How to Become Bankrupt?

by Vahid | Good To Know | Monday, January 11th, 2010

On November 30th, 2009 I published an article about Dubai economic crisis here. We used the chance to learn some lessons from the Dubai crisis and the problem that it has made for thousands of investors there. Now there is something more to know about this country and the reason of its bankruptcy. This can be a good lesson for everybody, both in life and business.

Dubai started so many multi billion dollars projects within the past a few years just based on the money they borrowed from the other countries including European countries. Spending too much money on projects, while it is not clear when they will return the money, specially if you borrow the money from the others, is nothing but gambling with the others’ money.

Few days after Dubai economic crisis was officially announced, they finished another multi billion dollar project and opened its door to public, on Dec 02, 2009 (of course not to the “real public”. To those who can afford to spend money there). It is the biggest tower ever, named Khalifa tower or Burj Al Khalifa.

Now lets back to the title of this article. This is something that can teach us some lessons.

How to Become Bankrupt?

1. As a governor, when you borrow money from the other countries to buy gold from some of the other countries, to stick the gold to your buildings’ walls, ceilings, roofs, toilets and…, you and your country will become bankrupt. So this is the first and the easiest way of becoming bankrupt, if you are a governor.

2. When you borrow money to make the floors too bright and shiny, just to see yourself from the bottom angle, while walking on the floor, you will become bankrupt.

3. When you borrow money to make unusual furniture that look like everything but furniture, you will become bankrupt.

4. When you sell all your camels that were used to make money for you, to buy a golden camel and put it in front of your building, you will become bankrupt.

Business and investment are different from gambling. You should have loads of information, data and analysis behind every single dollar that you invest. It should be clear when and where the money you spend will be returned and how risky your investment is. Above all, your alternatives should already be in your hands, in case all the calculations go wrong.

As a Forex trader, there are a lot of lessons for you to learn:

  • We should not take too much risk in our trades.
  • We should not trade all the money that we have.
  • We should control our greed and be reasonable.
  • We should not let the others’ greed causes us to take risky trades.
  • We should not trade because we “think” that a trade will be profitable. We trade when our system shows us a trade setup.
  • We should already know what to do when our calculations go wrong.
  • We should still have enough money to keep on working and survive, if we lose some money in some of our trades.

95% of profitable Forex trading and also any other kind of investment is in one things: Money Management

Money management does not include the position size only. It is much wider than this. It includes everything from opening a live account and the account size, to position, stop loss and target size.

You will not become a profitable forex trader as long as you do not have a good money management strategy and discipline.

  • GBP:
    RICS House Price Balance 7:01pm EST
  • AUD:
    Home Loans m/m 7:30pm EST
  • NZD:
    NZIER Business Confidence 4:00pm EST
  • CHF:
    Retail Sales y/y 3:15am EST

.

EUR-USD: (11 January ; 01:56pm ; EST)

Finally, EUR-USD broke above the range resistance after several days. EUR-USD has been moving inside a range since Dec 23 2009, but from the beginning of the market this week, it went up and broke above the range resistance which is the 100% Fibonacci level for us. This is already a buy signal and is still fresh enough to take. It is expected that EUR-USD reaches the 161.80% sooner or later. Those who like to take this long position, should place the stop loss between 61.80% and 50% level at about 1.4365. If you think this is a wide stop loss, there is another option too, but it has a higher risk of being stopped out. You can place your stop loss at 1.4432  which is between 100% and 61.80% levels.

Good luck :)




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3 Comments:
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Comment by Jaren
2010-01-11 09:09:32

Vahid, there is one place where you can do these things an not become bankrupt (almost)….. LAS VEGAS ;), but they have the best money management and systems of all hehehe!

Reply to this comment
 
Comment by Ivan
2010-01-11 18:09:01

Once again, clear and concise instructions from you, Vahid.

I am constantly amazed at the depth of your understanding of complex issues, yet you present it to us in a simple and easy to understand manner.

It is not possible to discuss what you are doing on this site without simply praising your efforts to help traders.
I offer you my thanks for making information so freely available in one place.

Once traders see this site, there is never any need to clutter their minds or their computers with any other information regarding trading the forex markets.
Everything is here, including wise philosophy, and it is delivered to all with a compassionate understanding of everyone’s needs.

May you continue to prosper as you follow your heart.

Ivan

Reply to this comment
Comment by Vahid
2010-01-11 19:36:00

Hi Ivan,

Thank you. If I did not have the support of nice people like you, I would stop posting on my site long time ago. You have to be severed :)

I am doing nothing but sharing my personal experiences. I have seen so many of those who try to make money through Forex and I know why they can not. So I always try to help them to change their way and become profitable traders.

In most cases, the solution of a problem is much simpler than what people think, and so they always look for complicated solutions.

Thanks again Ivan.

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