Beware Unsuspecting Traders
As we look forward to starting the 2014 trading year on Monday [1/6/14], I want to emphasize some key points before money starts flowing into our accounts from trading. I touched on some of these in my last post, but they are worth mentioning again because they are so important.
Unlike any time in the past, banks and brokerage houses [especially those outside the U.S.] have made it soooooooo easy to open and fund a trading account, that even a third grader could do it in less than 2 minutes. It’s 10:00 A.M. in London, and by 10:15 your account is opened, funded, and you have 500:1 leverage if you want it. What could possibly go wrong?
So the key question here is why do they actively pursue you and want you to open an account? Why do they make it so easy? Simple; they think your money is going to be their money in short order.
Trader Fly: “Oh, that spider’s web doesn’t look that intimidating. It’s just hanging there blowing in the wind. I can easily navigate that thing, and if I do get stuck, how hard can it be to get out?”
Brokerage House / Bank Spider: “That’s right trader fly, we’re here to give you money and make your dreams come true. No need to worry, come on in and get your share of the free money”.
Now, just because you do your “due diligence”, that doesn’t mean you can forget about it and carry on forever. When red flags start appearing and blowing in the wind, you have to act and have a “Plan B” ready to go and be implemented; if it takes a day, a week, or even a few weeks to make the transition, so what?
I’m starting my 37th year of trading, and although my anecdotal evidence is vast, every year that goes by reveals things I didn’t think was possible a few years earlier. I’ve seen just about everything markets, banks, and brokerage houses can throw at people that cost them money.
But as I mentioned last post, it’s the tangential issues that catch most trader flies off guard. The two biggest issues I have seen throughout my trading career are 1) family and personal issues, and 2) money issues.
Divorce, separation, family illness or accidents, and family jealousy can have a devastating affect on any trader. Over the long run, you have to compartmentalize your trading activities from everything else in your life; people in your “orb of influence” have got to realize the importance of your trading time and that it is something that can’t be messed with by life’s details.
Over time, this will be the hardest non-trading issue you will face. No matter the situation, if you are a professional trader and trading pays the bills, you have to have a plan to work through the difficulty. Two things you must absolutely do; 1) plan early and let everyone know your seriousness of trading as a career, and 2) establish a “rainy day” fund [from profits when you make withdrawals] so that you can effectively take time off to deal with any situation. The last thing you want to have happen is that you have to trade at the same time you are dealing with a personal or family crisis.
TRUST ME HERE FOLKS; JUST PLEASE TRUST ME ON THIS.
The second issue is money. I don’t care how smart you think you are; how many credentialed degrees you have earned; how smart your family and friends say you are; or how successful you have been in the business world. Trading is different and has NO CORRELATION to your previous success or education!
What this means is this: get on a demo first if you have no trading experience and get comfortable with the MT4 trading platform and all of its functions. Brokerage houses don’t give a crap if you make or lose money on your demo; it’s there [the demo platform] to get you educated so you don’t make the stupidest mistakes known to Newbies.
The other money issue [that absolutely destroys people] is funding a new account with a large amount of money. DO NOT throw 100K into an account to see what happens. Start your trading with a small account [even if you have money to spare]; maybe 1K or 2K, something that will absolutely not affect your middle class existence. Nobody is going to have to tell little Sally that she won’t be able to go to college in 10 years because Daddy screwed up and lost 1K trading FX years earlier.
All the “physical” tools you need to be successful as a trader I have made available to you; now, you need to be smart and build your trading business from the ground up into a large money-maker. Remember, trading is a business so treat it like one.
If you have questions about these issues, and are in need of a little advice on the subject, write me at email@example.com and I’ll give you the most honest answer I can.
Have a great day everyone.