I want to talk about something that traders don’t consider when starting out and it’s often
not until years later they understand this idea.
Let me give you an example of the “Hidden Costs Of Opportunity”…
A person works as a barista in a popular coffee shop where they have incredible coffee and mouthwatering
pastries and breads. They love the vibe and make $18 an hour with tips.
Day after day they notice the lines of customers coming in and the barista starts thinkng… “Wait, why not
open my own cafe and then I’ll make way more than $18 an hour!”
Seemed like a a no-brainer as they did the math and calculated that the average customer spent $7 and their are
between 150 to 300 a day coming in.
Here’s the problem that’s made with budding entrenpeneurs over and over… (This applies to traders too which I’ll get
*They glossed over the fact that the rent is $4000 a month due to it’s central location.
*The cost to build out the café is $60,000 and the financing costs.
*The salary for the 4 employees.
*Business fees, taxes, permits and insurance.
*Health and unemployment insurance for employees.
*Product cost and product loss from spoilage.
*Advertising, marketing and website costs.
*There’s even more but you get the idea…
When the dust settles and the proud new café owner crunches the numbers they’re shocked that with the 14 hours a day
they spend in the shop they’re still only making less than $20 an hour.
So in the end they’re still stuck in a JOB. To add insult to injury, they now have endless worries and responsibilires
they never had as the barista.
This concept is discussed in detail in the best selling book called the ‘E Myth’ by Michael Gerber.
I realize that their are individuals that do break out of the above dilemma but statistics show this number is small for startups. It can be done but takes a special type of entrepreneur.
When it comes to trading you need an education and most traders will spend a minimim of $2000 and many will spend 5 to 20 times that amount.
Let’s look at a totally committed enthusiastic trader that spends 8 hours a day staring at charts trying to learn the trading game.
Say they have the ability to earn $18 an hour. Well if they spend 40 hours a week learning trading that’s $2880 a month that they didn’t generate. Sure they could work 8 hours a day and learn trading 8 hours a day but that’s
not easy to do and leaves no time for anything else.
Then on top of that most traders will lose significant amounts of money trading. Many will blow out their account a couple times before starting to turn things around.
Even if they do start to become consistent and make 10% to 20% a month, it’s not going to be enough to live on with a $5000 an account.
Just like the cafe owner the “Cost Of Opportunity” was way steeper then they thought when all expenses were added in.
You see the problem in trading is that everyone starts out just thinking about the profits and not the opportunity costs and risks.
I’m guilty of that for sure!
So I may be a bit of a kill joy here but I want you understand this clearly.
So what’s a solution?
I would say the best way to start is by using just the 4 hour and daily charts. On a 4 hour chart you just need to look at the charts 10 minutes before the new 4 hour bar is starting and see if there is a trade. You can spend even less time if you have 8 and 12 hour bars which are great for swing trading. On your weekend off that’s when you can stay glued to your pc as long as you like.
This way you can still make an income from your job which will give you financial stability which is essential for having the right trading mindset. I would HIGHLY RECCOMMEND that until you can make 100% – 150% of the amount trading that you do at your job that you still keep working full time. More importantly do this for 6 to 12 months. Don’t quit your job after having a “Hot Streak” for a month.
When you have proved that without a shadow of doubt that this is a viable career path then go for it!
In the end don’t be in a hurry as the markets are going nowhere and there will always be new opportunities.
As my first trading mentor said… “Trading is the hardest easy money you’ll ever make!” That flew by my novice trading brain at the time but I sure get it now.
My desire for you is to help make the road to your success easier and to avoid as many road blocks as possible.
I hope this rings a bell for some you…
Enjoy your weekend,