Forex Mistake #12 – First Come, First Served

Why Choosing the First Broker That Called You Could Get You Broke

Today it’s time again to remember my own mistakes, to show you I was stupid, I lost money, I was easily fooled… basically it’s time to trash myself so that you can learn something out of it. Looking forward to it… The mistake I am going to talk about has to do with my eagerness to start trading; basically the first broker that called me over the phone convinced me to invest. Why is that wrong? Read and find out.

 

I’m So Gullible Sometimes… Or How I Got Broke

A few years back I co-owned a toner cartridge company (you know, that thingy you put in your printer to… print). We were buying them from a factory and selling them at a higher price to other businesses all over the country. Buying low and selling higher is basically the core of commerce so I wasn’t trying to re-invent the wheel and things were going pretty well. It wasn’t making me rich but there was no reason to complain either. Ok, being the CEO of the company (in my country the title is different but it’s almost the same thing), my phone number was listed in several public data bases (i.e. Yellow Pages) and could be easily fetched by a broker’s sales team. So it was just a matter of time until I’d get a phone call from a broker. And I did. I knew the Foreign Exchange market existed but I didn’t know exactly how it worked so the sales guy explained it to me briefly. And by briefly I mean lightning fast: it’s like buying cheap and selling higher. Look, if the Euro is stronger than the Dollar, the pair goes up so you buy EUR/USD and you sell it when it’s higher. Ah, he got me at buy low, sell high… after all that was what I was doing with toner cartridges and I was pretty good at that so why not do the same thing with currencies. Yeah, where do I sign and how much money you need? And that was that. I was a Forex trader. Now I can laugh about it but back in the day, when I realized how much more I needed to know than just “buy low, sell high” (or buy high, sell higher and vice versa), I felt a little overwhelmed. Of course the sales guy told me it was easy, of course he said they are the best brokerage for me and I believed everything without thinking to look twice. Only after I opened the account I realized the lowest position I can trade is 0.10 lots – which for a newbie is definitely too much, unless you are trading a fat account – and their spreads were some of the biggest in the industry – if I remember correctly, the EUR/USD had a 5 pip spread. It is true that when I started trading the spreads were higher overall but still, EUR/USD was the most frequently traded pair and 5 pips was huge. So my money was stuck with a second-rate brokerage, my trading skill was close to zero and all this was the perfect recipe for a blown account.

 

Moral of the Story

If in this world would exist only one car brand, you would have to drive that one and you wouldn’t know how a better one feels. You wouldn’t have the luxury of choosing what car to drive after comparing one against another. I acted as if only one broker existed in the entire world and I realized only after I lost some money that I could have chosen another one with better trading conditions, better spreads, education, support, better everything actually. Fortunately there is a choice and you are responsible to make the best one. Don’t assume immediately that you have to invest money with the first brokerage that calls you and don’t be afraid to say: Hey, your trading conditions are crap so stop bothering me. Compare brokers, read reviews, use their demo or… ask me, because you probably realized by now that I’ve made all the mistakes in the book…

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