How I lost $10,000 in 5 Days!!
So when it comes to making money, there's definitely a "smart" way to do things, and then the way that I, and I imagine most others go about it. Which is to say: stumbling from one mistake to the next, leaving a trail of money and tears lol.
Here's my experience, I've definitely learned what not to do (and a little of what does along the way), so hopefully you'll learn from my mishaps.
One of my first eye openers on my path to riches was LEVERAGE. I'd just read Robert Kiyosaki's Rich Dad Poor Dad, and this was one of my main takeaways.
So I promptly funded a trading platform, MBtrading (they're out of business now, more on that later) and started trading the currency markets.
If you're not familiar with the currency markets, it is basically trading one currency e.g. the US dollar against another, say the EURO. When one goes up the other falls. Pretty simple right? And even better most currency brokers give you way more leverage than the stock market. So instead of leveraging 2 or 3:1 in the stock market, you can leverage 50:1 or even a 100:1 !
What does that mean? It means you can control $100k worth of positions with only $1000 of your own money. It means you can turn a $5000 deposit into $15,000 very quickly.
Unfortunately the reverse is true as well.
You see leverage is a double edged sword that cuts both ways. It cuts like a hot knife through butter on the way up, and like an industrial grade laser on the way down!
This is how it starts:
I just turned $5000 dollars into $15000, I'm a genius! at this rate I'll be a millionaire by the end of the year!
Then, the struggle is real..
I just lost $2000 in 2 seconds, okay let's be smart about this I can make it back, just need a tad bit more leverage. Just this once....
Next stop, Delusion.
Alright, I'm down to $4,000 , but if I double my next trade I'm back in it baby! I can win it back...
Finally Despair sets in.
Aaaaand I've lost all my money in 5 days. Sh*#t.
So, Should you Day trade?
To Quote James Altucher:
"Only if you are also willing to take all of your money, rip it into tiny pieces, make cupcakes with one piece of money inside each cupcake and then eat all of the cupcakes.
Then you will get sick, and eat all of your money, but it will taste thrilling along the way. Which is what daytrading is.
I don’t believe you. Many people daytrade for a living.
No. I personally know of two. Maybe three. And they work 24 hours a day at it and have been doing it for a decade or more. So unless you want to put in that amount of time and be willing to lose a lot first then you shouldn’t do it.
One more thing: when you daytrade and lose money it’s not like a job.
When you go into a job you never lose money. If you show up for two weeks, you get paid. Even if you have been warned repeatedly about sexual harassment you still get paid. You might get fired but they won’t take your money.
The stock market takes your money on bad days.
Sometimes it takes a lot of your money."
As for MBtrading, they went out of business. My next broker FXCM got sued a bunch of times for ripping off customers.
The morale of the story don't Drink and Trade... or Trade period.
Until Next time!
What's your move?
JESS
"The road to riches is paved with gamblers and charlatans."
I lost $300 in my dabble in forex trading in 2010. That ended my trading then :)
Smarter than I am, it took me 3 years! Almost all of the brokers are crooks too.
Found that out the hard way.
Sad you had to learn the hard way, I had no other money to continue in my case so I had to stop trading :)
Take what the market gives you and bounce and revisit later for re-entry if has potential.
I swing trade and OTC market on possible runners had some success but not the big one yet but I'm close . The rule is stick to your plan !
Oh yeah, 100% ive found longer time frames are the only wsy to preservd sanity!
I had a similar experience when I began trading 3 years ago - make a little money the first few trades, start risking larger equity % on trades to make more, end up losing more, then risk even more to make it back. The lesson to learn from that is that trading the markets isn't dangerous, WE are dangerous in our actions while trading.
I am successful trader now because the only alternative I had to giving up was getting smarter about the way I traded and approached trading. Trading is simple, and eventually easy. Firstly, math doesn't lie and you must concern yourself with the math of your trading to succeed. Secondly, other individuals have succeeded at it so you can too. ALWAYS risk less on a trade than you stand to profit. Risking $1 for $2 you can win only 33% of the time and still break even. Use only 1 or 2 strategies for determining buy/sell entries. BUY LOW/SELL HIGH at/near support/resistance, trendlines, fibonacci levels. Put your stop loss beyond a recent high/low/ support/resistance, or trendline. Don't load your chart with indicators, they are only an interpretation of price action - use 1 or 2 maybe.
Most people give up on trading after going through the ups and downs initially, but I've always been determined to succeed at it because it literally is a dream job when you establish yourself as consistently profitable. You can go anywhere in the world with an internet connection and make money at any time (with 24hr markets), with a continual pay raise by compounding interest, and profit during economic recession/depression, while experiencing the benefits of tax write-offs for business expenses. The greatest thing about trading to me is not the return on my money, but the return on my time.
Good for you @prosperous, you are a better man than I! Also I didn't tell the entire story, the ultimate reason I stopped trading was the stress and to spend more time with my kids.
How long have you been trading for?
Hey What's up @goldsilverguide , right up my alley.
I'd been trading for about 4 years, I decided to change my strategy after my child was born going on 3 years ago.
I'm going to have to check out some of your post, I have some goldsilver investments myself.
Hopefully you'll follow me as well, I've got some pretty entertaining adventures in finance.
nice, i checked out your posts, thanks also.
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STOPWow what a crazy ride you had. For every one day-trader who mas made millions at it, there are probably 10,000 more who went broke. This is why I greatly prefer long-term, value-style investments. Good post!
Thanks man and agreed, Value investing is THE way to go. There's really no point in trying to compete against the robots in the short time frames.