He shared his story with me and I want to share it with you. This student has been a trader since 2004. Forex trading became his only source of income and his full-time job until he decided to quit in 2013, because of a very bad trade. He couldn’t handle the pressure and the stress of living off Forex trading anymore. He started to think that his mindset was not right for Forex trading and he could live better with a normal 9-17 job and a normal salary.
He got a job as a terminal security officer (not exactly a 9-17 job) and he seemed to be happy like that, but something changed in 2017. I love the way he described what happened, he wrote: “something bad happened that changed my life: I got promoted”.
After 4 years, he got promoted and he was earning $270 more per month. So he started to think: “what am I doing? Is it really what I want? Working late at night to earn in a year what I used to make in a couple of months?”.
Let me first say that I highly respect every kind of job. Life is not just about money. You can enjoy your life with a $1,000 salary and you can hate your life even being a millionaire Forex trader.
By the way, this story reminded me of a similar episode described in the book “The new market wizards” by Jack Schwager.
The author interviews some famous traders, asking questions about their strategy, important moments in their career, mistakes that they have made along the path and many other things. The conversations are then reported in the book and you can really get some good Forex trading tips.
The following is a conversation between the author and the top trader Bill Lipschutz:
Schwager: what happened to your account? As I remember, you started out with about $12,000.
Lipschutz: that’s right, and the peak was about $250,000.
Schwager: really? You had built it up that much!
Lipschutz: well, this was over a period of about four to five years.
Schwager: still…
Lipschutz: yes, I had a lot of success. Anyway, I ended up blowing out virtually the entire account in a few days.
Schwager: what happened?
Lipschutz: on September 23, 1982, the Dow went from down 30 points to closing up 20. This was the famous Granville reversal, which was the bottom of the bear market.
Schwager: does “Granville reversal” refer to the rally occurring just after Joe Granville (an extraordinary popular market advisor at the time) had put out a sell recommendation?
Lipschutz: exactly. I was very bearish and heavily long puts. I kept pyramiding all the way down. I was really pressing. I lost most of the money that Monday, and by Wednesday the account was virtually gone.
I thought of myself when I was 17 and trading with my mother’s account. I was earning just a few euros, which was already good, considering that I had a basic knowledge of Forex trading. Then I started to think that I could increase my positions, because I wanted to go on holiday with my friends and I needed money. I didn’t last 3 days like Lipschutz… it took 3 hours, more or less, to blow my trading account!
So there must be something in common with these 3 stories. A lesson that we can learn, a tip that we can use in the future to be better traders.
From my point of view, the most important lesson that we can learn from these 3 experiences is: remove emotions from your trading.
The student, who wrote me the private message, lost a huge part of his account because of greed. Bill Lipschutz lost everything in 3 days because of greed. I lost everything in 3 hours because of greed.
If you think about other common mistakes, they are all because of our emotions: over-trading, revenge trading, over-sizing… sounds familiar?!
Remove emotions from your trading and trade like a computer!
Just out of curiosity, you might wonder if Bill Lipschutz learnt the lesson after that bad experience.
Yes, he did. After that episode, he went to work at Salomon Brothers to improve his trading skills and, today, he is the head of Hathersage Capital Management, a hedge fund specialized in Forex trading and with a capital of $1 billion.
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