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2. My Early Days Trading Forex

I want to talk about my early days as a Forex trader because I’m hoping that my story will be something you can relate to. So it doesn’t really matter if you are brand new to trading or if you have been trading for a number of years. I’m sure that almost all traders go through the same cycle of the learning process and its one reason why I put my Forex coaching course in place was to help fellow traders short cut that initial learning process which for me took about 4 years before I became finally profitable.

So let me tell you about those early days. I took a course here in New Zealand and I paid $NZD5,000 to go to the course. This was the same course that I had heard about on the radio station while I was milking cows towards the end of my farming career. The course was okay. It got me into trading which was the main thing about it.

At the same time I was researching everywhere online. I was researching all the different indicators, I was printing out pages of text and chart images and I was putting all of the indicators on my charts, I was reading about them, putting them in folders, I was basically getting all the information I could about everything out there online and using that as my training arsenal.

Looking back it wasn’t the best thing to do because in some ways as you know, or as you will soon discover, if you have too many indicators it completely confuses you. I’ve also discovered over the years that almost all indicators are very similar in that all they are doing is telling you what has already happened with the price. Whether it is a MACD or a RSI or CCI or whatever it might be, almost all types of indicators are formed by taking some form of average, whether it’s a fast or a slow or a different combination of price that has already happened. Those indicators all lag price.

In all honestly they are not a great deal of value to us as Forex traders because we need to trade from the right hand side of the chart to see what is happening right now in real time and make a judgment on that.

However, back in those early days I wasn’t aware of that so I was doing all my research and I’m sure you have done something similar if you’re trading right now. I was just looking at all indicators out there and trying to basically conger up a combination of those indicators that I thought looked to be the best at that time.

What I liked about the course that I did and what got me into trading after taking that course was I found all the information on the course quite logical. I found it very easy to understand and pick up good looking trade set ups from what I was taught. Whereas I noticed a lot of other people in the course really struggled with the whole concept and even though I didn’t have any background in trading or such, mathematics was one of my strong points at school. So numbers, figures and charts came quite naturally and quite straightforward to me so I was quite fortunate in that respect.

To the actual trading itself, well after the course, I went straight home and opened a live $10K account with a brokerage in the US and it was of course the brokerage who the course people suggested. Back then I had no idea about affiliates and things like that so I just went with the brokerage they suggested. Little did I know they were only suggesting this brokerage because they were getting paid in return for sending all these clients to the brokerage. Look that’s fine, that’s the way the market works. I was quite green back then and didn’t understand a lot of that.

The brokerage was okay but I suppose back then there wasn’t a huge amount of choice. Another thing was that one standard lot (or around $10 per pip) was the minimum contract sign that I could trade. When you are brand new to trading that is not a great thing. Obviously mini
lots or preferably micro lots like you can get from almost all brokers today are the best way to go because you can trade with very small and accurate position sizes.

When I started there was no such choice so one standard lot was the minimum I could trade. Which when it came to real money it resulted in either some big gains or some very big losses. Like most new traders the losses were bigger than the gains when I started trading live.

I didn’t spend a lot of time on demo which is probably a mistake and it is one thing I encourage people to use demos but also be really cautious about the way you use a demo account. If you are starting as a new trader or you’re learning a new strategy or system, ensure you treat that demo account as if it were real. You see, when I did have a few demo accounts before I did the course I was randomly putting on buys and sells and didn’t have stop losses or profit targets and I didn’t have accurate position sizing. I was just putting a trade on just to put a trade on and I fluked quite a few positions and I was making an absolute fortune in demo accounts. I remember printing out my results and showing it to friends and showing them how much money I made in this demo account. It was huge amount of money but I had no idea what I was doing and I soon got to find out about margin calls because obviously that run didn’t continue forever and I eventually had a margin call and my demo account was closed. It was a good lesson because on my live accounts I’ve never come close to margin call. I’ve never lost my account on a live account so there was a lesson to be learned there.

Another mistake that I made that so many people make is that I opened a demo account with a huge amount of money. I think it was something like $100,000 on demo. My first live account was $10,000. When I was making a profitable gains on my live account I was quite disappointed in a way because the gains I was making was nothing like the gains I was making on my demo account because I was trading demo on 10 times the account size.

I think this is a point it is really under estimated by so many people because if you decide to trade demo, open that demo account in roughly the same account size as you intend to open your live account. For instance, if you think a $10,000 live account is what you are going to trade to start with when you go live then open and trade on a $10,000 demo account.

It is very easy to get caught in the hype that brokers try and give you $50,000, $100,000, $250,000 demo accounts. Don’t make the same mistake that I made. I was thinking “wow this is easy and I look at all this money I’m making” and of course you go live and it doesn’t happen and it doesn’t correspond into your live account. So that’s an important tip there for you to remember.

I also need to tell you when I started and hopefully it doesn’t apply to very many people but when I started it was only on a dial up internet connection. There was no broadband for the first year or so.

I had my Son who had just turned 3 at the time and of course when I started to trade was at the time that I was ready and not when the market was ready. You see I put him to bed at night around 7 o’clock in the evening, get him settled then go to my computer, get that set up, try to get dial up to work then get the charts to work and it was like this, “well it’s taken me so long to get this ready, now I’m taking a trade, where is it?” What trade am I taking, what position, what pair? Little did I know I was forcing trades to occur. I was trading because I was ready to trade not because the market was ready and the market was saying “hey look here is a good position based on what you just learned”.

It is a very common problem even today with high speed internet around that people tend, when they start off trading to get at their computer when they finished work, put the kids to bed or whatever it might be and put the charts on and say “right, where is that trade”.

People force trades. The best way to trade and the only way to trade really in my opinion is for the market to show you there is a set up. I’ll talk more about this in a couple chapters time when I’ll be talking about different time frames etc. It’s a really important point to note that the market needs to be ready to suggest a set up. Don’t just take a trade because you are sat there at the computer ready to trade.

Another thing I need to tell you when I first started trading was my very first live trades taken on the US Non-Farm Payrolls. Back then when I first started trading the Non-Farm Payrolls moved an enormous amount almost every month.

We’re talking 200 - 300 pips sometimes more than that. Huge spikes up or down whether the news was good or bad for the US. It was very easy back then to make some really good gains because it was easy to enter the market, the brokers didn’t freeze the charts or widen the spreads too much. Of course things are completely different today. My very first trade taken live on the US Non-Farm Payrolls, I remember I made $1200 in a matter of 10-20 seconds on my $10,000 account. So I made a 12% gain on a live account within that time.

I was shaking at the time I couldn’t believe it. I put straddle on. I put a straddle on I think 15-20 pips higher than the recent price action and lower than the lowest recent price action. In US time it was 8:29:30 am and I put the two positions, just 30 seconds before the news release. It was a sell stop trade that entered. I remember it clearly. I can still see that day and that chart, I can picture where I was. All I remember was the market was crashing and “wow”. My trade was jumping up and down and going all over the place and all I could think about doing was deleting the buy stop trade in case that got triggered and closing the sell stop trade as quickly as I could. All I could think of was closing the trade and making some money.

It was a 12% gain and just an amazing trade. Now that went on quite a while after, many months after until brokerages started to catch on that people were straddling the news announcements and making a lot of money.

Another thing I started in my early days of trading was over trading. As I’ve already mentioned, I started trading when I was ready not when the market was ready. I was forcing trades to occur. It was like “I am ready so where is the trade?” I was placing trades just randomly because the feeling of being in the market and watching the account move up and down was quite a buzz and quite an excitement. What I failed to realise was I really had no idea what I was doing.

The course that I had paid for and studied hadn’t given me any real clear exit levels. It gave me some ideas of how to enter a trade but it didn’t give me any clear exits. At times I was trading without any stop losses. I had no money management control. I was trading one standard lot on every trade regardless of the pair or the set up.

I was trading blind really without a plan and without any goals. I think it’s a common thing that most new traders go through. Due to my experience now I can help traders get past those initial start-up problems that everybody has. My course is really about short cutting that learning curve by offering good quality education.

Another thing I did which was silly looking in hindsight was I kept dreaming of what I was going to make. I kept writing compounding calculations on the computer and I was always thinking “well if I’m making this number of pips then I’m making all this money and if I compound it and never have a losing month then I can see my account going up and up and up exponentially”. It came to the point where hundreds of thousands of Dollars weren’t exciting anymore so if I kept compounding or taking more and more trades or having a high risk, putting on two standard lots rather than one then I was making millions of Dollars in my calculations.

Of course that never happened in my early days but there is a danger there by thinking “how much can I make and how quickly can I make it?” I think it comes down to very cleaver marketing on the internet by so many people, whether it be people selling systems or robots or brokers themselves, although they have calmed that down a bit recently.

I was just making all this money and seeing all this money coming in – in my mind but without thinking about a strategy. I was doing all of this based on a $10,000 account which is completely crazy. If I made a $10,000 gain on a $10,000 account that was a 100% gain in a year which is an incredible result. However, in my mind I was making hundreds of thousands and even millions of dollars. I’m sure you have done that yourself and if you haven’t you would be one of the few that haven’t.

It’s just something that Forex seems to offer you, the opportunity to make an absolute fortune. Little did I realise that it was going to take many more years of hard knocks and heartache and tears and trying systems and buying things before I finally made some real money consistently from my trading.

In those early days it wasn’t thousands or millions. You’ve got to start somewhere and go through those learning curves and take the knocks so you can come out the other end. So I’m going to talk about more of that in the next chapter.

To view the video or download the mp.3 audio file please visit

http://theforextradingcoach.com/andrew-mitchems-forex-book-signup.html

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