Lex van Dam is a Dutch investment manager, investor, and writer specialising in trading in equities, currencies and financial derivatives - and the creator of the BBC's Million Dollar Traders with over twenty years of professional trading experience.
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Expert Q&A: Lex van Dam
Could you tell us how you began trading? What difficulties did you face at the beginning and how did you overcome them?
I did work experience at an investment bank and they offered me a job. I never realised that trading existed as a job and I loved it - sitting behind your screen all day staring at green and red and trying to make sense of it and predicting the next move! Difficult to accept was that you can be right about your analysis and still lose money. But if you don’t accept that and deal with it you need to stop trading and do a real job, which is not a great alternative.
What made you decide to start your YouTube channel?
I wanted to make sure that people could watch Million Dollar Traders, which was my idea and is still a classic ten years later. It shows the real pain and struggle of trading.
In your opinion, what are the essential elements of a good trading plan?
It is exactly what I teach on my website. Have your own idea, do your own analysis, get your timing right, get your mind in the right place and don’t risk it all. And stop copying other traders.
Psychology plays an important role in trading. What are the most common things, in your experience, that block a trader’s progress?
The biggest issue in trading is ego, which is the same in real life. Most traders should read self-help books and not trading manuals.
How soon should a trader move from a demo to a live account? What are the top three factors to determine the move?
Deciding what money you can actually afford to lose, deciding how much time you can really dedicate to trading, and what it is that you want to achieve. Again in my course, I spend a lot of time talking about this. We all get what we want from the market.
Strategy flipping is pretty common in trading. What’s the one thing traders should ascertain before they decide to change to a new strategy?
Does it actually make sense? Is your strategy perhaps just mean reverting or just trending? What’s the state of the market that made you make or lose money? What do you expect the future state of the market to be? Selling strategies to other traders might be more profitable than following these strategies. Again it comes back to building your own intellectual capital, there are no real short cuts. Stop the casino behaviour.
Where do you think signal services play a role within the forex trading industry?
Great for the people selling them. I would much rather focus on teaching people the tools to use in different markets than pretending there is one size fits all.
Should a new trader use a % amount to configure their risk or a fixed dollar amount per trade?
I would say do not risk more than 1% of your capital per trade, probably less.
In your opinion, what’s the main reason such a huge percentage of traders lose money?
Because they are not taking the time to learn properly. They start off with money and no expertise and end with some expertise but no money.
You often hear traders saying you need to put the time in to become a consistently profitable trader - but what does this mean to you exactly and where should a trader be putting in the most time?
To me, FX trading is about following a process. In my case five steps which involve actually understanding the economy of the countries whose currencies you trade. Again I teach how to do this. Also you need to follow what’s going on right now - that is why I always look to my Trading Club on economic activity, economic surprises, real rates, futures positioning and price momentum. Stop pulling that trigger, instead sit back and do some work!