About 3 years ago I took an active interest in online Forex trading. For a longtime I had been fascinated by the idea of passive income. According to Investopedia.com, Passive income is “earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.” The prospect of earning money without being ‘actively involved’ was nothing less than music to my ears. However, much as these online brokers promised good returns, with little effort, i was abit skeptical about risking my money, because about 5 years earlier, many Ugandans had lost lots of money in Forex trading. I therefore decided to take a more cautious foray into this world to better understand the forex market, trading and how it works. This involved taking courses in forex trading, studying the best forex traders and listening to testimonials from active traders. What i learnt was radically different from what most people think Forex trading is, let alone my earlier preconceptions about Forex trading. Needless to say, my research into forex trading taught me lessons that i have found to be applicable in almost all aspects of life. Allow me to share my top lessons from this experience;
The ‘easy money’ myth.
In my study of the consistently top earning forex traders, that is, those who trade for a living and have been doing it for a very long time; i learnt that most had gotten great after experiencing huge failures and near catastrophic losses. These bad experiences forced them to go back to the drawing board and understand the fundamentals of the business they are doing. They are actively involved versus being ‘passively’ involved. That is, they dedicate between 3 hours to 12 hours a day to trading. So for one to think that you can get similar results by ‘passively’ trading would be highly presumptuous.
‘Passive’ income requires more activity than I thought and is not ‘easy’ at all.
Choose a strategy with an edge and stick to it, through thick and thin.
The Forex market is the biggest market and probably the most difficult in the world. Money is made by making the right prediction about where one thinks the market is moving to next and then you put your MONEY where your mouth is. If your prediction is right, the market rewards you, if you are wrong, you are punished.
You therefore have to come up with a strategy with clear rules which helps you predict market movements so you can make the right prediction. After, zeroing in on a strategy, whether yours or copied from another person, you test it with as little money as possible. Only when you get good results, can you then increase your investment. Otherwise you need to change strategy.
Also, a good having a good strategy doesn’t mean that you never experience some failures. Losses can sometimes occur even with a good strategy because of factors outside your control.
Just like any other worthy endeavor in life, a good strategy is one which has way more wins than losses. If you happen to find one and through testing and experience, it is found to deliver good results, stick with it even when going through a dry patch. Few roads are smooth all the way; there are a few speed bumps along the way. As long as your still on course to your destination.
PS; some strategies need reviewing regularly because the environment my change and the conditions that made these strategies successful might have changed. Life is also alike
Money = Certificate of Appreciation.
A few months into my Forex trading journey, I began to experiment with a strategy I had learnt and was preparing to move from a demo environment to a live environment trading ‘real’ money. I however started having second thoughts about proceeding because during my research, I had come to find out the online Forex trading is a Zero-sum game. This means that in all transactions, one’s gain means another person’s loss. That is, every positive value creates a negative value, thus a sum of Zero. This went against the principle of ‘win-win’ that I abide by. I believe that my interactions or transactions with others should create win-win outcomes for both of us. As a result of this, because the other party will get value from transacting with me, he/she will then pay me for the value derived. In appreciation of the value received, my client will then give me money. That is why I refer to money as a certificate of appreciation.
Because online Forex trading is a Zero-sum game, it failed the test of win-win, which is a key value of mine. As a result, I had to abandon it as a source of income but not before extracting valuable life lessons that I never thought I would have gotten from this trade.
Worthwhile Musings 