In 2013 I had my first margin call. And I did not have more capital available to invest in my trading. So I quit trading. The surrounding circumstances are a sensitive personal issue and something I have not discussed with many people. The 3 years from 2013 to 2015 were very hard for me in financial terms. First, my job as a financial advisor was not bringing me good income, as my sales were not good, and I got paid only on commission. Yeah, I was a financially poor financial advisor. I was barely making enough to cover my rent and food. And in terms of trading, as you already saw in my last post, I was hit by a perfect storm, which wiped out my trading account. Of course, I am the only one to blame here, as I was overleveraged and trading bigger than I could afford. Excuses or not, at the end I detonated my trading account, and I could not trade anymore, so I was not able to help my finances through trading.
Fast forward to the summer of 2015. Then I had a bit of money for trading again. After a 2 year break, the scars had healed, and I again thought that I could make some profit trading. So I jumped back in the game. My return trade was long AUD/JPY. It was not a carry trade, I just aimed for a 100 pip profit. And I got it. I do not remember the details surrounding the trade, but I do recall that I did 2 more trades for a total profit of 31,408 yen. Not a bad result, and definitely my self esteem got a boost. I was making a bit of money trading again. But due to a tight financial situation, I took my profits and paused my trading. In retrospect, it was a good decision- get the profits and run!
I did not get back to trading until May 2016. I had a stable job back then with a regular salary. So I was able to fund my trading account. And I went back into the game with a carry trade! The same style that had gotten me a margin call 3 years ago. Only that now I had learned my lesson, and I was going to trade only TRY/JPY. My strategy was to add to my position on weakness. Start at 1 lot long. Then add 2 more lots lower. Then 3 more lots. And 4 more lots. Improve my average price, then close at a profit, as the price eventually recovers. Of course, I also had my carry trade profits coming in every day, so this strategy made sense. What could go wrong?
June 2016: BREXIT, DID I HEAR MARGIN CALL?
Yep, I got another margin call. This time the result was the Brexit referendum of the UK. The Japanese yen sharply strengthened as a result of the Brexit favorable results, and although I am ashamed to admit how I got my margin call, I will say it as it is.
I am a certified Financial Risk Manager. I have the FRM certification. I passed the exams for it in 2014. The exams tested my ability to manage financial risk. This means that I should be able to avoid margin calls, right? Well, I could not avoid the margin call of 2016. Seriously, they should have taken away my certification. How did this happen?
Now, obviously the history of trading and investing is full of stories of famous investors, much more experienced and skilled than me, blowing up their accounts. I am not the only one. But still it was a stupid lack of risk management on my part that lead to my margin call. Basically I had not calculated well how much money I needed to have in my account to prevent a margin call. The price started moving against me and went too far hitting my margin call level as my account equity decreased. I lost 54,898 yen that year in my TRY/JPY trades. This is more than I had made the previous year, so I was negative. But I had learned my lesson regarding margin calls. I was never again going to leave my account exposed to margin calls.
2017-2020: CARRY TRADING SUCCESS
God bless the TRY/JPY. After my stupid loss in 2016, I made profits 4 years in a row.
2017: 136,160 yen
2018: 183,538 yen
2019: 23,580 yen
2020: 12,242 yen
The last year of this carry trade success was 2020. Remember the Covid pandemic? My carry trade got in a bit of trouble as risk sold off due to the pandemic, but eventually it recovered. There had been a change in the interest rate of the Turkish lira though. Trying to stimulate the economy, Turkey lowered its interest rate to the point that I was getting almost nothing in terms of carry points. So I closed my last position at a profit and took a break from trading. Low interest rates everywhere during the pandemic in 2021 and 2022 made the carry trade kind of a misnomer. There was nothing to carry!
So in 2020 I took a break from forex trading in this low interest rates world. Until when? I did not know it back then, but my trading career was going to get serious soon. Really soon.