Trading and riches seem to be connected together. This is mainly because people on social media promote trading as some kind of wealth making machine. Yes, it can generate wealth, but to become rich overnight from trading is just a fairy tale. In this article you are going to read why this is a fairy tale and how you can actually become rich in trading. However, this does require a lot of effort and action-taking. If you are not willing to do that, skip this article. If you are one of the few that can, this article can really help you to become a better trader.
Trading, where to begin?
Trading has been around for a very long time. People have been trading all kinds of stuff over the years. Trading forex, commodities & equities has also been done for quite some time. However, electronic trading hasn’t been around for that long.
Trading is being portrayed as an amazing job where you can have multiple women per day, drink a lot of booze and make a lot of money from your yacht. If you believe this is possible for you, let me bust your bubble right here. It’s a fairy tale sold to you by gurus.
So, where to actually begin? Simple! By first of all deciding why you want to be trading for a living. What draws you to it? It has to be more than money in most cases, otherwise you won’t find the inner strength to stick to the game long enough to make money from trading. So, start there and think about it. Most beginners skip this step and then wonder why they can’t make it work and why they can’t make money from trading. If trading is not in line with your path and you just follow money, it will be a hard lesson.
Learn the basics (they are free)
Once you have decided you really want to pursue a career in trading, it’s time to start learning the basics. This includes:
Studying different markets
Knowing the success rates
Learning different concepts
Learning basic risk management
These are all important points to begin with when you want to make money with trading. Study different markets. Some markets are highly volatile and accessible, others are not. For example, the DAX is volatile and might be perfect for shorter term traders. Forex is very accessible but tends to range. Does that fit you and the way you want to trade?
I have been trading forex for around 5 years now. My strategy makes money in the forex market, but I recently discovered it works way better on indices. Why? Because I trade breakouts and indices just trend way more often than forex pairs. Knowing this information, you can make a lot more money.
You also need to be realistic. The success rate in trading is very low. On average 90-95% of daytraders fail. With swing traders, this success rate is a bit higher, but still very low. Why do you deserve to be in the top 5%? What makes you different from all the other traders? What’s your personal edge? Think about that.
To make money in trading, you need a trading strategy. It doesn’t matter what you choose, because with enough testing and studying, you can make any strategy profitable. What does matter is that the strategy has to be 100% clear to you. It has to match your personality and you have to fully understand it. If that’s not the case, you won’t be able to stick to it when you hit a drawdown. You also won’t find the energy to pursue testing when things get boring. So, start by going to Google and learn different concepts like candlesticks, certain indicators or the Wyckoff method. We also did a video a while back where we spoke about certain concepts, click here to view that video.
Basic risk management protects you from blowing your account. Most beginners blow a few accounts and the only way that is possible, is if you manage your risk in a bad way, or don’t even manage it at all. If you are a beginner, start with a demo and learn the platform. Test your strategy and only go live if you are profitable on demo. Then, just risk 1% per trade. You are still in the learning phase. This is where you see how your strategy performs in the live markets. No need to waste a lot of money on that.
I always tell people that you need to first backtest and be profitable there. If that’s the case, see if you can trade the same way you did on that backtest on a demo account. If you have been profitable on that demo for around 6 months and you have fixed all of your mistakes, then go live and start small. Have you been profitable on a live account for 6 months and fixed all of your mistakes? Then it’s time to scale up.
The basics are all free out there on the internet. Until you know what candlesticks are, how to take a trade, which markets you want to trade and how you can manage your risk, there is no need to pay a mentor. This information is all free out there on the internet.
Why trading is gambling
Trading is gambling, it’s that simple. Anyone that tells you it’s not is just naïve. On the internet you can find different definitions of gambling, some are:
To play games of chance for money
To take risky action in the hope of a desired result (money)
Gambling is the wagering something of value on an event with an uncertain outcome with the intent of winning something of value
Now tell me, how is trading not gambling? Trading is gambling and the sooner you accept that, the better. Nothing is certain in the markets, you can only play the odds, manage risk, stick to the plan and hope for the best, that’s all. This is also one of the reasons why trading for a living is so hard. Trading to make money is possible, but you are gambling for a living, really think about that.
Trading to make money?
So, can trading make you rich? Can you approach trading in a way to make money from it? Yes, and yes, but the odds are massively against you. It took me around three and a half years to become profitable. Right now, I earn a parttime income from trading, not full time. To become a full time trader, you have to have a very large account and you have to cope with so much more stress than when you are a parttime trader.
You won’t become a profitable trader overnight and it takes years of hard work and dedication. It’s a very hard job, believe me.
Remember that kid at school that never studied, but always passed exams? Yes, that was me. I had it very easy. I was naturally smart and I could focus for hours. I thought trading would be perfect for me. Turns out I still had to put in a lot of effort and hours. So please, take it from me, only pursue this if you really like the job.
Becoming rich overnight is always based on luck, not skill. If you become rich overnight the odds are very high that you lose that money, so there is no point in that. You can become rich in a slow way, which is by learning how to trade & investing in index funds, month after month. Yes, it sounds boring, but this is one of the greatest ways to become rich. If you combine that with real estate in a smart way, you can build some serious wealth.
To conclude
So, can trading make you rich? Hopefully this article has been clear and you now know that trading can make you rich, but not in the way you thought it would. It is going to take years before you become profitable. If you decide to invest in an index fund, the returns are slower but it’s easier to become so called rich.
Trading is not easy and it takes a long time before you master it. Yes, you can be trading for a living and you can be trading to make money, but it will take a long time, so remember that. You are gambling for a living.