This week will be the two year anniversary for my best and worst Forex day. It was late November 2005, I was about to move to a new apartment on December 1st and boy did I have expenses! Just like many Forex traders today I had a job that basically barely covered my living expenses, so with the move, my financial situation was a little tight. My wife and I were expecting our second daughter and raising our first who was turning one in December. But I had an outlet...Forex! I was convinced that I was going to be the next George Soros. I had $1,000 in my Forex account and I relied on that. The EUR/USD was at 1.17 back then (WOW! Who would have thought that I could have made over 3,000 pips just buying the Euro...) and it was ranging between 1.1640 and 1.18.
That morning, before I left to work, I made a quick evaluation of the market. I was still a newbie and didn't know much about technical analysis, but I had a hunch based on the day's financial news forecast, that the dominant color would be green for the pair. I opened a position - 1 standard lot, Euro. I risked it all.
When I came back from work that day I couldn't believe what I was seeing. The Euro was at 1.1796! I made about 100 pips which means about $1,000. I was shocked. It was the most money I have ever made in a single day. My thoughts were racing:" I am a pro...", "I can soon quit my job..", "Question: What should I wear for my picture on Forbes magazine?"
Back to reality. Looking at the charts I figured that the trend was weakening so I should close the position. Good move. I closed it and looked at my account details: About $2,000. Unbelievable. I felt it was a gift from God for the new apartment. But the gift was yet to come...
Since I've established the fact that I am a "pro" already, I decided to take another look at the charts from a "pro's" point of view. The RSI was above 70, a signal that the pair is overbought. I figured why not place a counter trade and make even more? The market will reverse for SURE and I can make easy money from it...and besides, today is MY LUCKY DAY! What can possibly happen? So I opened another position - 2 standard lots, Dollar.
What happened next is rare. But it happened. The Euro went up another 100 pips to about 1.1915! I didn't have a stop loss... That hour I was loosing money and gaining a bitter cocktail of fear, anxiety, and anger, by the minute. At first I thought "it's going to reverse any minute now", but as time went by I just gave up and watched my precious money go to my broker (yes, I traded through a broker that is now being sued for trading against it's clients..). It was the most money I ever lost in one day...
Thank God I was never really punched in my stomach, but I think that day was the closest I ever got to that feeling. It took me a while to recover, financially, emotionally, and to build my trading self confidence again. But I did. I managed to get some money and started trading again. I lost more money since that story but overall I gained more than what I lost.
And yes, it was God's gift to me. He slapped my face to bring me back to reality and make me a better trader. It would have taken me many years and allot of money to absorb the lessons I learned that day and make it a part of who I am as a trader.
I think that there are many lessons that can be learned from this story most of them are obvious: Always place a stop loss, trade in the same direction of the trend, etc. But the most important one is stay humble and NEVER GIVE UP. Even if it hurts. Always learn from your mistakes and move on!