Profit from trading is the hardest easy money you will ever earn
How long does it take for me to become a profitable trader? This is probably the most asked question by any new trader, and the answer depends on the personality and mindset. No one can tell you how long it will take to become profitable, but they can tell you long it took them to become profitable. Some people can do it in a year, the other 5 years, some will never produce continuity in results which really defines a profitable trader. Like any other business but this one the most, much of it all depends upon the person. By giving up after spending a certain amount of time in learning and trading, you will never be profitable. Have you ever heard the saying “Hard work beats talent when talent doesn’t work hard?” That is the truth but, perseverance beats hard work when hard work gives up!
I am educated. Is it enough to be intelligent and educated to become a profitable trader? I would say no, but it would definitely help. In the 2009 documentary “Floored” a great number of floor traders weren’t able to make the switch from floor trading to online trading. Floor traders have been around for more than 150 years, and it didn’t require any type of formal education – all that was needed was a quick mind and a strong tolerance for stress. Although some would argue that computer algorithms and quantitative trading is making it harder to turn a profit, on the upside traders, these days have the advantage of having a lot of online resources to help them learn quicker and gather market information more efficiently.
What do I exactly need to know to become a profitable trader?
Once you have chosen your desired instrument which could stocks, forex, futures, etc. You need to decide what style you want to go with and if you have tried some of the trading styles and system that fits you stick to it. Before investing a large amount of money in your Live account, you can try your skill by trading with Funded Trader account where you pay only for the registration fee and capital for trading, with certain money management rules is provided. I this way you can sharpen your trading skills and earn some profit along the way without risking a large amount of your own money.
The profitable trading system you will use must include the following things:
- Entry strategy
Your entry strategy could be based on several different things depending on what kind of trader you are. The entry strategy is your trade entry strategy and it is going to tell you when to buy or sell a certain instrument. This means that you need to apply your technical analysis and price action reading techniques for entry and exit momentum.
- Exit strategy
Your exit strategy will decide when it’s time to get out of the position. This will be made up of two components a “take profit strategy” and a “stop-loss strategy.” When you exit a trade you should be hoping for two things: making a profit or exiting with a small loss. You can be right 37% of the time and still be profitable if your average win is greater than your average loss. There’s a very popular formula used in trading that tells you whether or not you have a profitable system, traders call it: Expectancy.
How to calculate expectancy:
Expectancy = (percentage of winning trades * average win) – (percentage of losing trades * average loss)
Here is an example of a profitable trading system that only produces winning trades 37% of the time:
(0.37 * $500) – (.63 * $200) = an expectancy of $59
In this example, the expectancy of $59 was the long term average result of every trade. In other words, for every trade this trader made he averaged a profit of $59. If the past dictates the future, with a trading system that yield’s these results we could expect to make $5,900 in the next 100 trades.
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Position sizing
Position sizing is part of your money management strategy and refers to how much money from your total account you are willing to put towards each trade you make. How much you decide to risk per trade is also part of your money management strategy.
What do you need to overcome to become a profitable trader?
Not giving up. When people first start trading they become really excited about the opportunity to make easy money, however, it does take time. The road to profitability is a long one, and a lot of people don’t realize that. Some people will take longer than others to get there and along the way, some, if not most, will give up.
Avoid losing your investing capital. It’s not uncommon for a person in there early stages of trading to blow up their account. Most of the traders are experiencing a complete drawdown of their accounts 5 times before actually becoming profitable. That is why the most common way to start your trading career within the Funded Trader Program. You will have more capital for trading then by investing your own and you will risk much less then if you experience drawdown with your own capital.
If you do wish to start with a live account on your own no matter what, you can set yourself a limit of how much you’re prepared to lose before you take a step back and halt your trading. An example would be – just say your account is down 30% and that’s your limit, you would put a halt to your trading and try to figure out where you have gone wrong before recommencing live trading again. In reality, a 30% drawdown on a trading account wouldn’t be out of the ordinary and would be considered as an acceptable amount for a lot of traders. If you ever experience a drawdown of 50% or greater, it is time to stop and start taking some mentoring.
Take a time to learn technical analysis and trading strategies by paying for mentoring or finding free resources online, or using the combination of it as the best solution. As for the old saying you need to learn before you can earn. Some people just don’t put in enough effort and the effort means time and a willingness to learn. It’s crucial that you spend as much time as you can studying the markets in order to understand how it works and how you can take advantage of it, and the best way to do this is by your own study and someone who will give you a shortcut and correct you to learn in a proper way not wrong one.
By definition, although you don’t think so, profit from trading is the hardest easy money you will ever make. That’s because trading is so hard to master, it takes a lot of time and patience. In this business luck will only get you so far; to survive long term you can only rely on your experience and knowledge.