So you wanna be a trader? Get out there with the big dogs in the markets? Get your profits buying low and selling high?
Step 1: Don’t. Instead, take that money and set it on fire. At least the flames would have warmed you for a second, unlike what would happen if you trade your beginner’s account to zero.
Trading requires many skills and qualities. The most important is your edge. If you ask me what’s an “edge” just take Step 1 and keep walking. Your edge in trading is the source of your advantage. It is how you can compete and win in the markets.
Who else is in the markets? If we talk about competitors and competition there are…
Billion dollar college endowment funds
Billion dollar retirement funds
Billion dollar hedge funds
Billion dollar banks
I hope you see the theme. You’re competing against billions of dollars of research, staff, and equipment. If you (some guy with an internet connection and a laptop) think you can consistently OUTGUESS your competitors, you’re playing with fire. It would be easier if you save your time and set your money on fire right now. Because guessing will see you hand your account to the market, piece by piece.
There is no simple advantage that a retail trader can gain. You are fighting against businesses that exist solely to draw your account down to zero. They’ve spent plenty on learning about you. And what do you know about them?
Run. Just go and buy a second hand BMW or something. Don’t buy a gumroad course on trading either. I’m serious. Why would anyone reveal a usable, profitable system for under $100k? You think a profitable trader going to turn you into their competition for $299.95? Please. The info on Google would get your account to zero, but for free.
Trading is 100% about advantage. I guarantee you have none in the market as a trader.
Are there any exceptions? Of course there are, or else the markets wouldn’t even exist. Where can you create exceptions as a trader? The first way is by investing your own time and money (risk) into gaining experience in the markets. You can do this even with $1 trades. Plan your trade, write your entry and exit, measure your risk:reward. One book that really helped me with this idea is Alexander Elder’s ‘Trading For A Living’.
If you spend $50000 doing this and record everything, you will learn how to do it. You will find situations in which you have the advantage.
Another way is by simply extending the timeframe. Your competitors are concerned with pulling profit this afternoon. Or tomorrow. At the very latest, next week. If you can wait them out, you’ve already created a powerful advantage. I realize that this is much less “trading” and more like investing. I know. But if you want the greatest advantage, then it can help to sacrifice some speed in return for certainty.
It seems like trading is a rite of passage for most people who decide they want to be rich. It’s easy to access. No one checks whether you’re qualified to fund a Robinhood account. But the ease of access only exists because it makes it easier for institutions to fleece you on what is very much their turf.
The safest way that I found for making money is detailed in my book Garbitrage. In it, I completely detail my system for going from zero dollars to well over six figures in just two years. Because this is what your account should do – grow, not shrink.