In a global foreign exchange trading competition, the first place was won by Canadian Jeff Hughes, who started his career in online foreign exchange trading for $500. By competing, he won $1,000 and a BMW Mini Cooper.
Jeff Hughes is a full-time house man. Before working as a full-time house man, Jeff traded stocks for 4.5 years. Having his daughter made him have to make some adjustments in both trading time and trading methods. "I've given her most of the day," Jeff says, "and she sleeps a little bit every day, and she doesn't sleep very long, so I have to prepare well when I make deals at night, which is a good thing." ”
In November 2003, Jeff opened a demo account, the demo account quotes, operation interface is the same as the real account, but did not invest real money, in a month, he earned 100%. This led to a surge of interest in Forex trading. He invested $500 in December, and after four months, his account rose from $500 to $4,000. Now 80% of Jeff's assets are in the foreign exchange market and 20% are still in the stock market. Every night, he concentrated on watching the plate for 3 hours.
Before being a full-time husband at home, Jeff worked at a bank, mostly doing customer service. At that time, he began to speculate in stocks amateurishly. "When I went to work, I traded during my breaks, and in the end, I made more money by trading stocks than I did at work, and with the support of my wife, I decided to quit my job and speculate in stocks at home full-time."
Jeff is basically a technocratic, short-term speculator. But when there are major economic data, he is equally concerned. His main currency pairs are EUR/AUD, USD/CAD, EUR/USD, EUR/JPY, GBP/USD. He places an average of three orders a day and holds positions for 10 minutes to an hour. But occasionally he would hold the position for days or weeks. He found himself more successful in the swings. "Sometimes I just lock in a currency pair and only hype it in the band."
Jeff likes the candlestick chart: "I glanced at that chart from a few meters away and I knew the market." Sometimes I watch the market while feeding my daughter. At night, after his daughter goes to bed, Jeff can calm down and do a few hours of market analysis, writing down what he thinks is support and resistance." I had an idea of the 4-5 trades I'd make tomorrow, and if that was in line with my prediction, I would follow suit. He usually looks at the daily chart, and during the day he pays attention to the 5 minutes.
When he's not trading, Jeff enjoys fitness and playing guitar. The best thing about Forex trading: "I have a lot of room to control, and it feels good to make money!" Jeff used the Fibonacci retracement on the 5-minute chart and the Exponential Moving Average (EMA) of periods 10 and 40 to judge the price levels of the in/out of the market. Two other graphs that Jeff often uses are: a 60-minute chart showing stochastic indicators that he uses to make trading decisions, and a daily chart showing EMA for periods 200, 100, and 50, which Jeff believes will ensure that his trades are consistent with the long-term trend.
Trading experience
Reporter: Before you entered the industry, how did you think about trading?
Jeff: When I think of trading, I think of the words intense, exciting, rewarding, managing, challenging. Now I find that this is true, so my instincts at the time were right.
Reporter: What prompted you to start trading?
Jeff: In June 1999, I made far more money on the stock market every day than my salary, and I spent all my free time researching the success of stock trading. In early April 2000, I left the bank and started trading tech stocks exclusively.
Reporter: Were you a huge success from the start?
Jeff: Successful at the beginning? Nothing. I did make a lot of money before I decided to trade full-time. However, 8 months after I resigned to start full-time trading, nasdaq fell 2,500 points. My money was made in a bull market.
Reporter: When you started trading, how big was your account?
Jeff: I believe my account size is below the average level at the time. Between 1999 and 2000, many people had large accounts. When it comes to Forex trading, my initial account size is smaller than everyone thinks.
Reporter: We want to know more details. How much money was in your Forex account at the time?
Jeff: It's ridiculous to say, but I really only opened a mini Forex account for $500. In the next 4 months, I've made $5,000 on my account, which of course is a very small number. However, shortly thereafter, by operating that mini account and another small account I later owned, I was able to withdraw a portion of my money from the account on a regular monthly basis as my income. In fact, as one of the 12 finalists of the Forex Trading Contest, I was given an account worth $1,000, which is my 2nd account. Since then, I have been trading Forex through this account as well as my original account. Of course, I still trade stock options sometimes.
Reporter: Why did you start trading Forex? What is so appealing to you in this market?
Jeff: My interest in Forex trading was sparked by reading and browsing trading magazines and websites about Forex trading and small Forex trading accounts. I think there are two main reasons that led me to forex trading. First, the 24-hour market structure. Second, amazing 200:1 or 100:1 (varies depending on the account type) margin trading. At the same time, I am also very interested in the concept of "no commission".
In fact, traders who conduct technical analysis will find that the movement of the Forex market is closer to that of technical indicators. My success in operating a demo account has laid a solid foundation for me to trade with real. Of course, the grand prize in the trade contest is the MINI Cooper car.
I qualified for the final in february and was one of the first finalists to be selected. And in June got a MINI Cooper. I think traders around the world will welcome the non-stop 24-hour trading market from Sunday night to Friday night. This gives me the flexibility to schedule my time. Of course, no additional trading commissions, only the bid/sell spread is also important.
In addition, I don't think the average stock trader recognizes the huge potential returns that a 100:1 margin trade on a standard Forex account or a 200:1 mini Forex account can bring. For example, a trader holding a mini account can buy or sell a currency worth $100,000 for $500. As long as the position rises or falls by 50 points, it can get a 100% return. (Of course, leverage is a two-way street, making you money and losing money).)
Trading experience
Reporter: Many traders who start trading Forex with small accounts are eliminated by the market within a few weeks or months. You also started trading forex with a very small account and are now trading full-time. Do you have any valuable experiences that you can share with other traders?
Jeff: I think the difficulties I've had in stock trading and options trading have prepared me for the trades I'm doing now. I believe that operating a small account in no way means failing in the Forex market. Traders can open a mini account with minimal funds, which offers 200:1 margin trading. It's a great combination of opportunities. After all, an important measure of success is to make money with the least amount of money or the money of others. You have to really take the time to delve into it. You have to learn the basics of trading.
Experiment on a demo account, open a mini account with minimal funds, make small transactions, each transaction does not exceed 10,000 USD (1 lot). As the scale of funds expands, the position is slowly increased. I think other traders can try to do that. Many people ask me" "What should I do", which is not a question that I can explain clearly in a meal, but what I am doing now is something that any other trader can do.
Reporter: What type of trader are you?
Jeff: I think I'm a technical analyst. Because, I mainly trade near support, resistance and trend lines. My trading is based on moving averages, stochastics and trend indicators. I make trading decisions based on the candlestick shape on the candlestick chart, such as the inclusion line, the doji, the meteor hammer, etc.
At the same time, I think it is prudent and wise to keep an eye on changes in fundamentals, because changes in fundamentals always have an impact on the big trend. I say this because the Forex market is always focused on a small amount of economic data and changes in interest rates across countries. When a trader observes the chart patterns and indicators, if he can also notice the changes in the published economic data, it will help the trader to evaluate the changes in market sentiment.
Reporter: What do you think is the most important technical tool? Why?
Jeff: Do you just want me to pick one? I think that for different analysis cycles, the importance of different technical indicators is also different.
On the long-term chart, I have to draw a trend line, otherwise I can't make a judgment. A long-term trend line that is supported or broken indicates a huge change in market sentiment.
On the medium-term chart, I can't make a judgment without support and resistance, Fibonacci pullbacks, recent highs and lows. During the long-term and short-term analysis cycle, if the long-term trend remains unchanged, the strength of the support and resistance levels will play a decisive role in the short-term trend.
On short-term charts, for me, moving averages are the best indicators to determine in/out of the market.
Reporter: What is your trading philosophy?
Jeff: I like to put three charts of the same currency on the screen.
One is a daily chart that ensures I am operating with a long-term trend, one is an hourly chart that I mainly use to determine my trades, and the other is a 5-minute chart for selecting in/out levels. You have to be able to foresee upcoming transactions in advance.
My main concerns are:
1. The price is above the 200, 100, 50 period moving averages on the daily chart, and I am sure of the long-term trend.
2. On the hourly chart I see that the stochastic is in the oversold zone, so we are close to the 50% Fibonacci retracement support. Because I believe fibonacci retracements are very effective in forex trading.
3． On the 5-minute chart, I see the exponential moving average of the 10 periods breaking upwards above the Smoothed Moving Average of the 40 periods. I have tried various combinations of technical indicators, and in my opinion the above judgment is more valid. I spent 15 seconds on the graph looking for if the graph I wanted appeared.
Trading tips
Reporter: Why do you think Fibonacci's retraction is particularly important?
Jeff: Because traders think it's important. For me, it's absolutely interesting to see traders all over the world buying and selling based on Fibonacci retracements. But precisely because traders around the world respect this law, fibonacci retracements are a self-fulfilling prophecy.
They work because everyone is using it. I'm not a mathematician, but it translates the evaluation of human nature into a mathematical equation. In short, this is the essence of man at work, after a round of obvious upward or downward movements, there must be some people who will think that the price has gone too far.
Reporter: Generally, how long do you hold trading positions?
Jeff: Usually I have 1 to 3 days of trading positions. Of course, sometimes it may vary depending on whether the market is moving as I expected or being stopped out early. I will operate a large number of trades with no more than 20 minutes in one trading day, but I have also had the experience of keeping a position that is consistent with the market movement for 3 to 4 weeks.
Reporter: Are you a systemic trader?
Jeff: If the word systematic means following a program step by step, and all transactions are made in the same way, then I'm not. But my preparation was systematic. My lifestyle dictates that I do a lot of preparation the night before trading or whatever time I have.
I look for my favorite technical patterns in various charts. I wrote down all the Fibonacci retracements. I write down the trading ranges or the inner lines, which will eventually be broken by the market from one direction or the other. I try to understand newly released economic data or changes in interest rates in various countries, and sometimes I plan to trade before and after the release.
Reporter: How long do you work every day?
Jeff: Every day is different, mainly based on my assessment of the market trend of the day, whether it is consolidation or obvious trend. I try to avoid spending too much time on trading unless necessary, because sometimes I may be with my daughter, teaching her, playing with her, encouraging her, and so on.
Of course, she also needs to sleep. I would try to trade for 3 to 4 hours during the day when she slept or other times, and then trade for another 4 hours or so after my wife came home in the afternoon and before I went to bed. This is my daily schedule from Sunday night to Friday afternoon.
Reporter: Where does your judgment come from?
Jeff: Sometimes you have to go backwards and look closely at what unusual things are going on in the market. Whether the market will break through a certain trading range, or whether the market sentiment will change fundamentally, then judgment will come into play. Any time you make a profit depends on how you can keep the winnings going.
Let's face it, many times we can profit from currency pairs with smaller consolidation ranges. Choosing the best time to open a position and making a profit in a major round of 500-750 points in the market is actually equivalent to making 15 to 20 beautiful swing trades.
Reporter: Is there a perfect system?
Jeff: I don't think so, but who knows? Can a computer fully interpret the emotional changes in the minds of tens of thousands of traders around the world? Because I think a perfect system should be able to do that. The market is changing rapidly and is constantly improving, so in order to adapt to this change in the market, you must also change the way you trade frequently.
Trading is much like survival, and only those who adjust themselves to changing market conditions can have a stable life at all times. I think many traders have experienced a time when their system was working near perfection, and of course, that's when you started to think that nothing would go wrong, but right away you found out: Oops, oops! Only those who can make timely adjustments when their system fails are successful traders.
Reporter: Do you study all kinds of analysis cycles?
Jeff: Yes. In fact, I think that's the best way to see the whole market.
Reporter: Do you use more technical indicators, or do you use more graphics?
Jeff: I personally tend to compare with graphs, but sometimes it seems that I am more successful with technical indicators. I think combining the two is the best way to do it. As long as you know what you're looking at, why not use all the tools at your disposal to reduce risk for yourself?
Reporter: Does volume play a role in your trading method?
Jeff: As far as Forex is concerned, it's an interesting question because there is no direct contract volume related to Forex. But usually I think volume is a very important aspect of trading. You should know the following about volume: the price rises with the increase in volume, the market is likely to continue to move higher; the price falls as the volume increases, indicating that the market may go further down; the price rises as the volume decreases, and the market trend will slow down, showing a potential reversal or correction signal; the price falls with the decreasing volume, indicating that the market trend will slow down, indicating a potential reversal or correction signal.
Using some charting features in Forex trading, such as volume bars, can monitor changes in volume, but I don't use it. However, at night when I can look closely at the market, I can see the change in volume in the movement of the graph, which is my method.
Reporter: How do you test your trading ideas?
Jeff: I test my trading philosophy with small trades anytime, anywhere. Sometimes, when you think of a certain method, you will succeed immediately after experimentation. But then I had to sacrifice my sleep time at night, so I struggled to find a balance between life and trading. This is a problem and a dilemma that every trader faces. You have to study hard because there is no perfect trader in the world. We all know that on any trading day, we miss countless opportunities.
Reporter: Are you always looking for new technological forms?
Jeff: Yeah, I'm always looking for new technology patterns, and the market is improving every day, so you have to be also changeable and adaptable.
Reporter: So how can you find it?
Jeff: You have to be willing to take the time to observe. I take a lot of notes, and as soon as something happens, I write it down. If I miss a trading opportunity, I write down what happened. If I get out of the game with a stop loss, I'll write down the most likely reason. If a trade is more successful than I thought, or if it is better than it should have, I will record it. By the end of a trading day, I've probably written 10 pages of scrawled notes, and then when I'm preparing for tomorrow's trade in the evening, I'll take a closer look. Interestingly, I rarely trade without interference because of the need to take care of my daughter, so I need to prepare more things in advance than the average person.
Reporter: How many different technical patterns do you trade with?
Jeff: I might just use one pattern or a combination of multiple patterns. I like to take advantage of inversions. I've always advocated taking risks. I would write down the ascending engulfing pattern on the candlestick chart and wait for the pattern to be confirmed. I'll look near support and resistance levels (it could be Fibonacci retracement, trend lines, or previous lows/highs). I will focus on oversold/overbought readings of relative strength indexes or stochastics and look for positive divergences. I'll pay attention to signs of increased buyer power, which is the volume I just talked about.
We are talking about more obvious reversal signals, in fact, you can often see these patterns, sometimes it may be a very short-term reversal on the 5-minute chart, sometimes it may be an important change in the main trend on the daily chart. Either way, as long as I can seize the opportunity, I can make a profit. If the 200-day moving average provides support or resistance near the area of the 50% retracement level, I would think that the trend in this area will change dramatically and trade accordingly. I find that 20 and 80 seem to be often support or resistance levels, so it's a good place to open or close a position.
Risk control
Reporter: How do you control your risk?
Jeff: Sure, I control my risk by setting a stop loss, but it really depends on the work I do on the eve of the trade. Some technical patterns are less risky. So you have to do everything you can to reduce the uncertainty of trading. Playing the father/trader lifestyle at the same time makes me have to do a good job of trading the night before, keeping an eye on what happens on the day of the trade, and as I mentioned earlier, I write down the support and stop loss levels. My chart is full of lines drawn on the eve of the trade, used to mark trend lines, Fibonacci retracements, previous highs and lows, and so on.
I'll keep an eye on what data is released the next day. When I post them, I'll set prompts on my handheld or write them down on my worksheet the next day. I would adjust my settings to the graphs I wanted to keep an eye on the next day, and at that time, depending on the performance of the various currency pairs, some graphs would be set larger and others would be smaller. These will minimize my risk in every trade. Being prepared and careful to use stop loss and trailing stop allows me to play the role of a good trader and father at the same time.
Reporter: Your stop loss is mainly based on technical analysis, not money management, right?
Jeff: Possibly, but I would say that I set stop losses on the basis of comprehensive technical analysis and money management. My Stop Loss is usually set near the support and resistance levels of technical analysis, rather than a fixed number of points. A fixed number of pips doesn't make sense to me, so I think setting a stop loss based on the support and resistance levels of technical analysis is equivalent to wise money management. By setting a stop loss according to a fixed number of pips, you have no basis for trading. The pair may be in a consolidation, slightly out of the normal zone, and at this time, according to the number of stop loss points you originally set, you have to stop out without technical or fundamental reasons.
Reporter: What do you do when you're in the wrong trade?
Jeff: Bad trades are often caused by their own reasons. Using the right stop loss can put the decision in your hands. Sometimes, if I feel like I'm missing something during the preparation process, I modify the original stop loss level.
Because I believed in my preparation, and I knew that there were other technical forms available at that time. So sometimes, if you see that the market is not moving in the direction you expected, you have to take action, so I can close the position before I reach the stop loss level.
Reporter: Is money management a separate subject?
Jeff: Money management is an integral part of trading, and if you start trading or thinking about it, you have to know: all traders lose money, and that's part of trading. About 95% of traders have lost money in their first year of entering the market. Risk management determines whether you can get through this period safely. Protecting your capital is absolutely important. It's like a gunfight, and you just want to stay alive, to retain your strength, to participate in the next day's battle. Until you have a few years of trading experience, you can spend 5 to 10 seconds to look at a chart, you should try to estimate conservatively, if there are technical or fundamental reasons, close the position immediately.
Reporter: How many positions do you use for each transaction?
Jeff: Each trade accounts for about 5% of the amount of funds, and the upper and lower fluctuations range between 2.5% and 7.5%. I adjust for different situations depending on whether the trade fits my risk scale and whether we are in a short-term, medium-term or long-term trend.
Reporter: How do you manage your open trades?
Jeff: I keep an eye on my positions, and if the market moves in the direction I expected, I raise or lower the stop loss level to make sure I don't lose money. At the key support/resistance levels of a round of movement, I liquidate half of my profit first and keep the other half of my position with a trailing stop order. It is then easier to open/close positions with 1/4 positions, and when I see that a potential technical pattern is beginning to form or nearing the end, the remaining 1/4 positions can be used. I trade with two different accounts, one account to open a position with the timing of the main trend, and another account to trade at the right time when a small trend with the opposite trend occurs in the main trend.
This simple method allows me to keep my mind clear. Some of my thoughts are very simple, and there's a reason for that, everything I do as a trader and what I want to get on every trading day, is put second, because my daughter always comes first. This problem is more appropriately explained by my computer settings. Because I use the latest technology to manage my positions effectively.
I'm a father first and foremost, so sometimes I stop trading and be a good father. Thankfully, I use the tools I have to play the role of a good father and a trader at the same time.
Reporter: Which stop loss and/or profit target do you use?
Jeff: I use stop loss levels and trailing stops. The difference between successful trades and failed trades is the application of stop loss. When you open a position, first set a stop loss level, and then when the market moves in the direction you expected, set a real or psychological trailing stop. Within a trading range, set a tighter trailing stop. I like to use more flexible profit targets. I have a goal in mind, but at the same time I know that this is how you keep a profitable position, because it determines your overall yield. I don't easily place an order to close a position unless there are special circumstances. I make a judgment on whether the trend continues or pauses before a reversal occurs. When setting a trailing stop, consider how much room you can tolerate for retracement or up and down fluctuations so that you can maintain your position.
Reporter: When you execute a transaction, is it a subjective process or a mechanical process?
Jeff: It's an interesting question, at first, I thought I was executing trades subjectively, my preparation process was mechanical, and the way trades were executed was different because of the different things that happened on each trading day. My lifestyle requires me to be prepared beforehand. I have to know when which currency will pique my interest, and then I analyze how or why the market will reach this level in order to make a final decision, but my lifestyle may also determine that half of my trading is purely mechanical. I get the job done, look at the price movements and graphs, and then make a trade.
Trading psychology
Reporter: Is there any connection between your successful and unsuccessful transactions?
Jeff: They all started out the same, right? Eventually they either go up or down. That's the only thing they have in common. If the market is not moving as you expect, you have to close the position. Your time and money should be spent on the next form of technology. In fact, a trade that is opposite to your expected direction may become a successful technical pattern in a few minutes, hours, or days after which you will open another position.
Reporter: What was the biggest setback you encountered?
Jeff: I did have some difficulties, and a few weeks after nasdaq reached its peak of 5,000 points I started trading full-time. Before starting Forex trading, I mainly traded options, and once, I bought a buy option, which expired in less than a few days, and most of my investment was lost.
In April 2000, I had a lot of unsuccessful trades because I thought the stock was going to go all the way up. It's just a joke, but you know what? Psychologically, I pack up those unpleasant memories or I wouldn't be here today. In Forex trading, I haven't encountered any terrible setbacks. But before I achieve today's success, I have had enough precious lessons to enable me to avoid those mistakes.
Reporter: What do you feel most confused about trading?
Jeff: What I was most confused about in trading was preparing for the possibility of technical patterns, and then observing the changes in the patterns, but then missing them. Finding the technical patterns of possible trades on the eve of trading is my main job in trading. Not being able to grasp the best time to open a position is very confusing. However, my daughter always comes first, she is an amazing girl who can encourage me to move forward on the most difficult days.
When did you realize that trading wasn't just a temptation, but was about to become your full-time job? Or did you feel it from the start?
Jeff: When I first started trading, I thought, "This is what I want to do." Then, when I had difficulties in trading, when my method was no longer effective in a bear market, I had to do self-reflection. I had to take a step back and try something different that drastically reduced the size of my trades. When I started making consistent profits in a bear market, I started thinking that was something I could do. However, my recent success in the Forex market has taken my confidence and determination to a whole new level, not what I can do, but how good I can be. Trading is largely about confidence, and sometimes confidence can waver, but if you can stick to it in the most difficult times, you'll be rewarded. Write it all down and you can benefit from it.
Reporter: When do psychological factors come into play?
Jeff: It's a battle against yourself. Truly understanding this is an important step towards success in trading. Once you recognize this, and I mean really recognize it, you can learn to take a step back and not make deals that are doomed to fail, rushed, irrational, unplanned.
What do you think about fear, greed and self-respect?
Jeff: Every trader has to fight fear and greed. You have to know that trading is not a quick way to get rich quick. It's a business, and you yourself combine all aspects of the company: manufacturing, accounting, information and technology systems, THE CEO, and so on. Losses are the cost of the business. Markets change because of fear and greed: fear of missing out on opportunities, fear of losing money. Greed is even more frightening, not only making you into the wrong market, but also turning what was originally profitable into a loss that is difficult to swallow later.
What do you think is the difference between you and other traders who have tried and failed?
JEFF: Persistence.
I keep experimenting with new technical patterns, new markets, until I find an environment that suits me. I'm more cautious about the size of the trade until I see a definitive result.
The most important factor was that I had an invincible support group. My wife, Claire, has always been patient, and she has always believed in me, even in the shadow of the doubts and incomprehensions of the people. This is something you have to have in this tough, challenging market.
Reporter: In addition to playing with your MINI car, how did you spend your free time?
Jeff: Trading is a way of life that takes your whole place completely, so I try to find a balance through challenging leisure activities (both mental and physical), such as going out regularly, or playing guitar, and things that require concentration. But more often than not, I just want to hang out with my wife and daughter for a day.