Saturday, December 16, 2006

Forex easy success

When i started trading, i had two months in a row when i made about +20% on my capital every single month. I thought i was already good at trading, but i didn't started to trade real money because i remembered the old rule: you need at least two years to get good at it, and that was a great decision because next months brought me nothing but loses.

Despite i made a lot of (virtual) cash i didn't learned a thing, i was just enjoying my profitable trades and thought to myself how good i am at this. Don't make the same mistake i made, try to learn from all your trades.
Think about:
- why you made a trade
- what market did
- what you should do next time when similar event will occur.

I keep all my positions open for at least few days, so it is not a problem for me to remember them, but if your trading style requires you to make several trades a day then you should start a journal, you may think they are for 13 year old girls but they are not, all highly successful people write and update their journals. Alternatively you may try starting a blog it is free and you can share with other traders your ideas, thoughts and what you are doing. People are generally nice and will be happy to help you with trading.

I also realized that effortless success is worthless success. It may be good in a short run but in the long run, the problem is no one ever learned from easy success. After few good trades people tend to think: hey i know this stuff, and they start to bet big bucks and what they bet on is nothing more then luck.

Some time ago i knew a guy who took 10 000$ loan from bank to trade on forex, when i first met him he had only 4 000$ left. He told me then that he read an article on internet about a man who made millions on stock market and he thought that trading is a fast and effective way of making money. So like i said he borrowed cash and started trading. After just two months he lost 4 000$, so he decided to buy automatic system ("magic pill") which will trade for him. First month of robot trading was great, he recovered some cash and everything was going straight, but the disaster was still to come, suddenly out of nowhere robot started losing, poor guy didn't knew why and what to do with it, because he bought this robot and let it work, without looking into sophisticated algorithm robot was built of, the only thing he knew was: robot is losing. When he finally decided to turn off automatic trader, he was already down additional 2 000$ and of course profits that this robot made were also gone.

When you first look at this story it seems there is no "easy success" embedded, but i assure you there is. It's an article about a guy who made millions from stock market, but often it can be short sentence like "You can make easily 200$ a day by trading forex market".

I am not saying that making big cash on forex is impossible, i am merely saying that road to success is not as easy as it looks like. You have to make a lot of trades loose cash (better to start with virtual money), learn from your trades, analyze them, search for patterns on charts and develop your own style which will feet you, not your need of money.

The most successful forex traders i know are not the ones who made money very fast, but those who lost their deposits twice before they started to make money month by month and yes it took them about two years to get there.

But again don't get me wrong on this, you don't have to lost 20 000$ to start making money. I am just saying you should be prepared for it, trade for at least six months on demo account, then when you will get comfortable with trading demo, start trading real cash with oanda, marketiva or fxsol. This are brokers who will let you trade with small amount of units this also means small deposit, as low as one for oanda and marketiva