Speculative attacks on markets have been thwarted repeatedly by the various interventions of governm...
21 Important Lessons Learned from 10 Years of Forex Trading
11/23/2012 6:00 am EST
Forex trader, Nikos Mermigas of Spartan Forex Trader Academy distills the wisdom and experience he gained after 10 years of trading into 21 lessons.
My name is Nikos and I have been trading the financial markets since 1999. That is 13 years now. I started with stocks and lost about 90% of my invested money within three years. In 2002, I started with forex trading. It took me about another two to three years before I started to make consistent profits. I learned the hard way and I still made a lot of mistakes, but at least I learned from these mistakes and my account was growing slowly but steadily. In order to help you guys with your personal trading I will share the 21 most important lessons I have learned that made me stay on the “bright” side.
Lesson 1: Do Your Research First
I started with trading in 1999 because suddenly everybody here seemed to make millions with stocks. But as I said, it only seemed that way. Most stories were pure fantasy and good marketing, it was not real. Of course some people made a lot of money, but only the guys that knew the game. Only real traders made profits, like always. I did not know that of course. I just listened to some friends, went to a broker, and spent a lot of money on some no name stocks. Of course I lost almost everything and that just because I didn’t have a clue about basic money management and how financial markets work. So, do your research before you invest even a penny and that brings us to…
Lesson 2: Never Listen to Amateurs
When I lost my hard earned money almost 13 years ago, I felt sick. Not only because I lost a lot of cash, but also because I listened to people that never really made money with trading. They were very good with words and had a million ideas, but I never actually saw them trade. When I asked a so called “friend” to show me some results of his trading account, he always found a nice excuse to avoid that. In time I found out that he had lost everything in stocks and in the casinos. With other words, I was consulting a gambler. That is just an example and what I am trying to say is; if you want to succeed in trading, only take advice and listen to people that actually know their business.
Lesson 3: Find Out What You Really Want to Do
As I mentioned before, some people start with trading just because they think it is easy money. Most newbies usually quit when they start to lose. Now some people insist, but why? Is it the ego, or is it because they don’t want to accept the loss. Is it the thrill or an adrenaline rush? Is it just the money or maybe the fact that a trader can work from home? It could also be love at first sight and now you have to work on the relationship…lol. I think it is a bit of all those. After a while playing around on a demo account and testing out strategies you might find in the Internet (some are good but most are useless in the long run) you will gain some experience and things become clearer. That is the time when you need to think about your choices. Become a bit serious and pick a product that suits your personality and just start. It could be forex, stocks, futures, metals, or whatever you think is best for you right now. You can change or add products later on.
NEXT PAGE: The Starting Point|pagebreak|
Lesson 4: Look for Your Mentor and Trading System
Without a system or a coach you will waste a lot of valuable time and probably money. It is not easy to decide where to start these days. Internet marketers are selling thousands of so called life changing systems. They surely change their life if you and another hundred thousand folks buy their systems, but what about you? How can you distinguish? Word of mouth is probably the best way to go. Ask your friends and others who are trading. It is not a guarantee, but a good way to start. Make sure you can get hold of your future coach or mentor. Just talking to the coach’s’ secretary is not the way to do it. If you find a course you like, try to contact the person and arrange a personal online meeting. Talk to him or her and if the chemistry is good try it out. I tried different courses since 2000 and 2005 and went to seminars outside the country too. I took from all the courses the most valuable information and started to create my own strategy. But this is only my story in a nutshell.
Lesson 5: Ask the Right Questions
Trading can be easy, if you ask the right questions. I am not talking only about questions that concern your mentor or trading system but also questions you have to ask yourself. I will give you examples for wrong or at least “too early” questions. I guess you will recognize these questions.
- How long will it take for me to become successful?
- How many pips can I make every week?
- Can I make at least 1000 dollars each month?
- I don’t want to be rich, but can I make at least a good living with trading?
- I need to make x amount of money by the end of the year, is it possible?
These are just some classic examples. Now, when I say the questions are wrong, I mean they are wrong because you haven’t qualified to ask these questions yet, because you haven’t yet managed to make at least some small profits over the longer term.
Let’s compare now; good questions would be…
- I like trading, but does it really suit my personality and how can I find out?
- Will I be able to succeed if I learn to follow good system rules with patience and discipline?
- I only have a couple of hours a day to watch my charts; can I still succeed?
- I know I make a lot of mistakes, how can I change that in order to stop losing and start winning?
- I need to make x amount of money, how should I plan to achieve my goal?
In other words; you automatically ask the right questions if you understand what obstacles you are about to confront. Successful trading is a small, powerful seed in your mind that needs to grow. It is a long-term relationship, not a one night stand!
Lesson 6: Do it Step by Step
I was frustrated after many unsuccessful attempts to make it work for about two to three years. I was at a point where I said; Nick, do it right or leave it! I had so many unanswered questions; I had had some good, but mostly bad results; in short, I was confused, so I started from scratch and filtered out what worked for me and what didn’t. I started a trading journal and a trading plan. I organized my trading times and the forex pairs I wanted to focus on. I applied money management rules and tried not to repeat the same mistakes over and over again, but most important of all; I did it step by step. I could not apply everything at once, because it was just too much change in too short time. Adding more discipline month after month was my “secret potion.”
Lesson 7: Never be Afraid to Try Out
You cannot improve your skills if you don’t try out and practice. When I thought I had something very powerful that was worth testing, I opened a demo account and tried it out in all market conditions. I put it in my journal and tracked the results. I kept what made profits on long term and I got rid of everything else.
NEXT PAGE: Your Mind Set|pagebreak|
Lesson 8: Don’t be Scared to Lose Trades
If you are serious about trading you should know one thing for certain; you will have losing trades and that is OK. It would be different if you had the ability to see into the future. In that case please let me know, otherwise never mind. You don’t have to win every trade you take. Imagine, winning every trade would take out all the excitement out of trading. How can you have fun with trading if you always know what’s going to happen next? You don’t need to like losing, but you need to accept it and focus on the next trade.
Lesson 9: Have Passion for Your Trading
As I always say; Put your whole heart in to it, or leave it. If you don’t have passion for your trading, you are simply wasting your time and money. I am not saying that you have to trade every day, or that you have to smile all day long, but when you decide to trade, make sure that you are in a good mood. The last thing you want to do is trying to make money when being grouchy. There will be days, where you don’t even want to see a chart and that is Ok too. In this case just take a break and relax!
Lesson 10: Be Positive
As a trader you need to be a positive person. If you are not, make sure you change that. I believe that it is almost impossible to be successful in this business if you can’t smile. You need to be able to delete all negative thoughts when you switch on your PC. Make sure you practice that. There are many nice exercises for this matter. Do not underestimate this issue please. Positive thinkers have a huge advantage in the trading business.
Lesson 11: Don’t Think About Money All the Time
I know that it sounds like I am asking too much of you right now, but believe me I am not. If you are at a point where you are trying to move from losing to not losing and then from not losing to winning, you already have to do a lot of thinking. If you now add the factor of “making money” to it all the time, you will be overwhelmed. Don’t forget that trying to make money causes stress if you are not used to it. Thinking of money will also distract you from focusing on your trading rules and money management. You don’t need that kind of stress at that point. In order to avoid that in past, I traded with very small lots and risked only 0.2% on every trade I took. That did not make me rich, but I got used to focusing on my trading and not on my account balance.
Lesson 12: Focus on Your Success
When I say focus on your success I mean that you have to focus on your targets and your goals. Don’t let anything come between you and your targets, even if it does not look that easy at the beginning. I always have new targets, new goals and new visions so I never lose interest.
Lesson 13: Choose your Friends Wisely
It may sound a bit hard, but you need to take a “closer look” at your friends. Not every so called friend wants to see you succeed in your life. It is a fact that many people are not satisfied with their life or lifestyle. People are jealous and don’t like to see others succeed by trying something different. Things get even worse if it is a matter of money. So be careful and have the strength to walk away from people like these. Look out for positive and successful folks. Be open-minded and don’t be shy. Meet with people that smile and don’t try to take advantage of you. You will see and feel the difference very fast. After 10 years of forex trading I have learned this lesson well.
NEXT PAGE: Trading Psychology|pagebreak|
Lesson 14: Don’t Let Anybody Tell You What You Can or Can’t Do
I don’t know how it is with you, but in past I remember many friends and family members telling me what I should do or what I shouldn’t do in my life. Luckily I never paid much attention to them. When I have an idea and it is planted in my mind, I will try to move mountains, if necessary, to achieve my goal. The only reason I would walk away would be, if I discovered that what I was trying to achieve was not worth the effort. So, listen. Next time, if you have a plan and somebody tries to give you “advice” ask him or her, this simple question;” Do you have experience in this area and did you try it out yourself?” Make sure you ask for a direct answer and accept no long stories and excuses. The answer will probably be “no”. Than you can say; “Sorry, but if you are not an expert in this area, you can’t give me advice”. That should be enough to make your point clear. It is maybe not the most polite way to reply, but you need to protect your dreams!
Lesson 15: Don’t Tell Everybody
There is no need to tell the whole word about your plans. If you want to succeed with trading and you are not sure how your buddies are going to react, keep it for yourself. Make sure you talk only to people with the same mind set as yours. Everybody else can wait!
Lesson 16: Admire Successful Traders
Don’t be jealous when you meet professional traders, but admire their success. Try to learn from them whenever possible. Try to do what they do in your own way. Spend time studying their ways and their behavior. Many people talk really badly about successful traders and always try to blame them for whatever reason. But be careful because you want to be a successful trader too; so how can it be that you want to become like someone you actually hate!? Please remember that.
Lesson 17: Never Trade with More Than One System
Experienced or newbie, stick to one system and master it first. Make profits over the long term and make sure you have a lot of confidence in yourself and the system that you are using. If you think you need to try out another trading system afterwards, just out of curiosity, be my guest.
Lesson 18: Blame Yourself
Whatever happens to your trading account or your psychology before, during, or after your trading, never blame anyone but yourself. Even if someone else were responsible, blaming them would only bring up negative energy and that is the last thing you want to have on the table when you trade. Take the responsibility a 100% and move on.
Lesson 19: Trade with Emotions
You have probably heard the phrase “never trade with emotions” and to tell you the truth, after 13 years I never really understood how something like that could even be possible. I always trade with emotions and I will continue doing that. I trade with passion and have fun doing so. Passion and having fun are emotions, right? Fear and greed are emotions too, but you don’t have to worry too much about these two. You can’t get rid of fear and greed, because both are part of our trading life, but what you can do, is try to control both. You just need to remember your trading rules, knowing that they will protect you and your account from bigger harm. Do that, and your fear of loss won’t be that important anymore!
Lesson 20: Take a Vacation From Your Problems
There are hours, days or even weeks in our life when everything seems kind of pointless. If you start feeling a bit empty inside, just take some time off. It still happens to me. When I get this feeling, I take a break and go on vacation. Do something similar. Read some good books or go get a hobby. Whatever you do, make sure it has nothing to do with trading. When the time is right and you feel better, come back and make some nice pips! Another very important lesson after 10 years of forex trading.
Lesson 21: Find a Trading Buddy
It is very important especially for newbies in this business to find or start trading with someone that shares the same passion. When I first started I did it with a good friend and to tell you the truth; we would have had a much harder time without each other’s support. Make sure you and your trading buddy are on the same page when starting out.
Of course there are many more lessons that I have learned over the last 10 years of forex trading, but the above are the most important lessons in my opinion.
By Nikos Mermigas, Founder, Spartan Forex Trader Academy