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Trading To Financial Freedom – How Would You Start To Do It?

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Financial freedom is a desirable goal for most yet it is one of the most elusive things to achieve in life.

Working in a 9 to 5 job with a family at home whom are dependant on you bringing home a pay-check puts a constraint on the amount of time and money you can put into a side hustle. Therefore any excursion into the “making money online” industry must have the potential to deliver the returns you want.

It is for these reasons many turn to day trading the Foreign Exchange (FOREX) markets and the Stock Markets around the world. There are very few endeavours where you, as a retail investor, can have affordable access to a market that turns over trillions of dollars every day.

With trading platforms competing with each to offer such low commission rates it seems that we are in a golden age of internet trading as any private individual with a very basic initial outlay can get involved in one of the biggest industries in the world and start their journey to financial freedom.

Is It An Easy As It Looks?

No.

One of the most startling statistics that stock trading platform eToro issued is that a whopping 80% of day traders lose money over the course of a year on their website with the median loss being 36%!!!! Wowzers

If that doesn’t concern you a little then you either have balls of steel or you are not getting it. Let’s add some context to the statistic just to drive it home. At the end of 2019 eToro confirmed that they have over 12 million accounts registered with them – so of those accounts 9.6 million would be losing money!

Do you know better than the 9.6 million losers at this point? Am sure most of them thought they did when they first started out. But success is possible as the 20% of winners show.

This is not an easy game – in fact its what is known as a “zero-sum game” where for every loser there is a direct winner who is taking that money directly (after eToros commission fee).

What separates the winners is that they have an “edge”, which allows them to take money from your account and put it in theirs. The edge can take the form of a technological enhancement i.e. their computer is “colocated” next to the exchange and gives them the market price quicker than yours does or it can be informational where they know more about what is going to happen to a company stock than you do.

Either way the odds are stacked against you, the newbie, as when it comes to making money traders are ruthless.

But that doesn’t mean it’s not possible to make it, it just means it’s not as easy as it looks – especially if your perception of the industry is that you are the new Wolf of Wall Street ready to make millions.

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Where Dreams Are Made And Destroyed – Wall Street. Credit: Aditya Vyas

Where Do I Start?

Good question and perhaps the one that no one company will explain to you. Let me tell you why.

As mentioned above eToro’s platform has over 9 million accounts and counting that are losing money yet the company still makes millions of dollars every year. The more you trade the more they make – they don’t really care if you win or lose as long as you continue to play the game.

If you take a look at eToro’s website, as with other large trading platforms, there is a deluge of information. Articles explaining successful short-term strategies, profitable signals and optimal bank management are all engineered to get you to open an account and start making money … for them.

Whether its technical trading signals or company financials there is a strategy for all types of investor in order to get the ball rolling. But it comes down to one important factor…the edge.

You must have a definable edge or the big fish operating the winning accounts will swallow up your trading capital as soon as you start.

Finding an edge is where it starts to get interesting. Ask yourself this – if you found out something no-one else knew and that would make you mountains of cash – would you tell anyone? You may tell your friends and family (which would also be a mistake) but would you publish your findings – of course you wouldn’t! Why would you get rid of your advantage only to allow others to make money at your expense.

This is why most trading gurus who tell you about their amazing new strategy which is raking them in $1000s every day should be taken with a pinch of salt.

But that doesn’t mean there aren’t some traders out there “giving back” and helping others achieve financial independence. The good ones will be the ones who tell you how to create an edge and to think about trading critically, always analysing your results.

Alarm bells are always ringing when I see a trader wanting to share his new lucrative strategy with someone he has never met and his main advert is him on a new Lamborghini.

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You Should Know What A Scam Ad Looks Like By Now

How To Approach The Minefield

Long-term investor, short-term trader, fundamental investor, technical trader, call options, put options, commodities, CFD’s, Futures – it’s not hard to be overwhelmed with the wealth of information out there about the variety of tactics and instruments there are in this industry.

You may even feel like giving up as soon as you start – you wouldn’t even be alone in that most traders give up after 2 years on these platforms.

Similarly another industry that dominates the internet is the fitness industry. If you have ever Googled “how to lose fat” you will see that there are thousands of experts vying for your attention, each telling you how to do it quickly and that their method is the best.

If you look closely enough they will all contradict each other at some point.

The same is true of the trading industry where there are even more “experts” shouting and screaming at what you should be doing but this time it’s worse as you can’t be 100% (or even 10% sometimes) sure that they have your interests in mind.

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Becoming More Methodical In Your Approach Is Key. Credit: Isaac Smith

What to do in this scenario where all seems lost? As always – turn to science.

Science is the process of delving into the unknown and trying to make sense of what the truth is by conducting as many controlled experiments as possible and analyzing the results.

This is what you must do in order to get a clear picture of how the markets work. Do this and you will never need anyone’s advice on trading again.

Think about it – if someone genuinely has a winning strategy, how do you think they found it? Did they pay $99 for a system which taught them everything or did they go through the painstaking process of finding something that works.

The key is to experiment and record everything you do when you are trading – learn it for yourself, develop your own opportunities and you will have an edge over others. I would argue that the 70% of eToro’s losers are those who don’t want to put in the hard work but just want someone to tell them when to buy and sell.

Think critically, think methodically – note down everything that you and what you trade. Analyse the results and do more of what works…if it’s not working – do the opposite. Become efficient at this process and you will be picking up on market inefficiencies everywhere.

The Biggest Cost To Day Trading – Opportunity

Day trading is the natural “go-to” industry for those who want to acquire more wealth and build a better life due to:

  • Low Startup Costs and Barriers to Entry – you can start trading with small amounts on your laptop in your spare bedroom so long as you have an internet connection.
  • Low Commission rates – gone are the days of brokers ripping you off on the spread, nowadays, they are competing against each other for your business by offering lower commissions.
  • The most liquid markets in the world – you can trade your position instantly whenever you like.
  • Variety of instruments to diversify your portfolio.
  • Possibility of making a life changing amount of money in a short space of time.

The payoff might be bigger in the trading industry more than any other but it has one big cost and that is opportunity.

This is hard profession to understand fully and don’t let anyone tell you that it’s easy as when it comes to making money people are unforgiving. There are no friends here as Wall Street’s Gordon Gekko used to say, “If you want a friend, buy a dog”.

There is an opportunity cost to fully committing your time and effort to this highly competitive industry. What if I told you there were other lucrative niches that were not nearly as competitive that you may even have the inside track on? There definitely is such a thing and that is the point of this website – to help you uncover them.

By Tom P

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