Hi,
I don’t think it’s any different from being self employed in any other field (as a matter of fact it has advantages over any other field).
Let me put it to you this way:
I had my own business for about fourteen years (computer hardware, software, and fleet management systems) and eventually it just got too much for me. I particularly started loving the part where you had to almost beg people to pay you for your time after the work had been succesfully completed! Then there was the travelling. Then there was the preparation of quote after quote and meeting after meeting which, a lot of the time, would not turn into a deal. Also - to be honest (probably due to the aforementioned reasons) - it just got to a point where I was losing interest in what I was doing. I remember well the first month that I was on my own - when everybody else I knew was getting their salary paid to them on a certain day and for the first time in my life my money was not guaranteed at the end of the month. Anyway - I perservered - and made a very good living in the next fourteen or so years.
What does this have to do with forex trading? Read on.
The fist thing to consider: can you live with the ‘uncertainty’ of not having a ‘fixed’ income? If you can then in my opinion you’re good to go. Again - it’s no different from being self employed in any other field. No matter what field you are in there is no guarantee that from one month to the next you are going to do some good deals or pick up new business. As a matter of fact - at least in forex - there is ALWAYS something going on, the market is ALWAYS open, and there is ALWAYS some or the other opportunity to make money. In other words - there is ALWAYS a deal on the table, there is ALWAYS a client or customer, and once you close a deal - there is no negotiating the terms of YOUR payment - you call your broker - and get your money - no questions asked!
Now don’t get me wrong - it’s not easy either and statistics estimate that only about 10% of traders actually make it in the long run. If you have a look around these forums you will find that up until a point I lost a HUGE amount of money over a period of five months or so mainly because I thought it was easy and quick money and thought that I was the new ‘wonder’ trader on the block. It’s not an easy living and if anybody tells you that it is - then they have no idea what they are talking about. I even know one or two people who actually don’t consider trading as a ‘real’ job and think it is a ‘lazy’ and ‘easy’ way to make money. It can be the most frustrating and lonely job on the planet and it makes you dig deep into your personal resources and pshyce. On the other hand - even although I am only now starting to make consistent profits and am not even close to covering the losses that I made in the past - when you finally start ‘getting ahead’ - when ‘the penny drops’ - there is no better feeling. If you really want more insight into this I strongly suggest that you buy yourself a copy of ‘Mastering The Trade’ by John F. Carter. The sections on the ‘phsychology’ of trading alone make this book worth it.
I do (sort of) agree with your friends though - the part about ‘speculating’ that is. I don’t believe that that is what we are (or should be) doing though. Put it this way - I believe that if you are ‘speculating’ then you are ‘gambling’ and the market WILL feed you your a**e on a plate. I have come to see it more as ‘investing’ or ‘saving’ - just like you would at a bank BUT the returns are FAR greater. Let me add that saving is something I have NEVER been able to do so I’ve had to dig deep once again to understand this. Why do I say this (and play on these words)? Have a look at any currency pair or stock or index or commodity over a long period of time. There is ALWAYS a long term trend in one direction or the other (by long term I mean nothing shorter than a day) and that’s where the money is. Have a look at a five or fifteen minute chart and you’re never quite sure where you are or will be in the next five or fifteen minutes. I started ‘speculating’ expecting quick money on a minute by minute basis - no deal! Once I got out of this mindset things started to turn around. Also - when an indicator has been devised - a ‘period’ almost always refers to a day in my opinion - not a minute - or five minutes. Now that I have started ‘saving’ i.e. saying to myself - I am taking this amount today - and ‘investing’ it for a week or two - things are good. I think one of the biggest pitfalls is that in the beginning - because we have been influenced by other people, movies, media, etc. etc. - we tend to think that you need to be buying or selling every minute of the day and in that way we will be making piles of cash. From my experience - the only people making piles of cash out of that kind of trading are the brokers! While this probably does work for large institutions or brokers - simply because they can buy or sell HUGE quantities - and then only need a small movement to make profits - it can’t work for people like me anyway - with limited resources. Trading longer term also to a large extent protects you from those painful and distorted fluctuations that happen just prior and after a major news event.
Actually - while I am typing this up - I have just reminded myself of a favourite joke of mine - which I think sums up really nicely what I am trying to say (or at least seems to work for me):
The young calf and the old bull were standing at the top of a hill looking down at a whole lot of cows feeding in the valley. The young calf said (excitedly) to the old bull “let’s run down the hill and fk [I]one[/I] of those cows". The old (and wiser) bull replied "why don’t we just walk down the hill and fk [I]all[/I] of those cows”. Not quite the eloquent explanation you would find in a trading book but do you get the picture? (I’m from South Africa and I figure with you being an Aussie you’ll appreciate and get the joke).
And one other thing (I always have to dodge the arrows coming at me when I make this statement): don’t think that because you have been demo trading for an extended period of time and you are making a profit that this means that you will be successful. It doesn’t! Demo and live trading are two different animals for two main reasons: because it’s not real money you are trading with you are inclined to take bigger risks which for some obscure reason on demo trading almost ALWAYS pay off AND demo accounts are no reflection of the real world. There are many messages on this and other messages boards addressing the subject and from what I have read almost everyone (myself included) made a fortune on demo trading and wiped out account after account once live trading. Open a small live account and trade small lots and learn that way. A good example is this: I (now) ONLY trade the indices (mainly the DAX 30). The DAX closes at 17h00 NY time and reopens at 02h00 NY time. If you have placed a stop order between the closing and opening times (remember your broker is ALWAYS open) the order only gets filled at the market opening price i.e. the price ‘slips’ in relation to the market opening price when executed. In demo trading the price is not ‘slipped’ and the order is filled at the exact price at which you placed it. Also - because of the volatility of this index - market orders are always requoted BUT in demo trading - the order is always filled instantaneously at your price. These are just two examples but there are many ‘subtle’ differences that are not explained to you and all of these differences add up to losses in the end if you don’t know about them. On the other hand - if you can’t cut it demo trading - that’s a no brainer!
I can also tell you that because of trading I have learned more about the world that I live in in the past six or seven months than I had learned in just over forty three years! It is an ongoing education and there is something new to be discovered around each and every corner!
I believe it’s like anything in life: if you put in enough effort, dedication, and time, do the ground work and research - and above all - are captivated with what you are doing - you will succeed.
(I suppose you can tell that it is Sunday morning and the markets are closed and I have nothing better to do than subject everyone to my inain drivel. On the other hand I have not posted for a while so I don’t feel too bad)!
Regards,
Dale.