Welcome back to my a little bit forgotten blog.
For over an year I have neglected this blog, but I have recently decided to be proactive and have had thoughts of getting back to writing. Every day for the last few weeks I thought about coming back, and here I am now. I will attempt to be regular and stick to it, posting at least once a week. I believe that writing is a sort of stress therapy. Who needs psychiatrists, am I right? When I put my thoughts down in writing, I am sometimes surprised myself. It helps me see things in a different way, and digest my reality. When thoughts are just in my head, it all appears so complicated and confusing. Write it down, and I can handle it. Or at least I can see it more clearly and accept it for what it is. So let's go.
This blog has covered various topics since I started it in 2008. I started with self-improvement and most recently I have been discussing forex trading. For the time being, I will stick to the forex trading topic. It is my resolution to continue building my forex trading expertise, continue trading and extracting regular profits in order to supplement my income. But before moving on with discussing my current trading ideas and strategies, I would like to take you back to my humble beginnings as a trader. Spoiler alert: it has not been easy!
2003-2009: JUST WATCH AND LEARN
I had been observing the foreign exchange market fluctuations for a while, ever since I started earning some money from my part time job in 2003. I was earning in Japanese yen, and I was following the exchange rate with the USD. Since my savings were in yen and I was getting paid in yen, I was happy when the yen strengthened, and disappointed as it weakened. In terms of actual foreign exchange, I was not doing actual trading, but when necessary I exchanged my Japanese yen for USD or EUR. I tracked the exchange rate and aimed for the most attractive rate possible. Naturally, it was random, and when I got it right, it was luck, and when I did not exchange at the best time, I was just unlucky. No one can predict the future.
I continued to exchange yen through banks occasionally until 2009. My best results came at the end of 2008, when the Japanese yen sharply strengthened as a result of the financial crisis. I can still recall how I was getting excited as the yen strengthened and so bought dollars, only to see it get even stronger in the coming weeks and months. Naturally, all about luck once again. At some point in 2009 I opened my first demo forex trading account. I played a little bit with trading at that time, but since it was not real money and also I did not really know how to trade, I did not do it regularly. I was just watching and learning, but nothing can replace the real life lessons of making and losing money.
2010-2013: REAL TRADING - LOSE, LEARN, PROFIT, CARRY, AND MARGIN CALL
I opened my first real trading account in June 2010. I can still remember my first trade. It was on USD/JPY, and I randomly opened a position in the direction I thought it was going to go, and then quickly closed it in a few minutes as I saw some profits. I had no stop loss, no take profit, no plan for how to react in different scenarios. I just pulled the trigger, and then closed for a small profit. I was able to do it a few times, no losses, just small wins. And I felt like: this is so easy, I am going to be huge in forex trading. I will be rich!
On the following day, there was the US Labor report NFP announcement. I had done some research, and I was looking to go short AUD/JPY. I had even put a limit order to sell above the market price. My trading was evolving, and I was no longer trading at market rates. Watch out for me! So what happened next was that my order got filled, but then the price went against me. I was losing money and the price would not come back to give me a small profit. I had lost my magic touch, and I did not like it. I had read about big losses from forex trading, and since I had no plan, I started to get afraid. Then I learned about stop losses. I believe I saw someone on Twitter discuss their stop loss on the same trade I had on, and I copied that stop loss. I think I also had a take profit set, but I did not really need to worry about take profit targets, since my stop loss got hit first in a few days. I had my first loss, and it was not small. I cannot recall the amount, I just remember how shocked I was that I lost. And the future did not look so bright anymore.
After my first loss, I went to study more about forex trading. I learned risk management, that you should always have a stop loss and a take profit target, at a ratio of 2:1, in order to make sure that even with a 50% rate of being right, you can still make money. This is just the basics of trading. I also learned about several ways to decide what trades to pick. Naturally, being a beginner, and not being confident in my own analysis, I started copying the trades of those who shared their trading on Twitter and Stocktwits. I can not recall many details about my trading back then, I just remember that I was losing money for over a month. By the end of the second month I started to have some winning trades. Mostly my wins were the result of patiently waiting for the trade to play itself out. Due to not having confidence, I had been closing some trades early and before my initial target was hit. And then the target got hit, so if I had stuck it out, I would have made a bigger profit. This taking profits too soon problem would not go away easily, being a psychological issue, and will torment me for the rest of my trading career. Fear never goes away, I still have the same desire to take profits while I can. We can only learn how to control fear, learn how to live with it.
My trading really got to the next level when I joined a trading mentorship group at some point in September 2010. Of course, the biggest attraction for me in this group was our mentor sharing his trades, which I copied unabashedly. The results were good. It was not perfect, but I was making money. I had lost money in my first 3 months, and now I was making back what I had lost. I believe that in a few months I had recovered my losses, and reached a breakeven point. I continued copying the trades of my mentor, and after a while I started paying a monthly fee for the service. The idea was to learn his methods and apply them on my own and come up with my own trades, but I never managed to do the spin off part. I continued with my copycat trading, so we cannot really say that I was doing my own trading. This continued for around 3 years. So if I was making money on my trading, even if it was just copycat, how did I get a margin call?
JULY 2013 - MARGIN CALL
I got a margin call. I had been trading for 3 years, and I had got some very good results with my trading. I was making money. Especially in February 2013, I had an awesome month. The trades were going my way. I was on a flight, I landed in a few hours, then I checked my trading account. Big profits! I decided to bank in, closed my trades, and enjoyed my trip. I thought that finally I had figured it out. Life was good!
Then came May 2013. After 3 years of copycat trading, I had thought that I needed to do my own style. And somehow I got the idea to do the most brainless type of trading - carry trading. There were some currencies such as AUD, TRY, ZAR, which had higher interest rates than USD, so I could get paid a little bit for every day that I was holding a position in those pairs. For example, go long AUD/USD, and just keep the position open, enjoying a few cents of profit every day. It worked, until it didn't anymore. And the reason for it stopping to work was the famous FED Taper Tantrum.
The FED Taper Tantrum started after the May 2013 meeting of the FED. They announced that they will start to slow down their QE. The QE program weakened the USD, making my carry trade possible. With the Taper Tantrum the USD strengthened sharply against all my carry trade targets. I was losing big money. So how did I handle it? Initially I started adding to my positions, believing that the direction has to reverse soon. Unfortunately I did not, and my losses mounted, and actually my position was bigger that I could handle with my account size. I still remembered my risk management, and I set up stop losses on all my trades. Whatever happens, I am out at the stop loss. Hopefully they would not get hit, but if they did get hit, I will be out in order to prevent further losses.
Long story short, in July 2013 all of my stop losses got hit. I lost about 90% of my trading account. Unfortunately, at that time I did not have the opportunity to top up. I had to take the loss, and move on with the remaining money. I still had some money in my account for a few more trades, and hopefully I could recover slowly. But something broke in me at that time, and I lost my confidence and the desire to trade. I cannot remember the details exactly, but I think I took one last risky trade with very little capital, and the trade went against me and I got a margin call.
A margin call does not mean that someone called me on the phone to discuss my margin, although originally that is exactly what a margin call meant. When a person is trading, they have a margin in their trading account, and when that margin goes down to a certain level, the broker needs you to top up. He calls you, and if you cannot top up, he closes your trade forcefully. In most margin calls, people do not top up. I mean, most likely they would have put up more money in the first place, right? In modern days you are obviously not given the opportunity to top up, especially with online trading. A margin call is thus just a forced closing of all of your positions due to lack of funds. Game over. And this was my margin call of the summer of 2013. This is when I quit forex trading. At least for the time being, that is.