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Investing & Trading Lesson (Part 1) – Know & Understand The Risk

January 13th, 2010 Leave a comment Go to comments

Do you ever heard your friends, families, colleagues said the they got bankrupt after play in Stock, Option or Forex Market? I am sure you frequently hear that, maybe dozen of times, maybe hundreds of times. It’s really true. There some theory said that 90% trader loss in this world. I don’t know exactly is this number really true or not. But the fact about the amount of unsuccess trader much greater than successful one is really true.

I found some interesting stories in the largest forum community in my country, kaskus. In thread posted by acangz, there is a discussion about people experiences after knowing forex trading. Most of them ever got bankrupt. I translated some of these stories in English.

Story 1

First, i deposit $100. Eh… only 3 days it’s already become $1.500 then I witdhraw it. I just know that if we witdhraw in MT4 Broker the account doesn’t disappear suddenly. The bad is… after 1 day +, almost 2 days it’s didn’t processed and i didn’t complain because i feel i was only newbie. Know i got large amount of money, i just want to witdhraw it as soon as possible. Too bad, it couldn’t be witdhraw directly. There are a lot of rules i must read. I feel itchy and keep doing some trade while waiting my witdhrawal process to be done. Too bad, i got margin call and i can’t do anything on it

(INSTAFOREX @kaskus.us)

Story 2

my personal experiences in trading was like this…

just understand, i only newbie. so i place careless order month 1 until 4, i consistent to wake up in the morning and i place buy and sell in corellation pair. only TP about 10 pips each pair. i place 10% margin. never read news. if i place an order, i just didn’t do anything on it. i watch it 1 day after that. if it minus it liquidated. if profit it witdhrawn 50%.

month 1 :16 days profits and the rest losses.
month 2 :10 days profits and the rest losses.
month 3 :18 days profits and the rest losses.
month 4 :12 days profits and the rest losses.

the event happen in the beginning of month 5

because there was my friend withdraw his account with fantastic amount. i was corious and decide to trade on top speed to make profit. and the result, in several second, i got margin call, because i made mistake placing the lot. I entered 100 lot (unit in mar*ktv) on my MT4 real account. It’s automatically Margin Call. Thats enough for my suffer (careless)

(MENOFA @kaskus.us)

Story 3

My biggest losses in forex about 175 pips aka $ 17.500. hahaha… its because of non farm payroll. The story was like this, bro. Friday night after family event in my place, ok…. because i couldn’t see chart continously at that moment, i place take profit and stop loss. I hope in worried while sometimes looking saxobank in my mobile phone. After the news released, the price rose 30 point from my buy price… wah… i am so reliefed already make profit 20 poin (i place take profit only 20 point)… 10 minutes after i look saxobank in my mobile phone… the price already down 195 point from my price. i was in hurry turn on my computer, watched the graphic. it’s really true like what i fear. take profit and stop loss suddenly disappeared on its own 30 minutes after news released. So 30 point jump was useless… so it’s minus, so bad luckkkkk…. it’s ok. loss or profit its part of business, no need to regret.

(dewangga85 @kaskus.us)

and many other stories….

This is only three example of thousand or maybe million stories of a trader who try to get rich from Forex. I think you will found a lot of story like this among traders. So… you will understand why i make this as the first part of my lesson. This is the most important thing you must know before you enter this world. If you don’t ready about the risk, i recommend you to avoid this world. Because it’s better you do the conventional works than got stressed when doing this type of job. Many of seminar guru only give some bullshit promise. They only said the good part of trading. If trading can make you rich, of course it can happen the opposite way. So the most important what i want to said here is you must follow these rules before enter this trading world. There are only 2 rules

1. Never use money for trading from debt

I met a lot of trader use the money for their trading from debt. This is really really risky. Almost all trader who start learn about trading going bankrupt for the 1st and 2nd year of his learning journey. So it’s really really unrecommended to use money from debt.

2. Use  money you can afford to loose

It’s related to the first rule. Better use your own money for trading. I recommned you to use your free money. What do i mean “free money”? It’s money you don’t use. It can be your saving account, your certificate of deposit, your excessive fund from property, etc. So it will be allright if you loose them. It of course feel hurt but it will not make you feel like this is the end of the world, or some thing like that. So you still can continue your life.

If you agree to follow 2 rules above, you may start learning about trading. What i want you to notice is the statement “Stock/Option/Forex Market can make you rich fast”. I think you frequently read/heard this statement. What i want to add in this statement is “It’s also the good way to make you poor fast”. It’s not a jokes. I just want you to clear enough about the risk. This  is true. Most Traders expect an instant reward, which is something that is completely unrealistic. Positive results will not just come because a Trader expended energy, the Markets do not really care how much time and effort is put in. There is no ‘Time=Reward ‘ equation in any trading Market.

The last part of tips i can give you is Never Stop Learning. A good trader not born that way. a good Trader is only ever somebody that has been taught well. A good Trader has been willing to expand their thought process, and to willingly move outside of their own comfort zone.

Thanks for acangz for his posting in kaskus.

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