Don't just make money...KEEP IT!

So I've been trading off and on for a number of years. I feel I have good skills as far as entering and exiting trades, but time and time again, my money management has destroyed my account. This has been true with my poker playing as well. My ability to turn $100 into many thousands in one night has been proven time and time again. I've done it probably 10 times with my biggest score 15K in one night. Of course, the money is quickly or eventually divested by stupidly jumping limits to quickly....from 1/2 NLH to 25/50NLH within a few hours. Poof. Gone. This is absolutely akin to overleveraging in forex.

Two trading stories. 4 years ago, I funded my account with $500. Within several months, I had turned this $500 in to $13,000. I was trading naively with a divergence strategy and overleveraging like mad (400:1). Two months later, the account was gone. Boo hoo. Waaah. Woe is me. Fast forward to last summer...I funded my GFT with $500. 8 weeks and a few hundred trades later, I had $26,000 in my account. I thought I was a genius, blah blah blah. Simple strategies, S/R, trendlines, and very generous stops. So I took out a couple grand (to trade essentially for free) and was left with 23K. I was using GFT's 400:1 leverage and thought it was the greatest thing since Wonderbread. But as I have learned, leverage can be your greatest asset or your worst enemy. Well, you can guess what happened after that. 4 weeks later, my balance was zero. I was so depressed about my stupidity and lack of discipline that I quit trading.....until now. I am starting over but with a new discipline. My main focus is going to be on money management, which is THE KEY to success, as I have learned.

I plan to do the things that I glossed over before. Risk no more than 5% per trade and my leverage will be 20:1, unless the new bill is passed, then 10:1. I am starting anew with OANDA due to their unique policy of allowing you to size your positions any way you'd like. I think that feature is amazing.

So what's my point? Not sure...perhaps to let folks know that it is indeed possilble to prosper in forex, but if managing risk and leverage is not at the absolute forefront of your trading plan, you can kiss that money goodbye. Its the boring stuff that you MUST focus on, not the "system", the latest cool indicator, or TraderJane's amazing "market pick thread". In fact, if you cruise the "Interactive Trading" thread at all, I'll put my money on the fact that you are a losing trader.

That is all.

-Liz

Great post!

Here's something else to consider, try looking at leverage and money management offensively and not just defensively, it can be one's best asset in the right hands, or one's worst enemy in the wrong ones.

You're fortunate in that you survived before the realization, most don't, in fact most never understand the significance of MM and leverage.

Good trading!

Welcome to the enlightenment point of trading. The first thing you will feel when you exercise proper money management is that you make profits extremely slowly. Even with a 100% win (assuming something like that exists) you will still find that accounts hardly grow at the speed you were used to.

If you are really good, I'd say about 10% a month is fantastic result. I'd be happy if I made 10% consistantly every month.

You call returns of 10% per month 'slow'!

If I understand you right, your aggressive leveraging helped you convert $500 to $26000 in a short time. Now the same thing has become harmful once you start loosing. Unless you mean to say you moved from aggressive leveraging to super aggressive leveraging...

TS

Lol hence the "if you are really good"

Here is something to consider: Go back to the demo on a 400:1 account (unfortunately it will have to be something other than GFT now) and trade the way you were trading. Get a decent screenshot program (SnagIT or something similar) and take a shot of the chart(s) when you get in a trade and when you get out of one. Then you will have a visual method to determine why you stayed in certain (losing) trades and why you might should have gotten out.

It seems as though you were using the 400:1 to your advantage majority of the time. Rather than going to nothing:1, maybe you can use the screenshots to determine how to improve getting out of the trades that begin to go against you. Because in actuality, if you keep trading the same way, lower leverage just means you will lose money slower.

Assuming you were not just lucky several times and actually have a method that you use to decide to get in a trade, it appears like you have the ability to make money, and should just focus on the causes of losing it. Tweak that a little, and you will find that high leverage can be a very GOOD thing!

Just my 2 pips...

Fantastic post Liz.

I have read every single one of your posts on this forum, I am just starting out with 10k lots next week armed with many and more sound advice by reading as many posts possible in the last 4 months while on demo.

Like you, I eventually came to realise about s/r, albeit I do like the fibos. I trust you are well and that you will post further.

Kind regards

Excellent post. I run into big losers maybe every 3 months or so like clockwork. It usually starts after I have a string of losers in a row. The desperation to get the money back can be overwhelming. The string of losses can be brought on when there is some sort of anomaly in the markets that is very unusual. An anomaly can be an extreme selloff followed by an extreme retrace of some sort. It has to be a market condition that just doesn't happen that often. If you don't follow your rules to the letter during these unusual market conditions, your account can get shaved off a bit. The good thing is as I have gained more experience over the years, I have been able to regain my losses by returning to discipline. In the early days of my trading career I was never able to recover from such a loss, but now I have turned that around.

Interesting post. Youve had success but it sounds like youre challeneged by money discipline. What about rules for withdrawls? Sounds like you might have some "leaks" that don't have to do with Forex

Crazy, I found myself in the same boat as lizzard. I took out a big wad of cash. 10k to be exact. I grew my account to 30k in about 2 weeks. I had a decent strategy with S/R lines but a extremely volatile market came on my 3rd week causing things to bounce all over the place knocking out all my stops quickly. 3 days into that 3rd week I was sitting on 5k left in the account and soon after lost the rest. I will remember this week for the rest of my life.

What did I do wrong? Was I just really lucky for those 2 weeks or was it skill?

obviously it wasn't skill because otherwise I wouldn't have let myself lose my entire account.

People always told me that money management was the biggest thing in the forex. I was naive in thinking I could still risk more then what was recommended. I killed my account every time. all us traders would be way more successful if we could just manage our money better.

so, after my losses what did I do? I put in another 4k to try and make back what I lost. Guess what? i gained it to 8k in a week but then in the 2nd week of trading that account was lost as well.

I was totally over leveraging as my account like liz. caused me to do awesome in the forex till I started losing. Something happens to the mind when it has a big loss in the forex. I know for me, I freak out and almost lose my account after my first loss. 1 loss turns into 2 then 3 then 4 then next things yo know. you're out of money. It's crazy how this happens.

What I've learned now. You could have the best strategy in the world but with poor money management it doesn't matter, you'll most likely lose your account. I've broken my risk down from 50% risk per trade to 30% to 20% and now I never risk more then 5-10%

I know of traders that make 100s of thousands a year only risking 1% per trade. We need discipline here not better trading strategies.

After 3 years, I've just now finally had my first perfect week in trading. I brought in over 40% on my account risking 10% a trade on my account. 100% no losses. 10% risk is the maximum a good trader should use. I'm not sure if I'm a rliable good trader yet. guess time will tell but 100% no losses in a week is a good start I would say. See what happens after my first loss... will it be a train wreck?

Numerous times Liz started off with a small account around $300 and grew it to a few thousand. What if every time to grow the account to say, 2000/5000.00, withdraw it to a holding area (bank) leaving only $300, your original sum and then start again. This might have the mental effect required in MM, you know 'I'v only got a bit of money here .......

Liz
In what quantity do you buy when you start with say only $500, how did such a small amount affect how you traded.
Thanks.