Fundamental Forex Trader with Walter Peters and Enho Kuo
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Announcer: Sometimes, forex trading can be a wild and wooly place to be but forex trading doesn’t have to be the bad lands for your partner instead hunker down and bend your ear. You will be burning the breeze in no time. Here at the Truth About FX Podcast.
Walter: Welcome! It’s Walter here. Today, we have a very special guest. A private trader, Enho Kuo, from Canada. Enho has a really interesting journey that he’s going to share with us. Not only that, he’s going to show us how he’s been using fundamental analysis in his trading and why this has been a game changer for him. He’s going to talk about how trading is similar to diets and trying to lose weight.
We’re also going to talk about how there is this one barrier that Enho and many other traders have found in their trading. Once you get around in this barrier, it really opens up your trading and can open up consistent trading results for you. Enho will show you what he did to get around this barrier and what his solutions were and you can see if that may work for you as well.
Finally, we’re also going to talk about the time frame that Enho uses as a key resource for his trading. He knows that other institutional traders and hedge funds use this as well, this chart as well, and we’ll talk about how he uses this in this trading. We’re going to talk about all of this stuff and more in this interview with Enho Kuo. So, welcome, Enho.
Enho: Thanks for having me, Walter.
Walter: Glad to have you here. So tell me a little bit about how you found yourself in trading. How did that happen for you?
Enho: For me, it was really an interesting journey because I actually came from a background that’s completely nothing to do with trading, finance or even math. Originally, I was really in a pursuit of career in art so I’m really into film making, acting, things like that and got into it because the art career, it was really hard to break in for me.
One night, I saw infomercial. That infomercial says, “Hey, you buy this program, this software, and you just follow the signal and then money will come”. So, that’s really how I got into it at a very young age at 21 years old. I saw this infomercial. I saw that and, “Ah! this, this is it. This is my backup for me to keep doing art and then I can be fine. Just follow the signal”. So, that’s really how I got into it. Of course, those signals really don’t work at the end of the day but that pretty much put me into this industry.
Walter: Right, that’s interesting. Was it forex trading that you’ve signed up for? Is that what the product was?
Enho: It was the stock trading. I started with stock, maybe the first five six years and then switched to forex at 2012, 2013,. Really, a couple of years ago I’ve started learning to do with forex.
Walter: What did you do after buying the infomercial product or whatever? Did you start reading books or websites? How did you get sort of up to speed?
Enho: No. Actually, the first five years was really, really horrible. I didn’t do anything and that’s I think, the core part for me to even be here. It’s just this wonderful journey that it’s such a reflection of my life because when I first start trading, my mentality was totally wrong. I was hoping that signal can make me money and when it didn’t, I just quit.
For me, it’s like you say, a cycle of doom. I switched not only strategy to strategy but signal to signal, at different assigned class. I tried stock and doesn’t work and I say, “Okay, maybe I should try option”. It doesn’t work then I say, “Okay, maybe I should try futures.” And ,it doesn’t work and then I say, “Maybe it’s not the right time”.
So, for me, the first five years is not really a learning journey. It’s more like just keep tripping over and getting wounded up and then just learning. I didn’t read anything, to be honest. The first five years is really like gambling but that’s also a little bit of my background. I don’t know if we’ll have time to get into it because it’s just more easy to understand me.
I was born in Taiwan and my parents, since my daddy caught up the train when China first opened the door. My grandparents was farmer but then things start changing from my dad’s generation so he caught up the booming of China, 34 or 35 years ago. He started business there that he basically became a multi-millionaire and later had me when he was really late like almost 40 at that time, specially, it was really late.
So, he had me. I was virtually born to wealth, basically. I’m born to silver spoon. A wonderful resources but it gave me a mentality of entitlement and really didn’t really give me a lot of good attitude. That really reflect. Why is it important? Because it reflect in the first half of my trading journey.
It’s really this like easy to quit and I have no discipline, no persistence. That’s basically how I deal with challenges and then that reflect in my trading career in the first five years. Unlike a lot of people in the forum, I think it’s great that people learn very fast. People learn from their mistakes.
I, somehow, know this nice environment somehow shield me from learning about myself or the reality of life. The first five years of journey -- this is the tenth year. The first five years was really just a play around, not doing anything for trading or in life, in general.
So, I start changing not at the age of 25 , 26. Maybe it’s age, maybe it’s life. I start thinking like, “Hey, I need to actually learn this stuff. I cannot keep buying the signal. It doesn’t work.” So, that’s why I started learning, start picking up books. I just read books to books and then I picked up your books. I think 2012, 2013. I’m beginning scenting. Every time I read a book, I just try to find a shortcut. I always try to find a holy grail. Pretty much everything that you or all the trading books point out all the mistakes, I have done it.
That’s why every time I tell people you can learn something from me that maybe because I really made so much mistakes for such a long time and partially because of my environment which enable me to really, basically, not giving a wake-up call but that’s really the whole big pictures.
So, I started reading books and started learning a lot more about psychology of trading. And then, that’s where things start changing, to realize that what is the why for every trader to even want to trade? To even want to use this means to make money? What does money mean to each and every individual? That’s why I do the Psychology Course, really, and that’s really where my trading career start to shift.
Walter: Really! So, wasn’t the systems that work for you is that -- you’re talking about that You Get What You Trade For Psychology Course. Was that the catalyst for you, is it?
Enho: That is the catalyst. That one and that was the beginning and I started learning a lot of life coaching. I do, I’m a huge, deep believer that having a great system is definitely very important but you need to have a right psychology and you need to have a right attitude in terms of trading.
If you look at the big picture, there’s so many systems out there that’s right and everybody is talking about system. If system alone can work, then really you don’t have, 85 or 90, I don’t know what percentage of trader who are losing money constantly. Not just that logic side, if you’re really looking at it, it’s definitely not the system alone and that’s why they argue. I think it’s really the psychology. To get to know yourself is the key.
Walter: Yeah, absolutely! That’s why we have so many traders who are trading “the same system” and they’ve totally different results. Yeah, that’s right! So, what did you learn about yourself, Enho, that was something that you kind of said, “Okay! This was the turning point”? Because that’s interesting to me that... I mean, it sounds like in the beginning, if I’m reading between the lines, what you were doing was you’re looking for signals and then when the signals didn’t work, you partially blamed the market.
Like, you were doing stocks, and then futures, and options, see. You totally switch markets after a failed endeavor with some signals. Is that a fair characterization?
Enho: Yeah! I mean, absolutely. It’s not only market I’m blaming. I was blaming everyone. Every, author, books I read, I just feel like “Oh, you know this people and maybe those money..”. So, that was really my mentality at the very beginning.
I think what’s changing is when I’m through that psychology course, the interesting about market is really if you go there and it’s such a mirror of reflection and, like you say, you get what you want out of the market. To understand why do you even want to take this trade or what is winning or losing meant to you.
Those are the core part that, really, that’s a starting point. Then, from there, you really reflect basically your whole life and then understand why you’re doing a certain action. I think most traders fail, it’s not system.
System is important but, like you said, a lot of traders are trading the same system but only few succeed. It’s really because system virtually give you a signal or give you analysis. But, how you trade, how you manage, and how you deal with losses, that’s really what’s it of winning trader part.
Walter: Yeah! So, is that sort of the main thing? What did you take away from the “You Get What You Trade For Course”? Was it that you needed to learn how to deal with losses? That, was that part of your background that you know was affecting your performance as a trader or a signal follower? What was it that you were leveraging off after getting those insights from the course?
Enho: I think the most brilliant thing is that we don’t come to the market with a neutral perspective. That everyone of us bring our habits into the market and that habit was shaped by a lot of past events. It’s not like an EA where you put certain criteria then the EA will work, right?
If the EA doesn’t work then the signal or strategy doesn’t work but, for traders sometimes, you sabotage your own system. You sabotage your own strategy and the reason is because of those old habits so, the first day from this course is really to understand exactly what’s trapping you. What’s trapping myself? What was my old habit?
Prior to that, I pretty much blow-up my account not only once like three times. It’s just repeat movement. No, this is repeated action again and again and every time with different systems with even different asset classes, very first few thing to start is forex but I end up in the same situation. I blobber in my account with different strategy, different asset classes, and really was trapping me is that old habit.
When taking those course it’s really you need to find out what’s that thing that trap you. Exactly why you’re doing the things that sabotage your own strategy and that I think is the course. I always like to use as example for health and we don’t come to the gym with a perfect body with 6-abs. You definitely come there with extra fat or with a bad eating habit.
So, when you go there you find a trainer, you really try to get rid of those bad habits. Once you get rid of those bad habits then what’s left will take care of itself. My mentality for trading nowadays is exactly the same. I come to the market to eliminate or minimize the risk and also to tackle my own personality that had trapped me.
Once I removed those negative personality then what’s left is my own strength. What’s left is a trophy (profit) and that trophy (profit) will take care of itself so, that’s basically my belief. Then that’s why the psychology course I took, that’s basically what I learned is really what’s holding me back, what behavior sabotage me, and most important thing is why, what’s the psychological effect.
Walter: Yeah, that’s great and I love the analogy. I think what’s nice about trading, or perhaps confronting, is that when you trade you are presented with your habits. It’s like looking in the mirror. There are a lot of other jobs that you might choose.
You can get yourself in a situation where maybe you’re wearing baggy clothes. Maybe you’re wearing a costume or something you don’t really see yourself completely as who you are with all of the love handles and everything that you talked about. And, it’s so true because there’s a lot of BS in other jobs when they have performance reviews and weird things like that where they talk how, what kind of a job you’re doing.
Well, trading is really quite simple. You just look at your balance, you just look at your trading sequence. You look at your statement and that tells you where you’re at. It’s like looking at yourself in the mirror naked. There’s nearly no hiding that so you can’t hide from that so I think that’s a great analogy that you use there.
So, that’s fascinating to me that you really felt like the biggest gains you made in your trading world once you kind of discovered where these things were coming from, where are your traps were in your old habits and why that was sabotaging your trading. So, how long was it before you saw things start to turn around for you?
Enho: I think after that psychology course, I stop losing, that’s for me. Come to this trading. I think, especially it took such a long time for me. My story is like a recovery story, right? So, I came here like basically a drug-addict. I’m like I came here and that’s why I think now that I am looking at myself, it’s a great journey because the progress. It is really working well.
So, right away, I eliminate those behavior. Basically, I believe that I stopped blowing on my account. It’s funny most people they blow up their account maybe once and they’ll learn their lesson but it took me really several accounts and that’s just the amazing part.
Once, I shift and eliminate the bad habit and I didn’t even know but then at the end the year, I just realized, “Oh! I didn’t blow-up my account this year, money was still there.” So, it was a big surprise. It was even a big surprise for my dad who basically funded those account because whenever I start. My past experience, every time we met, we only meet once or twice a year because they’re living in Asia. When I’ll tell him about trading, he’s always like, “Oh, did you lose everything again?”
Every time, it’s like that. Since I think, 2014, 2013 I started telling him and he was really surprised. He was like, “Huh? There’s money left, really?” And I’ll show him and that’s really my biggest joys, that my parents even start seeing this change and, “Oh, wow! You actually managing to hold on to it.” And I know it sounds surreal for maybe people from different backgrounds but it’s just such a common phenomenon.
You try to keep, you’re boring with lot of entitlement that you really don’t accomplish anything in life and you really so, that’s basically a sort of big picture. Took me really right away to really tackle that psychological issues and the best tool I guess is really trading journal for me.
I mean, forex tester and all those things are great for strategy. For me it it’s really start writing journal. Not only for trading for everyday, basically. That’s what I took from there and really understand, “Wow, if I can change my attitude and psychology then my trading result change.”
That was actually when, why do I use health result because that was the same year that I started to lose weight so, everything reflect together and that’s why I find it so fantastic. Since 2013-2014, I stopped losing money and I started losing weight and then started getting everything is in a better position.
Walter: That’s great. So, really for you the big step was the fact that your account was basically at break-even it wasn’t losing anymore. Is that correct?
Walter: So, the course helped you with learning how to journal and that helped you in your life outside of trading as well. Did you find yourself just setting this aside? I’m wondering, do you find yourself sort of more aware of your thinking and the way that you approach things in everyday life? Was that part of the sort of the side effect, so to speak?
Enho: Oh, yeah. I mean that’s the best outcome, actually to be self-aware, because I think self-awareness is really number one key for everything in life. You have to be aware then you can acknowledge your shortcoming. Then, you can change with strategy and actions but what most people fail to realize this they didn’t even have that self-awareness to begin with.
So, there’s sort of inner cycle of denial and that’s what you see all the time. I mean, I’d love to use this analogy with health because it’s such as similar product. Where you have so much diet, method and strategy -- yeah, you know obesity is such a huge issue. You are really wondering don’t we have enough health supplement, support, agreement or even diet strategy and article from our doctors why obesity still a big issue. It’s like trading.
Walter: Yeah, exactly. In trading, it’s very easy to start up as a retail trader. It’s accessible to everyone, especially when you have high leverage stuff like forex so, it’s something everyone can get into. The other side of that is, why is it so easy to get into? Why is it so easy to pick up a diet book or diet pills or whatever? The reason why there are so many options out there is, obviously, it’s a huge problem.
There are obviously are a lot of traders, the majority of traders, who don’t do very well. There are a lot of people who are trying to lose weight who are unable to keep it off. You’re right. It’s the same thing, isn’t it? Where there’s a huge problem like that, there are lots of potential solutions.
I guess, from my point of view and looking at your background -- I wonder why is it -- do you think that so many people have difficulties trying to make it work? Is it because they’re not self-aware or is it because they have the wrong system?
I think I know what you’re going to say but, what is it? Do you think that the people are missing? Why do they get stuck in a cycle of doom that you spoke of earlier where traders find a system, traded for a while, give up on it, go look for a new one, find a new one, traded for a while, give up, go find a new one? Why do we get stuck in that cycle?
Enho: Of course, there’s so many reasons. Some people have a bad strategy but, mainly, it’s psychological issue. I actually heard from one of the trader I really admire. I think it’s just a couple of days ago, I realized that he said the number one reason trader fail is actually laziness. It shocked me and I realized that’s actually true.
Most people, if any problem that you are willing to say, to make a decision, to change then you know if you have psychological issue, you take those psychological course. If it’s a strategy issue, you use forex tester or you learn from other traders. But, I think, it’s the mentality of shortcut.
It makes sense, like you say, because it’s so easy to the barrier for trading industry is virtually none. Everybody who has money can open an account and start doing it. That psychologically breathe this kind of easy mentality into people’s mind so, most people don’t approach medical school’s attitude.
They know it’s going to be hard and they prepared to work really hard. They know that they might not even make it but most people come to trading place with the mentality that, “Oh, it’s going to be easy. I’m going to make it very soon”. So, I think that’s really a bias of trader, that we come to the market really with not a neutral mentality. It’s really a lazy shortcut mentality.
So, really, that’s what happened in the cycle of doom. It really come from people who quit very easily and the reason quit easily is just because, somehow this mentality “somebody else is making money quickly, faster than you. There must be some holy grail”. That’s really only phenomenal I think in trading and also in health as well.
We all come to hear thinking that, “I buy this equipment, I’m going to lose weight.” So, that’s really as simple as the similarity I find in this two industry, the whole industry basically. That’s why there is so much scammer out there because the whole industry is really setup for you to give you this illusion that it’s going to be easy. It’s going to fast, it’s going to be great. Walter: Yup, that’s it. I mean, you nailed it. It really is the trading education industry’s fault where it’s sold as “if this is what you’re going to do, you’re going to plug this system in or sign up for these signals and then you’re going to be drinking pina coladas on the beach. You don’t have to worry about anything.”
Which, of course is a lie. I mean, trading is work like any other work. It’s just a different type of work. So, maybe you put your work in on yourself, your psychology or going through forex tester and pumping out volumes of data and statistics.
Maybe you have to get a little more comfortable with statistics and numbers and projections than you ought. Maybe you’re not an accountant at heart or statistician but you’ve got to get your hands dirty. That’s a different type of work. It means you get paid by taking risks instead of getting paid by spending time getting, trading your time for money as you do for most jobs.
You actually make money by trading risk for money, essentially, and that’s obviously with that risk comes times when you’re going to be down money. You’re not always going to be up. I think you’re right. I think that’s one of the things I thought a lot about this and how on one hand the big lies sold as if “you just do this and you’re going to make money and you don’t have to do much. You can just relax”.
But, there is a kernel of truth in that. Some of the most powerful trading systems and strategies are extremely simple and, so while that is true, it doesn’t necessarily mean that it’s going to be easy for you to execute those. Would you agree with that?
Enho: Yeah, definitely. I mean simplicity is definitely not easy. Over in life, when you walk further in life, you will realize the simplest thing is really some of the hardest thing to do.
Walter: Yeah, absolutely. Maybe we can shift gears a bit and talk a little bit about where you are now because what I find fascinating about your approach is that you are one of the few traders I know and who actually do well with quite a fundamental approach. I’d love to hear a little bit more about the way that you approach fundamentals because I know that there’s kind of a key aspect to your trading.
Enho: Yes, sure. I started last year but interesting is that why did I even start. It’s really from a psychological aspect. So, I look at my trading and prior to that I was used to Lodon Box and London Box was another great strategy I learned from you and tweaked a little bit and it was making money. As I said, I wrote my journal and I just realized I still have this uncertain... I mean, I shouldn’t say uncertainties are always there but I just have this feeling of not enough.
I’m not talking about the result. I’m talking about myself as a trader. I realized that because of my background, I was very again not doing well in school and things like that so I always purposely avoid any academic stuff. I always probably avoid the economic side of market. The reason is they speak this belief that I don’t think I have what it takes and that’s why in 2015, I started to realize that something really bothered me, wailing in my tendency of trading.
Why do I feel like I cannot tell people in the trade? I feel like, “Oh, it’s this economic knowledge, this fundamental knowledge.” But the things that, it’s not about that, it’s like I ask myself why didn’t I just even pick out the book to read it. It’s because of this belief that I think I would never understand the fundamental side. I will never understand this so that’s why I changed right away.
I find out that’s a psychological aspect that trapped me and say, “Hey, I gonna start learning that.” So, at the beginning, I didn’t really thought much about the idea, “No, I’m going to use that as the main strategy”. Now, I was just thinking that, “Hey, I’m going to learn more about the fundamental side.”
So, I learned it and I really fell in love with the approach and that I spent whole last year basically just learning, practicing, forward testing, and that’s what my main strategy now. What does that do to me really is not about the knowledge. It’s to again look back and saying that I actually be something that I didn’t believe I had what it takes to do.
Walter: That’s great. So, you’re essentially pushing yourself. It’s interesting, I find that you talk about not being comfortable academically. I find it fascinating that there are I think a majority of people in the Western world who make it to a point where they’ve got several million in the bank.
Oftentimes, a lot of those people don’t really have much of an academic background. That’s not where they come from which I find fascinating. It’s almost as if doing well academically sorts of put you in a path where you end up working for someone else.
Enho: Yeah. That’s true.
Walter: Yeah, that’s true. Anyway, so you’ve decided “I’m going to do this” so, you’re kind of pushing yourself. Is it fair to say that you’re trying to stretch yourself out a little bit and sort of just make yourself a little bit uncomfortable?
Enho: Absolutely. Yes, that’s a key success factor, I think, for trading in life. Every year, stretch yourself a bit. Stretch yourself a bit year by year.
Walter: Yeah. So, how did you do it? So, you learned more about fundamentals and you said, “Look. This is something I’m going to do.” And, it’s something that you’re going to learn it even though you had a psychological barrier feeling like you’re not particularly well-suited for academic learning. You said, “This is what I’m gonna do.”
How did you go about this? Was there a sort of a process of learning and testing? Or, how did you get to the point where you felt like, “Okay, this is working for me”? What’s interesting to me is that did you give up on the London box trading system on the breakout trading system or did you just decide to add something to your portfolio of strategies?
Enho: The London box I started tweaking it I think 2015, 2014 to just reduce the drawdown of that strategy. That right now and after I do the back testing, forward testing, I think which I’m going to share in the seminar. I think it’s a great automated system and it’s really dependent on whether you can tolerate the drawdown for that. The beauty is that you only trade really like 5 minutes a day they just have done it wrong.
Enho: I personally don’t do it in life money it’s because the drawdown does not fit the way I want to be for now.
Enho: So right now, I’m looking to have very little drawdown versus profit and that’s just because I’m building this portfolio. That’s the number one thing people say they want to see in the portfolio. My other specific goal that’s why I don’t do that kind of a new strategy basically if it has a high drawdown, it’s not fit for me at this stage but it can be a wonderful strategy for different people with different agenda.
I stopped doing the London box with life money. Then, the basic, I completely -- and I think it’s a great strategy again and I wish to share it in the conference. And, I start doing the fundamental and the reason I like it is it just fits me, psychologically, in a way where I want to be, basically.
Walter: Right. So, you’ve decided you’re using fundamental so, what’s your process? How do you... Is it like you read certain sources or are you know the interest rates? What’s the basic skeleton outline of how you make your decision I guess?
Enho: So, the technical side, it’s really virtually the same. You know the strategy side I still use daily -- Big Shadow, Kangaroo Tail. I think you know having fundamental knowledge is really a great work because you just combine with your existing strategy. So, I’m testing you know, to use another strategy that people on your foreign views just combine with a little bit fundamental side so, basically strategy-wise, technical strategy-wise is virtually the same.
The difference is really how you approach the market so I do approach you with fundamental side. I do rate -- I basically start as I say nowadays 90% of my trading is done outside trading -- so I rate news, read a lot of articles then you really approach market like an analysis basically. You write your report on what happened today or this week before I even open up my chart and that’s what I do.
I pick up this strong currency versus the weak one and the reason why it is strong and what could have happened in the next catalyst and then I go to daily chart. I maybe look at if there’s a signal, a reversal signal, continuation signal, and then that’s where I go about trading now. The only different thing is I also trade news events and as you know you trade a downtime period yourself.
The same thing we know waiting for the surprise but a different thing is I have a more thorough analysis to even decide which direction to take or to match up which currency. This currency is really, is not like buying stocks you read but is buying a strong country and sell the weak country. That was a fact that belief is the fundamental data and the sentimental event so that’s basically in a ballpark, that’s my strategy nowaday.
Walter: Yeah. What if you’ve found in terms of results how has this work for you in terms of your the bottom line?
Enho: The bottom line is first to reduce drawdown a lot. It’s because I basically take very little trades that are active. That’s the first thing. I reduce a lot of drawdown which is my basic number one goal. Second thing is really it’s more like internal confidence that you know why you take this trade and exactly what’s the big picture why you’re taking this trade.
Another important thing is the management because the management with fundamental trading is very dynamic. Unlike before, maybe I really go one-to-one, one-to-two, things like that. Really, nowadays what makes me to stay or exit a trade is always the fundamental reason or the sentimental event.
So, that means some trade I may exit early. Some trade I might like hold on very long. Sometimes .I move my stop loss. Sometimes I don’t move my stop loss. So, if you look at the ballpark in the technical side you find is sort of a random why you’re doing here and that. But that’s basically in the fundamental reason.
Walter: That’s interesting. So, would you, for an example say, you’re in a trade and then one of the pairs in the trade they change their interest rates? Is that an example where you might get out?
Enho: Yes, definitely. If there is a price change then that’s definitely a big enough events to get ou. Maybe you got into trade with different reason now the whole picture changed so you definitely get out. Not all data are equally important but interest rate is, of course, very important especially if it’s not nounced so basically, I think, trading is a belief.
It’s like today you saw a British Prime Minister give out a speech and a huge rally into GBP. If you look at the fundamental side, nothing has changed. Really, we’re just still in a basically talking process, different talk, different talk in the reality nothing has changed but the belief of traders has shift.
Walter: Right. For example, let’s say, you have a currency like, let’s say for example, the GBP -- you just talked about the GBP. Let’s say, that you see the GBP in the downtrend and then you see something like this where Prime Minister speaking about the country and there’s a bit of a rally. So, do you see sort of the major fundamental pieces driving a market or currency pair in this example for the GBP against the USD in a certain direction?
Then these little sort of minor rallies or retracement moves are based on sort of like almost like insignificant news and things that kind of prop it up for a little while but then it sort of reengages in the trend. Is that kind of how you see it? Like more important pieces of information, drive the market and then these lesser important pieces of information, just create little sort of minor rallies and things like that.
Enho: Yeah, definitely. That’s really right down. That’s really, I mean in the ballpark. So, the personality because of that so you really -- the way you trade like is very dynamic. The way you put your stop loss or it’s virtually you just don’t want to get this kind of weak start because it’s from a lot of small movement but, essentially, you want to write down the fundamental side of the picture.
Walter: Yeah, that makes a lot of sense. So, let’s say you are in a position of a USD/JPY and you see the USD/JPY going up up up so the USD gaining against the JPY.Then, you noticed that, let’s say, this is a Monday and you’re still in your long position on the USD/JPY but then you see that Thursday some important news is going to come out.
Do you look at that and think, “Well, maybe that’s a place where I might get out” depending on how are you anticipating, depending on how that news goes? Maybe, if the CPI is really bad or something. How do you manage that? Do you just simply wait for the news to come out and then make your decision?
Do you anticipate, “Well, this has been going on for along time. It looks like it’s heading to some resistance here”? Maybe you know that news comes out on Thursday and that’s where you see the turnaround or at least a deep retracement. Do you anticipate news like that?
Enho: Yeah, definitely. That’s exactly how I basically you trade your scenario so, before the news come out, you have different scenario. You tell yourself, “Hey, what happened if the CPI it’s a beat? What’s it gonna do to you or so? What happens if it’s a negative deviation? What happens if it’s a mixed result?” so that’s basically it. You have different scenario and then in this different scenario, what you’re gonna do with different action point.
So, when the result come out you really just wait to see which scenario that you’re placing to. Sometimes, of course, it reacts completely in the opposite side of your scenario then that’s really just the market yourself. There’s so much you can do and anticipate it but sometimes you don’t know how fast people switch their belief.
Especially, I think recently you know you saw this big event especially you see it in action. It’s just such a huge shoot that belief switch right away. I find it fascinating that’s why I really like this kind of approach, basically trading your own observation, your own imagination, and then you see if it match up to the trading result.
Walter: Right, interesting. So, here’s a question for you because there are some funds from private funds that essentially use a very fundamental approach. They get some ideas. They think that they expect something to happen over the next couple of years and they lock into these positions based on that idea. Now, some of these funds don’t really do much in terms of trying to time their entries.
Let’s say, someone is looking to sell USD and buy a JPY for example. Well, in all the reason that they’re doing this are purely based on fundamental reasons so you think the JPY is really going to gain in the next couple of years but they don’t really spend a whole lot of time trying to time these entries. Would you ever do something like that or do you also have that technical side to your trading where you’re using precise entries based on technical analysis?
Enho: I still use technical analysis because technical analysis is as important as fundamental I think. I know you know a lot of people like to debate which one is important. I think you know why not have all. I think the more tools you have, if you manage well then it’s, of course, going to help you have a better edge.
So, yeah technical analysis. It’s for me, again, is a reflection of trader’s action and that’s essentially it’s a very important part. If fundamental alone works which they do but if that’s really the only tool that you know, you were basically an economic professor will all be very good trader because they’re really the technical side, it’s not easy. You time the market but also you see exactly how trader reflect in their action and technical charges show you that so that’s a very important part.
Walter: Yup and so... Since you’ve adopted this approach with using fundamental analysis to drive your trading decisions while still keeping technical analysis as your tool and using that to make precise entries. Do you find something that was surprising? That you didn’t anticipate anticipate? Or anything that’s interesting you think, “Wow I didn’t think this would happen for me” or something like that.
Enho: For me, it explained a lot of time before when I do pure technical and a lot of time we say, “Oh, the signal get busted” or a signal doesn’t work. You know things like that. And, sometimes you -- especially for me -- I get frustrated or I just say, “Okay, that’s basically a part of a drawdown.” Where you have a strategy if pure technical based you just keep following whatever signal show up.
If you completely ignore the fundamental side then you do have to tolerate through those drawdown period and back then, for me, I think that’s just part of the game but right now I feel like, “Oh, now I know the reason why I shouldn’t even get into these pair in the first place.” Because in the fundamental picture it’s just completely in a do-your-thing service.
That’s why I find out why actually it does reflect -- always reflect -- back to the fundamental side so, for me, I’m really really using that to eliminate a lot of losers. I’ll say that’s the biggest advantage as I find because you’re really looking at in bigger pictures.
Walter: And, you find yourself trading mostly higher timeframes like daily or weekly or 4-hour. How do you enter?
Enho: I tried different timeframe. I find daily... It’s definitely a very good timeframe. It’s because that’s really where most traders or hedge fund traders look at. The industrial standard you’re guided when you’re close and really tell you what happened for the past 3 sessions, what happened today basically so daily is really valuable.
In terms of risks events it’s not really matter of the timeframe some of these events, I depend on the result. I just jump in if there is a surprise and how I manage it actually it’s really depend on my own psychology. How much conviction do you have?
Walter: That’s interesting. So, your psychology basically determines how you manage it.
Enho: Ye, definitely. I actually have something I want to share in a conference is that we have the fundamental analysis, sentimental analysis. The fundamental, you look at data. Sentimental, really you look at news, events, read through the lines. The technical analysis, I think those are common but, for me, I have psychological analysis.
That psychological analysis really the key to management my trade. I give you example of when people say that, “How long should you hold your trade or when should you get out?” That is really a psychological reason for yourself. If you don’t get that down, you just follow somebody else you always feel something is wrong.
So, for me,I have this sort of the way I call you “Wheel of Pain” is that I analyze myself to say, “Okay what kind of scenario I often feel most painful” and that I line up and I try to avoid loss scenario. For example, one of the most painful scenario for me is to give back what I made.
For me, to do such trade right away is actually okay but to make maybe 80% of 1-to-1 and only to give everything back and become a loser, that really bothers me so I actually use that to decide how I manage my trade and I time it with shorter timeframe. If I’m more convicted, I let it ran and I use it hourly, four-hour or even daily.
If I’m less convicted, I use maybe 15 minutes or 5 minutes to time the trade but one thing is that generally don’t get out of the trade. I, generally, tighten my stop loss so why I use different time frames Just I use different bar I use three bar exit. I use different bar to that the market exit me.
Walter: Right, so that’s interesting. So, you generally tighten your stop loss so you get popped out of the trade when it hit your stop like a trailing stop rather than deciding, “Ok I’m gonna get out now”?
Walter: And, do you think that because -- I really like the idea of the Wheel of Pain and looking forward to seeing this it at the event -- but I wonder if you think that one of the reasons why so many traders might find it difficult to find consistent profits is they’re not really considering this idea which is what sort of scenario is going to be most difficult for me to handle and using that to base their decisions basically rather than sorting allow the market to blow them around like a leaf in the wind. So I wonder if that’s something that you think is core reason why many traders experience difficulties in the market?
Enho: Basically, if you are able to make money in your testing software but not in real life it really that comes down to the psychological issues. I do think that 90% of once you get a strategy alright but you still have a trouble making money or still blow up your account. Yeah, that’s definitely a psychological issue that only you can find out the issue.
That is really the hardest part because people can give you tools to guide you to how to find out those issues but you have to do the work to really find out what those psychological pain that traps you.
That’s really the hardest part is we just don’t like we as a human we don’t like to, like you say, it’s self-awareness so we don’t like to look at our own shortcomings. We don’t even like to acknowledge that. Some of those things are very emotional and many people just don’t want to go to those places.
Walter: Yeah, that is exactly right. So, okay that’s fascinating. If you’re not making money in your live account but you can go back in forex tester or whatever testing software you use and do quite well, then obviously, the issue to there is in the execution. It’s a psychological issue which is stopping you from or it’s some sort of barrier that’s keeping you from executing as you do in your testing that makes a lot of sense.
It’s also I think, I suppose why it’s so easy if you examine trading contests. You look at trading contest where traders are trading a demo account and you look at their results then you compare that to the live trading accounts in the live contest where all the traders in that contest are trading with live accounts.
You’ll notice a great disparity between the leader in the demo account has a 10,000% return whereas the leader in the live account might have a 200% return and I think that’s also exactly what you’re talking about here. It’s, psychologically, very different when you’re trading for real money. Wouldn’t you agree?
Enho: Yes, definitely.
Walter: Yeah, let’s talk about some of the things that we’re going to learn at the event. You’re going to show us your “Wheel of Pain”. What else are you going to show us in terms of fundamental analysis and your trading? I guess, one thing that comes to mind and I’m just curious if you’ve tested this idea because you traded the breakout system with the London Box or whatever you traded that for a long time quite successfully with really really high reward to risk ratio and possibly a lower win rate that a lot of traders can deal with.
I’m wondering if you’ve used or you tested some of your fundamental ideas and overlaid those on the London Box. It that something that you may have looked at or kind of tweaked the London Box system to fit sort of your fundamental analysis, procedures or, is that something that you looked at?
Enho: That’s something where the core part of those high ratio thing is what I looked at as a baseline. So, for me, I realized the reason… That will make me take a look at London Box and they feel like, “Oh this is such a low winning rate. It’s too risky” but, the invention of London box is really to be risk-averse.
That is for me at a time because I hate losing and then for me the mentality is really that if you can win once and then you can lose 10 times. For me, that’s a risk-averse psychological point of view so I do think that’s really across the board for all strategy if definitely you have a higher ratio and a higher winning rate that you got a really great strategy so sometimes it doesn’t work that way. So, I do incorporate that baselining to it.
A different thing about London box I do find I do understand fundamentally why it works in the first place because I try that was British Pound versus Japanese Yen. But, I also try Euro versus Yen, and Dollar versus Yen, and I realized why Pound-Yen works so well. It’s because the personality of the currency.
That one is a safe haven currency and the other one is a risk sentiment currency so they always have this inverse relationship, and on top of that they both are very volatile. That’s why they can heat that tame to wild even more ratios so that’s what really what’s fascinating for me I realize that’s why only works in this pair.
Walter: Right, that makes a lot of sense. And so, the currency the market itself is the driver behind the success of the system so right now with your fundamental analysis, your trading all different types of market, aren’t you?
Enho: Right now I’m still to currency but I do want to... I do look at the whole market equity or commodity everything is correlated but my main part is still in currency. In the future, I do want to start extended to maybe futures in the more and more gold commodity things like that.
Enho: As for now I still do many currency trading.
Walter: Right. And, you trade many different types of NZD/JPY and AUD/CAD and those sort of crosses or do you stick to the majors?
Enho: No. As long as it’s the main 8 countries then, I do all those pairs together. I had like 28 pairs in total but it has to be with those 8 major countries.
Walter: Got it, yeah. So, you’re looking for a lot of strength versus weakness to make you know sort of cherry-pick, aren’t you? You don’t take a lot of trades but you look for the really obvious ones based on your analysis.
Walter: So, tell us a little bit of what we’re going to learn at the event. I’m curious. So, you’ve got the “Wheel of Pain” right and you’re going to show us how to pick strong versus weak market. For example, let’s say that the data that you read says the CAD is going to be really really weak and then you’re reading that the NZD going to be really really strong for whatever reason, this is what you’ve come to so you might be looking at a NAZ/CAD trade or something like that. Is that fair to say?
Enho: Yeah, something like that. Yeah. At the event, I really want just to basically layout a complete package like how do you really approach the market at least for me then really talk about the fundamental side, sentimental side, and technical side. I like to give out a seed then people can really grow on their own from there.
That’s what I wish to bring there and especially emphasize a lot on the psychological side and maybe bring out a resources because for me I really think the key part is that I sometimes look at myself and really amazed why am I here. This kind of feeling how come -- I’m saying in a good way. Like, how did I be able to do all these things especially in your forum there’s a lot of you know academic people, very smart people?
So, I feel like, “Hey, if I always really if I can do it with this simple strategy or simple layout then people can really grasp that concept”. So, yeah I do want to talk about psychological analysis and the “Wheel of Pain”. I’d like to give out London box, I do little tweak so people can play around with it and really talk about how to approach the fundamental side from a non-economic majors. Basically, just normal people how do you really learn, it’s just really not hard and how do you incorporate that with the technical side.
Walter: Yap. That makes sense. It’s one of the interesting things that I hear when we talk about trading with somebody they say, “Oh, you must have to keep on top of. You must be really smart. You must have to keep on top of all these news and all that sort of thing.” But, what you’re saying is that it’s not necessarily that complex. You don’t have to be an economics major or a background at a bank or whatever to understand how we know what to look for and how to do it.
Enho: It’s true. I think you just need to have that trader’s attitude. That’s really the most important thing.
Walter: Right, that’s interesting. So, I mean you’re like living proof. You’re someone who has an Arts background -- right? -- and you’re digging into the economic news and economic data and that sort of thing and making it work with your trading right. I mean, that’s really kind of a when you step back and look at it you said, “Look, I’m not a person who is necessarily an academic and that’s not my comfort zone and yet I’m able to do this.” So, it’s obviously not something that’s beyond the reach of everybody. It’s something that you can do. Just gotta practice at it I suppose.
Walter: Alright. Well, Enho, is there anything else that you’d like to share with us and anything that we missed out on? Any last bit of advice for those people that perhaps someone’s listening to this and they’re thinking, “Well, I don’t know if I can ever get there. I mean sure I’ve gone through 4 and a half years of struggle”?
You went through several years of struggle before clicked in for you but is there something you want to share with some of the listeners here thinking, “Yeah that sounds great for you and helped but I don’t know how it’s gonna work for me”. Is there anything you want to offer as advice?
Enho: I think first thing people can do without even understanding anything about the market is really understand that trading, at least for me, I think trading happens outside the market. So, if you are able to develop that mentality of a trader, a personality of a trader outside of market then, you will see it’ll reflect in your other areas of life.
So, for people to maybe they will feel very excited, they want to jump into trading right away, I really encourage people to really look at your life first. The basics is to go through those kind of life-awareness process and it sounds a bit hideous for people say, “Oh, I just want to get into. I just wanna strategy and make it work.”
But, the sooner you get your own psychological life in, shake then the last barrier, you will have further down the road so, actually, don’t need to rush to that strategy and all those. Those things are ready once you started you realize those are the easy part. The hard part is yourself so understand e yourself and will reflect in both way. I do believe a real good trader often have other areas of life in shake in relationship, in happiness things like that, and that’s what I think.
Walter: Excellent. Excellent. Excellent. Well, thanks so much for sharing and I’m looking forward to hearing from you at the conference and seeing what you are able to share. I’m sure it’s going to be great and I really appreciate all of what you offer to those traders in the forum as well because you’ve done a great job of showing people how you approach things and it’s been really good.
So ,your webinars, obviously, some of the most interesting ones in there really I think because you a unique approach and I think a lot of traders can get a lot out of some of the nuggets that you’re sharing. So, really, really appreciate this and I’m really looking forward to the London Conference.
Enho: Thank you very much, Walter. I’m so excited to go. It’s great you’re putting London too. I love London. Walter: That’s gonna be great. I’ll see you soon and again thank you so much and I will see you soon.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.