Firstly, I am in no way claiming to be a seasoned trader, but here is my journey so far......I hope this will help some folks who are thinking about starting to trade professionally.
Couple of years ago I sold my home, moved in with my boyfriend and was happy with life. I had approximately £200,000 cash in the bank and spent a very long time thinking about what to do with it. My background was predominantly in property investment but decided now was not the right time to invest and thought I would wait out until the next market dip.
I was unhappy with my full time employed (stable) job and thought I would look at opening my own business, looking at popular franchises. Spent months researching and decided that this route was too risky for me, didn't want the hassle of employing people, dealing with market lulls etc.
Then I had a brainwave! I remembered that years ago my dream job would have been to trade in foreign currency but I didn't have the capital back then. After careful discussion and support from my partner we decided that this could potentially be a good option. My aim was to have a better quality of life and earn a little cash whilst being able to work from home.
I started with a couple of forex books, spent countless amounts of days online watching youtube video clips, completed the school of pipsology. I went to a couple of free seminars with my new found enthusiasm and quickly realised that these mainstream 'coaching' sessions where just a money pit for the organisers who prey on people's lack or will to do their own research.
For me, this was never a get rich quick scheme, it was going to be a business, one which I would take as seriously as opening a new shop along with all the initial costs that came with it. I could've spent thousands of pounds on these educational courses that were being offered but decided that I would rather risk x amount of my own capital instead, learning from my own mistakes and understanding how the market works by watching it daily.
I opened my demo account in August last year and as the usual story goes, it went fantastically. I placed a realistic amount of 'play money' into the account which was £20,000, leverage at 1:100. Within a few weeks I had made about 20% return, was ecstatic and thought 'wow, I can't believe this is happening, I must really have a knack for this!'
My initial trading plan involved scalping, I wanted as little risk as possible and aimed for only a few pips per trade on large sized lots and with repetition I would hopefully make decent returns. I was incredibly lucky on news announcements, looking back I can't believe how I managed to be on the right side of most trades but this was nothing short of just gambling. It wasn't real money, I wasn't feeling the pain of any loss but I was euphoric on the wins.
I felt that I had spent enough time researching and impatience also kicked in, I was clearly making lots of money on the demo so why waste any more time, get a real account!
I took a 3 month career break from work in November so that I could try out my trading full time, I could do this because I had enough funds to cover my living expenses without the pressure of having to make money for a living.
Well, I opened my new account on Friday 13th - day of the Paris attacks and lost £1300 within a few minutes. I did have stop losses in place but didn't understand what was going on so I moved them, thought it was just a large whipsaw that I would fade out. That really killed my morale. I was so sceptical, believing the conspiracy that my broker had played me! I did't trade for a few days, I was honest with my partner and again he was very supportive - you need that. If you don't have support you will only hide your losses and well - we know what happens to relationships thereafter.
I completely changed my trading plan, promising to myself that would never happen again. I traded carefully, slowly, patiently and although I was slowly getting better I still felt that I was gambling. I didn't know what the market was going to do?
I subscribed to a live squawking service for large monthly fee as I didn't want to be left in the dark again in the event of breaking news. This is when I had blip no.2.......
The squawking service was great, it informed me of economic news releases, central bank speakers, breaking news, option expiries and much more.....including trading recommendations from the likes of Morgan Stanley and JPM.........
When I heard that USDCHF was a great buy that week what do you think I decided to do? Yup, placed 1 lot on that mother! And what do you think happened??
Well, I moved my stop, refusing to admit that I was wrong, and stupid, and completely naive. I then thought "well it's definitely going to move back up, so I'll place another 1 lot so that I can make some pips on the way. When my partner came home that day and saw that I was in a large drawdown we had another discussion. "why don't you just remove your stop losses, you always get stopped out just before price then moves in your direction?" For some stupid reason I agreed this was a good idea. The moment I removed the stop loss I felt an immediate sense of relief. I could now sleep easy knowing that my stop loss would not be triggered. I place more trades without stop losses and even though my days would be quite stressful they would mostly end well.
I handed in my notice and left my job in February, estatic at my new found career.
From being nearly £6000 in drawdown at it's worst it took about 3 weeks before price rallied back up, but I closed the trades at breakeven through fear, although it carried on moving up. This gave me the confidence that trading without stop losses was a great idea, as I would've otherwise taken a large loss. My account was now up by around 10% overall and everything was rosey.
Well, a similar thing happened with EURJPY some weeks later. Full of confidence I just let them run. I had read about lots of people who had blown their accounts and I thought it would never happen to me, I was way more smart than them.
The JPY kept gaining strength and was becoming very overbought, I thought not long before its going to rebound. I was in quite a high drawdown and thought I could help save my capital if I added some more funds to the account to give it more room as I was closely approaching my margin limit. In my stubbornness, it took 3 weeks but one morning when I woke up I found that my account had blown. I'm sure I do not need to explain what a bad day that was for me.
I put this down to being a very expensive learning curve and went back to the drawing board. New trading plan, new strategies, new style. I tried dozens, not giving any particular one enough time or attention to make a difference. Long story short, I found my style eventually and everything was going well. Until another bad buy on sterling which I also allowed to blow my account. I had lost a small fortune and was questioning my ability as to whether I was just one of these dumb a$$ people who loved the idea of trading but was just not cut out for it.
I knew I had to give it one last go, if I stopped here then all that would have happened is that I had lost a great deal of money, if I carried on then perhaps it would all be worth the heartache in the end?
Through a great deal of luck, I was introduced to a trader who has now become a mentor of mine. He has shared his experience and knowledge with me and I now trade with strict money management rules and only take high probability trades. I miss a hell of a lot of opportunities this way but I also get to keep hold of my capital. I have spent a long time making lots of pips only to lose them in a day by overtrading so I now take the rest of the day off if I've had a great morning. Equally, if my mindset is not right or the markets just aren't doing it for me I now back off - which is one of the most difficult things to do.
I have been quite lucky in the sense that I have had enough capital to see me through a period of unemployment, be able to blow accounts and still continue in the belief that even though I have been through hell I can see massive progression and learning from my mistakes.
"If you can't take a small loss, sooner or later you will take the mother of all losses." Ed Seyota
This is so true. All new traders suffer with an ego, they refuse to accept when they are wrong and take it personally. In order to survive your trades must end in 1 of 4 ways:
If you allow your losses to run you can never succeed. Cut them short and let your winners run - letting winners run is also one of the most difficult things to do for new traders.
Keep good records, make a log of all your trades so that you understand what made it un/successful - learn from them.
"Show me a trader with good records and I'll show you a good trader." Alexander Elder
Do not worry about trying to understand how economic new releases will affect the markets - just pay attention to how the market reacts to it.
Do not trade high impact news releases.
Do not take any trading recommendations from any financial institutions/articles! People are paid very good money to spread rumours. Ask yourself - why is this person giving me this information?
Start out by trading the trend - learn how to read charts and types of candlestick formations.
Buy strength and sell weakness.
Do not - I repeat - do not try to pick tops and bottoms - it only really ends one way!
Do not trade with a bias. Trade what you see.
If you are having a bad time (argument with partner, death in family etc) step away until you are 'happy' in yourself again, this will only lead to making bad decisions, revenge trading.
One piece of advice that I am certain I can give is that if you are expecting to make a a high return (over 20%) every month then walk away now. People can have ocassional great months doing this, but to do it consistently takes a lot of skill. I will be very please with myself if I can see a return on my (lost) investment in the next couple of years.
Just like any profession, you need to spend a lot of blood, sweat and tears in return for experience, over 10,000 hours of live trading is probably about right. I am trading/watching the markets on average of 12 hours per day to increase my exposure and understand what causes volitility, why some months of the year we trade in a range, why there is a large selloff without any fundamental reason. If you want to do this properly, you need time, and with time you need some capital backing.
If 95% of us knew what it takes to become a great trader, we would run a mile now!
Do not give up your job unless you are sure you can comfortably see yourself through the year. I have now got myself a weekend job to take the edge off but also just to keep myself in employment and maintain those skills whilst interacting with others on a 'normal' basis.
I know this is not what a lot of new traders want to hear - heck I was one of them! But the reality is that this is not easy, you really have to be passionate about this and want to do it because you love it, if money is your only motivator then greed will succeed.
Just reading charts or just paying attention to fundamentals is not enough, you have to fully submerse yourself and change your lifestyle, the way you think, what interests you. I have never been so up to date on my current affairs and I love it! Speak to other traders, share ideas. Use your judgement on the information you get and where you get it from, you can never stop learning and most of it is free on the internet!
'If you are afraid of failing, you won't get very far.' Steve Jobs