Unfortunately, the retail trading world is full of false promises. No other industry has as many snake oil salesmen, promising to make traders rich for a fee. The more a newsletter writer or trading system seller tells you how easy trading is, the more cautious you should be.
Consistently profitable trading requires a winning system that fits a traders personality, and they must have the discipline to follow it Implicitly.
Here are a few things that a new trader needs to understand:
- No trader wins on every trade. The best traders in the world only have a 50%-80% success rate.
- Trying to get rich quick requires so much risk, that the probabilities of ending up poor is far greater than your chances of becoming rich.
- Consistent 15% – 20% annual returns are what world class traders and portfolio managers make.
- Some of the best traders’ best years were 50% – 100% annual returns, in specific market conditions, that were conducive to their strategy.
- Market conditions will have a huge impact on your returns each year, regardless of how you trade.
- The higher returns you aim for, the more risk will be required, and the larger draw down you will have getting those returns.
- If you risk 5% t0 10% of your trading capital on every trade, your risk of ruin is 100% in the long term.
- If you think that the above percentages are just too small, then it is very likely that your trading account is too small to make those percentages meaningful.
- To trade for a living, you likely need a multiple six figure account, and a minimum of one years worth of living expenses to avoid the unrealistic expectations of small returns and the accompanying stress.
- Trading is a profession like any other, and requires the same level of discipline and dedication to be successful.
- All your profits comes from other trader’s losses. You must beat other traders to be profitable.
- Trading is the hardest easy money you will ever make.