About This Series
It’s said that a wise person learns from his mistakes. A wiser one learns from others’ mistakes. But the wisest person of all learns from other’s successes.“ — John C. Maxwell
The main purpose of this series is to serve as a medium through which our traders learn from and empower each other, enabling us to progress toward our common goal of being successful traders.
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Hello everyone, my name is Grant, and today, I’d like to share one of the most exciting moments throughout my trading career. Without further ado, let’s jump right into today’s story.
How It All Started
I remember one day my classmate had his laptop opened during our lecture. His screen was filled with bars and he was occupied with clicking and dragging his mouse. His name is Paul, and this was 7 years ago. Paul noticed I was watching from behind, and he pointed to the corner of his screen and told me that he just made $20 while we were in the class. “What? You could make money from your computer? Anywhere? Anytime?” The thought of achieving financial freedom flashed across my mind and I was hooked on trading since then.
We were still in college and I had nothing better to do. My butt used to be my couch’s soulmate. I would play video games all day till late with no aspirations. I thought to myself, this is the time for a change and so I went through a similar process as most of you did when I first started out. Learning about the candlesticks, exploring technical analysis, and reviewing economic calendars. Paul and I would also hang out during the weekends to discuss everything about trading. Fun times, to say the least.
However, things started to go downhill when we were both hit by a losing streak. Losses upon losses were eroding our self-confidence and we decided to take a break and go back to the drawing board. The losing streak also made us think hard and deeply about finding trade setups that would guarantee us profits.
Here is a detailed discussion of losing streaks in forex
Not sure how, but one day I found myself playing around with stop orders on MT4 and thus the idea of placing stop orders on both sides of the market was born. “Maybe this is the way to making profits with 100% certainty?” I thought to myself. With full excitement, I told Paul about this idea and we decided to test this out when the markets are volatile. “The next NFP it is!”, said Paul.
Learn more about NFP here
So here is how the idea is supposed to work.
Image 1: Our plan for stop orders placement.
Image 2: Ideal outcome 1- Price rallies to hit the buy stop and subsequently the take profit level.
Image 3: Ideal outcome 2- Price tanks, triggering our sell stop and its take profit level.
- We would get ready half an hour before NFP and observe the price action on our favorite pair- the XAUUSD.
- At 8:29 a.m. EST, we would place our buy stop and sell stop at a fixed distance from the current price. (We usually set it at $5 away from the market price.)
- We are only aiming for a $5 price movement. Therefore, the TP is set at $5 away from the entry price. Don’t ask me about the SL. You know why.
- Once the clock hits the 8:30 mark, gold goes wild and volatility picked up like crazy. Either one of our stop orders should get hit (Or at least we hoped so)
- As soon as one of the stop orders is triggered and take profit is fulfilled, we immediately remove the stop order on the other side.
The fact that my idea continued to perform after the initial implementation led me to show off to everyone how brilliant it was. We traded every major news release and were flabbergasted as the results seemed too good to be true.
How to Trade Key News Events
And yes, it indeed was too good to be true.
After only 2 months of carefree trading, we encountered our first loss with this trading strategy. It was during an NFP. I can’t recall the exact month as it was 7 years ago. I suppose I could go and dig out my old trading statements, but it doesn’t seem necessary.
On that day, we went through the exact same procedure. Got ready 30 minutes before the event, placed our stop orders accordingly, and waited for the clock to tick.
8:30, the price spiked, and everything still seemed normal. Not until we were caught off guard by the appearance of two open positions on our MetaTrader. There should have been just one, either the buy or sell position.
“Both of our stop orders were triggered, Paul!” “What should we do?” It was our first time, so we had no idea. The good news is that our positions were hedged, meaning our floating loss was fixed. When the price of gold went up, floating profits on our long position increased, offsetting the increase in floating losses on our short position.
After doing a brief research on the NFP numbers (we tried), we chose to close our long position. Now we are net short on gold, during some of the most volatile periods in the markets.
Things only got worse from here. Gold reversed relentlessly against our positions and we were floating a 20% loss in the blink of an eye. The only thing that was on our minds was attempting to save our trading accounts and all the profits that we made previously with our news trading strategy.
I can still vividly feel the adrenaline rushing through my veins and my heart beating at twice its normal rate. As gold prices continued to soar, we proceeded to make one of the worst trading mistakes that traders can make.
Grim Reaper’s Scythe
We averaged down!
Witnessing the ever-increasing floating loss, we doubled up and added more shorts. That was my suggestion to Paul, and he nodded. It kinda gave us the martingale vibe. What were the results, you asked?
Surprise surprise. Our accounts were blown in a matter of minutes. We overleveraged and were getting margin calls and got stopped out shortly after.
We were sitting there, looking at each other with no words coming out of our mouths. We felt empty. Our trading accounts were empty as well.
Frankly, that was really mentally devastating for both Paul and myself. Months went by before we started trading again. But during the time when we weren’t trading, we reflected on what we did on that eventful day and swore to never break our risk management plan ever again. We also blacklisted averaging down from our trading systems.
To those who are on a losing streak or have encountered significant setbacks in trading, don’t give up. Trading can be one of the hardest endeavors that you can undertake, but it proved to be one of the most rewarding as well. Not just financially, but more so about discovering and understanding oneself and how to cope with our own shortfalls.
Fast forward to the present, I am glad to say that I am still in the forex and trading industry, though I have ventured more toward the cryptocurrency side of things.
I have compiled some of the best advice that I have received from other experienced traders that I’ve had the opportunity to connect with over the years.
- Don’t be afraid to try new things. If you don’t try, you will never know.
- Keep your emotions at bay while trading. It doesn’t help.
- Revenge trading is disastrous. Shut yourself out of trading for a day if you encounter 3 consecutive losses.
- Always update your trading journal. This is the most invaluable treasure that you can own in trading.
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