How I manage to break-even my 80% drawdown and trade for living

Sometime I will see new Forex traders a bit discourage perhaps they are still having drawdown after trading for few years. It seem not hard to understand, when i am new to Forex trading (I am still new by the way :D), I always see how people brag how much return they made (they talking about few hundred percent return a year). How people share their 5 digits profit screenshot and how they made Forex trading look like a no-brainer thing. This lead to newcomer to think like why other people do it like so easy but it is so hard when we are the one who doing it.

Also, some traders become skeptical after trading for years and wonder is it Forex is entirely a scam or is it a financial instrument that really can help us grow our wealth.

I totally understand that, their doubt, because once I am just like them. Please allow me to share my story on my Forex trading journey.

I started my investment journey first before i venture into trading, and I invest on Equities/Stocks. Then, last year  around this point of time I started trading Forex instruments.

I don’t really like Forex for the past because I don’t really know how it work and before I really understand it, I already heard countless of retail traders burn their accounts (contrary when you started dive into Forex, to understand more of Forex, you suddenly see a lot of Gurus brag about their profit return) .

Why i will get into Forex then, long story short, when I am trying to trade stock/equities, there is some correlation market data that I can get from Forex/Commodities from a broker platform, what I actually did at that point of time were just registered a demo account to get the data, who know it actually lead me to my Forex trading journey.

Before i traded Forex, I am able to achieve quite a good return from trading equities and I was thinking, what so different between them, it look the same, can be same chart movement, like same candlestick, same technical indicators can be used and the list continue.

So i jump to the trades and here it goes for the starting few months,

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I eventually blow my account. Luckily i just traded 100 dollars free money from the Broker and two hundred dollars from my own fund. Yet it is very depressing, trust me.

Some of the days I am able to make like 20, 30 dollars (is like near 10% return a day). Some of the days I give back not all my profit but create extra 1-2% drawdown.

Everyday there are winning trades but there are losing trades too and soon (check the first few months of my trading)…

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I hit almost 90% of the drawdown. My account actually faced margin call and face my first force margin sell in my trading journey. I only left less than 50 dollars in my account.

That’s when I start to dive in more on Forex to understand it better, try to understand how other Forex traders manage their trades.

One of the good trader I encounter when I am on my draw-down is when I saw this article online  that talk about law of large numbers and I think it is very interesting. Then, every week I will receive his videos and he will share about his trading insight. That’s also lead me to access some of the good traders who really help other traders with genuine heart and I learn a lot of good trading stuff from them. I am really grateful on that. It really keep me alive when I am on my drawdown streak.

What really changes my trading and turn my trading performance to this?

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**I start double my account capital every month when I am able to generate positive return

So i discover there are few factors that help to improve my trading performance.

Perseverance/Grit/Tenacity

This is the key to every single things we are trying to master and succeed…not matter in music, sport, startup, business and of course it apply in trading too. You need time to pickup the skills and experience. What we often see is how successful a person, how rich a person has become but very often we didn’t see how many times they have fall and all the struggling they go through before they are able to reach where they are now. Which the media often keep that cover.

 

Passion

I am grateful that I am able to meet traders who are really passionate in trading and their consistent sharing make me keep going in my journey when i am in losing streak. There are of course some traders out there are more interested to earn your money through hefty course fees but there are also genuine traders are there to help you by sharing newbie mistake, their past mistake and their painful journey and hopefully your journey can be much smoother. If you ask me whether they have succeed on doing that, I believe they have. I am one of the trader that received their kindness and benefit a lot from them.

If you ask me how can you know who are the genuine traders, their passion will tell you, passion is something very contiguous, those who really trade for living and really love about trading you really can feel it, let the time tell you.

Why passion is so important, this is because if money is your priority that lead you come into trading (nothing wrong with that) but soon when you on your drawdown and losing streak, you will actually stop trading. You just can’t get what you want at the first place and you lose the motivation to do trading.

What make me able to continue the journey despite the drawdown continue and losing streak is because I really love trading, not matter on what financial instruments. Of course I want to make money from it but when i lose money because of it, I still love it. Weird but true. That’s keep me going, I am doing something that I really like and it give me something to look forward when i wake up tomorrow.

In addition, people place their wealth stake in trading and I think this is a very serious business that earn my respect and inspire me to go all in to succeed in this area.

Trading Strategy/Edge

Very often we keep heard others said about finding “Edge”in trading. We need an edge to able to make consistent return. I think edge is something very hard to understand, at least for me when I started trading. It is so abstract.

I prefer more layman term, a strategy that you have faith and it able to bring consistent profit for you over a long run.

Very often, when we started our trading journey, we just want to find hot tips and try to shift around different strategy and try to profit from it but most of the time it failed us.

This is because we don’t have conviction on that trading strategy. We just see people use it and success but when we execute it, we can’t see immediate result, which is immediate profit that we are looking on.

Conviction, need time and practice. Through countless repetition of the same strategy and tweak it to perfection, your conviction on that trading strategy arise. This is why experience traders often advice new traders to stick with 1 and the only 1 trading strategy first.

What we need to do on our  starting point is to find one trading strategy that is work for us and keep repeat it and perfect it.

However, is it our whole trading journey we can only depend on 1 trading strategy. Of course not, I started with 1 strategy and now I have 5-6 strategy in my sleeve but it takes time to build them and mastery them.

Trading Plan

Having a trading plan is very important too. How often traders jump into a trade without any plan but out of emotion as they don’t want to lose a great chance to profit from a bandwagon.

Let me give you a practical example from my trading journey on the impact of having trading plan.

If we look on the chart below, we can see a very strong downward trend.

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But for me instead of shorting it, I actually long this pair currency most of the time (with the just starting dip as an entry). What is the result?

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I am still able to make consistent profit. This is because I have my own trading strategy and trading plan to tackle the trade. Just imagine if I just long this pair without any plan and see how the market move, I guess I will blow multiple time of my trading account by now.

Every traders are different in term of execution and their trading plan but all successful traders have the common traits, they will create a plan, have a plan that they are comfortable with, have conviction and it work for them.

As the saying goes, if you fail to plan, you plan to fail.

Mindset/Attitude

I read less than 10 trading books but the real book that is like a bible to my trading journey and also really shift my trading performance is surprisingly this book.

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Through this book, it change my mindset and attitude toward trading. I realize a lot of traders they just want to try, like playing game of chance and hopefully through what they do, get a big profit out of it. Literally did they know, how well prepare and what is the mental fortitude for those consistent profitable traders prepare themselves for their each trade and rip off those unprepared traders’ money like no tomorrow.

Imagine money is like troop and trading is like a battlefield. If you didn’t plan well for a battle, you are already plan to lose. To convince/capture other people troop (money) to join you, you must have some key quality and key differentiation than their own general, to win them over. Also, most important lesson for new generals, learn to survive on each war first which most of the generals (traders) forget that. As to become a great general, first rules of thumb, don’t die first.

Trading Journal

How often we went for a trade and another one then follow quickly another one, without really knowing what we really do.  We just thought by doing a lot of trades like those professional did (we assume), we will be gaining a lot of trade experiences, then we will earn lots of money. Little did we know, without a consistent trading review, we are subjected to a lot of blind spots we are not aware and we keep repeating the same mistake again and again.

I started my own trading journal after repeatedly saw these two traders keep reminding new traders to do trading journal in their sharing, ask traders to review their trades. This is the most grateful thing that I can be thank off. It definitely make a difference in my trading and perfect my trading strategy after i picking up the habit to record down my each trades and review them.

Trading Time-frame

As a newcomer it will be a good starting point to trade daily time frame or so called higher time-frame. It is not because compare to lower time-frame it is much easier. The difficulties is pretty much the same but in term of adapting the trading environment, higher time frame provide newcomer more time to digest and analyse a trade.

For me, when i just started trading Forex, i started with lower time-frame, i cannot cope with the fast moving market where i keep making a lot of non-plan trade and taking a lot of unnecessary lose.

Start with trading higher time frame and familiar with how the market work first and you can always trade lower time frame when you are much more familiar with the trading environment and especially getting in depth and understanding on your trade instruments/pairs.

Risk Management and Money Management.

How i blown my account for the first and almost the second time is that I don’t have proper risk management. With initial 300 dollars capital I will try to buy 3000 to 6000 dollars worth of position size. Why? Too eager to see profit run, if i just trade few hundred worth position size, I only able to earn few dollars if I am right on a trade, or even if i am wrong i will only lose few dollars, it will not worth the time and effort that i putting into the trade.

This lead to a problem, I am trying to over-leverage my trade. With almost all in to a trade, if I am wrong and without proper stop loss, very easily my account will lose 10-20%, and each time I am down with such high losing amount of money, I will tend to goes full size again in a hope to recover, which eventually lead to a margin call and account blow out.

It all happened due to absence of risk management. This is the key thing that I learn from Art of War too, to fight a battle is not just about whack your whole troop and hope they win the war but you have to manage your risk well and make a proper plan. If not fighting a war will be just depend solely on how many troops you have, the biggest troop side will win, unfortunately, that’s not the case.

Imagine if every trade you only risk 1%-5% of your capital, throughout long run with an edge in the market, you will be able to generate a positive return without getting account blowout. You learn to preserve your capital.

But if you trade with $100 capital, 1%-5% per trade will be $1 to $5, which most of the time won’t make people committed in their trading journey, so why instead of under-fund your account and taking unnecessary risk, why not fund well your account with higher capital.

If you can’t afford to place a larger fund on your account then you must have a strong discipline in managing your trade position size.

 

Above are the few of my learning points and hopefully can benefits new traders or those who are still struggling.  Also, see the reality of profitable traders learning curve where most of the time we don’t have the opportunity to witness (no one like to share their painful journey).

I remember someone say this before and it still hold much truth to me.

“When you watch someone perform, you’re seeing them at the top of their game. When they score the winning point or sell their company for millions — you’re seeing them in their moment of glory. What you don’t see is the thousands of hours of preparation. You don’t see the self doubt, the lost sleep, the lonely nights spent working. You don’t see the moment they started. The moment they were just like you, wondering how they could ever be good.”

Let me end my sharing with a quote,

“Whatever course you decide upon, there is always someone to tell you that you are wrong. There are always difficulties arising which tempt you to believe that your critics are right. To map out a course of action and follow it to an end requires courage.”

– Ralph Waldo Emerson

Happy investing and trading pals! Feel free to comment and share you thoughts.

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