How comfortable am I with the possibility of losing money?

As a person who is new to this idea of trading currencies I have been soul searching to get myself centered BEFORE I lay real money on the table. The thought of having 1 bad day ( or more ) and walking away with less $$ then started with has occupied me for a few days now. I think I have given this more attention then learning strategies, how to read charts and other technical stuff.
I wanted to hear back from some members here on their thoughts on how to cope with a losing streak. It would be good to better understand the physiological impact this has on a trader and to get some insight on this. Thanks

Well not a bad thing to think about as you will lose money. It is just part of the game and you have to look at it as just that. You will hear alot about how you should learn what you did wrong from your losing trades. Why there is some truth to that especially in the beginning stages. I am going to cal bull S#$t on that. The have to accept the fact that sometimes you didnt do anything wrong your analysis was not wrong your timing was not wrong but you lost the trade anyway. It happens. It dont mean change the way you look at the market change your strategy or anything. It simply means that trade did not work out. Now once you understand this now you can work on what to do when your trade is not working out. It has a simple answer cut it. We all lose money but how much money depends on you. Cut you loses short and let you winners run and you will be in good shape at the end of the day.

When I started out three years ago I also had this issue very much at the forefront of my mind, its only natural to not want to lose money that you are investing. And, as I am about to say, money management is crucial, you need to be able to recover from a possible string of losses. Risking to much of your account per trade is known as financial suicide, you need time to ride the up’s and down’s.

Second to what I have just said, I also strongly believe that back-testing your trading theory is also at the top of your list. By doing this over an adequate amount of historical data you will start to build a picture. You will see what the average number of loss’s can be, and you can work your money management around this result. Not only will this give you personal piece of mind, but it will give you a nice bench-mark to work from.

For example, if your historical trading results through back-testing showed that you maximum number of consecutive loss’s was 8, then when this happens in a reality in your cash account you can stay calm knowing that its not uncommon. Failing to plan is planning to fail, excuse the cliche here.

Give yourself known benchmarks, it will stop you from panicking when things don’t quite go to plan.

Start off with a micro account with money you can afford to lose. Look for high probability trades and log all your trades. Once you build confidence, learn which TFs and pairs work for you, adjust your trade size accordingly. Sounds easy but it definitely isn’t and most important be patient. Good luck

Money itself isn’t much. The valuable thing? Time, really.

It may be a little more correlated for me because I own a small business and can literally work 24/7 if I want. The key is time management. Anyone could literally become either a brain surgeon on the one hand, or an expert on daytime soap operas on the other, depending how they spend their days.

With that in mind… are you unwilling to lose one hundred dollars, but willing to spend a thousand hours in order to avoid it? That’s the kind of question, really. Maybe if you are in an impoverished country and people only make a dollar a day, then a dollar is critical. I suppose that is some part of it; what opportunities each of us have, in order to weigh the decision.

Of course, if you don’t become a good trader in the end… well, may as well save both time and money. The commitment to excellence from the very start is key. This isn’t the sort of thing to embark upon, and do ‘half way’ ~ for surely that will be an expensive adventure.

I thank everyone for offering their perspective on this subject. What I have read from the responses has given me a personal feeling of ease. I have a bit of a problem with over analyzing, but I can find my way back to center with confidence in a matter. I have found some of that confidence here on the forum members :60:

I like the way you look at that. I have always said how much is your time worth. To me I look at it as an investment in myself. By the end of the day I have spent so much time studying markets I should have a doctors degree. Well I dont but I also dont have a huge student loan to pay off either. Nor was I thought about the markets by someone that was handed a curriculum by the same people that ar set out to take your money. Instead I let the markets teach me the markets but it does come at a price and that is how much time and effort are you willing to invest to make it happen.

Yeah! I also like the post of Desmond Sterling, I am spending way much more time than money. And that´s what really worries me, as Im relative new in this, Im not sure yet if this gonna work.

If I lose the money, or part of it, its not a big deal, but if I spend two years and still around break even, puff… that will s…ck!

That with time is right. However, you can’t [U]learn[/U] to trade (or anything else) if you just invest money and no time. Plus to learn to be profitable takes a lot of time. No matter if you buy into if with a mentor and/or seminar or for free.

just keep at it. Keep moving forward. It really all depend on you dedication to making it. I have been in trading for a few years now but really didnt put to much into it. I have been trading forex for 2 years and I can say the first year I thought the same. Honestly the beginning of this year hurt pretty bad and I thought about throwing in the towel. I gave it some thinking and decided if I wanted this then I need to go for it and dont hold back. (actually my wife told me that but thats the first time and last time I will give her credit ever again lol I hope she dont read this) Thats when I decided to give it my all I mean after all if I want it you cant give less than 100%. After all you only get out what you put in. Since then things have turned around for the better way better. Good to the point that uncle sam is going to want to talk to me coming soon. Thats fine with me I hate paying taxes but I also know if your paying taxes your making money. If I can do it anybody can trust me. I have no education hell I didnt even make it to high school. I went from a pot smoking young adult (if thats what you call it) to building jet engine for one of the largest companies in the world. To a dad (my best job yet). Forex is for that day that I get laid off from my job. I have survived many layoffs so far but one day my name will be called I know that. I am 29 I started there at 24 so I doubt I will retire there. I have nothing to fall back on. Now I can say income from Forex most months goes toe to toe with the income from my job. I dont take out my Money from Forex to build it for when that days comes I can walk out with a plan and a smile on my face. There are still some aspects I have to work on like health insurance and stuff like that that is offered through my job that will no longer exist when I do go full time. That is coming soon to a theater near you. My point is alot of people fail because they want all or nothing but dont want to put in the work it takes to make it. Thats why they fail. If you want it bad enough and are prepared to do what it takes to make it you will for there is nothing stopping you but you. Good luck hope to see you here on your 2 year mark. I just past my one year mark on babypips and I owe most if not all of my success so far to babypips.

Hmm… I’ll not sugar coat this. Seriously, unless your prepared to put in some serious study and screentime (my first three years, I put in tens of thousands of hours… 16+ hour days… I kid you not!). I’ve been at this a LONG time and I’m still learning. The other route… find a mentor. But from what I’ve heard and read… its a mine field. The saying, ‘those that can do and those that can’t teach’ springs to mind. In any event before taking the plunge think long and hard.

Read a book called Trading in the Zone by Mark Douglas. I cannot recommend this book enough it will make you realize that trading isn’t all about how many wins you make, but how big those wins are.

One of the examples he uses in the book is a professional trader from the 80’s I think that won less than 10% of his trades yet he was one of the best of his era. (It’s been awhile since I’ve read the book so I apologize for not recalling the guys name)

Risk management is KEY

[B]How’s this for not sugar coating it…[/B]

My honest-to-god equity curve. I earned all that money at a rate of $15/hour at a job I don’t really like.

Where on that curve would you have given up?

and if you think I’m an idiot, that’s a perfectly fair assessment, but know that I have no regrets. I learn by doing, and doing in trading involves losing… a lot of losing. I knew that going in, no point crying about it after the fact :wink:

most of that money didn’t go to learning actually… it went to “breaking down” my ego. I guess I just had a really big ego LOL

Akeakamai… no I’d say the ego was still pretty much intact. :57:

I’m prepared to look at each and every trade with the perspective of “[B]what can I lose here[/B]” and from what I understand, that is the essence of being professional.

If I continue to have problems with my ego, I will find ways to deal with it. If you have any tips, I would love to hear them…

I tried to start a small tech biz in the late 1980’s, which never got off the ground… lost over a year’s worth of time on it. Yet that failure taught me enough, that fifteen years later I tried again and succeeded.

Tried to create another small business in 2009 in addition… technically it made a few bucks but in terms of time=money it was a far bigger loss than akeakamai’s graph. No regrets either… in fact I’ve started a few small companies that, well, just sort of ground to a halt. But in doing so, I have three that didn’t. But that’s okay as the successes covered the failures.

One thing I’d like to point out: a lot of successful people aren’t very smart.

This is a common observation, in fact!

Note that simply trying and not quitting is perhaps more essential than even knowing what you are doing, in a lot of circumstances (though admittedly, not with forex). There’s knocking on the Door of Opportunity intentionally, but there’s also drunkenly leaning on the door and falling through, or even being thrown through it, kicking and screaming… all of these methods work.

The only method that doesn’t work? Telling oneself it’s not worth going anywhere near that door, and hiding in a dead end job somewhere. Which would be fine perhaps if there was such a thing as job security, but… well we all see the news these days.

Specifically answering a question though… I do believe I would have stopped at the first 10% draw down upon an account (regardless of whatever that dollar amount might be, impossible to tell from the graph) and re~assess, going back down to maybe ‘penny per pip’ until the methodology was sorted out. That’s just me though; I really like to have “know what I’m doing” hard~confirmed before putting serious cash down.

This is, of course, no reflection upon anyone else’s judgement; I’ve known people who have spent lavishly on sports cars, houses, second wives… for that matter, third and fourth wives too, whilst maintaining alimony on the first. A mere 20k is chickenfeed, compared to those all~too~common situations…

Thanks bobmanics for this very honest and personal response.

Just kidding with you Akeakamai. In actual fact in my ‘humble opinion’ lol, I think its essential to have a healthy dose of ‘ego’ or perhaps to put it a better way confidence. I’m sure you would agree that as your account has grown the psycological pressure to get your trading decisions right increases. The percentage of account trade size remains the same but the dollar win/loss will increase. Pulling the trigger knowing you could lose 1-10k, even if its 1-2% of balance takes some getting used to. :cool:

The thought of having a solid risk management plan has to be in place. I have been reading up on different views about this very important aspect to successful trading. I thank you for this post.

The [B]KEY[/B] is that you have a desire to do what you do. What is successful or not is completely subjectively. Even a losing trader can be successful, if he loves what he does. That’s probably not the thing what society would call succesful, but who are you? A copycat of societies common rules or yourself?

Now, what I’m not saying is that the goal should be a losing trader. Albeit if you set your money target first, you will likely fail to make money. That’s one of the contradictions of life. What I also do not say is that a losing trader is a successful one, if he just claims he is doing something “pretty cool”.

There is one very important question imho which gives already the answer if somebody can make money with it or not: What are you going to do with the money? If you are just doing it to buy Ferraris and so on, I guess it’s more like gambling. If you are doing it to spend it careless, you are not “worth” the money you have. If you [B]invest[/B] your money carefully, that is imho the essence that you are worth the money you make. So, this is imho the key part of a successful trader/investor/politician/whatever (you get the picture).

Sure there are lot of ppl who have money who imho are not worth it. Albeit if you look behind their curtains, it smells. I am not so sure if they are happy with all the money they have. I’m again not saying big money is an issue. It’s what you are going to do with it and what you are do to earn it, what makes you worth of the money or not. What I’m trying to say is: If you are honest with yourself, you will likely get what you want. Might it be money or something else.