Vegas is a nickname for a former local trader named Barry Haigh, who achieved fantastic gains as a forex trader. In his articles, he describes in his style his simple trading systems, which could be used in multiple time frames, he carefully explains the theory behind every part of the system. Barry also shares funny and interesting stories from his career and ideas for trading in general. If you desire a simple and comprehensive trading system or you just want to read about trading from a different angle, this article is right for you.
How did it start
“The hardest easy money you will ever make.”
The first thing a veteran trader told me the very first time I walked onto the trading floor, on my first day of trading at the now-defunct Mid America Commodity Exchange, sometime in the late Spring of 1980.
Fresh out of exchange orientation, there I am in my brand new trading jacket, with a shiny new trading badge with a red dot conspicuously placed for the world to see. I decided to start my career trading gold futures.
I hit the trading floor from the member's lounge like I own the place, striding confidently into the trading pit about 20 minutes before the open.
There are only a handful of traders there at this point, but they collectively give me a sneering look, realizing in an instant this is the day of the month when new members are unleashed onto the floor. I come to realize very quickly all newbies are treated like financial road-kill by the veteran floor members.
We are there to fund their free-wheeling lifestyle, make the payment on the Porsche, maybe even fund juniors’ college. We are not there to survive and buck the odds. We are not there to add to the pit population. If we survive it means the same amount of public orders divided by more people, and that ultimately means less money in their pocket.
As the gold market gets closer to the open, members start coming in at a rapid rate.
I get jostled around like a pinball, moving from spot to spot because I am standing in some members much-coveted space.
I feel that if one more guy [not many, if any girls] squeezes into this pit it’s going to explode.
I am so close to people that if I moved about three inches I could kiss them.
I feel like I am prepared, having spent weeks memorizing hand signals, bidding and offering protocols, checking trades, and proper record-keeping measures mandated by the exchange and the CFTC [Commodity Futures Trading Commission].
Just a couple of minutes until the market goes live.
Pit energy is rising exponentially as brokers are yelling out pre-open bids and offers, giving the pit an idea where the price will be when the opening bell rings.
Members are also trying to get the brokers attention, to let them know how interested they are, and at what price, in filling their orders.
I am nervous and excited, thoughts racing through my head.
Can I do this? This place is nuts!! Will I remember how to bid and offer? On and on ad infinitum. Ten seconds to liftoff.
I have been waiting for this moment a long time.
Working, saving, and planning for well over a year. I have hocked everything I own to be here.
I have begged every relative from immediate family to the eighth cousin twice removed for money [It’s a great way of making sure you never have to see them again].
I raise enough money to be here, but just barely. I start with about $8,000 in my trading account after I buy my membership [about $10,000]. I have a wife, a two-year-old son, and outside of my trading account, about $10 in the bank. I have a rent payment and an 11-year-old car that uses more oil than gas.
I have a family [both sides] that thinks I am completely out of my mind. I am a sucker, a sap, a nit-wit, an idiot.
They’re making bets with each other the exact day I blow out, with the over-under at about 30 days.
How can you do this to your wonderful wife and son, you irresponsible dumb-ass?
Pressure, what pressure? Do you think this is pressure?
The opening bell rings. All hell breaks loose from every direction. I am being hit from all sides, screaming people in my face. Everything is moving at warp 10.
Price going up, down, and sideways.
Bids are over offers in parts of the pit, and people are already threatening fights. I get hit with a wad of spit on the front of my jacket.
Nice I think; wonder which cockroach this came from. In no way, shape, or form am I ready for this. I’m paralyzed.
At the end of the day, I’m down about $50 on 2 trades that I made. Not bad I think, but I’m physically and mentally exhausted.
I will do better tomorrow. I make my way up to my clearing house to put my trading jacket and tie in the trader's lounge and gather my things and go home.
I put my trader jacket and tie on a hanger and notice that somebody has penned on the back of my jacket [black magic marker] the following: “FAG Trading”.
No wonder those babes in the elevator were laughing. Welcome to the exchange. Can you take it?
Twenty-five plus years have passed since that first day, and I still remember it as if it were last Thursday. I often think of what that veteran trader told me. Simple, funny and perceptibly accurate. A perfect colloquialism illuminating life as a trader.
I know many of you who are reading this are losing money trading futures and/or forex.
It makes no difference if you are a newbie or have been losing for years.
You’ve spent hundreds, maybe even thousands of dollars on worthless seminars and/or systems in an attempt to turn things around.
Everything seems so promising yet losses continue to mount. You’re confused about how to stop the bleeding.
While you sit at your computer screen [instead of standing in a pit at an exchange] you go through the same emotions, bewilderment, hurt and shock that I experienced in the very early part of my floor career.
Pit trader or computer trader; every trader, sooner or later, face the trading demons.
Please take heart!! I have walked in your shoes. I understand totally what you are going through.
However, it is time to take trading matters in a different direction.
That is the purpose of this file. I am going to layout a trading plan for you to become wealthy. All it takes is time and your ability to implement the plan [more on this second point in a minute]. What makes making money in futures and/or forex easy is
- Having a method,
- Implementing the method at the proper time without second-guessing yourself
- Staying with the trade until the market tells you it is time to exit.
I receive many emails from people who are bewildered at why I am willing to share my trading secrets [up until now the 1 hour and 4-hour tunnel trading methods] with the general public for free.
It is very simple. First, many veteran traders early in my career helped me enormously.
They gave and never once asked for anything in return. They didn’t have to do it, but they did it out of a sense of “what goes around comes around”.
Secondly, it does not cost me anything to share my knowledge of markets.
Even if everyone who reads this implements it exactly as written, it won’t affect any currency pair 1 pip. Finally, I am disgusted at the hucksters who have built an entire cottage industry out of the misery of newbies and losers. Preying on their hope, all they do is separate people from their cash.
My challenge is to communicate what I know about this effectively. As a donor, I will do my best. As the donee, do what it takes to make the change and become a winner.
The Vegas Tunnel Method - Step By Step
First, you need a charting service.
Since most all electronic trading platforms have charts with technical indicators, this shouldn’t be a problem.
Create a 1-hour chart on whatever currency pairs interest you. Barcharts or candlesticks make no difference. Overlay on this 3 things: 1) a 169 period [1 hour] ema [exponential moving average], 2) a 144 period [1 hour] ema, and finally 3) a 12 period [1hour] ema.
The 144 and 169 ema’s create what I call the “tunnel”. The 12 ema is an extremely valuable filter that you will want to have there all the time. I will talk more about this in the filter section.
Memorize or write down and keep next to your trading screen the following Fibonacci number sequence: 1,1,2,3,5,8,13,21,34,55,89,144,233,377. For trading purposes, the numbers of interest are 55, 89, 144, 233, and 377. Insert the levels into the chart. To do so, click one of the moving averages with the right mouse button and choose properties. In the open window on the Levels tab, enter the appropriate levels as shown. Beware, however, for pairs with five decimal points, the value has to be multiplied by ten, as the system was created for pairs with four decimal places.
Wait for the market to come into the area of the “tunnel”. When it breaks ABOVE the upper tunnel boundary, you go long. When it breaks BELOW the lower tunnel boundary, you go short.
Stops and reverse are placed on the other side of the tunnel.
As the market trades in your direction, you take partial profits at the successive fib numbers respectively, with the final portion of your position left on until one of the following conditions occur: 1) market hits the last fib number [377 pips] from the ema’s, or 2) the market eventually comes back to the tunnel and violates the other side.
Example: GBPUSD is trading at 1.8500. The ema’s are as follows: 144- 1.8494, 169- 1.8512. The market breaks 1.8494, and you sell at 1.8492. Your stop and reverse are now at 1.8512.
Over the following hours, the market starts to go down. 40 minutes after you put position on, the cable is at 1.8440.
You can use for computation purposes either tunnel boundary or the median of the tunnel.
Ema’s are still the same, so if you use the median, 55 from 1.8503 is 1.8448. You should have taken part in the position off at 1.8448.
The market does nothing rest of the day. Stop can be moved down to protect the position or left alone at a tunnel.
You are now looking for price to be 89 pips away from the emas.
Since 55 was already passed, it no longer concerns us in this cycle.
A couple of days later, the cable is at 1.8300 and the median of ema’s is 1.8410 [1.8400 – 1.8420].
You should be out of another portion of the position at 1.8321.
Market bottoms here and in the next 2 hours, cable screams to 1.8535. Your remaining short position is covered at the upper tunnel boundary of 1.8420, and you are now long from this point as well. Since you are long, you would now take partial profits at 1.8475 and 1.8509.
This is a fairly typical example.
If you were to just stick to this basic model, your account would grow very well over time. Las Vegas was built with far fewer percentages in the casino’s favor.
In case you haven’t figured it out, this model cuts your losses very short. By definition, you can’t lose very much on a single trade from your initial entry position.. On the other side, you take some quick profits at the 55 level which satisfies the scalper in you, and you have positioned yourself for bigger profits, in the long run, should the market keep going in your favor. By definition, you are letting profits run.
The Achilles heel of this model is when the market chops around the tunnel and gets you in and out multiple times for small losses. I will cover how to deal with this in the filters section.
That’s it. This is the model. Fairly simple in its design, and easy to remember. Has all the things every local want in a model, except the quick 2 pip scalps, which you can’t do anyway. Cuts losses and lets profits run. Yet for its design simplicity, the thought behind is more complex. Time to talk about that.