Read Time: 3 minutes
Online trading could be a smart way to supplement your income and you can actually fire your boss and become a full time day trader.
One of the advantages of making money through online trading is the relative freedom that it offers you in relation to other moneymaking ventures.
However, tales abound about many people who have delved into online trading with great expectations but who ended up losing all of their trading capital.
Online trading is not a scam and it is a potentially rewarding journey if you make the right moves. However, most successful traders tend to sugarcoat the truth about online trading when encouraging new traders. This piece explores five profound truths that can help you set the right expectations if you want to make money from trading. Interestingly, these facts are universal irrespective of whether you want to trade binary options online, trade forex, trade stocks, or trade commodities.
1. You don’t need an Ivy-League degree to succeed at trading
Newbie traders have the misconception that you need to possess a certain amount of financial wizardry before you can succeed as a trader. This misconception is further fueled by the high minimum requirements that investment banks demand when recruiting trading employees. However, the reality is that it takes more than a deep understanding of maths to succeed as an online trader.
Granted, you need to understand the basics of technical and fundamental analysis; yet, you’ll need more in psychological conditioning, disciplined mindset, and patient trading habit in order to beat the markets. You need to be ready to learn and understand how the market works, and then you’ll be ready to face the rough waters of global markets irrespective of whether you have a degree or not.
2. Trading won’t come to you naturally
It has been established in the first point that you don’t need a fancy maths degree to be a successful trader. However, you are likely to fail if you think that you can guess your way through trading or if you think that you can become a successful trader by learning on the job. Humans are wired with a natural “fight or flight” instinct, which is a force that pushes immature traders to allow their losses to run while they tend to cut their winners short.
You need to make a conscious effort to act logically when you are trading – and it will take you some time before you bypass the fight or flight instinct to act logically.
3. Percentage gains don’t mean a thing
The Internet is bedeviled by hundreds of self-styled gurus, experts, and pros who claim to know the secrets to unlocking a profitable trading career – if only you’ll buy a membership or training package for $49.99. These charlatans will then bedazzle you with “facts” on how they made 100% return in their trading account. Many people will fall for the ruse and part with their money to buy the insider knowledge from the guru. Even if you don’t fall for the ruse, you might be scarred with a feeling of inadequacy if you can’t quite record a 100% return on your trading account.
Professional traders don’t live money to pile up in their trading accounts and their account balance tends to fluctuate each month based on how much gains or losses they recorded. If you want to be a successful trader, you should focus more on your risk-reward ratio. Hence, you do well to think in terms of how much money you risked in your trades and how much gains you made on those trades.
4. You won’t become a successful trader overnight
This point will take you back to the super-secret trading systems and strategies that online trading gurus sell to their victims. You won’t become a successful trader overnight – it doesn’t matter if you bought a $5000 trading system and you monitor the markets with 10 screens hanged at different angles on the walls.
Trading always involves a measure of uncertainty and variables and it takes a lot of time to learn how to manage that uncertainty. However, given enough time and a commitment to attain a mastery of the markets, you can become successful traders. More so, a newbie that spends 20 hours a week learning about the market is likely to become a good trader much faster than a newbie that spends 2 hours a week learning how the market works.
5. You won’t get thrills and excitement from a successful trading career
Many people assume that the life of a successful trader involves trips to exotic locations where you can trade on the beach, yachts, fast-cars, and a great deal of fun. Of course, a successful trading career can earn you enough money to become a beach bum; yet, most successful traders live a fairly “mundane” life that you’ll expect from a 9 to 5 job.
In fact, you are likely to develop a stoic demeanor once you outgrow the initial thrill that accompanies your first couple of gains and the heart-wrenching pains that accompanies your first couple of losses.