Forex Trading Tips: A Formula For Printing Profits

A Formula For Printing Profits

Last night I celebrated my birthday at my favorite steakhouse in New York – Wolfgang’s. Wolfgang was a former waiter at Peter Luger’s, another great New York temple of meat before striking out on his own. Wolfgang’s in my opinion is about a million times better than Lugar’s and since I’ve first eaten there four years ago he has managed to carve out a small empire opening up four more stores. He was kind enough to drop by the table and shake my hand last night which made the celebration even more delicious.

What makes Wolfgang’s so incredibly good is that it knows exactly what kind of a restaurant it is and does not try to accommodate itself to the latest vagaries of food fashion. The menu is a single page sheet that basically says - salad, steak, fish and dessert. K tells me that she doesn’t like the fact that the choices are so limited, but I greatly admire that approach. Wolfgang keeps it simple, but everything he puts on the table is absolutely perfect.

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As the night came to a close and I nibbled on my whipped cream slathered pecan pie and sipped an espresso I thought about what Wolfgang’s can teach me about trading. (I am by the way, probably the only person in the world who was more impressed by the fact that former Japanese Prime Minister Koizumi has eaten there rather than either Tom Cruise or John Travolta, both of whose pictures hang on the wall of the restaurant).

It suddenly struck me that the lesson of Wolfgang’s is very simple. Stick to your model. When it comes to trading there is something to be said about the way Wolfgang does business. He doesn’t do anything fancy. He focuses on a few ingredients and he executes with Teutonic precision every dish on the menu. The result is that the place is jam packed every night.

Trading can be simple too. After all price has only two states - trend and range - and you rarely need anything more than a 20 period SMA to determine what’s going on in the market. Every single trading model can be classified into two camps – momentum and mean reversion. The key is to simply understand the dynamics and limitations of what you do and stick to the discipline of doing it. Wolfgang proves that a few rules executed well can be a formula for printing profits.

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