Trading As A Main Income

Note that the title is “Trading As A Main Income“, not trading to get rich quick or trading for a million bucks.

Now that we understanding what the title is implying let’s discuss it as realistic, mature and serious traders who are looking to turn trading into source of income. In a sense, trading for a living.

THE HYPE

Through the years, trading has always been a pipe dream for most who wanted to get filthy rich. With the advancements in technology over the last decade, this pipe dream has been brought closer to home than ever before. Today, it is a very accessible dream to anyone and everyone. All you need is a computer and an Internet connection.

And of course, you need the right kind of market.

This is where the hype starts. We have been over-exposed to all sorts of advertising and promotional rah-rah that make us believe that it is actually possible to make that fortune a reality. We see ads with winners making really fantastic profits from a single trade and we hear of friends who make a living from trading and living the good life. We see the rich and famous on TV that had made fortunes in the market. We read about people making fortunes from the comfort of their homes.

We believe we can be one of them. Worse, we believe it is really that easy.

BEING REALISTIC

There are many stories in the market, especially by those selling the dream, that you can make millions of dollars through trading and investing. There are testimonials from those who have made a year’s salary in only two weeks and some who have turned a small account into a million bucks.

I am sure there are truths behind those stories but the one truth that is never told is whether that success story continued and how it ended. Most end in tragedy. Poor financial management, complacency, reckless overtrading and inconsistency usually plague such successes. The reason those successes don’t last is because it is not really success – it is pure luck.

And luck always runs out.

The truth is that it takes money to make money when you don’t have luck to make you a million.

I often ask people what they would like to be making on a monthly basis based on what they think they know about trading. Their answers often range from “$10,000 a month” to “$50,000 a month” or “$1,000,000 a year”. Of course these answers are born out of the hype that has saturated and corrupted their minds. Then I ask them how realistic that is and make them do simple mathematics.

Most of the world’s most profitable investors boast an average annual gain of around 20%. The average trader gains around 10% to 15% annually. Thus if we take a humble 5% as a benchmark;

To make $10,000 a year, you would need a capital of $200,000.

To make $50,000 a year, you would need a capital of $1,000,000.

To make $1,000,000 a year, you would need no less than $20,000,000.

Let’s get real, shall we?

Real trading is about creating a proper and sustainable income based on being realistic, pragmatic and consistent. I always tell my students to aim to make $50 to $300 a day. That is realistic, pragmatic and it can be a consistent income that pays handsomely by the end of the year.

Almost all my students don’t even have a $200,000 capital to begin with. Beginners almost always start out with $5,000 or $10,000. For a 5% gain, you should aim to profit at least $250 from a $5,000 trade or $500 from a $10,000 trade. That’s realistic and doable on a regular basis. Sometimes you will get lucky and the market may handout a little more than 5%.

If you are able to take an average of $300 off the table a day, you’re looking at a $1,500 weekly wage or $6,000 monthly income. Even at a $100 a day, you’re looking at a monthly income of $2,000 which works out to $24,000 annually. Now that is what trading is really about.

If you can’t achieve that humble level of success, don’t even dream about the big money.

If you can’t handle small successes, you won’t be able to manage a windfall.

A WINNER IN A SEA OF LOSERS

It is a well documented fact that in the world of Trading, there is a small percentage of winners and a disparagingly disproportionate percentage of losers. It is also common to hear about many small time traders losing thousands of dollars to a few winners who make hundreds of thousands and even millions of dollars. The obvious truth is that there are a small number of traders making lots of money from a huge pool of traders losing their capital.

Why the imbalance and why is it so unfair?

In actuality, it is not unfair because those who are successful at it have done all it takes and more to get to that level. They are a dedicated and disciplined bunch of people who have the values that most people dislike; they are Patient, they Work Hard and they Practice their craft. It takes a very special person to have those qualities and to live out those values every day. It demands Discipline, Dedication and Determination which most people don’t possess.

Most people would prefer to have easy money without having to work for it, wait for it or practice to get it. They lack the determination to learn how to do it, they are never dedicated to earn it and won’t have the discipline to keep it.

This is typical of life. The few who are rich are those who have worked for it, experienced failures and earned it the hard way. The many who are poor work for the rich to make them richer. The same can be said of the market. Those who learned it and earned it the hard way will always make losers of those who are ignorant and foolish enough to believe that the market is easy money.

The losers are the ones who believe that the market can get them rich quickly. They treat the market as if it is a system to be beaten. They also use the market to gamble their hard earned money away. In short, they don’t take the market seriously and don’t respect the market as a serious, highly qualified and professional financial business.

If it were that easy, then why would Wall Street Traders need to go through years of university education and more years in mentorship before they become the best in the world? If it were so easy, why do we keep hearing so much about so many people wiping out their accounts in the market instead of hearing more about those who have become enormously successful? The success stories are far and few between but the woeful stories are plenty and common.

ONE HARDWORKING WINNER AGAINST TEN IGNORANT DREAMERS

In the movie, “In Pursuit Of Happyness“, Will Smith’s character, Chris Garder struggled in life as a medical machine salesman looking for and dreaming of that “next big thing“. Cutting the story short, Gardner becomes a trader on Wall Street after a lot of reality checks, struggles, sacrifices, trials and failures. The sacrifices were not his own alone but that of his family and more famously, his son who kept his faith in his father’s pursuit for happiness.

We know today that he is a successful and well known figure on Wall Street.

It didn’t happen overnight. He didn’t get rich quick. And he certainly didn’t attend a three day workshop to learn how to trade.

If there was one element missing from this rags-to-riches story, it would be how Gardner still had to continue to work his ass off as a trader before he made his first million. He had learnt what the pros did and how they did it . And it took a lot of hard work, patience and practice.

I’d like to share with you a simple fact that seems to have been missed by everyone who chases their dream of becoming successful – have you noticed that there are many movies and books about successful people and how they struggled, failed and struggled some more before eventually finding success … but there are none about people who became successful overnight or got rich quick?

This is because it is a reality of life – true, lasting success doesn’t come easily and those who have it had to work for it. Nothing comes easy.

WHAT I DO AND WHY I DO IT

Real trading is all about making a steady income. I don’t boast about being a big time trader. Those who know me will tell you that I don’t trade big time. I don’t make tens of thousands a day or even in a week. The trades I make have a humble profit objective of $100 to $300 for every $5,000 to $10,000 capital outlay. I frequently do make a higher average than that, often between 3% to 5% and on the occasion, more than 10%. But it all starts with a humble 2% to 3% target.

At that level, you still can make a million starting with a $10,000 account but it will take around eight years if you have the luck of the right market;

A $3,300 capital should return you around $100 on a single trade which works out to around 3%. Thus three trades for a total capital of $9,900 should get you a minimum of $300. If they were inter-day or intra-day trades, you’re looking at $300 a day averagely. That works out to around $72,000 a year.

But that’s a minimum, meaning to say that anything less literally tells you that you’re not trading well. You need more practice or you need to find out what real traders do and how real traders do it.

A $10,000 trading account yielding 3% daily means that on a monthly basis, its actually turning around $6,000! But let’s keep it real and say that you’re only half as good and there were some losses too … let’s say half … you’d still be making $3,000 monthly. This is still $36,000 a year – a really good side-line income for any trader who is starting out.

Now consider that with more practice and experience, you’re able to increase your trade sizes and thus increase your profit margin over the next few years – $36,000 turns into $54,000 the next year. Now you have a capital of $90,000. In the subsequent six years at the same growth rate you raise your account worth to $135,000, then $202,500 and in fifth year, your account grows to $303,750. By the sixth year its grown to $455,625, year seven its up to $683,438 and on the eighth year, you finally break a million at $1,025,156.

Somewhere in those years, you might take a hit and you might get extremely lucky. With proper financial management and discipline, you will keep the losses small and let the luck ride big.

But that is only if you know what real traders do and how they do it.

So why, after reading this, are you still thinking that you can get rich quick through trading?

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