Best Forex Trading Tips from “The New Market Wizards” – Part 1

Posted on Posted in Beginners, Education, Money Management

Best Forex Trading tips? In this article I’m going to share one of the most important.
I have received a private message from a student of my Forex course on Udemy. He shared his story with me and I want to share it with you. This student has been a trader since 2004. Forex trading became his only source of income and his full time job in 2007, but he decided to quit in 2013 because of a very bad trade. He couldn’t handle the pressure and the stress of living off Forex trading. He started to think that his mindset was not right for Forex trading and he could live better with a normal 9-17 job and a normal salary.
He got a job as terminal security officer (not exactly a 9-17 job) and he seemed to be happy like that, but something changed in 2017. I love the way he describes what happened, he writes: “something bad happened that changed my life. I got promoted”.
After 4 years, he got promoted and he was earning $270 more per month. So he started to think: “what am I doing? Is it really what I want? Working late at night to earn in a year what I used to make in a couple of months?”.
He decided to give Forex trading a second chance. He took the course in September 2017 and his plan is to reach $100,000 by the end of 2018 and quit his job at the airport. As he writes, he took the course because of the risk management section. He needed someone to remember him that you can lose everything if you don’t manage the risk of your trades.

Let me first say that I have respect for every kind of job. Life is not just about money. You can enjoy your life with a $1,000 salary and you can hate your life even being a millionaire Forex trader.

Then this story reminded me of a book. The book is called “The new market wizards” by Jack Schwager.

The author interviews some famous traders, asking questions about their strategy, important moments in their career, mistakes that they have made along the path and many other things. The conversations are then reported in the book and you can really get some good Forex trading tips.

The following is a conversation between the author and the top trader Bill Lipschutz:

Schwager: what happened to your account? As I remember, you started out with about $12,000.
Lipschutz: that’s right, and the peak was about $250,000.

Schwager: really? You had built it up that much!
Lipschutz: well, this was over a period of about four to five years.

Schwager: still…
Lipschutz: yes, I had a lot of success. Anyway, I ended up blowing out virtually the entire account in a few days.

Schwager: what happened?
Lipschutz: on September 23, 1982, the Dow went from down 30 points to closing up 20. This was the famous Granville reversal, which was the bottom of the bear market.

Schwager: does “Granville reversal” refer to the rally occurring just after Joe Granville (an extraordinary popular market advisor at the time) had put out a sell recommendation?
Lipschutz: exactly. I was very bearish and heavily long puts. I kept pyramiding all the way down. I was really pressing. I lost most of the money that Monday, and by Wednesday the account was virtually gone.

 

What did I learn from this story?

First of all, I thought of myself when I was 17 and trading with my mother’s account. I was earning just a few euros, that was good considering that I had a basic knowledge of Forex trading. Then I started to think that I could increase my positions, because I wanted to go on holiday with my friends and I needed money. I didn’t last 3 days like Lipschutz… it took 3 hours more or less to blow my trading account!
So are you looking for one of the most important Forex Trading tips? Trade like a computer.
The student, who wrote me the private message, lost a huge part of his account because of greed. Bill Lipschutz lost everything in 3 days because of greed. I lost everything in 3 hours because of greed. If you think about other common mistakes, they are all because of our emotions: over-trading, revenge trading, over-sizing etc.
Let your emotions out of it, trade like a computer!

What did Bill Lipschutz learn from this story?

I think that he learnt the same lesson. After that, he went to work at Salomon Brothers to improve his trading skills and today he is the head of Hathersage Capital Management, a hedge fund specialized in Forex trading and with a capital of $1 billion.

Original Quora Question: What are the best Forex Trading Tips?

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