Draw Down Experiences and Recovery

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You know, I was just thinking about this and it reminded me of something I have recognized recently: I am terrified of trading! Not only is pain everywhere, but so is fear. Its odd because I look forward to each trading session. But I look at each one kind of like a new barefoot walk across hot coals. When I get into it, its no big deal, but that fear never really totally goes away. Am I normal?

In my opinion your more normal than any trader could hope to be BUT know that theres only one remedy to this...time and experience. You will learn to adapt to that scare and evolve to a point where your body recognizes it as a norm. Could take months, maybe years, thats why they say trade only what you can afford to loose because logically if you always have the scare of blowing an account that could get you homeless or eradicate your ability to provide, you might never get to the next phase.

I was recently asked some advice by some college kid in the states who was considering FX trading. This was my initial repy

I am more than happy to talk with you however, after fours years, I am a net loser, having lost 30k in the first 3 of those years. I have no capital with which to earn those losses back and that time can never be returned.

This is what I think about forex

Forex trading is right up there with alcohol or gambling for destroying lives and families. It is not reliable as an income source. If you are looking to make money I would say half the effort applied to any other venture will produce positive results. Only a very small minority, less than 1% are successful. Why would you contemplate anything with those odds against you? It will take all you have probably leave you ruined physically, emotionally, and financially. You are walking into a den of vampires if you continue and, once you have been bitten, there will be no turning back. Focus your attention on whatever your studying and look for opportunities to give love.That is the only way to achieve satisfaction in this life. I urge you, walk away and forget you ever heard of forex.
If you are determined to continue with this you need 3-5 years of training and dedicated practice. After which, if you make the grade of elite trader performance, You will need a sizeable investment stake, at least 100k preferably more, to make enough money to live off. Based on my own experience, I can steer you in the right direction to recieve the training. . I cannot guarantee you will listen and do only what you are told. I cannot promise even after all that effort, that you will ever see a single cent of profit.

He persisted undeterred and requested an interview. The questions were along the same lines as this thread. Here is the interview, I thought It was worth sharing here

Q1 How long have you been trading currencies?

4 years since I opened my first live account. I read a couple of books and did some online research for about 6 months first. I had no trading or financial knowledge prior to that




Q2 What brought you to the Forex market?

A trusted friend told me he had taught many others how to make 20% per month. He said he would teach me. He lied, he knew only a little more about it than myself. There goes my first 10K




Q3 What did you do before you traded currencies?

I am a tradesman and still am. I work for myself as a wall and floor tile layer




Q4 What do you feel makes trading the Forex market unique and different, when compared to other professions?

It is unique because the answer to becoming successful lies not with mastering technique but mastering yourself. The work is always available and you can choose freely how much time and when you will work



Q5 Do you make a living trading currencies?

No. I do not have the required equity to draw a wage from my trading and I wont have that for sometime




Q6 What is you daily schedule like?

I have a day job so I trade after work most days sometimes for less than 1 hour but usually at least 2 or more hours. When work is quiet I will sometimes spend most of the day and night trading or associated work




Q7 How long did it take to become consistently profitable trading currencies?

4 years. I have only just proven myself consistently profitable now




Q8 What were some of the setbacks you faced? What changed to allow you to become profitable?

Continued losses month after month, year after year. Every system or technique failing. Nothing changed, I came close a number of times to giving up. I was just lucky that I didnt. Despite all the pain and suffering of my own experience telling me it was not possible for me to succeed, I kept my focus on anything that suggested consistent profitability was possible




Q9 Did you have to develop a "trader's mindset"? If so, how?

Its not really a mindset specific to trading. It is said that fear and greed is what drives the market and that these emotions are what cause traders to fail. I agree, but fear and greed is what brings people to the market in the first place. They want more than they have even though they have more than they need - that's greed. When the market takes money away from the greedy they become fearful. At this point they keep playing out of greed but are not effective due to fear. That is the riddle. Its a set up from the start ensuring you cannot win. How do you overcome this catch 22? My theory is that these emotions are actually puppets of an underlying emotion that is hidden from view and rarely addressed by any human being, trader or not. The puppet master is guilt. Guilt is the human condition and while that is so, the trader will subconsciously use the market to punish him/herself. You need a mindset of innocence to fearlessly trade the market. You need a mindset of completeness, satisfied with everything you are to trade the market without greed. Once you achieve this, trading is no longer needed for anything and can therefore be freely chosen. These are lofty goals. Most people live and die without facing this. To let go of guilt means to accept love. Love is the most terrifying thing that exists in the world. It will be avoided at all cost. This is the real reason people fail, in my opinion



Q10 Is there anything else you want to share about your Forex experience?

I placed a limit short order just prior to answering these questions. That order was triggered without me knowing while I typed my answers for you. I just closed that trade making my profit objective for the day. How easy was that?
Good luck
Doug

Yep. Try this.

Everyday before you trade, think about trading. Try to envision putting on trades. See if you feel any anxiety about it...I'm sure you do. Then ask yourself this. What is the upside of me putting on a trade? How does it benefit me. When you find an answer, let's say it's the obvious one which is I make money, then ask yourself, How do I benefit from making money? Once you have the answer to this, such as I can buy xyz with the money, ask yourself...How does buying xyz benefit me. The key is to explore the upsides of putting on a trade as thoroughly as you can. We all want to make money, but for different reasons.

Once you've done this, now ask yourself, what's the downside of me putting on a trade. The obvious answer being, of course, I lose some money. Then ask yourself, how does this not benefit me? Once again, explore it thoroughly.

The goal is that in this type of exploration, you'll find that there are upsides and downsides to putting on trades (as in everything in life). Hopefully, you'll find that the upsides outweigh the downsides. If you do, and if you do this everyday and even write them down, you'll see that it benefits you to put on trades. This should help you to alleviate, or at least mitigate, the fear.

This can be done with anything that creates anxiety or fear in your life. The key is to do it thoroughly and consistently.

It brings to mind the great quote:

"The only thing we have to fear is fear itself."

F.D.R.

Thanks, Dopey.

I don't really consider fear a negative attribute, unless it edges into anxiety, which it does occasionally when I am trading. I kind of need to be on edge a little bit to be focused. But that's just me, I guess....

Must be something wrong with me then but I am also really good at saving money.

I'm not as successful as I would like considering the amount of time and effort that I have put in over 5 years but it's not all about trading for me. I used to be really ignorant about anything that went on outside of my little world and I find the fundamental side of trading fascinating and I can spend hours reading about things. Trading opened a whole new world for me.

I do have consistent profits but I am having a little problem with my money management at the moment. I've just opened an account with Oanda (three months now) and I'm not putting on large enough trades! To try to conquer this I've opened a sub-account with a smaller amount of money to see if I can up the risk and test my pain threshold. Maybe I'm missing those high impact emotions that I experienced in my earlier days. So after 5 years, I still face demons.

I do not make enough money to live off. I live in London so the cost of living is quite high. Some months are better than others. I would not like to have to trade for a living. If I did I would have to totally change the way I trade at the moment. I trade for fun with no pressure to meet any expectations other than my own. Forex is my little bit of Vegas.

That truly is knowldedge but applying it when the situation demands is true wisdom, very few have evolved to the point of practising that. So many would read these wise words and leave highly inspired but when a move goes against you and a drawdown hits you, its all a wash. Those that keep coming back and show relentless perseverance will eventually achieve this state of mind.

Brilliant Doug, truly. I can't believe noone's commented on it. Your post is like the story behind Ed Seykota's "everyone gets what they want out the market".

I'm slightly more mechanical in my trading so I can't say I fully buy into the idea myself, but I do know you're joining a long line of veteran traders who say much as you do.

I've kept a rough tally since I started of not just capital but time spent on this, and as businesses go, this one's had by far the highest startup cost. They don't advertise that on the FX ads eh?

Lol..Oh no...all they advertise is "get rich quick". I mean take a look at Fapturbo's sales page...jeez! Whats sad is how many buy this farce, see what they NEED to see rather than what they should, whether its the greedy looking to get richer or the desperate just trying to survive, its a paradise for the conniving internet marketer. They say 95% fail in this realm, well thats not necessarily true, that statistic mostly includes newbies that open a live account with the illusion of quick riches. What do you think the failure rate would sum up to if a college drop out cordoned a brain surgeons position?

Theres no way around the pain, sacrifice and commitment needed to make it in this realm. Forex, in my opinion is the most misunderstood industry that's ever existed.

So yes, thanks Doug, you're spot on.

Agreed - but, hard truths are hard to admit. Usually until its too late...

Drawdowns! Well, I must be the only guy here to blow up 50k account three times in 1 year. But still I have no psychological disorders of any sort.

Haha, its on demo, friends. I am still to go live. I think sometimes what would have happened to me if this were live accounts..

You wouldn't be joking bout it for sure

Fake money, fake psychology. You'd be better off trading with some real money, even if it were a small amount.

Yep..demos take the essence out of trading, no spikes, very stable, no stop hunting no real emotion and the ability to reset and start over again lol Amazing how seductive it is to reset a demo account and say "Ok now i got it, now we start" and thats a loop doomed to unlimited reiterations. A Mini that follows demo trading is a must in my opinion.

A lot of traders, professionals and otherwise use extremely low leverage and no stops whatsoever. A lot of these traders are very successful too, the question id like to ask these traders is, when do you call it a day? I mean ive seen both things happen: 1) A bad month that wipes out all realized profits accrued in previous months and 2) Accounts being blown up within 1 month or lesser, ive also seen this method being very respected and on the money.

No matter how strong a leverage or position sizing theory, a line needs to be drawn some where. Discretionary systems need some mechanical module just like every mechanical system needs some expert discretion to last in the long term.

You wouldn't possibly allow an account's floating loss to hit -50% or -70%? I have no opinion on this trading method neither prejudice nor passion, all im doing is inquiring in regards to the threshold because if done right it can be immensely profitable.

Yeah in my opinion EAs cant outsmart the market in the long term, every 100% mechanical system is just eventually bound to head south in a bad way if it isnt constantly monitored by human minds. EAs should be used to alert or suggest a possible entry/ exit so the trader can further gauge and only he should really hit the trigger. All the farce out there which involves products like FapTurbo and Ivybot should be banned and the creators prosecuted for the claims they make.

Thankyou triphop
The spin dished out by those with a vested interest in your loss, is much easier to accept. I would have ignored me when I started alsohttp://cdn.forexfactory.com/images/editor/smilie.gif

Well said.

Inf Investor, Rotterian - since you both mentioned FAP, I thought I'd share this. I spoke with a big retail broker who said that FAP was getting so big that they were having genuine execution problems because the orders all come in at once, and especially during the Asian session and less liquid pairs, it sucked up all available liquidity causing massive slippage.

So for all enterprising coders out there - decompile and frontrun FAP by a couple of pips, and you could have yourself a small but definite edge for as long as they're are people buying that tripe. Worth a thought anyway.