Conversation with a New Trader

Below is a conversation from Facebook that I had with a young trader and I felt that the questions he asked are questions that a lot of young traders have…

John Smith May 28 at 12:31pm
sry about the double message. hit enter by mistake. I have been looking for a broker for some time now and I was wondering how you picked yours? every time I look online at reveiws they are all mixed. It seems very few people like their broker and then there are 80% that give a bad reveiw.

How did you go about looking for yours?

My name is john and i would greatly appreciate any insite to what you have to say.

Michael Goldsborough May 28 at 1:00pm
Yeah, no problem. If you ask how long most people have been with their broker, it’s usually the rookies that complain. They have no idea what it used to be like. Today, most brokers are decent (at least the ones you hear about the most). I am with OANDA because I have had really great experiences with their customer service. What you need to look for is easy to withdraw/deposit money, order fills, slippage and availability. If you have over 1 million to invest you are going to want to look for an ECN (they are direct to market brokers). Under that amount a dealer desk like OANDA or FXCM are good choices.

I’d love to help you out where I can, please, ask me any questions you like. I never would have gotten started in the business if it weren’t for someone to answer my questions, so I guess I am paying it forward. Check out my blog if you haven’t yet, as well as all the links on the blog roll – great seasoned traders. See the link below.

John Smith May 28 at 1:27pm
Thank you very much. I was looking at those brokers but they seemed to have the most reviews but the worst reviews mixed in with really great reviews. but I am sure its because of what your saying about new comers. What would you say would be the best way to get started? How much is the least amount you think some one should start with? How was OANDA’s free account differ from the live account?

Thank you very much and I will check your blog out

John Smith May 30 at 2:15am
hi another Q. why does it seem that when im reading or watching live trades they seem to be talking about taking profit in a downward slope. i thought you could only make profit in an up trend.
if you could pls clear this up for me.

Michael Goldsborough June 1 at 4:09pm
The best way to get started is to trade on DEMO until you are consistently profitable for about 3 months. Then, based on what you’re comfortable with, deposit real money with the broker you choose. You’ll have to check with the broker to find out their live account cash minimums. The OANDA platform for Demo and Live are extremely similar- no problems transitioning. In fact, I still use my demo account to test out new trading ideas and strategy’s.

Michael Goldsborough June 1 at 4:13pm
If you are trading currency, there is always a downward AND an upward market. Since you aren’t just trading in one currency, in order for you to buy it, some one has to sell it – and vice versa. Let’s take the Eur/USD for example. If the chart is in a Downward Trend, then the EURO is LOSING value and the DOLLAR is GAINING value. Therefore, the EURO is in the Downtrend and the Dollar is in the Uptrend. What is beautiful about trading in currency is the markets are cyclical, i.e. there is no bottom and there is no top – a currency can NEVER (well rarely) go to ZERO.

Hope this helps.

John Smith June 1 at 4:38pm
if you dont mind me asking. do you do this full time?
“I have the demo open and learning while useing fibonacci tool.

Michael Goldsborough June 1 at 5:13pm
My income is derived mainly from Trading, but my style of trading allows me to carry a full time job that I enjoy. More like a hobby (and it pays the health insurance) then a job.

Keep learning Fibonacci. I use the Fibonacci Retracement and Fibonacci Fan as well as hand drawn Support and Resistance lines.

John Smith June 1 at 5:23pm
im really liking the fib style. I was just wondering how hard it would be to do this full time. I have plans of finishing school in PharmD/mba. I want to open independent pharmacies.

John Smith June 1 at 5:46pm
is it possible to get 10…20 pip trades a day?
if i had 100$ and 100:1 leverage. that would be 1000$ leveraged for a trade.( i wouldnt start with 100$ dont worry)
if i got 1$ per pip profit and made 200 pips a day that would be 200$ a day. times 5 days is 1000$ a week which is 4k a week and 48k a year…… right lol or im i off or unrealistic?
i know the numbers are low but im trying to see if my math is right.

Michael Goldsborough June 3 at 3:55pm
OK, sorry it took me a bit to get back to you…life is just busy sometimes.

I don’t want this to discourage you, but you need to be a bit more realistic with your expectations as to not get disappointed and leave the business of trading prematurely. I will help you as much as I can and let me know if there is anything else I can do.

First, your math is fine, it’s the logic behind it that is flawed. Remember, if it was that easy, everyone would do it and everyone would be successful and we would no longer have a market.

I would be remiss if I didn’t tell you that this very thought (how easy it looks to make money in FOREX) got me into trading. It would be foolish of me to not warn you that it is an extremely hard was to make an easy living. You can make 10 – 20 pips/day on average, but you can’t trade with $1/pip with $100. It is a numbers game, and you need the zero’s to make the necessary amount of money to sustain a living.

Think about what you’re saying, you want to triple your money everyday. People would kill for 15%/year and you want to make 300%/day. I average about 3%-5% each month, I compound my earnings and adjust my position exposure every 6 months.

Not to mention you need to have 6-12 months of expenses in a savings account in case you hit a real bad run…you still need to pay the rent and eat.