When I started trading more than 20 years ago I was all excited and thought that I’d be able to retire within a few years. Heck it looked so easy…
Buy on a dip or maybe jump in on a moving average crossover or anyone of the many strategies available.
Of course looking at charts in hindsight made it look as easy as shooting fish in a barrel but…
When the markets were trading live and the future of where the market might go next scared the heck out of me. What happened, why had my hundreds and hundreds of hours of study all of a sudden failed me? So let me answer that in 5 things that could have helped me understand the game I was really playing in.
1. Despite the claims online it takes way longer than mentioned to be consistent at this. As the saying goes…
“If it was easy, then everyone would be doing it.” While I can share my experience to give you shortcuts that can save you years of trial and error… It’s still going to take a newbie 3 – 5 years of trading to get good.
Even with that said there’s no guarantee as everyone is wired differently in the way they think and see things. Add in some pretty hairy emotions that can pop up in the heat of a trade and anything can happen.
And I don’t mean 3 – 5 years of demo trading. I’m talking about real money with your ass on the line.
2. There’s no “Holy Grail” indicator, indicator settings, EA or combination of these that will take away all the risk and uncertainty. Yes some are better than others but… It’s not the tool in your hands but how you use it.
I’ve looked at 1000’s of indicators over the years all in search of “THE ONE” but realized it was all about finding just a few that really clicked for me. I also realized that “The Secret” could be to use the indicators in unconventional ways so that they could work better than the conventional ways they’re traditionally used.
3. There’s no best market to trade. Millions of traders have been lured into forex because of the ease of getting started with just a few hundred dollars to open an account. On top of that there’s a great attraction to no commissions but… That doesn’t mean it’s any better.
The bottom-line is all markets from forex to bitcoin to stocks to commodities etc. all move up and down. That’s it! Sometimes they trend and sometimes they don’t. Sometimes they’re chaotic and make no sense and other times move more smoothly. In the end you have to pick a market you like, understand and comfortable with the risks involved.
With that said you truly need to become an expert in the market you want to trade. For example trading stock options is wildly different than just buying a stock. If you don’t understand options you can easily take a beating. The same goes for any market. The reality is they’re brutal and unforgiving towards fools rushing in.
4. Trading isn’t like baking a cake. Give anyone a recipe and the same ingredients and with some patience and care the cakes will come out the same. Trading isn’t like that all. Give 100 traders the exact same system and allow them 100 hours to study it and you’ll find a wide variety of results.
Once again it comes back to the way people think. learn and act. Two factors that make things even harder is that the fear of losing money clouds the judgement and causes the inability to act under pressure. The other factor is that the market is a wild beast and never does the exact same thing in the same way. Fear, greed, news announcements and economic data all lead to a constant state of “Hidden Curve Balls”.
5. When I first started trading the guy selling the program showed how he made 1 Million starting with just $10,000. What he didn’t say was that he was using a huge amount of leverage and got lucky as he kept buying through a mega bull market. Every once in awhile I see traders barely old enough to shave on YouTube talking about making 50% to 100% in a day or even hours. Impressive for sure on the surface…
Now I’m not doubting that’s possible with the right amount of skill but… You can’t make these crazy returns without a huge amount of risk and leverage on a trade. To get these kinds of returns it can require trading a full lot on a $1000 to $2000 account. Let me flesh this out a bit. Some brokers on a $1000 account will give you as much as $400,000 to trade with. This means that its easy to trade 1 standard lot which is worth $100,000. Well if you get into a nice trade right out of the gate and make 50 pips that would give you $500. Say you jump in again and make just 30 pips that’s another $300. So far your up $800 on a $1000 account. That’s a huge return and looks super impressive but… Say you lose 50 pips or $500 that’s a whopping 50% account loss.
That’s the deskside of leverage and often swept under the carpet. The big take away is you need to be realistic and accept that making 3, 5, 10% a month is more realistic when using smaller amounts of leverage and risk.
Keep in mind that trading with a lot of leverage is amazing until your on the wrong side of it!
When you become consistently consistent in all aspects of trading then you can slowly up your leverage which will give you even further gains each month.
Anyway, if your new to trading I pray that you take the above to heart as it can save you a world of hurt. If you’ve been around the block then I hope it might brings some things back into focus for you.
Have a great weekend!