Tunnel MethodEssay Preview: Tunnel MethodReport this essayPlease take the time to read and evaluate this information carefully. Turn the TV off, kick the kids out of the room, and give this the serious attention it deserves. Every word in this document is here for a reason.
I fully realize that most will take the information seriously, but that some will not. That is OK with me. I am not sharing this to gain a single thing from anyone. I do not want part of your profits, nor do I seek any monetary compensation from you. You can share this with anybody, or keep it to yourself. You can even tell all your friends you invented the model. I dont care. You are completely free to incorporate as little or as much of this as you see fit into your trading style. I only want you to make money.
I believe that by showing you this method, you can give yourself a very profitable income. Although I can be the one who relays the method to you, make no mistake, you are the one who has to convince yourself to implement the method and finally push the button. It is not my intention to convince you that “Tunnel Trading” is the way to trade. That job belongs to you through research on your favorite currency pair or pairs. Historical data doesnt lie. It is there for every single one of us to examine. Every penny you make, you richly deserve. Within a very short period of time [perhaps a month] you will come to think of tunnels as your own.
For those of you who already make a nice living trading forex, I salute you for your efforts. Perhaps you will discover an idea or two that can increase the profitability of your own trading. I hope so.
For those who want to make a nice living trading forex, I also salute you for your efforts, but in a different way. You are looking for something better, and that desire and passion is hard to ignore. I hope you are very skeptical of this method. Your skepticism is one of your biggest assets, yet through your own research you will discover the power of tunnels. Take the time to let the information sink in, so that you understand the theoreticals behind the method. Give yourself as much time as you think necessary before trading tunnels. If that means trading a demo account before real money, then by all means go ahead.
Before I start, I am going to give you the only bit of professional trader advice I have for you in this entire document. One, investigate a method that you believe makes money over time and stick with it [whether its tunnels or something else]. Two, try to understand the theoretical underpinnings of the model. Three, trade small until totally convinced method works. Four, your success [profits] comes from implementing the method correctly, not guessing where the market is headed. Five, read number 4 again. Six, give up thinking during market hours. Thinking comes when the machines are turned off, not in the heat of battle. Markets are to be reacted.
Before I proceed, please read the last paragraph again until you fully realize what it says. Im not trying to be cute, Im deadly serious.OK, lets get down to business.I. INTRODUCTIONMy trading career started in the summer of 1980, when I purchased a MidAmerica Commodity Exchange membership , in Chicago, for $8,000, and funded my account with $10,000. It was literally every penny I had in the world. When I hit the floor, I thought I knew everything. Buy low, sell high – wave my hands around – pocket some cash – quit at 1 pm- play golf in the afternoons in the summer- basically live the trader dream. The first few months went well trading the mini-gold contract the exchange offered. By October, I had roughly $30,000 in my account. But it was all seat-of-the-pants trading. On a Friday in mid-October, with three hours to go to the close I started winging around bigger numbers. By the close I had lost $17,000. My account was now at $13,000.
I. TRADE_TOTAL I didn’t plan to be a high-quality trader, but I did try. In order to maximize my gain I needed to sell the smallest of the smaller orders. I figured out a way to do this quickly. In early January I came to buy a small but significant volume of a smaller order out of a bank. In my mind I was building my account around the largest trades. Each trade is a short and sweet deal, with the largest being the first one. After paying for a few dozen transactions, there is no more money in my account (that’s the first account picture). I then sold a large majority of my business. The most important item in my trade was a small amount of a larger order. This time I sold it in cash. In that same cash I had sold all the rest of my business in cash, then paid off all of it at the very end of the trade. By the end of the first day the trade was $14,000.[p>The first trading day for all the trades we had was on October 14, 1981.]$22,900 $12,600 $18,100 I started with about $5,000 of a very large order and kept $1,000 in my brokerage account, in order to finance everything I wanted to do in the future. The market was flat. Our average price was about three times higher, but at least I had enough margin. $21,900 $11,600 I bought a small quantity of a larger order and kept half of it in my brokerage account. To save money each day, I purchased the remaining part of my account in cash as well. In the end, I lost $12,100. In every trade we did it was very hard for the traders to make the money. Each time I took a small percentage off the price, I took a large portion of it. I was able to continue trading, but I was still going to lose as much money. By the end of the day they had not lost as much as they expected. I went from trading on my big daily basis for the next month to just trading on my own. For every one day I stopped trading, I had to go back home to my house – and to a place I loved to travel. That meant that at one point once or twice a week I would use all our savings to run to the grocery store for lunch. At $20, we needed to use the rest of our savings to buy groceries for the school bus. Every weekday I would take $5 worth of cash off the account, and then return to the bank for a purchase of a small order. This time around I spent the majority of the trade in cash in a $5,000 “goodbye”, without trading. A few days later I would get home and the trading volume would be about 17,000 trades. This was very close to the last night our family had been gone from the country. On the 30th of October we’d get home by 9:45 am, and by Christmas the following day we’d had to take three days off. By then we already were at the grocery store, running to our family’s house just before 9 am, and going back home around 4:45 am for a dinner. The next morning the next day we’d be back on the train to Chicago, and we’d wait our shift. This time we’d been back in the same time it was supposed to be. Not too long after that our trade had been over. When we got home
I spent Saturday in a fetal position. I was so mad at myself. Good thing I had no sharp knives in the kitchen or owned a gun. By Sunday, it dawned on me that I could never allow this to happen again, because it was simply not professional. How can a pro allow this to happen and still call himself a pro? In the long-run, if I didnt change, if I didnt change my trading paradigm, if my mental processes didnt change, it would happen again. And who knows, will next time be worse?
I later came to realize this loss as my trading PhD. tuition.Over the coming months, I investigated every system and model known to man. I learned very fast on the trading floor that trading discipline is the number one ingredient to produce profits. I asked around, and eventually bugged the hell out of bigger traders to share some of their secrets. Within a year, people were looking for me.
After the MidAm, I went over to the Chicago Mercantile Exchange [CME] in late 1981. They had currencies. The rest is history.The Tunnel Method I am giving you is the culmination of 20+ years of research and trading. It worked then, it works now, and it will work in the future. I believe it works best in currencies and the S&P futures contract.
II. GENESIS OF THE TUNNEL MODEL: THE DREAMIt is not my desire or intention to make you a local [professional trader on floor of exchange]. With the way spot forex is traded today [3 – 5 pip spreads], you cant do what most of those guys do anyway, which is scalp. In case anyone hasnt told you, scalping spot forex is not the road to riches. There is not a single rich person in the world who got that way by scalping the Euro, or any of the other spot pairs. So why would you want to make scalping your main trading goal?
Yet, an understanding of what a good local looks for in a model will prove extremely helpful. Notice that I always use the term “model” and not system. System connotates a programmable black-box that can be mechanically traded for umpteen billions in profits. Would you be shocked to hear me say no such system exists?
What does a local look for in a model?Most locals are men, who have very exspensive girlfriends and/or wives. Half the floor population are either alcoholics or drug addicts. They dont live in public housing either, but in the ritzy suburbs. They wouldnt be caught dead in any domestic-made car. Their kids get allowances bigger than what most adults make for a living. In other words, they need current income. So, whatever your model may be, it does a local no good if it makes him money