New Trader Shares His Success Story
Raymond Firetag left his career as a mortgage broker and transitioned into forex trading following the real estate bubble. Here, we talk about his learning curve, how he blew out his first trading account while learning the craft, and the changes he made to recover from those difficult first few months.
We also discuss the strategies he uses and a few of the Web sites and blogs that he turns to for valuable insights and information. Listen in and learn how Ray went about learning and becoming successful in the forex markets.
Tim Bourquin:Hello everybody. Welcome back to the MoneyShow.com Trader Talk Podcast. Thanks very much for joining us for another show this week. As usual the idea of every interview is to give you something to think about in your own trading by talking to traders who are in the markets each day trying to find opportunities. We disccuss what they think they’re doing well and what they can improve on so that we can all learn how to trade in a better, more consistent manner. So our guest today is Raymond Firetag and that Ray is at the Traders Expo recently in Las Vegas. He is a Forex trader. We’re going to talk to him about his background, how he got into this and his overall philosophy of approaching the currency market. So Raymond thanks very much for joining us.
Raymond Firetag: Oh, thanks for having me.
Tim Bourquin: Well, you have an interesting background. Tell us how you got into foreign currency trading in the first place.
Raymond Firetag: Sure. I was in real estate for many, many years from about 1993 to about the early part of 2008. I probably don’t have to tell you, Tim, how that went these past few years in that industry - just a very tough, tough time in real estate. I decided that it really wasn’t something I wanted to keep doing anymore and a friend of mine who had been trading currencies for about a year said, " you gotta check this out" and for a long time I said, no I don’t want to do that. I thought, "trading, that’s not me. I’m not going to do that." And so finally I think just having been fed up with how real estate was going, I took a look at it and much to my surprise I found that l loved it. So I got started and made a lot of first time working mistakes there for the first couple of months and then got to a point where I was making more money trading foreign currencies than I was in real estate and decided to go full time trading.
Tim Bourquin: One of the interesting things I learned about you at the Traders Expo (www.TradersExpo.com) was that you basically blew out your first account. I thought it was interesting that you came back from that and said, "I’m going to continue on with this." A lot of traders say, " this game is not for me." What was it that gave you the idea to give this another shot?
Raymond Firetag: It’s funny, Tim. I think it was the sense that I’d found what I was meant to do and I said it very humbly because trading can humble you and there’s no guaranties but I think even when I first blew up that first twenty five grand that I put into my account I knew that I was on to something. I said this is it. This is what I want to be good at and I don’t know. It was just like Napoleon Hills "Think and Grow Rich" where the first part of the book he talks about this one gentleman that wants to be a partner to Thomas Edison. He was very, very persistent about wanting to work with him and eventually I guess he got to and the whole point was is that no matter how difficult and no matter what the obstacles if you really want something bad enough and you enjoy it you’ll find a way. That’s kind of my answer to that because I really just was determined. I loved the work. I loved doing this and so it’s just a matter of really applying myself and thinking, "I can be good at this."
Tim Bourquin: You’ve had some tremendous success over the past nine months since that time. What changed? What are you doing differently now that you weren’t doing back then?
Raymond Firetag: Sure. I think the main thing is continuing education as it applies to being a trader. I spend time every single week really studying the different countries that I’m trading in, whose currencies I’m trading in, including technical analysis for currency - I really make the time every week. I try to devote three to five hours a week to just studying the fundamental data and getting better at my entry and exit points. I think that alone - just really being a student on how to trade every single week - I think is helping the most.
Tim Bourquin: It’s interesting that a lot of Forex traders seem to focus more on fundamental analysis than other traders do but it sounds to me like maybe even a majority of what you look at for your trading.
Raymond Firetag: It is Tim. About 70% to maybe 90% of my trades are fundamental-based and the difference maybe 10% to 30%, maybe 10% to 20% I use technical analysis. So I usually start with the fundamental information and then based on what I think is going to happen fundamentally I’ll use technical analysis and chart reading to decide where I things are going fundamentally. I then decide what entry points make sense based on that fundamental outlook and that’s where I use technical to determine good entry points based on where I think things are going fundamentally. I do place a greater emphasis on fundamental analysis than I do on technical analysis.
Tim Bourquin: One of the other things we talked about at the Traders Expo - one specific trade that we talked about - you had put in a trade before a big announcement. Lots of traders try to avoid that because they’re not sure how the market is going to react. Can you talk about that trade and are you still using a strategy of actually putting on a position before a big economic announcement?
Raymond Firetag: It’s a good question, Tim. It seems like now a days there’s economic announcements every second. I mean it’s so hard to kind of keep track of the economic calendar and I was laughing with another trader the other day - it seems like policymakers have to keep announcing some new measure to prop up the markets. To answer your question yeah, I did get ahead of an announcement and I’m trying to remember what specific one. In this particular situation I think what you’re talking about is the Bank of England quarterly inflation report.
Tim Bourquin: I think that was it.
Raymond Firetag: I had done so much reading beforehand about what other analysts were thinking and that they were going to be very, very "dovish" in their outlook for interest rates and I did get ahead of that one and it actually worked out really, really well. So again it really depends. If I really have a firm understanding of where a country is heading fundamentally and depending on the kind of report it is. Sometimes I’ll get in front of it. Other times if there’s more uncertainty like now how equities are just kind of hanging around and not doing a whole lot this week, I’ll stay away from it until the actual announcement comes out. So again to answer your question it really depends on how comfortable I feel with my understanding of what direction things are going.
Tim Bourquin: Okay. So let’s take an example and say that you thought they were going to be dovish and that it was going to push the pound a certain way, push the Cable a certain way - talk about how you go into the charts. What do you look at in terms of timeframes and how are you deciding exit points and stop losses? I know it’s a pretty broad question but maybe you could take us from start to finish.
Raymond Firetag: Sure. In that particular situation I look at it on a weekly chart but I really focus on daily and four hour to one hour charts when it comes to Forex. So I’ll look at the daily to kind of get an idea of fundamental psychology and if I can see some clear Japanese candlesticks which I used to trade. In this particular instance I went to a four hour and noticed that there’d been quite… instead of doing a Sterling/USD I actually got short Sterling/Yen in this particular case and so I kind of waited for a rally and it did rally quite a bit and then I looked at the relative strength indicator and stochastic and it was pretty clear that we were probably topping it out. But the momentum to go higher was really kind of waning that there really wasn’t a lot of conviction to go higher and so I used those technical tools to get short in the Sterling Yen and this was probably about an hour or maybe an hour and a half before the Bank of England made their announcement and low and behold they came out were much more dovish than the market had anticipated and really gave everybody the sense that the Bank of England, if they had to would take rates to zero. I don’t know if it is going to go that low but certainly gave everybody the impression they were going to cut very aggressively the next couple of months. So I waited for the market to get long. I used technicals to determine okay, it looks like the momentum is petering out here. It’s a good place to get short. I set my stop just above key resistance and I waited. As far as exiting, I did have a goal I wanted to actually exit at a key support level and what I actually did is I met that level, took profits on half my position and let the other half run instead of trading stock behind the rest of it to see how much more mileage I can get out of it. That’s how I handle it.
Tim Bourquin: So do you find that there’s a lot of opportunity to play the overreaction to an economic announcement - waitng for the initial move and then the reversal?
Raymond Firetag: Correct. I want to make sure I’m hearing you Tim. You mean when the market start selling and it goes down and that if you get it bounced play it down again? Is that right?
Tim Bourquin: Right. So after some sort of announcement or after announcement instead of maybe getting in before you take the opportunity also to play any overreaction to come back to the mean I guess is what I’m saying.
Raymond Firetag: Correct. Yes, very much so Tim and that’s really been the nature of my trading around economic announcements and reports. I know some focus on stocks and what’s really interesting about this is that it’s the same idea where you have investors all over the world "throwing out the baby with the bathwater" but at the same time you get a lot of good stocks that are being thrown as well so some traders do come in there and buy it up and so absolutely depending on the situation. And what’s interesting right now is some other people have alluded to is that in a lot of situations when Central Bank is aggressive about cutting the rate the market, som traders view those as a positive that this country is in fact more progressive and so they sometimes reward that with a rally back up. And so yeah, sometimes depending on who it is. I’ll do that as well. In this particular case I feel like the Bank of England reaction was wrong. I’ve done that with all the USD trades as a matter of fact.
Tim Bourquin: Okay. I was just about to ask you to what are the currency pairs you trade. Do you favor any particularly or what is your favorite?
Raymond Firetag: I do. I don’t know if I just love the crosses Tim or what it is but I tend to focus on the Yen crosses, risk aversion and trading that thing has been profitable for me. I also like to trade Sterling USD and I have traded the Aussie dollar as well but I tend to focus on Sterling Yen, Euro Yen and Sterling USD. Those seemed to be the ones that I’d favor the most.
Tim Bourquin: And that’s interesting too because a lot of traders seem to be focusing on the Euro Dollar and it sounds like you don’t do too much except for the cross with the Yen.
Raymond Firetag: I don’t Tim which…early on people had told me you had to focus more on the crosses that have more liquidity, that are a little bit more reliable, you won’t get some of the market gyrations…maybe its because everybody wants to and I wanted to try something different or I’m not sure what that is but I find that along with the fundamental news and technical analysis just having traded the Yen crosses as much as I have I get a bit of a feel to kind of a gut instinct about what direction they might be going. I don’t know. USD has never held the same allure for me as some of the other crosses that I trade.
Tim Bourquin: Did you take any courses or books that you can recommend that helped you kind of make that transition from blowing the account out to doing really well?
Raymond Firetag: You just keep bringing it up, don’t you Tim.
Tim Bourquin: Well, I just think it’s fascinating. It’s so unusual it truly is.
Raymond Firetag: Oh, absolutelym and not to be misunderstood. I think it’s more important to talk about things that didn’t go right than things that did go right. The book that helped me a lot was Currency Trading for Dummies. Really. It’s just a great, great book and what I like too is towards the back they really talk about - the company that kind of wrote it forex.com, Brian Dolan and I think a partner of his. In the back they really go into how they set up a typical trade. So I just kind of set up my own charts the same way. But that book in particular has helped me a lot. Currency Trading for Dummies and then some of the other books that I’ve just picked up the bookstores had a better read on fundamental economic indicators and also a couple of books on technical analysis. I’m not a huge Elliot Wave guy per se but I do lean very strongly on the technical analysis, Japanese candlesticks, simple moving averages and then as far as the other technical indicators that I used or momentum indicators and directional ones a well.
Tim Bourquin: So it sounds like you’ve got a few tools. Did you start out trying to use a bunch of different stuff to figure out what would work for you?
Raymond Firetag: I did Tim, because not knowing I just would draw a lot of it, I tried Bollinger Bands for awhile. I used a little bit of Fibonnaci probably not as much as I should but I threw that on there a while and what I found is the more I got educated on technical indicators what I really learned is that - two things. Number one, it’s probably best to pick a couple of different technical indicators, get to know them really well, learn what technical indicators work best and which markets and really just kind of stick with those. I think if we try to use every single technical indicator out there you’re never going to make a trade because you’re always going to be waiting for confirmation and there’s just little and countless types of technical indicators that you can use. So I found it just by getting educated on technical analysis, experimenting with different ones, finding the ones that I felt most comfortable with and just kind of sticking with those really been a strategy that work best for me.
Tim Bourquin: Do you find that some work better with specific currency pairs if you drew down that far enough on it?
Raymond Firetag: That’s a good question Tim. I haven’t. What I have found those that like for instance stochastic work really well and more of a range market where the directional indicator and some of the relative strength ones worked well in trending markets. One thing I have noticed though is that even within a different Yen crosses they all have their own kind of unique personalities and idiosyncrasies and how much they react to different news. I found that the Aussie/Yen is very, very sensitive. It doesn’t take much for it to sell off pretty aggressively where the Euro Yen and Sterling Yen can be a little bit more resilient. There can be from negative news but they won’t capitulate as quickly. So I’ve discovered that more than which indicators work best for the end crosses but this one I have to explore.
Tim Bourquin: How about Web sites that you’re using to get this news? Any favorites?
Raymond Firetag: Sure. Like a lot of traders I kind of lean on Bloomberg. I looked to the Bloomberg Economy Section so I can read about the different not only - I have a sheet that I print out that tells me all the different economic indicators that are coming out every week for which country and then once those numbers come out whether they are at consensus or worse or better then what I’ll do I’ll go over to Bloomberg website economy section and typically they’ll have some more drill down commentary on what the number means to the market and to that economy going forward. In terms of websites I do use Bloomberg. I like marketwatch.com as well and the other guy that I really like it’s actually a blog. This guy is brilliant. It’s macroman.com. I think he’s a big headge fund type out of London and he is a economic trader as well. I think he trades everything but I read a lot of his commentary as well.
Raymond Firetag: I think I’ve got the website. It’s a macro-man.blogspot.com.
Tim Bourquin: Macro-man.blogspot.com
Raymond Firetag: Correct.
Tim Bourquin: Okay. We’ll link to that in the show notes. So as we kind of finish this out Raymond any tips you have and advice for people who are getting started back where you were maybe a year ago that you think was valuable to you, those that are going to help us with?
Raymond Firetag: Yeah. Don’t do what I did. I would say a couple of things. Part of my problem in the beginning as I was very, very seduced by the market I wanted to jump in. I wanted to be part of what was going on so I would just enter the market I wouldn’t think about whether my entry was the right one. I just want to be involved and I had a 50/50 chance and don’t do that. Okay. What I would recommend is two things. Number one, really educate yourself and trade shows are excellent for that depending on what trading platforms you trade on. I happen to be with forex.com. Use their resources. Go on to their website and look at the commentary they’re putting out, the technical levels that they’re talking about, how they interpret different economic reports and I would say practice - most platforms or currency trading brokers will give you a practice account where give you $30,000 or $50,000 in play money. Just try it out and I would say do that for a month. So trade that way for a month and then once you have gained some confidence from that and get a sense of what direction you’re going then open up a live account and really make a strong, strong commitment to really educating yourself every single week and really going above and beyond just going to one trade show a year or just using the resources on the platform you’re on. Really drill down deeper than that. I mean this is a serious thing. And so go to the publications that you rely on, study technical analysis and just make a commitment to doing that every week.
Tim Bourquin: Do you think that your business organization and coming from the mortgage business and that ability to organize and plan, does that help you at all in your trading?
Raymond Firetag: It did. I don’t know if it helped me so much in terms of planning and business. I think what really helped me was more of perspective. I think just coming out of real estate and having seen kind of what had happened. I just had a sense of my own idea about where I thought the economy was going and during that time you had a lot of these people on TV saying it was going to be a short and shallow recession - "a very contained thing, its no big deal" and I just thought these folks don’t get it. So I think just coming out of real estate I felt like I had maybe a little bit better perspective than some people about where I thought the economy was going but in terms of organization, yeah I have brought some things from that. Practicing more than I play really studying a lot more than I actually trade so when I show up for game day I feel very prepared and that’s probably been the biggest thing. It’s just really a commitment to always trying to learn.
Tim Bourquin: Excellent. Well, Raymond thanks for you time today and sharing some of your thoughts about the markets. I appreciate your time.
Raymond Firetag: Very much, Tim. Thank you.