Turning $15K credit card debt into financial freedom

Redsails said:
My first days..

So, in a previous post I explained how I decided to try day trading. Why did I choose Forex? I chose Forex because of its high leverage primarily. The only way to grow capital quickly is to use leverage, so that's why Forex. But also Forex was conceptually clear to me. It's a macroeconomic variable, and I have an advanced training in macro-economics, I understand in theory what determines currency exchange rates in the long and short-term. On the other hand, the price of stocks depends on a host of macro and company specific factors, and day trading stocks that I have no idea about seemed to be a stupid idea to me. I believe trading stocks is much more complicated conceptually and practically than trading forex for a beginner. Having said that I do plan to trade stocks when I have more capital (at least $300K). And in the future once I accumulate a few millions, I plan to transition to investing, as it is a more socially respectable activity.

I researched online brokers for a while and found out about TradeKing. I opened a demo account with them and started demo trading. I had notional equity of $50K which I leveraged to $2M. On the second day of trading I won $5K! I was pretty excited! I had never before in my life won $5K in one day! Also that day I got a call from a TradeKing sales guy. He explained to me that demo-trading is a waste of time since it never feels like the real trading. He said I should open a small live account since only with a live trading I can learn how to trade. I was skeptical at first and thought that he was just trying to get money out of me (he was a sales guy after all) but then I researched some online forums like Trade2Win and EliteTrader and found that his statements were confirmed by opinions of many wise traders.

Therefore, I deposited $2K and started trading on April 29. The first day I won $455! EUR kept going up and up, and I kept buying low-selling high. It was so unbelievable! To make 20% return in one day! I felt like a trade king. I shall forever remember that day.
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In the evening of the same day I quickly deposited $8K to my account bringing my total deposits to $10K and the next day I won $2K.

Needless to say I was elated. I made plans to become a millionaire by the end of the year. I believed that it was a manifestation of my destiny. I did not know that it was not destiny but some random luck. At that time EUR.USD was rising consistently for a few days and I just happened to start my trading in this trend. The funny thing is that I did not even know there was a trend because I never looked at daily charts. I did not even look at hourly charts. I was trading off 1-minute charts. Just buying low selling high.

The next day, May 3, EUR.USD reversed its course while I was holding a long position. I held my position for hours hoping that it would get back up but it just kept going lower and lower. I could not understand what was happening. It was so painful. When I finally closed my position at the end of they day I lost more than $2K.

I was devastated and angry. I withdrew my deposit and closed my account with TradeKing.
 
Redsails said:
As I said, I had always thought that trading (not only retail but in general) is a stupid activity. I learned Efficient Market Hypothesis in school. I knew that it was not possible to systematically beat the market. It is also not possible to be systematically lucky. But what I did not realize before and what I understood only recently is that you don't have to be systematically lucky to get rich. You just need to get lucky a few times.

It's like venture investing. You make bets, most of which fail but one of them will bring billions. Then with a bigger capital you make even more bets and the cycle repeats. The odds are probably worse in trading than venture investing but the principle is the same.

I firmly believe that is the explanation for successes of any trader or investor such Buffet or Soros.

So, I did not believe in technical analysis. And I did not believe in fundamental analysis. I believed only in luck. Therefore, I decided not to learn anything and just keep my trading rules as simple as possible.

Basically I had only two rules:

1. Trade in the direction of intra-week trend.
2. Buy troughs, sell peaks.

It happens that these were not bad rules at all! I was surprised to find out recently that these were exactly the rules recommended by the wise man John Murphy in his book "Technical Analysis of Financial Markets".
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This is an interesting post.
"you just need to get lucky a few times" sounds good in theory...
But if you understand randomness, you can calculate the probability of hitting a very profitable "lucky" trade - the chance is pretty low. It is highly highly likely that you will go through a lengthy losing streak before you finally hit that one lucky trade.
If you believe in Efficient Market Hypothesis, then it's a zero-sum game. Even if you get one huge winning trade, the large amount of losses will bring you back to $0.
So essentially you would only be relying on luck - hoping to avoid the long losing streak before you get the lucky trade.

"Then with a bigger capital you make even more bets and the cycle repeats." - you are hoping to get lucky systematically, which you said you don't believe is possible.

As for Technical Analysis - some aspects of Technical Analysis can be back-tested and clearly prove that the markets are in fact not random. Though it doesn't necessarily mean that these back-test results are tradeable.

Did you think about trading options? It may be a better approach. Aggressively trading options hoping that you get rich before Tail Risk takes you out of the game.
 
rexlord said:
Did you think about trading options? It may be a better approach. Aggressively trading options hoping that you get rich before Tail Risk takes you out of the game.
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If he had difficulty making money day trading futures, day trading options is as hard if not harder. Being there done that: Not profitable for me. Maybe others could have done better.
 
Redsails said:
The next day, May 3, EUR.USD reversed its course while I was holding a long position. I held my position for hours hoping that it would get back up but it just kept going lower and lower. I could not understand what was happening. It was so painful. When I finally closed my position at the end of they day I lost more than $2K.

I was devastated and angry. I withdrew my deposit and closed my account with TradeKing.
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In the past, ET posters reminded me that "hope" was not a strategy. You were basically gambling and not trading.
 
Account is down to $8K, have not had a winning day for a long time.

Yet, I remember a quote I have seen on this forum: "The number one trait of all successful traders is the refusal to quit in the face of adversity".

It sounds very true. Stubbornness might not make you a great trader, but lack of stubbornness will surely prevent you from becoming one.

Nevertheless, I updated my resume and started sending it out. Just in case..
 
Redsails said:
..continued

...I was devastated and angry. I withdrew my deposit and closed my account with TradeKing.
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Redsails said:
...Nevertheless, I updated my resume and started sending it out. Just in case..
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Now that your trading account is closed (good decision)...

What type of jobs are you applying for ?

How much savings did you have saved up for living expenses until you find a job ?

Did you ever consider just starting a business in the field of the type of jobs you've been employed or your applying for considering you seem like the type that's a high risk taker that's looking for a change in your life ?
 
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Redsails said:
Account is down to $8K, have not had a winning day for a long time.

Yet, I remember a quote I have seen on this forum: "The number one trait of all successful traders is the refusal to quit in the face of adversity".

It sounds very true. Stubbornness might not make you a great trader, but lack of stubbornness will surely prevent you from becoming one.

Nevertheless, I updated my resume and started sending it out. Just in case..
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not a bad idea
 
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