How did you manage your windfall?

I just can't imagine having the problem. I can easily imagine being rich.

I got an email from a buddy with a plane for sale a couple weeks ago. A beautiful Hatz, what a great toy, and only 30 grand.

I don't know when I'll own a house again, I don't have that need now. But it will be a few steps up from my last one, which was quite nice.

Whatever I do, I have to remember that every dollar I spend is 5 or 10 I won't have in a year from now. That will make it easier to stay in check until my income gets well into the 6 figures.

That won't happen for 2 to 3 years, so at any rate, all I need to think about now is my next trade.

This post is going to be simplistic in nature, but an illustration of how money can influence us. I recently increased my forex account signifcantly. Not by gains, but by rearranging my total nut. I suddenly began reverting to beginners mistakes when trading the larger amount. Cutting wins quickly, etc. My money management remains the same, my system remains the same; Nothing has changed but the dollar amount on my P and L window. Not displaying the P&L with the larger amount immediately reduces the stress. I'm not done funding yet but thought I should do it in steps.

The point is this: Dealing with larger amounts than you are accustomed to requires a transition period as the possibilities and risks increase in size. The larger the steps, the tougher it is.

That being said, the benefits of trading more capital far outweigh the liabilities. Trading smaller percentages of account balance yields more actual dollars while reducing percentage of account at risk.

Thanks to FXJarhead for finally convincing me of this.

True enough, us folks from a blue collar background are not pre-programmed for building and managing wealth. It's not impossible, but it adds a few significant steps to the learning curve that cannot be overlooked.

In the eighties Tony Robbins put out a lesson in conditioning oneself to wealth building. Most of it had already been said by Carnegie and Norman Vincent Peale and all the old-timers. But I remember part of it was this:

He asked everyday people about the lessons they'd been taught about money and their answers were of this nature:
Money doesn't grow on trees
Money is the root of all evil
The rich get richer while the poor get poorer
Money isn't everything
Money can't buy happiness
Easy come--easy go
Count the pennies and the dollars will take care of themselves
Though there is truth in those answers, they hardly could be considered a foundation for wealthbuilding.

Not surprisingly, when people of privelege were asked, their answers were of a completely different nature. Something like this:

Develop a plan
Use other people's money
Diversify
Always have your antenna up

Big difference.

WindFall??
If anyone reading this has had a "Windfall" in FX, take the money & RUN !!!

Personally, I've never had to deal with a Sudden Increase. It was tough enough just nurturing it to grow.

Sage advice. Especially if the windfall is big enough to change your life.

Dis-attach yourself from the money completely. You will not be able to sustain your wins if you don't. I enjoy any profits I make, but the whole thing is as much of a probability game to me now as it was when I traded virtually a few years ago. The moment I start changing my mental outlook, I find myself making irrational decisions.

As for handling the money itself once you bank it, I suggest you make no big deal out of that either, and encourage your family/significant other to think in the same way. Money is never a goal or a central part of your existence. That would be a sad, sad thing. The ultimate objective is to have it as a comfort zone, or at least that's the way it is for me, and I'm perfectly happy with my life outside of this trading business. I understand that some here trade full time for a living, making money as their main occupation - and I do not mean to devalue their endeavors in any way.. I just think we should put financial gain in the right perspective. There are more important things in life (science, love..etc).

Hi All...

I've read thru this thread twice today....and maybe it is me, yet I can't quite grasp the "context" of it all.

So I went to Webster's Online...
WINDFALL;
1. Something Blown down by the wind
2. An UNEXPECTED, or UNEARNED, or SUDDEN gain or Advantage.

Went to Investor Words;
1. Money Recieved which WAS NOT expected and NOT a DIRECT result of something the recipient did.

So is this what is being discussed here....Unexpected/Unearned/Sudden Gains not really worked for while trading Currencies?

Thx for any help
Fxj

Good point. I've never had a windfall. I guess accidentally ordering 100 lots instead of 10 and having it go your way would be a windfall.

I believe the correct term is "pipgasm".

Hey Bill...
Now put in that context.....I guess I have had ONE windfall in my day.....Though as Murphy's law would have it.....It would be the #1 type of windfall listed in Webster's LOL ! Blown Down by the ( my ) wind...( I was talking on the phone!!!! while putting on a trade )
Last Year, I meant to buy 600k usd/jpy and by accident hit sell.....it would have been a beautiful LONG position..... instead my "windfall" was for
-25 pips.

Personally I have the suspicion that I'll be as disaffected by 100k in my account as by 10M, as the same effect that means you're not used to it means you don't have any "ideas" about it.

Then again - have always been very different from almost anyone I knew in this regard.

The normal formula for coming into any kind of money for other people seemed to be:
-Hey, I suddenly have xxx EUR extra, I could buy...


Whereas my normal reaction was:
-Good, extra money, extra buffer for when things go wrong, to save up with.

Or:
-with their savings account, in their mind when considering spending, they always seemed to eye up the zero point, i.e. if they had 5000$, they looked how much 5000$ can buy

When I looked at my account, my first thought before spending anything is:
-if I spend this amount, how much money do I have left in terms of "how long can I live off of this amount without going broke"? Therefore if I had 5000$ and I felt I needed 400$ to live from, I wouldn't go below 1200$ if at all possible(these are random figures to illustrate)

Another thing is the purpose.
Usually I would observe emotional response, wishes and instant satisfaction, ego etc as some of the core drivers surrounding a purchase.
People would say things like "yea it was a little bit extra, but hey, it also looks nice!".
Or the purchase were things that were made mostly to be aesthetically pleasing, ease only minor functions and services, small comforts, indulgences, if you so wish.


My approach rotated around:
-What is the base requirement for me that I need to fill with an article purchase?
-What are the functions that I require from the purchase?
-Which item fulfills all my criteria best while leaving most of my equity untouched?
-Looking at the expense vs what I have - do I REALLY need this? Do I need it NOW(consider degradation of price over time and higher efficiency thanks to ongoing development curves)?


Does a small difference start to become visible in this type of thinking?

One of my strongest convictions is that you cannot make money if you do not have money. And if you do not know how to have money(Do you see how the differentiation becomes necessary in this society? We are DRILLED into not HAVING money, as we are taught we should spend it, DO something with it..not HAVE it...because others want it..because they require you to serve their idea..Simply saving money is already an achievement; not-spending becomes "earning", having..hence, having money becomes something you need to know how to do..sounds weird/paradoxical probably, but I hope my point comes across), then you will not know how to make money.
This seems to go against the "you have to spend money to make money logic", but really it is superior(in my naive, still very young eyes) because it says "if you spend money, make sure you spend it the right way to possibly make even more money when you do or for a reason".


I don't believe that simply coming into money can change the very fundamentals of how one approaches purchases, however.
I do believe firmly that it will open the door towards the temptation of whimsical purchase and the same behavior I just described.

If habitualization of this behavior changes towards the other extreme, or there are no checking mechanisms in place, than one runs the risk of falling prey to the same phenomenon that many lottery winners fall prey to:
They come into a lot of money quick, but not a year later they are out of it again, because they have been taught only to consume and spend and behaved whimsically when they do have excess money, rather than to know how to manage real wealth.

Personally I believe that personal world perception believes in perspective have a major influence in how one copes with money and spending and therefore wealth.

But again as I have said - I think I have always been a bit different in this regard, especially considering we are born and raised into a consumer society and expected to perform accordingly.

I'd like to close by saying that, of course, if one has a lot of money to spend, this does not preclude spending it more liberally, and without as much deliberation. It's a good thing to sometimes self indulge, to reward yourself, to live.
But if you know where you come from and why you do what you do, I don't believe that you can ever go astray that far from your real core belief.

interesting read...

I'm jealous of people who can retain the same psychology trading 40 lots versus 0.1

Scaling up positions adds the problem of hedging trades, i.e. response to the position by other participants and the br oker, making it harder to fly under the radar.

More difficult is the paranoia. Is someone going to muck around with my identity? Is this chick just smiling at me because I parked a nice car in front of the coffeeshop, or does she actually like me? Is my cousin going to ask me for yet another loan that will never be returned? Will the fiancee agree to sign a prenup without asking difficult questions?

Most interesting for me personally is this dilemma: if I get in an accident and become a cripple, will I feel like I spent enough money doing things I wanted to do, or was I too focused on growing my capital base?

pipjaculation!

You're thinking about it way too much... Just because a person has money doesn't mean they have to show it off to everyone (including other fx participants). In fact I think it's wiser not to, becuase as you pointed out so eloquently, everyone wants a piece of it (including other fx participants). I live a very modest lifestyle and am quite happy with it. The only things I own are a motorcycle and some computer equipment. The icing on the cake is the fact that no one bothers me for money.

What would I do with a windfall? Well, for every $500k I have stacked away, I would go get myself an annuity (a real one, not this new age deferred/flexible annuity BS or anything like that) with at least a 4% payout, if not closer to 6%, and start enjoying a staple income every year. Most people think that "oh what? $20,000 isn't that much at all every year..." Fine, be broke. I'll at least have a guaranteed income every year that will put a roof over my head and food on my plate. Besides, you start stacking those suckers together and before long you have a guaranteed income of $100k+ for life. I guess I'm a bit different, working in the financial planning field, but that's what I'd do.

Disclaimer: I come from an old money family background. For me, there is no replacement for that staple income. There is no replacement for having things taken care of. You pay off that house note, that car note, etc. Monthly payments are foreign to you. Either you can do it or you can't, you can't put it on "credit" and get in trouble later. Imagine having $20,000 a year base guaranteed plus whatever you earn from salary/wages. Done and done in my book. Check back 20 years form now when I'm 41, you'll find I've already retired. Thank you, and good night.

Well said Jedi. Staple income.

I can see myself trading a long time. Don't want to rely on it though. A steady income stream from many sources, property, dividends or whatever. That's the key to a stress free financial life.

I likes.(all of the post, sounds somewhat familiar..just that my origin/background is quite the opposite)

Fierceman and Merlin have really good points.

I haven't read this thread for a few days. I don't know what else has been said on the matter, so I appologise.
There's a lot of value in keeping quiet about your wealth.
Even having a successful family business leaves you in a different standing to some types of people who hate "Tall Poppies". You are looked at different when you keep it unknown. Been there.

I'm getting pretty good at this now. As my net worth grows. I intend fully to keep it under wraps here at home for the same reason.

You only need to be seen as a good provider and hard worker. Keep that impression up. That's all that needs to be seen.

Try this

No hard feelings. We are in a game which is not even zero-sum. Add the commission you pay and this is a rigged game. If one knows about market efficiency and how practical that is s/he will never expect any consistent profit from trading Fx.

I'll tell you a story.

One day my QA professor was telling us about share market etc and how she lost almost all of her savings when Asian EMs went broke in 90's. So she told us why actually no statistical formula can never bring any consistent profit out of any market which is free and has efficiency.

Before that I was heavily investing my time on a system and even tried to implement PMPT on my mini account! Funny, I had already lost two fully loaded mini accounts (for what I was making monthly car payments for a whole year and couldn't afford to pay cash bummer!) and was thinking I must be missing something and I was seeking the "light." (funny, we actually can not see light regardless how hard we try. Light itself can not be seen... anyway).

I must thank her for explaining, that saved a lot of my time. I almost lost all faith after her explanation that it actually can not be done, regular week-in-week-out positive ROI that blows all kind of finance sense that is.

Then one night I wrote a document for myself (I posted a modified version of that in Beginners Q & A) . A set of strategies for trending and ranging markets and scanned a set of indicators to suit my need. And I started trading without any pre-defined trigger to enter the market (I still use channels and Fib extensions to exit!). Till this moment I'm not sure what I'm doing right to beat the efficiency.

I know Fibs are worthless crap, I know my CCI indicator and all of it's divergences are worthless crap, I actually know why my standard deviation starts to go up in a trend (I know how to calculate that or EMA with a pocket calculator for that matter, so yeah, I know) but all of these gives me guts to pull the trigger (and I do use some of them!) yet, for a single second I can not approve that I knew for certain that price will move to a certain direction for certain time because I know market efficiency and whole capitalism is based on it. That nobody can beat it even any central bank or thousand nuclear bombs or all those worthless gold of Fort Knox. Market is efficient otherwise it would not exist.

The whole point of this post (not thread) is to ask anyone who is "expecting" profits from market that: Don't expect, it has no hidden deficiency. Curve fitting, astrology, math formulas, back or forward testing nothing can beat the market.

And yet, I started a thread asking for advice how to manage this fear of profits. Couldn't I read few personal finance books to cope with sudden balance sheet increase? No, unless a trader has gone through the frustration and finally withdrawing something out of his account, no other wealthy SOB can even come close to understanding why this is so hard to manage profits from trading.

The windfall is consistency rather than actual money value. Anyone who is consistent knows how worthless money is (hint: bended equity curve), how easy it is to make and that single thought is life altering and all of a sudden becomes valid once you have been consistent more than enough time to question a fluke.

(Coded message: 1:1 or less I know why :-)

Again, all the responses were helpful and I'm thankful for that.

English is my second language so please do consider that I've hard time expressing my question which might have added to the confusions.

I got a few mails about this thread from FF members, thank you for reading this thread and giving me your suggestions. I'm truly honored.

Edit: I did go on a tirade but screw it, it's not worth it.

As for your teacher, well, I only have one thing to say: "Those who can do, and those who can't, teach."

I'm done. You guys have a good weekend.

I'm still laughing at the assumption of an efficient market

Whenever I talk to my macro-economics graduated friend, when he answers, he'd always talk in sentences like "Well, usually, in an ideal version/the idea is that....[..].. but of course we all know that isn't always 100% the case, x happens, crap hits the fan and then you get y. ... [..] And that's why textbooks are always textbooks and reality is always...well...different "

At which point I usually ask him wtf all these people are doing learning theories that are quite widely disconnected from reality most of the time
..to which he says well that's not the case, they do of course work in general, most of the time, usually...(which to me sounds like cough cough well you win some you lose some ey )

But then again sociology does the same thing..all assumptions are idealized and curve fitted/adapted to reality as seen fit..if you want an exacter science look to math and even then people who are beyond the Thunderdome will say well there's an area where even numbers get fuzzy..

Bottom line - involve humans and it's all buggered. That's why Merlin can trade 'em