One of the hardest obstacles for people new into trading in the financial markets is in strategy development. Most people struggle for years trying to find the “perfect strategy” that can guarantee them consistent profits into the future. The harsh reality is that there is no perfect system, and what may work for some may not work for others.

A trading strategy is a set of decision making rules that a trader follows in order to justify executing, managing, and closing orders in an account. These sets of decision making rules are what provide logical interpretation of market data and ensure a disciplined and less emotional approach towards trading. A trading strategy is the process or methodology behind achieving trading objectives. By virtue of this, it then means that a trading strategy must have the capability of achieving the laid out objectives, and this is where the main obstacle lies for most traders

In order to formulate a strategy, a trader would first begin an idea based upon pattern recognition. Trading is both an art and a science in which we try to predict and profit from future price movements in the market. Predicting future price moves requires having an understanding of the market factors and phenomena that influence price. These phenomena when studied over a period of time can give insight into repetitive patterns that can be exploited for profit.

The journey of a strategy begins as an idea, an idea that would need to be tested further to find out whether it is capable of predicting future price movement in manner that is consistent enough to generate a positive return on investment. Our would-be strategy would encompass a few major elements such as the market instrument we would like to trade, the time-frame we would observe price movements, our entry criteria for both long and short positions, our risk tolerance per transaction, and our exit criteria for each trade. Structuring our ideas in this manner would make it easier to test out each element in our trading idea to find out which areas we would need to make changes to.


The fastest procedure to verifying the accuracy of the logic behind a trading idea, is through back-testing. This is also known as simulated trading. In simulated trading we play back historical price movements in real-time, and then test out the decision making rules or logic behind our trading strategy, to see how it would have performed in the past. This past performance will give us a basis to formulate a probability model for the strategy’s future performance. We tend to look at past performance – not as a guarantee of future performance – but as a guide. If the logic behind our strategy can work well in the past, then it can have a good probability of working well in the future.

Simulated trading has been shown to reduce the time taken to prove the logic in a strategy, and also give insight to possible modifications all within a short period of time, as compared to the traditional way of testing out strategies which is through forward testing methods such as demo trading and live trading. Forward-testing serves the purpose of confirming that the back-tested logic can work in current market conditions

Through simulated trading, a trader can test out their ideas in the past market conditions and make modifications to the logic to improve on returns. However, one must be careful not to over modify / over optimize the logic to such an extent that it no longer makes any sense in the current market conditions. Through back testing, simple ideas can be born into effective trading strategies.


My day to day work entailed closing clients for automated trading expert advisors. This entailed tasks such as cold calling, converting digital marketing leads from the company’s social media handles, handling walk in clients who specifically came for enquiries on the trading robots as well as organizing seminars to which we could educate the public on automated trading. The eight months experience exposed me to a great amount of research and learning because I had to immerse myself in the world of forex robots. I loved the experience because it was basically a performance based type of work where potential clients would be exposed to real time market analysis on the robots and it would be so such a great opportunity for them to be exposed to the reality that their investment would give them a return on their equity. The trading robots worked using simple indicator based strategies and what really pushed me to do business development for the company was that the robots had an equity stop loss feature that protected the client’s trading capital to a certain percentage allowing room for the robots to let the market do as it pleases. The combination of the robot selection also factored in different risk and reward ratios from extremely high risk high reward to low risk low reward robot selection meaning that they would serve different investors as per their risk appetite.

Photo Taken at the Company’s premises Training Room.

What intrigued me most is that the robots would work in different market conditions, trending markets, ranging markets and even in reversing markets providing more opportunities for investors to cash in. The portfolio selection consisted of seven trading robots trading on six instruments on major currency pairs; EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CAD and NZD/USD.  They had been configured the robots to work on both MT4 and MT5 trading platforms. The trading robots were based on simple indicator based trading strategies, working simultaneously on all the three market conditions in all trading sessions, London, New York and Asian markets. The robots functioned and traded on a remote cloud server known as a VPS provided by the broker. The company made sure that installation of the robots on a client’s trading account would only be done with brokerage firms who had a stamp of approval from Capital Markets Authority in addition to the international regulation from the country of residence in a bid to safeguard the safety of the funds of the investors. The robots run effortlessly on the MT5 Trading platform which meant that the company could only install the robots using Scope Markets Kenya’s Trading platform.

Automated Trading Seminar Session in Progress.

During the orientation process a week into joining the company, my business partner and I were incorporated & involved in the back testing process of the robots. This saw us go back in time and evaluate whether the robots could withstand the impact of the markets and their sustainability to give returns in future forward tests. The fact that the same robots had been served to institutions & corporations like local banks for their back end forex trading instilled some level of confidence to provide the same robots to the retail investors provided the performance of the very same robots could speak for itself. Numbers do not lie and my work was made easier by the days when statistics backed the results of the robots which saw us generate a new revenue stream for the company by providing the automated trading solutions to retail clients. The minimum trading capital required to start trading using the robots would be $1000 and the equity stop loss would be set at $600 or $700 for a$1000 account size depending on the risk appetite of the client meaning that if there was say a black swan event like a major global recession or even what happened to the financial markets due to the impact of COVID-19, the robots would automatically close all open trades and protect the investor’s capital to the equity stop level.

Speaking during an Automated Trading Programs Seminar.

The performance of the robots really took a huge blow due to COVID in the second quarter of 2020. Using a martingale strategy; the robots could barely withstand the impact of COVID 19 market reaction. This saw my supervisor adjust the equity stop losses for some investors with some of them cashing out but it was until May that the staff including my role in the company was terminated. I enjoyed the lessons and came out with great communication and client management skills due to the rapport that had to be nurtured while dealing with clients across board. I managed to generate revenues for the company with majority of the clients ranging from a minimum capital size of $1000 to even $10,000 for some investors. I developed and nurtured work relationships that will go a long way in the financial markets industry and that experience to me was golden and still has a huge impact in my day to day work operations pre and post COVID. To see the future of finance with automation first hand is an experience I wouldn’t trade for anything because the role prepared me to endless possibilities, research and potential realities of what trading robots can do for a specific niche of modern day investors.


Having worked from home for close to three years, it was about time that I stepped out of my comfort zone. I felt the urgent need to work within a team in the area of my passion and industry which is trading in the financial markets. In September 2019, my business partner and I visited one of our friends at his house. This visit was random on the day but we had purposed to meet earlier on to discuss the issues traders faced in regards to the regulation of the Forex Market locally. Bear in mind that only two brokerage firms at the time had met the pre-requisites for CMA Licensing in Kenya. The visit came at a time when some local trading professionals faced frustrations in the Kenyan market to run their business openly with some of them facing charges from the police even when it came to the bare minimum of running trading institutions to train people how to trade. This saw many people trade at the comfort of their homes.

Call it a match made from heaven, here I was finalizing on my higher education Master’s program from WorldQuant University to when three days later after the visit, I received a call from our pal’s friend asking if I could use a job as an educator in their training institute on Forex Trading. The company was specifically looking for a female trainer but I knew where my strengths lied so I immediately called my business partner and told him about the opportunity. Thereafter, I returned the call and we were invited for a 4:00pm interview on a Friday and had a conversation with their head of training who is now a very great friend and a contributor to our website and support in our bi-monthly webinar series in partnership with Scope Markets Kenya. I think he liked the both of us and we were incorporated in the company with my business partner joining their training arm and I joined the company as a business development executive in the automated trading department.

Lean staff team of six at Meta Capital Limited at Reliance Center Building 4th Floor, Westlands in Nairobi Kenya.

Education was and still is huge for us and the visit was to find a way to work without any interruptions from the regulator. This meant one thing at the time, aligning ourselves with brokers regulated by CMA at the time in providing education services to our clients which was a great choice. Among other things that were discussed during the visit was the use of automated trading solutions. The practical application of that concept to me was completely new despite the fact that I had studied about automated trading expert advisors in my Master’s Program at World Quant University. By this time I was working on my final dissertation and I had some knowledge about EA’s but from an academic and research perspective. What happened was that our friend had another pal of his at the house. Little did we know that what we were discussing was some form of vetting if you may call it so to one month later to work with my then new boss who specialized in quant trading services and had his office at Westlands in Nairobi.

I remember once having a sit-down with the boss on timelines before we took a Christmas break on the 20th of December 2019. At the time along with my colleagues, we successfully managed to conduct three seminars on automated trading systems with two brokerage firms with the stamp of approval from Capital Markets Authorities. It was a very lean team with the day to day operations needing only six people on the daily and partially working over the weekends. I really loved that the company allowed each and every one to execute on their roles with minimal micro management and that allowed me to thrive on what I was good at which was, generating clients for the company and the brokerage firms we were in partnership then. I explicitly told my boss who was also my supervisor that my plan would be to serve in that position for three years. Anyone who knows my work ethic knows very well I am pretty straightforward when it comes to being transparent on my deliverables and for how long I intend to be part of an organization for as long as I am creating value. Little did I know that COVID-19 would end my role in the company on May 22nd, 2020. However, I thrived and loved to work within a team, my colleagues were sort of my second family for the eight month duration.

Automated Trading Seminar with Scope Markets Kenya in 2019 at Meta Capital Limited.

Upcoming Interview with Linda Raschke.

Sylvia’s Traders Lounge is delighted to give you a heads up on an up coming live interview with a question and answer session with Linda Raschke.

This is an opportunity for Kenyans to interact, engage and have access to a professional with decades of trading experience.

We are delighted to partner with Scope Markets on this engagement. Those willing to attend can do so by registering on this link;


and be available at Scope Markets on the 15th of January by 2:00pm. We look forward to seeing you there!


We just recently concluded seminars and a three day workshop with FXTM in Kenya. Strathmore University students actively participated as well as interested citizens in a bid to explore the opportunities presented by the markets. We saw people from all age groups come to the events, eager to learn. They not only put in the hours in the sessions but also took time to unlearn what they thought they knew regarding trading.

We saw people open trading accounts for the first time in their lifetime and experienced traders who came to increase their knowledge. The most important thing was not the certificates awarded at the end of the workshops but the increase in the skill to trade for beginning and professional traders. Andreas Thalassinos did a great job expounding on technical analysis, its application and use in the financial markets.

While the Capital Markets Authority of Kenya issued a new directive a couple of weeks ago on regulation of brokerage houses seeking to conduct their business in Kenya, it should be known that FXTM is currently in the process of doing so. FXTM blends is very well with the vision and mission of Sylvia’s Traders Lounge, we are both big on education because we know that the skill to trade is just as important as your capital. Those who wish to learn and trade with FXTM can do so by following this link.


We look forward to having FXTM again in the first quarter of 2019.


I have said this before, brokers can be whores if they want to. One of the things that you should look out for as a trader is your choice of broker. The role of brokers is to provide a trading platform so we can access liquidity in the Forex market. Brokers make money off your trading account in form of spreads and commissions. Before signing up with a brokerage firm, ask yourself these questions;

  1. Is my deposit secure? Is the brokerage firm registered and regulated in its country of origin?
  2. How affordable are the transaction costs? Will I end up generating profits for the broker due to high spreads and commission rates?
  3. Is their customer service available to me 24/5?
  4. Does the brokerage firm have a user friendly trading platform such as the MT4?
  5. How long does it take for the brokerage firm to execute my orders? Speed is crucial.
  6. Can I access my capital, withdrawal and deposits whenever I feel the need to do so?

Once you address those critical issues, you can be confident that you are dealing with a professional brokerage firm. The last thing you want is to keep blaming the broker for your ignorance and lose of trading capital. In this regard, we have partnered with FXTM to bring you an educational series this October. This is the first time FXTM will be in Kenya. Our goal is to provide you with the right information that’s applicable to your trading skill.

In this regard, we shall conduct two seminars followed closely by a three day workshop. We shall commence this by engaging actively with students at Strathmore University. The seminar is open to all and not restricted to students.

Thereafter, we shall have the second seminar at the Nairobi Safari Club for those of you available on the weekend. This day is special for the business community and will be the official launch of FXTM in Kenya. Those who may wish to know what will be going on but for some reason won’t make it to the venue can watch the event on Ebru T.V business news segment then.

Since we shall only have 300 people at the hotel, early bird FREE registrations are welcome on this link. https://www.forextime.com/education/forex-seminars/the-ultimate-trading-formula-kenya2018/?partner_id=4921021

Workshops will follow the next week from the 16th-18th of October at the same Venue, Nairobi Safari Club. While the two seminars are free of charge, the workshops will attract a mandatory attendance fee of $200. Once you register for the seminar on the link, do not care for the fee, it’s optional to attend the workshops.

We hope that by you attending the seminars and or workshops, you shall get the basic knowledge to get started in trading the Forex and other derivative markets. Come and network with professionals who are not only passionate about the game but also resourceful. See you all then!

Crypto Watch.

After a period of suppressed prices ( late 2017 up to the second quarter of 2018, Bitcoin is now positioning itself for a possible breakout above the yearly (200EMA) moving average prices and quarterly (60EMA) moving average prices.
This surge has been precipitated by news that the  World’s largest asset fund management firm BlackRock, and billionaire trader Steve Cohen have expressed interest in Cryptos and blockchain.
Keenly watching whether the price will hold above 8,180 after a weekly close, and going forward in the third quarter of 2018, if an uptrend will eventually be established or the current surge is just an overreaction.
Disclaimer: This article is for informational purposes only and NOT a BUY or SELL recommendation/signal.

Obsessed with signals and indicators? Sure way to deplete your trading account.

This article is for the retail trader who wants to be in the game for the long haul, save yourself some bucks and thank me later. You have probably heard it before, there’s not one sure way to trading success. Why is it then that people are willing to pay for signals hoping to increase their profitability? Why would you rely so much on somebody else to tell you where to make a buy or sell and put your stop? Do you not trust your analysis if you have one? Do you have a method and a strategy that has been tested over time? Clearly you don’t. This is why you are willing to pay someone else, short cut your way into trading and then later find someone to blame when things go south.

There’s a reason why on average 90% of traders fail. You’ve got to ask yourself why, what makes you different, what’s your edge? “But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think”. Jesse Livermore. If you truly want to be exceptional at trading, you have to treat it with respect. It’s a business, you are the one running the show. The more you continue giving away your power to someone else and relying on their decision on how you execute on your trading account, the sooner the depletion comes, and quite frankly, you have no one to blame but yourself.

“The indicators and measurements that technical analysts use to determine the trend are not crystal balls that perfectly predict the future. Under certain market conditions, these tools might not work”. Kirk Patrick. Why? Because trends change any time, the markets do whatever they want, anything can happen. It does not matter how many indicators you have on. If they don’t help to validate your strategy and confirm your edge, you have no business using them. What works for me might not necessarily work for you, which makes trading intriguing and fascinating all together. Take time to back test and narrow down to only those indicators that increase your odds of success and winning rate. This takes time. I hope this helps those of you trusting “gurus”. Do not give away your power to anyone.

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The content in this blog is intended to be used for informational purposes only. It is important to do your own analysis before making any investment decisions. You should take independent financial advice from a professional, or independently research and verify, any information that you find on this Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

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Investment Warnings

Please draw your attention to the following important investment warnings.

  • The value of shares and investments and the income derived from them can go down as well as up.
  • Investors may not get back the amount they invested; losing an arm and a leg is a real risk.
  • Past performance is never indicative of future results.

Fees Matter.

“Performance comes, performance goes. Fees never falter.” (Warren Buffett. 2017 Berkshire Hathaway Investor Letter. Page 11)

Let’s assume you’re ready to invest. Perhaps, you even got some stocks in mind that you want to invest in. You read the analysts reports, went over the quarterly and annual reports, and feel confident about the market research you’ve done. Good. That’s exactly what you needed to do. Now, you wonder, which is the most cost-effective way to invest?

There are various types of brokers out there. Discount brokers, full-service traditional brokers, robo-advisors, etc.… The financial industry suffers no shortage of people willing to sell you stocks. Back in the old days. Investing in the stock market was widely a rich person’s privilege. Stocks were at very attractive prices, but fees were outrageous. Today, there are services that let you buy and sell stocks for free. It seems as if the financial industry is racing toward the $0 commission. Firms are making money in other ways, so don’t feel bad about it.

I, like almost every other stock junky out there, took last Saturday morning to read Warren Buffett’s share holder letter. Entertaining and informative as always, Buffett showed us the results of his multi-year bet he had going against a Portfolio Manager. This fund manager picked other hedge funds that could beat the S&P 500 over 10 years. While Buffett simply picked an index fund that tracked the S&P, mirroring its performance. Results showed that fees were largely the reason Mr. Buffett won the bet. While the hedge funds performed relatively well, after subtracting fees, almost half of their gains were eaten up. Leaving their investors largely under served.

The point of this story is to bring awareness to the difference fees make in your portfolio. Investors are assaulted by people who give financial advice. There are countless newsletters offering buy and sell signals. Options traders give advice to which options strategies investors should use. For some reason, nobody really talks about how much these trading techniques cost. I’m not saying their advice is bad. Sometimes it could be good advice these people offer. My point is that even by utilizing good trading techniques that work, your performance can be significantly impacted by the fees you accumulate.

Pay attention to fees. They can kill your performance. What’s the point of being a good trader and investor if half your gains are spent on fees?

Forex Conference held at Kenyatta University.

The year started with a bang after an invitation which was long overdue to speak to Kenyatta University students on what it takes to be a successful Forex trader. It was really great to have the talk in a higher education learning institution, my former school. The focus of my presentation was centered on Trading Psychology and Risk Management as can be seen on the PowerPoint presentation attached.Final STL 2 Forex Presentation

This event was organized by Axi Traders in collaboration with Gamerz Arena following the completion of a Forex Competition that saw two ladies and one gentleman take leading positions. The contestants were awarded for their achievement and shared their brief trading journey with the audience. I was delighted to be part of fresh and new talent and emphasized to the students that what really matters in this game is your level of skill and the time you are willing to put in to learn the ropes prior to execution.

The role of coaching and mentor-ship was brought up by the students who were really curious on how to get started in trading the financial markets. Part of the reason as to why Sylvia’s Traders Lounge was formed was to give a solid foundation to beginning traders as well as struggling traders to achieve consistency in their profitability with a focus on education. As you can see, the venue was packed with students eager to learn.

The conference could not end without a one on one networking interaction with interested and potential clients. The enthusiasm of this crowd was beyond exceptional, totally loved it. One of the students really appreciated the exchange and told me I had addressed one of his main struggles pertaining to draw-downs and trading personality in less than a minute. I look forward to representing Sylvia’s Traders Lounge in such seminars in the near future. Be on the look out, cheers!


Diversification is crucial to building a long-lasting portfolio. Just like in most team-based sports, we must build a solid defense against potential attacks. In this case, diversification can help us stay invested in the market when we otherwise would have cashed out. Diversification also helps us remain disciplined during times when the market seems to be going up every single day.

Maybe you own some bonds, real estate, stocks, cash, or even some crypto currencies as part of your investment mix. There are many ways to diversify within each of these asset classes as well as across them. There are almost endless combinations that can provide for a well-structured diversification strategy. I will not go into all of them because I would bore you to tears. Frankly, there are many books on this subject alone. You can spend months trying to learn all the different diversification strategies out there. I found this article from Fidelity to be a great starting point, https://www.fidelity.com/viewpoints/guide-to-diversification if you like to learn more. Here, we are going to focus on stocks only. I will assume you will work with a financial advisor to set up your asset class diversification.

The most common way to diversify in stocks is by spreading your holdings among different industries and sectors. Fidelity classifies each sector as follows:

Sector Industries Market Cap
Consumer Discretionary 12 $5.50T
Consumer Staples 6 $3.47T
Energy 2 $3.57T
Financials 7 $7.90T
Health Care 6 $4.97T
Industrials 14 $4.21T
Information technology 7 $8.83T
Materials 5 $2.22T
Real Estate 2 $1.20T
Telecommunication Services 2 $1.77T
Utilities 5 $1.31T

Others may use only ten sectors, but I prefer to use twelve instead. It gives us a better view of how the market is categorized. The more you spread your holdings across these sectors and industries, in theory, the greater diversification you will have. Simple right? Not so fast. Some of these sectors trade together. Thus, minimizing your diversification and increasing risk.

The way I prefer to diversify is to look for different industries and sectors that are not correlated to one another. You may visit one of the websites I recommended on my previous post titled “Where can I research stocks?” Yahoo Finance or any other similar service can provide you with historical data to figure out past sector correlations. In there, you can see that certain sectors trade together depending on which part of the economic cycle we find ourselves in. If things are not so good, consumer staples, utilities, and health care stocks may do well during this time. If the economy is doing well, we will see technology, industrials, and consumer discretionary trade up.

If there is no systemic risk, like the latest downturn in 2008, stocks will go through these rotations, adjusting themselves to what works during each season. If you have a portfolio full of tech stocks during a boom period, you will take a huge hit when the market rotates out of technology into utilities and consumer staples. Therefore, it is important that you choose stocks from each sector and rebalance every quarter or a couple of times a year.

Now that we have gone through the way I like to diversify my stock portfolio, we can meet next time to speak about how I go about choosing stocks in each one of these sectors and industries. I want you to do the work for yourself, use this as a simple guide to help you find the right diversification style that fits your risk tolerance.

Final Top 10 Forex Literature Covered in 2017.

Finally, this remarkable woman has some interesting stories. Those that keep you glued to your screen, you can’t catch a break. Kathy Lien in her book Millionaire Traders, How Everyday People are Beating Wall Street at its own Game will give you valuable lessons you can employ in your trading journey. This is a very good read for new traders. It emphasizes that there’s no one rule of thumb when it comes to trading. You are the Holy Grail, stop hunting for one. Kathy Lien was featured in a trading documentary, Million Dollar Traders a while back, I suggest you go look out for that. She and her trading partner Borris Schlossberg manage an asset fund management company for several years now. So when she tells you of successful stories of traders she has interacted with over her trading career, listen up. She covers the basics, the art of trading, getting started in trading before she cites real life examples. This book is definitely worth your time. In conclusion, she outlines six real truths in trading that you should be aware of when starting out; be well capitalized, expect to lose for at least six months, test before you try, always use stops, trade to your personality and have the right tools to trade i.e. an analytical mind and the correct platforms.

Another book I can literally read over and over again is Trading For a Living by Alexander Elder. He takes us through what it takes to trade successfully, why psychology is key and why you seriously need to evaluate your broker. Elder says, “The trading industry kills traders with commissions and slippage. Most amateurs cannot believe this, just as medieval peasants could not believe that tiny invisible germs could kill them. If you ignore slippage and deal with a broker who charges high commissions, you are acting like a peasant who drinks from a communal pool during a cholera epidemic. You pay commissions for entering and exiting trades. Slippage is the difference between the price at which you place your order and the price at which it gets filled. When you place a limit order, it is filled at your price or not at all. When you feel eager to enter or exit the market and give a market order, it is often filled at a worse price than prevailed when you placed it. The trading industry keeps draining huge amounts of money from the markets. Exchanges, regulators, brokers, and advisors live off the markets while generations of traders keep washing out. Markets need a fresh supply of losers just as builders of the ancient pyramids of Egypt needed a fresh supply of slaves. Losers bring money into the markets, which is necessary for the prosperity of the trading industry”. I will have a webinar up before the end of the year on brokers. Be on the lookout.

Technical Analysis-The Complete Resource for Financial Market Technicians by Charles Kirkpatrick & Julie is one of the bibles of Technical Analysis actually recommended by a CMT pal of mine. The book has everything you need to know on price, chart patterns, indicators and why you don’t need a million of them to trade right, risk management and taking profits, market cycles, statistics, what investors look for just to name but a few. Especially when you need to recover from a bad trading week or month, treat yourself to this book. It’s a treasure hunt, for real. I like how he elaborates the need to test out a trading system with regard to money management. He says, “There has never been a system that was 100% profitable, that never took a loss on any trade or investment. Although such a system is the ideal, it has never been achieved despite the brilliant minds, sophisticated mathematics and theories, and superfast computer abilities that have addressed methods of investment. It likely never will be achieved. The search for such a perfect strategy can become an obsession but is genuinely futile, and losses are, therefore, inevitable in investing and trading. Ruin is also very likely. Every day some traders and investors are wiped out, largely because they did not utilize a portfolio method that included an assessment and control of risk. The area between perfection and ruin is a compromise between the gains and losses, known more commonly as “rewards and risks,” of a system or portfolio strategy. As can be imagined, the possibilities between perfection and ruin are limitless and have much to do with personal preference for risk. The reward side of a strategy we can fairly well quantify, as was shown in the previous chapter on systems, but the risk side is not so easily understood. The trade-off between the two will affect the ultimate success or failure of a portfolio strategy. That is the essence of money management—to maximize return at minimum risk. No home runs, no Holy Grails, no perpetual money machines—just plain and simple, consistent profits with minimum chance of losing all of one’s capital”.

Going back to the basics because it’s necessary especially with the advent of Bitcoin as a digital currency, you need to read Manias, Panics & Crashes- A History of Financial Crisis by Robert Aliber. Some have called it a bubble, some are calling it mania, there is all sorts of news and entertainment, trading “gurus” commentating on Bitcoin, you’d think they had a sat down with Satoshi Nakamoto. Wherever your stand is, you need to know what leads to crashes before you open your mouth or type something for the world to read. Even though the financial crisis was majorly started in the real estate industry, the derivative is just an asset. The concepts are the same. Some have argued that Bitcoin is not a value producing asset and is thus only a speculative tool digital currency, while some have advocated for its use and foreseeable future even with minimal regulation. Quoting Robert Aliber, “The financial crises that are analyzed in this book are major both in size and in effect and most are international because they involve several different countries either at the same time or in a causal sequential way. The term ‘bubble’ is a generic term for the increases in asset prices in the mania phase of the cycle. Recently, real estate bubbles and stock price bubbles have occurred at more or less the same time in Japan and in some of the Asian countries. The sharp increases in the prices of gold and silver in the late 1970s have been tagged as a bubble, but the increases in the price of crude petroleum in the same years were not; the distinction is that many of the buyers of gold and silver in that tumultuous and inflationary decade anticipated that the prices of both precious metals would continue to increase and that profits could be made from buying and holding these commodities for relatively short periods. Grab a book and enjoy the ride!

My top 10 Forex Literature covered in 2017. (Part 2)

Fooled by Randomness by Nassim Taleb one of the guys who made a killing during the 2008 global financial crisis completely takes my mind to a new planet. I like to think of Taleb as a contrarian. What that means is that he has no problem buying while all the talking heads are screaming sell. He is confident about the positions he takes and doesn’t bother to take very key interest on what financial journalists say. Do not believe everything you see on T.V. In fact, if you can avoid taking action on the markets depending on what news and media houses tell you, that’s a sign of maturity. More so if you are a chartist, if you follow price action to the core. Price is king. However, if you’re into macro, a fundamental trader, by all means follow the news closely but do your own research and analysis prior to taking your positions. Taleb taught me how to filter through noise and what to focus on focus. Quoting him he says, “I believe there is a difference between noise and a signal, noise should be ignored, and a signal should be taken seriously”. Taleb usually has CNBC television station on all the time at his office but the volume on mute, simply because it’s one thing to read what’s going on in the markets, it’s another to let a presenter disrupt your thought process with his own opinion while you’re trading. He goes on to explain the place for randomness and probability in trading. That no one is immuned to randomness and you should be prepared mentally for any outcome. My take home crucial lessons from this book would be anything can happen, you don’t need to know what’s going to happen next in order to make money. That every moment in the market is unique. There’s a random distribution between wins and losses for any given variables that define an edge. An edge is an indication that gives you a positive expectation. It gives a higher probability of one thing happening over another.


I mentioned earlier on that price is king. In that regard, John Murphy’s Intermarket Analysis represents another step in the evolution of technical theory. According to Murphy, “With growing recognition that all markets are linked, financial and non-financial, domestic and international, traders will be taking these linkages into consideration more and more in their analysis. Of great emphasis is that no market trades in isolation, that all markets are interrelated and the four key sectors are currencies (Forex), commodities (Futures), bonds and stocks. The bond market is heavily influenced by the commodities, bonds normally trend in the same direction as the stock market, the United States Bond and Stocks markets are linked to global markets and some stock groups such as oil, gold mining, copper, interest-sensitive stocks are influenced by related futures markets”. Technical analysis remains the same no matter the derivative. It’s sort of like the lifeblood of trading, without which, your trading capital is dead. You cannot isolate price action in whatever form it comes whether it’s through trend following, momentum scalping, the use of signals and indicators, chart pattern recognition or whatever means you use to trade. It’s therefore paramount for new traders to have the basics into technical prior to them narrowing down to their trading style and fully recognizing their trading personality.

Let’s shift our focus to the emotions that come to play when real money is on the line. Hersh Shefrin has done a tremendous job in explaining fear and greed. His book, Beyond Greed and Fear gives you insights on the mass psychology of the markets which is primarily what drives the financial markets, one of the cues you should be looking into. He takes us through behavioral finance, some of the lessons you’re not taught in school. In his own words, Shefrin says “behavioral finance is everywhere that people make financial decisions. Psychology is hard to escape; it touches every corner of the financial landscape and it’s important. Financial practitioners need to understand the impact that psychology has on them and those around them”. Greed breeds overconfidence. “Overconfident investors who know a little of behavioral finance can do themselves great harm trying to exploit market inefficiencies. They are not smart investors and do NOT do the following; distinguish luck from skill, know that only some risks are worth taking and recognize that mistakes of other traders produce an extra source of market risk as well as a potential profit potential”. Fear breeds loss aversion. Quoting Shefrin, “Most people exhibit loss aversion. They have great difficulty coming to terms with losses. Consequently, people are predisposed to hold on to their losses too long and selling their winners too early”. Hope springs eternal. “Hope and fear affect the way that investors evaluate alternatives. Fear causes investors to look at possibilities with an emphasis on their desire for security and a potential for the upside”. Do not throw away good money chasing the bad because you can’t keep your emotions in check. When doubt creeps in, it’s time to exit, as simple as that. When you have hit your profit target, it’s time to exit. Take it from me, learned that the hard way.

Finally, this remarkable woman has some interesting stories. Those that keep you glued to your screen, you can’t catch a break. Kathy Lien in her book Millionaire Traders, How Everyday People are Beating Wall Street at its own Game will give you valuable lessons you can employ in your trading journey. To be continued…….


My top 10 Forex Literature covered in 2017. (Part 1)

Disclaimer, this article is in no way a marketing tool for the authors mentioned, rather my take home lessons from the knowledge I have gathered from reading their book material cover to cover. I hope you grab one of these books and read it for yourself. After all, ignorance is pretty damn ugly. I’m going to start with my current read, Trend Commandments by Michael Covel. One of the nuggets I like from this guy is his phrase, “Eat dinner or be the dinner”. In his entire book, he goes to portray that trading the financial markets is just a game of survival. More like Capitalism right? Whether or not you agree with it, it does exist and those who take advantage of it, make a great killing in the markets. Trade Hard, Slay Hard. That you really don’t have to be college educated, all you need to know is how to ride the markets. Digest how Michael puts it,

“Consider those who pursue academic PhDs. A PhD is a specialist, not a generalist. In the real world, not the academic one, the generalist is today’s winner. Not all PhDs are motivated entrepreneurial competitors capable of “killing it” (of course there are exceptions). A PhD, or any degree, does not protect you from failure. A degree says more than anything that we passed the test. My comments are no knock against degree winners, but they are a reminder that it is you against the world. If you have a degree, any degree, that’s awesome. I have three letters behind my name, but so what? Don’t use the degree on the wall billboard, circa 1950s leave it to Beaver America, to imply you are special? Those days are long gone…or maybe not!” In short, papers are good but they are not everything. Which is why at Sylvia’s Traders Lounge, we accept all types of students in different career paths, we also love high school drop outs.

The second book I really enjoyed is The Master Swing Trader by Alan Farley. This is a book I’d recommend to mature traders, those who’ve already identified their trading style falling under the classification of a Swing Trader. Meaning that you hold onto positions for a longer time frame. Alan emphasizes the need to identify the type of errors you can make and how to preserve your trading capital. Quoting him “Trend relativity errors steal more profits than any other trading mistake. An excellent position for one holding period often fails in the next larger or smaller time frame. Natural price waves that generate through multiple trends must align with reward targets and the chosen time frame. Make sure that strategies always focus on the right elements for that setup.

Investors make frequent relativity errors, but their broad position timing often forgives mistakes. Swing traders that miss their time frame will wash out of the markets quickly. Shorter holding periods spawn more critical time errors than longer ones. Short-term trends generate very noisy signals that trigger early positions. High transaction costs and lost opportunity also take their toll on these misinformed entries. Control this tendency through longer-term charts that capture broader price movement and filter errors”.

Let’s get a bit more technical, if you haven’t read Trading in the Zone by Mark Douglas, drop everything and find your way to the library right now. This is a great read especially for new traders because it covers trading psychology. We all know that the markets do not really care about your status, your prowess in communication, your background, I can go on and on. If your psychological make up isn’t right, you’re bound to fail. Your energy capital, brain capacity matters just as much in fact more than your skill to trade and analysis of data or news. In his own words, the legendary Mark Douglas says “I’ve worked at a personal level, one on one, with virtually every type of trader in the business, including some of the biggest floor traders, hedgers, option specialists, and CTAs, as well as neophytes as of this writing, I have spent the last seventeen years dissecting the psychological dynamics behind trading so that I could develop effective methods for teaching the proper principles of success”.

He goes on to add that “What I’ve discovered is that, at the most fundamental level, there is a problem with the way we think. There is something inherent in the way our minds work that doesn’t fit very well with the characteristics shown by the markets. Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful. They no longer fear the erratic behavior of the market. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears”.

Fooled by Randomness by Nassim Taleb one of the guys who made a killing during the 2008 global financial crisis completely takes my mind to a new planet. Look out for the lesson in part 2 of this blog post.