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HowToTradeDivergence(TheIceCreamTrader)By Rob Bookerhttp://robbooker.comBook Website and bonus materials -----------------ONE OF THE REASONS SO MANY TRADERS FAIL IS THAT THEY TAKESTATEMENTS LIKE “CUT YOUR LOSSES AND LET YOUR PROFITS RUN,” ANDTHEY BLINDLY FOLLOW IT. NOTHING - NOT EVEN A FAMOUS TRADINGMANTRA - WILL EVER RESCUE YOU IF YOU HAVE POOR TRADE PLANNINGSKILLS IN THE FIRST ----
THIS IS A TRADING EBOOK PUBLISHED BY TFL PRESSCopyright 2013 Rob BookerAll rights reserved. Published in the United States by TFL Press.http://tflpress.com2
TableOfContentsNOTETOREADER:The hardcore trading stuff starts on page 15.ContentsHow I Drove Myself Crazy - 4The Ice Cream Man - 7The Factory - 10Luigi and the Ice Cream Routine - 15Divergence, by Luigi - 20The Path to a Million Dollars -55How to Recover from Losses - 583
1HowIDroveMyselfCrazyI take another loss. So I switch directions. Surely if I change directions I’ll get it right. But then itreverses and goes the other way. What other way? The same damn way I thought it would go inthe first place.My friend Glenn says they should make computers out of rubber. That way, we can throw themout the window.Glenn’s right. I want to chuck my computer out the frigging apartment building. I want to see itexplode into a thousand million shards of wrong-direction-chart-plotting garbage.But of course I don’t do that. I am going to get this right. I am going to sit here and trade thiscurrency pair. If today is like the other recent days, I will keep trading until I get one thing right.Just one thing right. That’s all I want. If I can get one direction correct on these charts, with anyamount of profit, then I can end the day in peace. I can walk away. But not until I at least get onesmall nod of approval by this demon, this EUR/USD currency pair.Or else I can always do what Glenn recommends.My name is Frank. My brother, Harry, introduced me to trading. He lives in Japan now and hislife is a mess, probably from trading (definitely from trading) but once he told me about it I gotthe bug, I guess, and I can’t seem to stop myself. I can’t say that I am addicted. But I can’t saythat I’m not. I am in that middle ground where I’ve decided I will not stop trading until I learnhow to do it.I don’t have a job right now. I am living on savings for a bit – I’m young and I can do that forthe next few months. Because my brother suggested it, I started trading forex. I now hate mybrother. Because I live in San Francisco in the Pacific Time Zone of the United States ofAmerica, I am up for what seems like 24 hours a day. The European Session, as they call it, is themost active session of the currency market. It starts at midnight in my local time zone.I get sleep here and there. For what seems like the rest of the day, I look at the charts. I look atthe charts on my phone. I have an iPad and I loaded two different charting platforms on that. I domost of my trading from a laptop and that is never far away, either. How did I get like this? If Ihad a dog, it would be dead. Really. I would never take it out. My fish died three months ago. Icouldn’t even bother to get up to feed them. I am wasting my life away on this goddamnedcurrency market.4
In the evenings I volunteer at the Catholic Charities on Beverly Street, talking with seniors andplaying games. It’s not much but I live alone, and they live alone, and I’m young, and they’reold. I think I keep waiting for something important to happen in my life and by going to thesenior center – almost every evening – I am trying to speed up the process. On Thursdays Ideliver food to the shut-ins. Fridays I am a kitchen assistant, which means I mostly wash dishesbecause I don’t know how to cook. On Mondays and Tuesdays I call out the Bingo numbers.That’s what I am doing tonight.Even as I am calling out the numbers I’m thinking about the Euro. I left the house with an openbuy trade on EUR/JPY, and I was actually just a little bit positive on that trade. I declined to set aprofit target – because this could be the big move I have been waiting for, and I want to catch it.To keep myself from watching my phone during the Bingo game, I hum a song in my head,count to 100 over and over again, and tap my foot to the beat of the Frank Sinatra songs playingon the stereo in the Bingo hall. But I want so desperately to see what’s going on with my trade.At the end of the game I stop to see Lawrence. We have a regular chat on Monday nights.I can see that he has something for me. His hand trembles (which it always does) as he gripstightly to a small business card-shaped piece of paper between his thumb and forefinger. Hesmiles wide. He is excited to see me.“Lawrence, do you have something for me?”“I sure do, Frankie. I sure do.”“I’m excited to see what it is,” I tell him, and I reach out.But he snaps back his hand, much more quickly than I thought he’d be able to do.“Not yet, Frankie,” he tells me, scolding me before I know I’ve done something wrong.”“Okay,Lawrence, okay. No problem. How are the ladies tonight?”He grins. “Oh well, you know, for a ninety year old man they get pretty excited. I’m theyoungest man here tonight besides you, and I’ve got what the ladies are looking for.” I never askhim exactly what it is that he has – that the ladies are looking for – and I’m quite sure I don’twant to know. I let it go.“I see you have a card there. Is that a business card?”“Something like that, yes, Frankie.” He pauses. “Tell me, you still involved in all that currencytrading? You still doing that?”Yes, I tell him. But we don't have to talk about that.“Well, of course it’s all going to hell, you know that. The dollar. It’s going to hell. First Obamais gonna take away our guns and then he’s gonna set about to destroy this nation’s economy.”Lawrence talks like this often. I am not sure he has any guns, but if he did – I doubt anyonewould want to try to take it away from him.5
“Yes, yes, the dollar is probably going down,” I say, but that’s just to agree with him. I don’tactually care what happens with the dollar. Tonight I want the Japanese Yen to fall about 100 pipsand that will make back everything I lost earlier this morning. I could breathe easier. I haven’thad a winning day in two weeks. I’m going to blow through my savings if I’m not careful.Sitting here with a man over the age of ninety makes me realize that if I’m not smarter about mymoney, I’m going to end up old and poor and alone. Those are three things I don’t ever want tobe. Well, I wouldn’t mind getting old. But poor and alone? No, thank you. I lean in a bit. Maybethe business card has something to do with some special advice – some way for me to definitelynot end up poor and alone.“Frankie, I am going to give you this card here,” he says, “and it’s a special card.”His hand trembles mightily. He can hardly hold it out for me. His expression is telling me thathe wants the card to be special, he wants to do something for me because I have visited himregularly for the last 12 months. The card is probably worthless. But he wants to do somethingfor me and this is all that he has.I gently take it but keep eye contact with him. “Thank you, Lawrence. Whose card is this? Doyou want me to contact this person?”“You’re going to want to contact that person, yes. If you’re really interested in trading, and youreally want to make some money, then you need to talk to this fellow.”I don’t think Lawrence knows anything about trading – he was a janitor at George WashingtonHigh School in the Richmond District for 42 years. But I carefully fold the card into my jeanspocket in a way that shows him that I care about it. I haven’t even looked at it yet.“You see that man,” Lawrence says, “and he’s going to change your life. You really want tomake money, don’t you?”“Yes, Lawrence, I do.”“Then this is the man you need to see.”He says this with such conviction that I know he’s telling me the truth as he knows it - he reallybelieves what he is saying. Maybe I do need to see this man. Maybe Lawrence isn't just hopingthis guy will help me. Maybe he really will help me. I decide to pay this man a visit tonight.But when I get out into the parking lot of the Catholic Charity, and look at the card, my heartfalls into my stomach.6
2TheIceCreamMan“An ice cream man?”I crumple the paper in my hand. Crazy Lawrence, the man who thinks Obama is going tocome get his guns, gave me the name of an ice cream man who, and I’m not laughing about it, isgoing to help me with my trading.I walk home dejected.The only thing that can cheer me up now is if the EUR/JPY has gone up.It hasn’t. Two weeks straight of losing, losing, losing. And really, I haven’t had a singlepositive week of trading in – well, I can’t even remember how long. Maybe I am just foolingmyself.Before bed I decide that I’m just unnecessarily depressed. I need to pick myself up off the floorand do something about how I feel. I know I was wrong about the EUR/JPY. There is only onething to do when I know I am wrong – and I heard this in a webinar on FXStreet.com, or onTFL-TV, or some other place I can’t remember now – I gotta go the other direction. The market7
told me I was wrong about the EUR/JPY going up. The market was therefore telling me theEUR/JPY wanted to go down.So I take a sell trade, with a lot size just a little bit larger than usual, and drift off to sleep,still wearing my jeans.Morning light filters into my Sunset District flat a bit earlier than it does for anyone else in myneighborhood. My house faces east, and it’s taller than the others around it, so I get more naturallight in the morning than I do in the evening. Which I like.The first thing I do is rub my eyes and then grab my phone. I overslept, I know thatalready because I’m usually up before sunrise. It’s already past 7am. I missed the LondonSession. I missed most of the New York Session. And it hits me: I have an open trade!My thumb rests on the charting app – I pause. Do I want to look? No.I don’t want to see it. I can feel it. I know these things, even without looking. My luck hasn’tturned. I already know this trade is a stinker. I sold the EUR/JPY, right? I scratch my head.Maybe I bought it! Of course not. You can pretty much know which way the market movedovernight by looking at my profit and loss statement – the market always went in the oppositedirection of my trades.I can’t put it off forever.I take a shower. The water is cold but I don’t mind. Maybe the water heater is broken.I pour a bowl of cereal. It tastes stale, like cardboard. I look into the bowl. No, it’sactually cardboard. Maybe it got chopped up in there at the factory.I brew a cup of hazelnut coffee. It tastes like strawberries for some reason. I imagine (inmy delirious state) that if I wait a little bit longer, the trade that I know is negative can have sometime to turn positive. Maybe if I stop looking at it, then I won’t close it, and if I don’t close it,then it will turn in the right direction. I won’t have to keep changing directions that way!But no. It’s not going to work that way.So I take a peek. Maybe if I only look out of the corner of my eye it will be less painful.- 3,700.That’s not less painful. It’s three thousand, seven hundred dollars of pain. What the hellhappened overnight, I wonder? I curse under my breath even though no one is around. I have anentire conversation in my head, at the speed of five hundred thoughts per second, but then blurtout the end of the conversation out loud, as if someone has been here with my all along.“I have to do something different.”I live just a block away from Golden Gate Park. I put on my tennis shoes and leave thehouse. I don’t even bother to lock it. The sidewalk has been painted purple, or some kind of8
chalky blue color – all across the front of my house. It’s colder than usual for this time of day. Itoccurs to me that I might be dreaming all of this. Maybe I didn’t have a loss.I pinch myself.Nothing. I guess, for now anyway, I’m awake. I wish I were dreaming, because then itwould still be night, I could still get up early and close my trade.I think back to last night. Lawrence promised me that this guy would be helpful. What doI have to lose?9
3TheIceCreamFactoryI had lost three thousand seven hundred dollars so far on my long EUR/JPY position. I had noidea how much worse it would get. Why not just go to this Ice Cream Guy and see what he hadto say?I looked at the card again. No address. So I stopped inside a Chinese restaurant thatsmelled like cooked pig - even at seven in the morning - and went to the back where I knew theyhad a pay phone. Next to the pay phone was a phone book from, well, forever ago. But that'swhat I wanted. Any ice cream man or friend of Lawrence would be listed in an old directory. Andsure enough it was there in the White Pages:19th and Mission, San Francisco, California.On the way out of the restaurant, the owner, Marty, who I'd known ever since I moved toSan Francisco, shoved a bowl of noddles onto the counter. "You eat before you go, Frankie," hetold me. I looked at the noodles."Before I go where," asked, "Where do you think I am going?""I can see it in your eyes, Frankie," he told me, "You are going somewhere importanttoday." Marty and his wife always took good care of me, so I ate the noodles quickly.Somewhere important indeed.The old television above the counter played business television - not the usual Chinesesoap opera. A beautiful blonde reporter was practically yelling into her microphone out in frontof the New York Stock Exchange. "It's worries about the European Debt Crisis that's draggingdown the market today, Becky," she blared, "and that's probably going to last all through the daytoday." Oh great, I thought. The Europeans and their Debt Crisis. Couldn't they get their shittogether?I wondered how bad my EUR/JPY position was now.It had to be down at least four thousand dollars. Maybe more. That was almost half mymoney.It was getting worse. I needed to see the Ice Cream Guy.I thanked Marty and left a five dollar bill.10
I took the N Judah to Market Street and walked from there. It was not a short walk but I neededthe exercise. In just ten blocks I passed thirteen hole-in-the-wall Mexican restaurants, four liquorstores, and what seemed like a hundred newspaper stands - all of which proclaimed the start of aterrible debt crisis in Europe. What the hell? How badly did the universe want to show me that Ihad taken a trade in the exact wrong direction?What made this worse is that I had taken the trade in the right direction to start with. If I'dkept that open, I'd be making five thousand dollars right now. I imagined what I could buy withfive thousand dollars. Another two months of living expenses. An iPad. A trip down the coast toclear my head. A plane ticket to visit my brother in Japan. Well, scratch that last one. Harry was amess and if I had just made five thousand dollars, he'd probably ask me for it.I was so caught up in this line of thinking that I passed right by the address the first time.The other reason I walked past it is that it was boarded up.CLOSED BY ORDER OF BOARD OF HEALTHBelow those words a bunch of language explained the date and time of the closing.September 15, 2007. I scratched at my eyeballs. What? That was more than five years ago. Whatthe hell? I knocked on the boards. I felt stupid but I knocked on the boards anyway."Luigi!" I called out.I pounded on the boards again. He had to be in there. Why would Lawrence .And then it hit me. Geez. Lawrence had given me the business card for a guy who wentout of business five years ago, and who probably hadn't had anything interesting to say to anyoneabout business or ice cream (for that matter) in twenty years.Glancing up, I saw an old sign that clearly marked this location as LUIGI'S SANFRANCISCO ICE CREAM FACTORY in bold rusted metal letters. At once time, all shined up,they actually would have looked classy. The building took up half a block on the street side, andprobably took up an entire block around back - this was a large location. He probably, at onetime, had made a lot of ice cream here. I knocked on the boards again."Luigi!"A voice called from behind me."Luigi!? He dead!"A man with a shopping cart was chuckling, rolling by. Clearly homeless, but apparentlyknowledgeable on the whereabouts of the local Ice Cream Guy. "Dead?" I asked. "You sure?""Sure, think, boss. I went to the g*damn funeral."I sighed. That was pretty conclusive. "Thanks," I told him. "I'm Frank."11
I held out my hand. He looked surprised. He either wished I was handing him money orhe hadn't been touched in a long time. He took my hand and I shook it strong. I looked him in theeye. He smiled back. He hadn't been touched in a long time. I could tell he hadn't showered in awhile, either."I'm Bob," he said. "They call me Bob round here cause I just Bob in and out!" Helaughed as he said this, and bobbed and weaved like a boxer. "What do you do, Mr. Frankie?" Heasked."I'm a little bit in between things, right now, Bob, to tell you the truth.""Me too, Frankie boss, me too," he said, nodding a very kind nod."I'm also doing a little bit of trading," I added for no purpose. I hated saying that, becauseit just sounds wrong to do a little bit of it, but I wasn't a pro, and I didn't even feel like anamateur anymore."Ohhh, I can see why you wanted to see Luigi, then, Frankie, I can see," he said. "Luigi,he was some kind of money-thinker, some kind of money maker, yes, he was." He was nodding."Made a lotta dollars he did, all that financial stuff. Yes yes."I sighed again. Felt somewhat one hundred percent stupid, now, because I'd come all thisway and the man was dead, and he did in fact have some lessons to teach me."Thanks, Bob. I appreciate you letting me know about Luigi.""Sure, thing, boss," he said, and I started to walk away.I got about half a block away when a voice called out:"Hey, Frankie boss!"I turned around."You want get in here?" he called out, pounding on the wooden boards.A chill went up my spine."Frankie, boss, you wanna get in here?" He yelled again, and he pounded so loudly on theboards I could hear them vibrating in my head.Around back he led me. Cautious at first, but then with a spring in his step, and then we reacheda door that had clearly been bolted shut so tightly you'd think they were holding stacks of goldbars inside.Bob hopped up and down a bit in front of the door, like he was getting ready for a boxingmatch again. Nervous energy radiated off him. We don't have to do this, I told him. He noddedbut didn't stop hopping. He knew, and at the same time I knew that he wanted to go in (assumingthat was even possible).For a moment he looked up at the sky, and mumbled a few words, and then dropped hisright hand off the shopping cart, as if he were leaving it for good, and then pushed back his12
shoulders, lost the bounce in his step, and planted both feet squarely on the ground in front of thedoor. "It probably locked," he told me, and then with one gentle touch - as if to just check thetemperature of the door - the door swung open. Just the way it would if the place had recentlybeen burglarized.He didn't skip a beat and stepped inside. Cold. Dusty. Bob tells me that no one has beeninside this factory in more than five years. Once Luigi died, they tried to keep it open, but no onecould run it like Luigi, and mistakes were made. "Maybe I made some of those mistakes," Bobsaid, and I realized that he had worked here. That why he knew."You wanna see the back office," he said. We walked between huge machines, rustyalready and now worthless. Giant machines for turning milk and mixing ingredients. Huge boxes- maybe some still full of who knows what - still lined the room. Some abandoned factories arefilled with trash and rats. This was just a dusty, moldy, silent and otherwise clean, gigan
the next few months. Because my brother suggested it, I started trading forex. I now hate my brother. Because I live in San Francisco in the Pacific Time Zone of the United States of America, I am up for what seems like 24 hours a day. The European Session, as they ca
