Q: I started as a full time trader at a bank a few months ago. Basically, I feel like I have a Ferrari, but I can only drive it on a parking lot. I have all of the currencies available to me and tons of capital, yet I do not have consistent results. I am an engineer with a masters in financial risks, so I have good understanding about the market. 

I also consider myself highly disciplined. I get up every day at 4:30 am to exercise no matter the weather; it is just on me. Consequently, I don’t have any problem executing my stops; however, I am still inconsistent. For me to ask for a course or some learning seminar, I need to be able to generate some profit so it can be paid for. It is like, “Which came first, the chicken or the egg?” So I need to show at least some potential. (I am sure I have it, and I know they saw it because they hired me.)

I like to think of trading as a probabilities game where I can have an edge to make it profitable. If I can let the good ones run, I can be consistent.  I like to think about R in terms of volatility and then define the position I am willing to risk. 

My main problem is that volatility (ATR) is too big for currencies. Since I need to show daily profits, it is impossible to wait that long for my trades. So I have been thinking about taking 10 pips as an arbitrary value, (linked to my risk, so I can afford 1000 USD loss) for example, and put in a trade waiting for at least 3-4R. But 10 pips is nothing really; it is pure noise. Are the probabilities going to work in this case? What is the best way to do intra-day spot trading? What approach can I learn about in order to design a good system?—Patricia

A: Your biggest problem is that you work for a bank and most banks don’t understand trading or risk (they just think they do). But they do know how to make markets and make money from customers, so they think that the traders they hire should be able to make money.

Do you know how much money you have to trade? That’s a key question. Out of the 3,000 bank traders that I’ve talked to almost no one knows the answer. So how can you do position sizing, which is key?

Do you know how much money you could lose without losing your job? You could do position sizing based upon that.

But then there are other questions: Are you supposed to trade every day, even when there are no good opportunities? 

Does the treasurer have a meeting every day? Are you supposed to trade along the bank’s line of thinking (i.e., okay to lose if you do what the bank says, but not if you don’t)?

If none of these are the case, then you are in an exceptional position. If the answer is yes to all or most of my questions, then the question you need to ask yourself is, “How can I make money under conditions in which it is very difficult to make money?” And I should point out that currencies are not even great places to put money right now.

As a starting point, I’d recommend my new book, Super Trader. That will at least open your eyes to what you might be missing. — Van