By Zac Storella, CountingPips.com
Today, I am pleased to bring you our latest forex interview with forex trader, author and trading mentor Rob Booker. He is the author of many trading books including “Adventures Of A Currency Trader” and “The Currency Trader’s Handbook”. Currently, Rob has an informative and entertaining daily trading show (tfl365.com) where he analyzes currency trades and forex related events with his colleague Rob Wilson.
10 Questions with Rob Booker:
1. How did you become involved in the forex trading world?
I ran a business together with a friend in the late 1990s but we consistently managed to spend more money than we brought in. I knew how to make money, and sometimes a lot of it. But we couldn’t get the expenses under control. We were hiring new people every week. We were buying new servers, new furniture, making the office look good, taking a side trip to New York – the list goes on. And on. Eventually it was time to close the business even though it was making a ton of money. We ended with a lot of business debt and I needed a way to pay it off.
Soon after I spoke to a friend of mine who worked at Bear, Stearns in San Francisco. I hoped he might have a job for me. Instead he just had a lot of advice about what I should not do: I should not get involved in the financial markets, or an investment bank, or as a stock broker, or anything else markets-related. And for sure, under no circumstances should I even remotely consider trying to become a currency trader. This was the year 2000. He said that the currency traders were the worst in the business, and it was the most impossible place to make money in the entire world. It was worse than a casino, because in currency trading they took your money but they didn’t serve free drinks.
And that was it. I knew what I wanted to do.
2. What markets do you mostly trade and do you have any preference on the currency pairs you trade?
I trade forex but I am gradually moving to trade more options. Currently I’ve been trading an options demo account for more than a year and I love it. This is all on equities. I like buying time for a trade to work out. For a lot of people options is about math and formulas. For me it’s just about buying some time for a trade to work out. It is immensely appealing to me. I have been fascinated by the concept of time, and in particular how much time it takes for things to “work out,” or become “balanced,” and so options is a natural fit for me. But – and the pun here is unintentional – I am taking my time to enter this new trading arena.
For now, I trade any currency pair you can throw at me, with two primary exceptions. I have no interest in the USD/JPY. Right now the US Dollar and the Japanese Yen are low-yield, safe-haven currencies, and trading them against one another is like trying to kiss yourself in the mirror: You might get very excited about it, but once you do
actually do it, you realize it’s not going to turn into anything fulfilling. The second exception is the Swiss Franc. I want nothing to do with the Swiss currency for now, especially against the Euro. One hundred percent of patients on life support in a hospital have a more lively pulse than the EUR/CHF. People get excited about the prospects
that the Swiss National Bank will intervene and send this pair shooting one thousand pips higher. This could happen, but when? How much time do I want to tie up my capital in the hope that I can correctly predict the actions of a central bank? Most traders don’t realize that the Swiss National Bank has been intervening for months now to simply keep the EUR/CHF at 1.2000. It’s just not a risk:reward I’m happy to take on.
What I do love right now are the exotic cross pairs. The EUR/SEK, the TRY, the CZK and other currencies that most people never look at. The MXN – Mexican Peso – is a favorite. When most people ignore something, you get a unique opportunity to trade a financial instrument that moves in smoother trends. At least this is my point of view. Because they’re different they’re scary. I like that.
3. How did you get your forex trading education?
When I started trading there were no mentors or instructors. There was a guy but he wouldn’t teach me much. He talked to me for a couple of weeks but then he stopped answering my emails. I don’t hold it against him. I hate emails.
I then read every book I could get my hands on. I read about point & figure charting, I read Alexander Elder’s classic Trading For A Living. And then I read Martin Pring and John Murphy. Most of all, Edwards and Magee, the authors of Technical Analysis Of Stock Trends. Sometimes I think about digging up these men’s bodies, because I
assume they’re dead, and kissing them both on the mouth. Maybe I wouldn’t take it that far. But I probably would. Every trader should read that book no matter how long it takes and how much it bores you. It is the bible of support and resistance. Did I have a mentor? Well, the more I think about it the more I’d have to say that these two
fellows mentored me as much as anyone ever did. While answering this question for you I just ordered the 9th Edition on Amazon.com because I want to have the newest copy of it.
4. How often do you trade?
I trade every day. I trade from the 1 hour and 15 minute charts. Much of what I do can be, and has been, automated, so that I either don’t need to touch any buttons at all – or I simply need to check on it and set it up and turn it off each day.
5. Do you use technical analysis, fundamental, and/or sentiment analysis in your trading decisions?
I love fundamentals. I love talking about, learning about, and following economic trends. It’s the most enjoyable part of being a currency trader. And this fundamental analysis has no influence on my trading whatsoever. It’s paradoxical that I love it so much and don’t use it at all.
Let me give you an analogy. If you work as a mechanic, and you love your job, and all day long you work on Toyotas, you might go home and night and just absolutely love Formula One racing. You don’t use your knowledge of Formula One racing in your daily work to make a living from fixing Toyotas. But you love race cars.
I love fundamentals and I love talking about them. But I don’t need them to do my daily work.
To answer the question more completely, I am a technical trader and more specifically a support and resistance trader. You can watch TFL-TV – a free broadcast we do every day – and see that my charts have a few simple lines drawn across them and that’s it. Over the years I have traded and made money from all sorts of indicators. But
in my heart I’m mostly just a support and resistance guy.
6. Do you have any favorite economic indicators or technical indicators?
Support and resistance. That’s number one. Then I love divergence and built an indicator to plot it for me. Actually I built several. I love divergence – when price is moving one way but volume or a momentum indicator is moving in the opposite direction. The longer I think about divergence the more I realize it applies to our relationships,
work, and so much else. Imagine for a moment that you ask your girlfriend if she’ll go to Vegas with you one weekend. She says “Yes!” but then you notice that she’s not enthusiastic about the trip. That’s divergence. I could go on forever but one of the best talents of a trader in any market is the ability to recognize when the mass of
traders has become less enthusiastic about a particular trend. That’s where the money is made.
7. Is there a market outside of currencies that forex traders should look at?
8. We are about halfway through 2012, Do you have any thoughts on what we may see for major themes for the second half of 2012?
I see these major themes:
a) A weaker Europe? As Europe cleans up its debt mess, will the world view it as weaker overall? I think the answer is yes. This could send the EUR/USD as low as 1.2150 quite easily as as far as 1.1900. I think the market is looking for a reason to test that lower level in the EUR/USD. That’s an important level.
b) Will Japan ever come out of recession? This isn’t just a theme for 2012. It’s a theme for the next two years. This is important because the rest of the world is trying to do what Japan did: Keep interest rates low in order to stimulate the economy. It didn’t work in Japan. Why would it work anywhere else?
c) Job growth in the United States. Can the U.S. begin to produce 150,000 or more jobs per month, on average, through the rest of the year? If not, then we’re facing a weak economy, continued low interest rates, and that has implications for the value of the dollar. What are those implications? It depends. If the stock market can (inexplicably)
climb despite anemic job growth, then there’s a chance the dollar climbs. If the stock market falters, and the Fed does QE3 (creating new money), then the US dollar is going to weaken. A new round of quantitative easing by the Fed is good for a 1,000 pip rise in the EUR/USD.
9. Do you have any advice to someone starting out in currency trading?
Read Edwards and Magee until your eyeballs fall out. Get a mentor, someone who can watch and comment on what you are doing. Do the obvious: Cut off your losing trades fast, even if you think you’re not giving them a chance to turn profitable. You can always get back in. And let your winning trades run, even if you are desperate to bank a
winner. Where should you cut off your losers and how far should you ride your winners? Read Edwards and Magee.
10. For those out there who may have not heard of or seen tfl365.com, could you give us a little summary of what it is and the best way for our readers to find out more?
It’s where I teach traders what I did in order to trade for a living. I publish trade ideas and a lesson every day about what it takes to trade for a living. And we do it while having a ton of fun. Also, we talk a lot about trading strategies – how to find one, test it, implement it – the things I wish I’d had help doing when I first started out.
See more of our past forex interviews here.