled, happy, competent, brave, knowledgeable,
successful.
Shyness is fear that if we really said what we want to say, we
would be left alone, shamed, ridiculed, laughed at, fired.
Intellectualising is founded in the fear that we do not have what
it takes to fully embrace the solution, the offer in front of us. We
need more information, more facts, more confirmation.
Toughness. If we are fearful of our weaknesses, we act tough.
That way, no one (!) can see how scared we are.
Arrogance is the fear that we are missing the plot, we are not
smart enough, good enough, established enough.
Cynicism is our way of putting down others’ ideas and actions. It
is based on fear that they thought, created a better idea than us.
I’m Fine is hooked on fear that if we showed some deficiency,
something we didn’t know or have, we will be outcast.
Blaming originates from the fear that we are not OK. If they
caused this, we are innocent, hence better than them.
Using discretion in trading is caused by fear that if we do not
MANY FACES OF FEAR
outsmart the system, we will lose.
Freezing is based on the fear that any action we take will lead
to disaster.
No discipline is the fear that by being disciplined, we will miss
out on the good stuff (like pizzas, booze, parties, driving fast,
making huge profits!!!)
Expecting miracles is based in the fear that our situation is
so bad, nothing ‘normal’ would save us. So, it has to be a huge
trade, a huge profit, a lotto win, an inheritance… or all together,
that will do it.
Perfectionism is the fear that we will be blamed for acting on
‘imperfect’ data, ‘imperfect’ system or ‘imperfect information’.
Trade by feel is based on fear that they are better than us
coupled with desire to prove our superiority. Why would we want
to prove our superiority? Because deep down we feel inferior, that
we are not OK.
Break the rules is caused by fear that rules, systems, back
testing, solid data cannot be trusted. We fear that they are lying,
and the rules imposed on us are for our doom and gloom. So, we
think the only way out, the only way to succeed is to break the
rules.
Take profits early Because if we don’t we fear that it will
disappear. We fear the that profit potential of our trading system
is too good to be true.
Hope is based on fear that our situation is so bad, only a miracle
can save us.
Letting losses run is caused by fear that if we close our position
the market will turn around in our favour.
Not using stops is based on fear of being wrong, being proven
wrong by solidifying a loss. Someone I know watched his eight-
figure shareholding dwindle to nothing just because he was
fearful, if he got out, he would miss out on the good times ahead
(which never came)!
Influenced by others is caused by fear that what we know, what
we studied, what we created, what we worked on is not good
enough.
Aim for a big win is based on fear that our situation is extremely
dire. This leads to irrational decisions like position sizing mistakes.
Self-Sabotage is caused by fear that we need to beat the crowds
who are out to destroy us. By being ahead of them in destruction
of ourselves we win.
Carl Jung said: “Until you make the unconscious conscious,
it will direct your life and you will call it fate.” We uncovered the
73
MANY FACES OF FEAR
EMBRACE AND ACCEPT YOUR MISTAKES. LET GO OF
PERFECTIONISM, ANALYSIS PARALYSIS AND GO FORWARD
KNOWING THAT YOUR MISTAKES, WHEN YOU MAKE THEM,
WILL TEACH YOU VALUABLE LESSONS.
fears behind most self-limiting feelings and emotions, we have
made more of the unconscious conscious. Now let us take the
next step of resolving them.
Since fear is based on a negative fantasy of the future, it is
reduced or eliminated by knowledge and experience. Think of
how we learn driving. So much to pay attention to, so many scary
possibilities. We learn, we get lessons and we practice. We learn
more, we get more lessons and we practice more. Eventually the
paralysing fear reduces, and we get more comfortable driving.
Are the risks any less? No. But we are equipped with knowledge
and experience.
Here are ten tips to overcome your fears. Change how you
speak, especially to yourself. Instead of talking about negative
outcomes, start focussing and talking about positive outcomes.
Instead of “I will probably lose” say “I can win”.
Embrace and accept your mistakes. Let go of perfectionism,
analysis paralysis and go forward knowing that your mistakes,
when you make them, will teach you valuable lessons.
Imagine the worst possible scenario and find ways you would
handle it, in case it happens. Adopt the mindset: I can handle
it, if it happens.
Do something, take action. Fear paralyses us. By doing
something, anything, you are cracking that ‘freeze’ mindset.
Snap out of needing certainty before making a decision. Be
comfortable with deciding with what is available to you at the
time. Become an effective decision maker.
Imagine good outcomes, maybe even the best outcomes.
Imagine what you would do if these outcomes materialised.
This programs your subconscious mind that you are worthy of
success.
Believe success is possible. Replace “That is impossible” with
“Anything is possible”. Look for and find examples of success
around you and in your life. This is a good habit to cultivate.
74 YOURTRADINGEDGE JUL/AUG 2019
Search for truth, fact and information. Don’t subscribe to lies,
negativity and put-downs of media, news and social media. Base
your moves on “what-is instead of “what-ifs”.
Relax, breathe, move your body, stretch, have a drink of water.
Stress, tension and clenching muscles are what we do when we
fear bad things ahead. Moving your body releases energy and
changes your emotional state.
Take baby steps now, instead of waiting to run a marathon
tomorrow. The right time to take action is when you feel the
inspiration and urge. Thinking about it, and thinking more about
it, and thinking even more about it is not going to help much.
Helen Keller, an American educator who overcame the
adversity of being blind and deaf to become one of the 20th
century’s leading humanitarians, says this: “Fear, the best way
out is through.”
Sinan Koray is an internationally acclaimed speaker, author
and trading coach who is reshaping trading psychology and
transforming the lives of tens of thousands around the world. As a
professional trader and trading coach, he is considered a leading
expert on emotional control and mind mastery. He actively trades
Foreign Exchange, Equity Index Futures and Metals since 2003.
Sinan has addressed audiences in Australia, New Zealand,
Philippines, Middle East, India, Singapore, Hong Kong and USA.
He is the founder of TradingStressFree.com
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I could never find what I wanted in a Gann program that could do
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76 YOURTRADINGEDGE JUL/AUG 2019