Wednesday, June 3, 2015

FOREX TRADING'S LESSONS FOR BUSINESS

My friend, let us call him Maurus, made four years trading currencies in April this year. I am the unofficial chronicler of his journey.

I have seen him go from manic euphoria as the wins rolled in to debilitating depression when the losses came around during this journey. At the end of 2013 it looked like he had cracked the code, but after four consecutive profitable months he went into a slump that took him until September to pull out of. But his winnings in the last four months of the year were enough to ensure that he recorded his first profitable year in 2014.

Looking on I have learnt a few things from my friend’s experience, lessons I believe can be applied to any business.

1.       Initial losses are school fees
There is that thing called a learning curve. And in business it is if often paid for in losses. In the beginning Maurus floundered around, jumping from one trading method to the next, his agitation fuelled mostly by wrong expectations (remember the forex traders who were offering 20% returns a month not too long ago?). The losses accounted for his first and second investments before he stabilised. He rues the losses he made then, but you cannot pay him to go back and start again without his hard earned experience. He understands now – though grudgingly, that the losses are the tuition he had to pay to get where he is today. And he knows there will be more losses in future. It’s the cost of doing business.
2.       Start small
Linked to that and maybe why he is still in good health and alive today, is because he started small. His initial capital was not even a month’s salary. This helped him learn the ropes without too much pressure. As his confidence grew he added to his capital. In addition to reinvesting his profits he hopes to keep adding to his account from external sources. Many times the thinking is that one needs to have a huge chunk of money to go into business. While that is desirable, what often happens is that that initial investment is usually eaten up as you learn and if it is very big can cause one to give up too soon. The truth is for every business it’s about staying around long enough to learn the needed lessons.
3.       Focus on risk not on gain
Most of the glamour is reserved for making money. But Maurus learnt early enough to focus on the potential loss or risk of every trade rather than on the gains. He learnt through a lot of heartbreak that if you can keep the risk minimal – he only risks 2 percent of his account on any one trade, the wins will more than cover up for them if you have a good trading method. In everyday business the returns on investment on a given enterprise may look rosy but you need to have one eye on the probability of loss, which often means keeping costs low – even if you have a ton of money to blow on an endeavour.
4.       There are no miracles only the slow grind
Breaking through to success in one blast of colour and light is a myth best left to Hollywood. Maurus has learnt that the good trades will come every so often, maybe once every two months but most of the money is made in the numerous trades, where small gains and keeping losses to a bare minimum. The hunkering after the one big deal that will set you up on easy street is dangerous and destructive to business.
5.       Failure or success is all on you
Maurus has learnt that in forex trading there is nowhere to run. Whatever happens is your responsibility. If you are losing money there is someone making money so you cannot blame the economy or a capitalist conspiracy for your losses. He has learnt when you own your losses you can learn and come back a better trader tomorrow. In business do not succumb to the seduction of blaming the economy or the weather or the gods, because you will not improve. If you are losing money someone is making money you need to ask yourself why rather than moan around.

Maurus now has a better understanding of business, no just currency trading, than he had four years ago.


He feels he has got over the worst and have developed a mental discipline that he can only build on in coming weeks, month and years to go to the next level of his chosen pursuit.

3 comments:

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