OK, I am somewhat reluctant, but here it goes.....
There is nothing sensational or mysterious about it.
Only just do not read the following as knowledgeable advice. Because it is not.
When I started with € 10,000 back in May, I dutifully checked sites like www.actionforex.com and www.fxstreet.com on a daily basis, to read the opinions and advices of experts.
I combined these with some technicals (fibo, ma, rsi) and fundamentals, and placed my orders. So, no objective system that yields trading signals, just my own subjective interpretation (intuition, if you like) of a combination of factors.
I traded with only one lot per trade, opened only two or three trades, and went for a profit of 30 to 50 pips per trade. I had fixed stop losses and profit limits. Simple, I just cannot explain it with more details, it was just like that.
I made 25% the first month, I made 25% the second month. End of June 2005 my balance was € 15.683.
A little greed crept in......
As my balance grew, I decided to trade more lots than one per trade, 2 or sometimes 3. My usuable margin balance allowed me to. And wasn't I successful..??? And hey, all those losing trades caused by stop losses could have easily been profitable... Had not I noticed that in most cases the trend just reversed after having triggered the stop loss! I decided to increase my stop loss limit (100+ pips).
So I did. I had thus trades that were in the negative for days (I earned interest on the short ones!), but these could nonetheless be closed with profit, after a trend reversal.
This method proved to be profitable, as it decreased the number of losing trades significantly.
I continued trading this way till October. My balance grew to € 40.000.
During these months, having put a lot of time in my trading and in studying the charts, I had seen how simple it is to make a profit of 10 pips per day. Mostly, price moves at least 30 to 50 pips a day.
So, I reasoned, why not try to profit from these intraday movements as well, and make a profit every day, of, let's say, 10 pips minimum? Why performing long term trading, aiming at profits of 100+ pips, but not profiting from the intraday movements? 10 pips a day seem to be easier to achieve than 100 pips. After all, the market is ranging most of the time.
So, I did, and this was the beginning of large profits.
And greed got hold of me.
Starting with 5 lots per trade, I soon opened trades with 10 lots. A movement of 15 pips meant more than € 1.000 profit. Sometimes, it only took me 10 minutes to achieve this. I made € 5.000 per week easily. As rates moved up and down, I tried to profit from every movement. I even started to question the value of stop losses: why using them, if the rate bounces back and forth? In the end, even stop losses fell victim to an increasing greed, I would use mental stop losses instead, I promised myself.....
The obvious back-side of this method (won't call it a system) is that in each case that the price moves against your trades, the theoretical loss is accumulating fast, very fast. Soon, there was a discrepancy between my gross balance (ultimately 98.000) and my nett balance (40.000). Nonetheless, margin call limits were far away, my long and short positions balanced each other, so I kept my positions.
In fact, I think that I could have continued trading in this way for a very long time. I had already begun to close my most far away open positions, 1/10 lot per 1/10 lot, gradually. I would have had a "balanced" balance soon.
At the end of December, something unpredictable happened, that had nothing to do with the market itself or my way of trading, but with my trading platform.
My trading platform (VT Trader) allows "hedging", having long and short positions opened at the same time, without one neutralizing the other. The only thing you have to look after is to tick the "hedging box" (in the "Open trade" window) when opening a trade.
December 27th, I forgot to do so. Somehow.....the Christmas turkey must have been in the way, or so. I intended to open 10 lots short EURUSD, but - as the hedging box had not been ticked by me - instead I closed down 10 open long lots. The strange thing is, initially I even did not notice, I was in an hurry to do some shopping and got out. When I returned, and looked at my charts, I could not find the trade I had just opened. Only after looking through my open positions, I realized that I had closed some vital long positions instead. Of course, the highest positions (big figures in the red) had been closed. My balance dropped. Moreover, the EURUSD rate started rising. My short positions outnumbered the long ones.
My usuable margin had dropped, dropped with every tick. I really was kind of paralyzed, the flair with which I used to place trades was gone. I could only stare at the screen and see the rate rise against me.
The first week of January, I was forced to close down open short positions to avoid a margin call.
Now, at this moment, my balance is € 36.000.
The funny thing is, I have read a lot about forex, the way to trade ("use a system") and the way to manage your money ("always use stop losses").
Nevertheless, I did think that I could do it my way.
Although I tend to approach Forex seriously, I admit, that I am a bit of a gambler.
Money management counts......
That has helped with my "struggle" over entering stops!!!.... Like yourself, I've doubled my account & seen it dwindle over some silly mistake. Money management rules!!!!!....
PipBull
(thankfully set, but a long way from entry points on the daily charts).
