Hi folks,
Where do I start? If I was to look back as to when it all started, I would have to say it all started back when I first hit the $50k pa salary package and I already wanted to get out of the rat race quickly.
I got introduced to CFDs by my cousin back in 2005 and have now been doing it on again/off again for the past 6 years (kind of a bad relationship I can’t shake off). I started trading in equities, then went to commodity (mainly gold), then indices and finally landed in FOREX (mainly AUD/USD).
During uni I had developed a gambling habit so when I first got introduced to it, the thrill & potential of wins & losses were similar to that of being at the casino.
For the past 6 years I couldn’t differentiate between whether it was my gambling habit that was the driving factor behind my decisions or whether I just didn’t know what I was doing.
It finally dawned upon me recently that it was the former and not the latter. I didn’t know how to manage my equity, in other words, I was gambling more than what I could afford to lose.
So it goes without saying that I have yet to record a profitable year, hence I have put down CFDs as a hobby in my profile (according to the ATO (australian tax office) – that is all it is for me… Waiting for the day I can convert my hobby to a profitable business and in doing so I can offset my losses for the last 6 years. Mwahahahah. As you can imagine I have racked up quite a bill – let’s just say the amount left owing on my house could have been substantially less…
Luckily, I have progressed in my day job, so I have still managed to maintain my debt repayments. As the saying goes – don’t give up your day job…
My number 1 mistake has been – RISK MANAGEMENT. I have never protected my equity. I should know better considering what I now do for a living - ie managing risk on construction projects!
I know I have the necessary analytical skills and the potential to succeed… I have seen my live account balances go from $5,000 to $100,000 (within 2 months)… I have also had live account balances go from $10,000 to $30,000 overnight… I have obviously only told you about my successes – it goes without saying that I have had more failures otherwise I wouldn’t be writing such a long post.
When people ask me how trading is going for me, I have always blamed my work for coming in the way of my successes (ie. “I can’t be in front of the computer every single second of the day”, blah blah blah – I am sure you have heard it all or have used it all).
The reason why I am in the position I am at the moment can be contributed to the following things:-
Greed – unrealistic expectation of where the price will go and not having trailing stop losses to lock in profits…
Unrealistic stop losses or no stop losses at all.
In the end, it all boiled down to risk management.
Although I started doing CFDs almost 6 years ago, I would have to say that out of the 6, I have really probably really spent less than half of that trading (that would be the “on again/off again” time).
Anyways, I am hoping to continue learning and hopefully one day be living off the profits I generate through trading – but I have realised that this is a long way away and not a get rich quick scheme.
I HAVE JUST FORCED MYSELF TO OPEN A DEMO ACCOUNT FOR THE FIRST TIME IN 6 YEARS!!! $10,000 of Monopoly money – yay!!!
My first goal was to set up a business plan. Essentially this was basically a statement which identified what my goals were and how I was going to go about achieving them.
Secondly, I created a risk management plan for each trade. I used some ideas from other pages (eg. Pipwoof’s Triple Threat Exit Strategies). I think Pipwoof’s Daybreak and TTE strategies are quite nice…
My demo account has almost doubled from $10k to about $20k this past week… Out of 17 trades, I had 1 breakeven, 6 losses & 10 wins. Mind you the 6 losses were at some point profits but the markets turned. The breakeven was a trade I accidently opened but closed quickly as soon as it hit my BE point.
I have my closing trades below with the Amount column showing (profit/loss) for that trade… Just remember this is a demo account, so I don’t know whether I would still have been this composed… All of my entries were limit orders except for 3.
You will note that, my earlier trades were small as I was testing the waters… Combined pipwoof’s DB and TTE strategies… I probably could have closed those losses when they were miles ahead in the black but hadn’t reached the first TP point as per pipwoof’s TTE strat… perhaps I should have made a discretionary call on those – oh well…
The later trades you will find risked a substantially higher amount… The margins for the higher trades were $5,000 and the risk was $2,500. The reason for the higher margin call and risking 25% of my equity was due to the following reasons:-
- Weekly chart showed a morning star with the subsequent bar being a long red… Even though on the Monday morning (over here in Aussie land) prices started moving up, the rest of the world were still sleeping and thinking about how awesome and quickly their weekend went…
- I then turned to the daily chart, which showed the AUD/USD in an ascending wedge/channel (bearish signal) and had just broken and closed below …
- There was no news scheduled to be announced overnight… Unless something drastic happened in the US, chances were that it was only going to confirm the break by reversing once it got to the resistance around 1.0520
- Hourly MACD/Stochastic showed the pair was overbought…
- Trade direction @ open – short…
- Entry price was set based on resistance level in the hourly chart at 1.0520, which also happened to be around the previous support of the daily rising wedge (as per note 2)…
- Initial stop loss was at 1.0572 which was over 50 pips away which was perfect for me to risk $2,500 (I didn’t want to close prematurely) and it was also near the price range of the morning star from the weekly chart…
Result:- I woke up in the morning to find my trade setup was spot on +/- 2pips… The pair at the time was over 25 pips away from my BE point so I moved my SL to BE.
I then trailed my SL by 25pips every time the pair was over 50pips away from my previous SL… The rest is history… I went to sleep that night and woke up to find that the market had reversed but my SL had managed to lock in almost $10k in profits… Happy days…
NOW, I am sure most of you are wondering, how I could risk that much after writing all the other stuff before it… “Aren’t you going back to your old tricks???”
On the contrary, you will note I considered a lot of things before I set up the trade… I basically called a spade a spade…
Alternative scenarios:-
- What if the limit order failed to execute? I would have cancelled my order as it was basically intended for an overnight execution, any longer and a lot of things could have changed, eg. Fundamentals, Sentiment or Technical, especially knowing there was some Aussie RBA news coming out the following day… So I would have been on to the next trade…
- What if it went the other way? Like I said previously, something drastic needed to happen to the US overnight where no news was expected to be released on Monday over there… There were some other stronger resistance points below my initial SL.
But why risk such a big amount?
FYI, my goal is to start trading full time by the age of 35, so I have about 32 months to go… I should have over $100,000 saved up by then… So risking $2,500 is equivalent to 2.5% of total equity, which is what the recommended amount is… I am trying to see what I would be comfortable with at the moment…
So I am going to continue to demo it up until I feel comfortable and then probably start on a $10,000 live account risking $250.
This is my first of hopefully many posts… I intend to share my ideas as well as learn from other traders… A network of brains are always better than one… :22: In the future I will not be posting my transaction history details, I was just very proud for the first time in having a system that protected my equity and was also profitable…
Happy trading & good luck…
ppolra
PS. This would have to be the first time I have ever written anything down about my trading… It is such a relief to get it out there rather than keeping it to myself…