This is a list of trading lessons I have learned from working as an accountant for a company that specializes in trading Forex. I should mention that I have personally tried to master trading and investing for 10 years. The inspiration for this post came from a young 18-year-old asking questions about FOREX thinking it is a get rich quick solution to all his problems.
The Problem With This:
There is a bad stigma around short-term trading. There have been individuals promoting short-term trading as a way to become a millionaire, quit your day job, and buy your momma a new house within a month of trading. Investing and trading like anything else in life takes education, practice, and discipline. Saying that you are going to start trading and make a full-time income right away is like saying that you are going to get into the boxing ring with Mike Tyson and knock him out without any boxing training. The point is be relistic and have fun learning trading techeques. With enough practice, you can quit your day job and trade for a living which comes with rewards I don’t need to mention.
What do people who trade for a living have In common?
The Majority of These Traders Are Over the Age of 25.
During our younger years, our brains are hard-wired for learning information. When we turn 25, our brains have a better ability to judge risk and reward. As this article states, our brains don’t fully mature until the age of 25. If you want to trade your own account, you need to understand that the goal is to keep your account equity and take calculated risks to make gains. When I turned 25, the gains I made from trading and investing significantly increased. This could be science or coincidence.
Trading Isn’t a Mans World
Like many stereotypes, people think that it’s mostly men who trade. I thought about leaving this out of this article because the demographic of my website is mostly men in-between 18 and 30. While working for a Forex Trading company I learned that there are many talented women traders so don’t think that trading is all men.
Trading Is All About Consistency
If you read most advice about trading, you will see some garbage about people who have had one outstanding trade that made them a lot of money. (penny stock sites are notorious for this) This is not going to allow you to trade for a living. Doubling your account once can happen by luck, but imagine making $200 per day consistently like the traders I know who trade for a living. $200 a day, 5 days a week, is $40,000 per year which you could live on. Once you become a consistent trader, you can think about quitting your day job until then practice and learn while having a consistent income.
You Need to Be Adapting and Improving
I started out reading popular books on investing and trading and have continued my education ever since. With trading, you need to get a bias on the market to make successful trades. There are free sources online to help you. I have started building this website to help you learn about investing and trading. If you want to become a Forex trader, www.babypips.com is a great source to gain beginner knowledge on this subject. Then you have to search for more information once you have outgrown that guide. People who trade for a living have the motto of continuously improving their skills to make more money.
Even The Pros Use a Demo Account.
You might think that people who trade professionally or for a full-time income only use real money. I found out that this is false. All of them will tell you to start with a practice account and keep using a practice account. When you are first learning, this is a great way to practice without risking money. After you get consistent, this is a great way to test new strategies. I recently went back to a demo account to learn the price action better of new currency pairs better. Don’t think demo accounts are for begginers.
Find a Mentor to show you the way.
If you are interested in trading for a living find a good mentor to teach you strategies instead of reinventing the wheel. Having a mentor that I can ask questions has made a large impact on my trading in a short period of time. Every trader I know bounces ideas off their peers to learn more or get feedback. If you have no one to teach you, learn from pros like Lary Williams who made millions short-term trading. You can join a paid membership site like FXElive.com
People who trade for a living can talk the talk.
I have a formal education in accounting which is the language of business. Consider getting a formal education in economics, finance or accounting because this will help you understand the complicated lingo of finance. If you are interested in learning about the markets, trading, and investing go to college and make that your major. This will not make you a professional trader but will help you learn what makes markets move and the strange lingo. Remember that the Market makers are all trained professionals who have years of formal education.
Short Term Traders Lose Money
This goes along with being consistent in your trading. There are traders who win over 80% of their trades which means they lose 20% of the time. This is normal and that is why risk management is important for a trader. Your wins will make up for the losing trades with an accuracy rate of 80% as long as you avoid putting all your money on one trade.
Most traders Loose Due to Phycological Quirks
This is one of the most difficult things to overcome as a trader and investor. Holding losing trades too long, taking profits too early, or jumping into a trade when you shouldn’t because you are trading off emotion. Every trader including myself works on controlling their emotions and thinking rational during a trade. This is something that takes discipline and time to control but you can become a confident trader instead of being your own enemy.
I don’t make much money on off this website. I write articles and teach because there is a saying that you don’t truly understand something until you can teach it. With that being said, give back once you have made it as a trader and investor. It will reward you and you will understand your strategy better than you did before. This will also add to your confidence as a trader.