This is not yet another article to entertain you for couple of minutes and plant an idea inside your brain that you’re going to forget about by the bedtime. I am about to tell you a story, a true story about three traders. Three traders who traded with three different trading styles – day trading, scalping, and position trading.
You are about to hear a story of myself and how I went through three different trading periods, financially and emotionally. If you look close enough some of you might even recognize yourselves and learn a thing or few.
It took me couple of months to get over the Forex basics. You know the period when you close few winner trades on your demo account and you think you are about to kick some asses on Wall Street. Yeah, feeling’s nice and I have known it myself when I had first started. After spending few months digesting the basics on a demo platform, time came to choose the most applicable strategy. So I became a Day Trader.
I chose a strategy and added an indicator that seemed to be good to me. I can’t guarantee for how I decided it was good – maybe it’s better I can’t remember. And I decided to spice up things with few of my own rules and after some tests I got ‘cojones’ and decided to go live.
I opened an account with $1000. Opening positions with micro and mini lots, my goal was to make anywhere from 20 to 50 pips in average every day. So yeah, I tried to boost my account for 100% and after, what I called more than a good month, I multiplied my account by 150%. Now this was reason for a celebration as I had about $2,500 in my account. Not only did I make my goal but I even took it a step further. Fifteen years ago it was a reason to rip my hair off of the happiness, and I am fairly happy nobody could actually see me jumping around my room.
Now take a look at the heading once again – yep, day trader. You can guess what happened next I assume? Tricky and risky as it is – day trading did not bring much of good after that first month. I burnt my account down to $0. I didn’t feel good at all and I thought I was done trading once for good. If I only got a dollar for each time I thought that, I could have been rich by now. And so I didn’t trade for couple of months.
After few months of a pause, Day Trader within saw a scalping strategy as better chance to make a breakthrough on the Forex market, so I decided to go for scalping. I thought this way – I used to make up to 80 pips a day, now, all I have to do is to make couple of them for great profit – nice and dandy.
And so it was… I decided to go in with $3000. “High profits are conditioned with high investments”, I thought back then. I went in at real lots, with a goal to make 5-8 pips per trade. Armed with experience described under previous heading, I traded very carefully, trying to behave as a professional as much as I could have.
I earned roughly $1000 in the first month. It was 30% increase and it made me more than happy. My happiness didn’t seem to seize after I made nearly $6000 before the end of the 2nd month, before I learnt that history repeats… in somewhat harder way. Most of the people learn this in school and I had to find it out at stock market. I kneeled before my lack of experience once again, and this time the blow was much harder as my account was completely stripped off of those shiny $6000.
Another couple of months took for the wounds to heal and our protagonist got tired of short-term trades that took too much time and slightly more money. I was convinced that swing trading was the solution. After I’ve been spending up to few days analyzing the market, I opened positions and followed the price crawling up to my take profit for 5 and more days. I went in with $1000 and as you could have guessed once again – I was stripped off. My account statement was equal to zero and my moral worth no more than my account’s status either.
Each of these three stories represents one particular period of my life, while I was still inspecting the stock market’s grounds. These stories are excerpts out of the first 2 trading years of my life. It was nearly 15 years ago, I am still in the business and I still trade.
Some of you might ask which style I use now and what strategies I apply. Kind as I am, I am going to give you an answer – I don’t use one strategy, I use more of them and each of them is good in its own way. Trading style is important, but not crucial if you dispose of the real tool. I mean the trading tool. And if you know the technical analysis well enough.
Day Trader, Scalper And Position Trader Are Become Profitable
I know there’s a too-long-article alert in the back of your head starting to ring, so I’ll cut this down and get to the point.
I would like to explain you how is it possible to burn $2,500-strong account, or even worse – $6000-strong account in scaring short time period of no more than couple of days. You have to control your emotions. I couldn’t and I didn’t know how.
As a started, my reactions were a disaster – I reacted way too furiously even at the slightest changes in my account. Every cent I won was a reason big enough for a celebration and every dollar lost awaken not-a-healthy-dose of fury.
I desperately struggled to protect my account’s current status. If I opened a position that would start to drop down I didn’t want to close it when it reached the stop loss, but I hoped it would go back up instead. Naturally, market proved to be merciless. Price will NOT go in your favor more than it will. In the end, you are against-the-wall with closing your position with a great minus.
It is pretty much of a reaction I used to see at gamblers – bursting with emotions, what is follow by series of ill considered moves.
Emotions, too much of them, incorrect stop loss usage, ignorance of technical analysis, not clearly defined strategy rules and overall inexperience altogether doomed all three traders from above.
Today, the story’s different – I guess I’ve burnt myself way too many times. I use tested tools, technical analysis and strategies I’ve been building for years.
I trade as a day trader mostly. Of course I wouldn’t miss a nice opportunity to open up a position and keep it for 10 days. I use scalping the least, mostly due to lack of time. Main time frame I use is H1 with entire technical analysis done at H1, H4 and daily chart.
If you are perchance a news trader and you make money successfully then I would like to make a small tribute to you and tell you I enormously respect you. News reports are being mass-manipulated nowadays as well as statistics, it became nearly impossible to rely at such sources. I am absolutely immune at all the type of news reports, regardless of what I hear on TV I still like to stick at my own strategies. I haven’t had any headaches in a while.
There is only one single thing I feel free to use out of news reports and I trust it 100%. It can be only used 3-4 times a year but you can make a small fortune. I’ll write about it some other time.