It was a sunny afternoon when I sat with a friend Phil outside a bar, I had just finished work and Phil offered to buy me a drink. It appeared that he had received some sort of great news that day as he was far more sociable than normal.
Phil was never one to worry about money, he hardly ever let anyone pay while he was around. Not long after we had had a couple of drinks he bar tender came and said we had to leave because they closed early on Tuesdays. I could tell Phil was going to object to this. "Me and my good friend here want to stay for a few more drinks so what will it cost me to keep you open?" he said. The bar tender looked down at Phil and decided to come up with a random high number to amuse himself."$1500.00" said the bar tender. "Deal" said Phil as he pulled out a big wad of cash out of his pocket and gave it to the bar tender. The bar tender who was now in total shock just kept staring at the wad of cash. "There is $1700.00 there now be a good chap and fetch some more drinks" said Phil.
Although I had spent a reasonable amount of time with Phil I had never discovered what he actually did to make money, I had never herd him speak of work but he just handed over the equivalent of 2 months of my salary just for a few drinks! A while later and after several drinks I decided to pop the question. "What line of work ore you in?" I asked. "I trade the Forex market" Phil said. I though I had miss herd him. "What" I said. "I trade the currency markets" Phil repeated "I have been trying my hand at that too, but it is not easy" I said."Well it can be if you want it to be" said Phil. "How do you mean? Could you teach me" I asked. " I don't know if I would be of any help every trader has to find his own path, I could possibly point you in the right direction but it is up to your to find you path to success not me" said Phil. "Are you sure you want to start learning this stuff?" said Phil. "Yes, I have always wanted to but I never seem to make money." I said". Look I have to go and draw out some more cash wait here I'll be back in a moment". And with that Phil took off. I was totally confused, what was he talking about? Finding my own path, I didn't ask him to show me Jesus, I just wanted to do what ever he was doing. I wondered how much he would draw out, how much could he have he wasn't that much older than me.
After a while Phil returned. "I am going to teach you something about trading" said Phil in a strong tone. He handed me 3 notes each $100, "these are yours now. We are going to play a heads and tails game, each play is $100" said Phil.I looked down at the money, why did he want to play a toss of a coin with this much money and what did it have to do with the forex market. I agreed to play and I took the first go. "You win" said Phil and passed me $100.A huge smile stretched across my face. I went again, "You win again you lucky devil" said Phil. I now had more money in my hands than I make in 2 weeks hard work. "Do you want to continue?" said Phil "Yes" I said quickly.I had already thought of several nice things I wanted to buy with the money as soon as this crazy fool had finished giving it to me.
I tossed the coin again and lost, I had to hand over $100 to Phil. Not to worry I though I can win that back. Phil promptly ripped up the $100 note into pieces."What the ...k, you can't do that it's my money" Phil just looked up and smiled.I went on to loose every note except 1, I had $100 left and Phil had won and ripped up all my other notes. I was in serious emotional pain. I begged him to stop. "Why are you doing this?" I asked. "To teach you something, I want to teach you what traders go through every day. Trading is tough, especially in the beginning when you are making lots of mistakes. If you are at all still interested in trading after today then meet me here again tomorrow after you work and I will help you get started." said Phil.With that said he promptly got up and left shouting behind him, "hope to see you tomorrow"
The next day I still felt a sickly feeling after loosing that money but I desperately wanted to know how Phil traded and what he would say that evening. After work I walked over to the bar we previously had our little social drink and saw Phil sat there with a huge grin on his face."I'm glad you showed up" he said. "Ok I don't have much time today so let's get on with it, have you ever traded Forex before?" I shrugged, "only on a demo account" I said."That's great so you know how to place orders then?" said Phil. "Yes for sure I do, but I have already lost half of the account." I said. "Right not to worry" said Phil while taking a sip of his drink. "I am going to tell you several important things that if followed will turn you into a profitable trader. I want you to try and really use what I am going to tell you but unfortunately I don't think you will straight away. You see as I said yesterday every trader has to find his own path and one day after constant battling against the market you will have a huge ahha moment and everything will slip into place." "Ok I'm ready" I said eagerly. "Listen carefully, In order to win at his game you need to know 4 things." Phil said."1 you must never risk more than 3% on any 1 position. 2 you must always trade with the trend. 3 you must always cut your losses short 4 you must always, I repeat always add to your winners but never to losing positions" Phil then handed me a small slip of paper that had each of the 4 points on and asked me to pin it above my pc. I was a little disappointed I thought he was going to reveal some secrets that would make me money. "What about your system?" I asked "The system is not important, all that does it get you in the market, its what you do after you enter that will make you money. Just remember the 4 points." Phil said. Phil looked at his watch and got up, "sorry I have to take off now but keep me posted on how you do" and with that he walked away.
Several months went by and my trading was very hit and miss. The piece of paper Phil had given me was laying on the floor with his number on the bottom. I wanted to stop trading demo accounts and make some real money but how could I when I couldn't even make a profit. After letting off some steam I decided to give Phil a ring and ask his advice. Phil picked up the phone and greeted me with a cheery voice. I explained what I had been doing and my results were awful. Phil asked me to print off a statement of my account and go through every trade I made only this time follow the 4 points he had told me previously. I agreed and hung up. I was almost at a point to give up but I decided to give it a shot. I went through every trade I took and change 2 things, first I gave my trade a larger stop loss while still risking the same % of my account. Then after the position was in profit by twice what I had risked I moved the stop to protect some profit and added half the amount of my initial position. I repeated this letting my profits run. After hours of going over the charts and replying my trades I finished and the results almost made me jump up and down with excitement. My demo account which started at $10,000 currently stood at $4000, with the changes I made It would have grown to $18,000. I was in shock, could a simple thing like this make so much difference?
This was the beginning of my turn into a profitable trader. If you look all over the net you will see many people cutting there profits when trading, they risk 50 pips and take off half as soon as they get 25 pips. I have no idea why? It is the worst thing you can do. Try protecting some profit and adding to your winners. Let them run and build them into insanely profitable positions.
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