Diary of a forex trader
I started trading Forex in 2005 after stumbling across some site while looking for financial education. My uncle had recently talked me into the idea of investing, and as such, I was hunting for information. I saw the website touting foreign currencies and saw that the trader should "be aware of world events", which is something that I had a keen interest in. I figured to go ahead and give it a go. Oddly enough, I didn't use Oanda as a broker, rather electing to go with GFT, mainly because they offered so many currency pairs.
When I started, I only had $2,500 to fund my account, so I didn't quit my day job, which was actually my own construction business. I elected to trade on my days off, and began to read as much as I could about trading. I can still remember my first trade; it was a success - netting me $12 going long the South African Rand. It was shortly afterwards that I understood how little I knew about the Forex market.
My original equipment was simply my home PC, as these tend to be plenty powerful enough these days. I also had a white board to write down what positions I was in, and why. It was a great way to keep track of everything that was going on. I would also write all of the pertinent economic announcements coming up so that I could forecast waves in the currency markets.
I also found myself looking into various books, lessons, and trading courses. I attended every free webinar I could, and found myself trolling the public forums as well. It was from all of this that I started to get a "feel" for the markets. I began to see that certain things worked, and certain things didn't. Unfortunately, there was a bit of "system hopping" done, and I shunned several things that I eventually went back to. This is probably normal for new traders, but looking back... I can see how much time was wasted by doing that.
At the start, I traded the small time frames. I was probably what you would consider a "scalper", which is a common trap for new traders. Most of my trades would last less than 30 minutes, and I found that I was eventually a break even trader. This was very frustrating, as I would sometimes sit at the computer for 7 or 8 hours, only to be right where I was at the beginning of the day. I was using a moving average envelope system at the time, and although it was alright, it really wasn't the system for me. I began to focus more on price action, as I had come to realize that price was the only true leading indicator. Needless to say, I had to begin to consider whether or not this was possible. I decided that I was going to figure out how to do this "money trading thing", and I never looked back.
I will never forget my first "Ah-ha!" moment. I was long the British Pound against the US dollar, and my wife and son were waiting for me to get going, as we were getting ready to go to the zoo. Under normal circumstances, I would simply close out the trade and go ahead and leave, no matter what the result. During this particular trade however, she said "Why close it? You have a stop loss set don't you? Isn't that what it's there for?" I had to admit - I wasn't ready for a logical argument. I figure, "Why not?" and let it go.
I would be lying if I told you I didn't worry about that trade, but I also felt a certain sense of freedom in knowing that I walked away from the terminal with a live trade going. When I came back, I was stunned. I was in a trade that was up more than 100 pips, by far the largest gains for me up to that point. It was at this point in time I began to understand the concept of "letting winners run", and how important it really was. I can still see that trade in my mind all these years later. Because of this trade, I gained the confidence necessary to become profitable.
Looking back at my first few weeks, I would say that I learned the most back then. I would certainly have slowed down on the system hopping, as I eventually went back to some of the things I shunned anyway! I also learned the importance of demo trading, and how if you can't make profits in a demo account, then you can't in real life.
Also, one of the most important things I learned in those first few weeks was that staring at the charts won't make them do what you want them to! No amount of watching will convince the market to buy the currency you want it to! I learned that it was important to get up and walk away, to live your life, and let the market itself do the hard work of compounding your account.