Hello Saechoc,
first of all thank you for posting your thoughts; second of all, âminxâ is right in saying that âeven a newbie can get 500% increase in a few daysâ. Indeed, the point about trading as a business is to grow your account overall, so that over a chosen period (six months, a year), when you will draw the sums at its conclusion, you will have a positive figure.
Also, think about this: if you traded every day for hours gaining a lot of pips but also losing just as many, and at the end of your chosen evaluation period (let us say one month) you only gained, say, +0.5%, and this happened every month (unlikely to be so, but let us say this as a theoretical point), by the end of a trading year you would have gained 0.5x12= 6%. Now,
most bank-held savings account will not even give you 2% over a year, so of course it would be a good investment; however, what a bank account does not require you to do is to spend hours researching, analysing, and executing transactions, as the bank does it on your behalf, which means that you can work full-time and let that account grow with no additional effort. In other words: if you spent hours and hours of your life researching, analysing, and executing trades on the Forex market, you may want to also evaluate, at the end of a chosen period (one month, six months, a year) how balanced your time-money ratio is: could you, for example, be over-trading? If you traded less, but with less conflict (e.g. buying one pair for a few pips, then selling it for a loss, then buying it for a loss, then buying it again for a few pips, in a scalping fashion but perhaps without the necessary planning, trying to chase a trend on a small time frame, e.g. 5min. chart), would the overall result be better?
At the beginning, traders seem to want to be more âinvolvedâ, which usually means that they will put on more trades, as they need to hone their technical skills, and feel like they are more immediately in the game; as time goes by, they may continue with, say, short-term trading but also consider longer-term trades, which take more time to mature and may seem counter-intuitive as they will require less direct action⌠These longer trades may yield more profit overall than lots of smaller trades - for one, you will not be paying for spread costs many times over, but only once; âcarryâ/rollover interests may also be an incentive to trade longer-term - and they may take less of a toll on your time and psychological well-beingâŚ
You must think, also, whether you are over-leveraging: a typical sign of this would be a yo-yo account, where the growth curve would see-saw dramatically up and then down⌠Bear in mind that once you are dramatically down, you will have less money to leverage your trades with, therefore it is true what you will hear, that is, that losing is faster (and easier, in a way) than âwinning your money backâ: I put the last phrase in quotation marks because the typical ârevengeâ trade psychology comes after a losing streak, when we, as human beings as well as traders, are most at risk, being unable to trade objectively and perhaps unable to control our raging/turbulent emotions - heart pounding, stress rising, brain cutting short our more rational processes in favour of âfight back modeâ.
Over-leveraging yourself for âwinning your money backâ is a risky and often deadly game for your account, therefore the hardest but most sensible thing to do is to swallow your pride, like a bitter pill, and come out publicly, as you have done, to admit your mistake, and eat humble pie, taking consolation from the sympathy and support of the trading collective, as there will be many more traders who will have been through exactly the same learning curve and similar disappointments.
In the end, you must try to risk less, for this, and this alone, will give you the opportunity to keep your account profits unharmed by the inevitable âbad tradesâ or unpredictability of the market (going against your bias): given that we cannot predict the market, and we can expect to be proven wrong on a number of occasions, our only certainty is how we manage to minimise losses, e.g. using stop-losses and smaller lots, so that the losing trades will not keep us out of trading.
So, take a look back at what you have been doing and see, for example, if you put on too many trades, or bet too much money on some trades (especially the ones that you felt âgoodâ about but turned against you), or did not use stop losses effectively (either too tight, or too wide, or none at all, or trailing but in the wrong context): when you will have done that, try to change one aspect of your risk management habits, e.g. lot size, and see if that will have a positive impact. Do not change everything at once, as it may not give you enough time to single out where you were going wrong: if you were testing a strategy and you will now make some changes to it, you would not want to change too many parameters, otherwise you would be no longer talking about the same strategy, and effectively you would have to call it a new strategy and start a whole new testing period.
I hope this helps.
Happy trading.
