Trader Myths Busted
|Hello traders! This week I’d like to dispel a few myths about the trading lifestyle. This will be similar to my recent articles “Common Classroom Questions” 1 and 2, but instead of questions the topics will be information that I freely offer up to my students during any of the Online Trading Academy classes that I teach.
Myth #1. Professional traders stare at charts for many hours a day. Thank the trading gods that this isn’t necessarily true! While there are plenty of traders who do stare at the screens for hours, this minority of traders is putting in too much work! (In my humble opinion.) While taking trades every few minutes may seem like a great idea, truth is the majority of time the charts are NOT in areas we should be trading. When we enter in high quality supply or demand zones, and target another zone for profit, what else do you have to do after the trade is entered? I personally don’t have the psychic ability to mentally force the charts to do what I want when I want it, so staring at current positions is a waste of time.
What about scanning for more trades? In our Professional Trader class, I usually narrow down the list of stocks we can trade from several thousand to about two dozen. With the proper knowledge, you can scan through those stocks in about ten minutes. What about in the forex market? Because I concentrate on the major pairs plus a very small number of cross pairs, my choices are down to about 16 possibilities – which should take about ten minutes to scan. If your pairs aren’t at a high quality zone, you must wait for the charts to get there. Instead of staring at the screen and waiting I strongly recommend placing your entry, stop, and profit target ahead of time so you can go do something more meaningful with your life! If you are uncomfortable with this technique, at the very least set up alerts with your platform to set off computer beeps, and email to you, or even a text message. When the alert goes off, then go back to your computer and consider placing the trade(s). Do these things, and you will be surprised how little time you have to spend watching your charts.
Myth #2. Professionals are born traders. You either have it or you don’t. Obviously, since we run an education company teaching people to trade, we disagree with this! You can also count in the thousands of our students who would disagree with this as well! While there will always be people who are “naturals” at any one particular endeavor you can point to, anyone can learn to do just about anything they are physically capable of doing. What really counts is that individual’s discipline and determination. Show me a determined and disciplined trader, and I will show you someone who will be able to outperform the markets. Your coaches at Online Trading Academy are just as important as your instructors! An instructor usually flies into your town, teaches class for a week, then you will have limited contact with that instructor. It is your coach and your Extended Learning Track classes that help keep you on track and accountable. The process certainly isn’t “read this pamphlet, go make a million dollars.” If trading were that easy, there wouldn’t be any money in it!
Without the proper support structure-trainers, mentors, coaches-there isn’t a successful professional that figured out everything on their own. Why try to reinvent the wheel, when we have a perfectly good wheel already available? What I constantly say in class “keep track of what you are good at and what you are bad at; stop doing what you are bad at, and do more of what you are good at. When you want to make even more money, just trade larger position size.”
Myth #3. You have to have a lot of money to be a trader. That is hardly the case. To be an active/pattern day trader in the United States stock markets, you must have a minimum of $25,000 in your account. But when you learn what we teach you about leverage and opportunity cost, you probably won’t do a lot of stock trading in your income accounts. You will more than likely move to a higher leveraged asset class like forex or futures. To be active in these markets you don’t need $25,000! Some brokerage firms will let you open a futures account with as little as $10,000, $5,000, or less. Spot forex brokers will often let you open an account with $100! Now, I’m not saying you can make a living with a $100 account, but you can at least learn to trade with live money. When you consider the power of compound interest, just earning a couple of percent a month will take small accounts to large accounts faster than you might think. By reinvesting your profits into future trades (trading bigger size), eventually you will be able to trade for a living.
It isn’t about having a lot of money to be a full time trader the second you are done with your first Online Trading Academy class. It is about finding the style, goals, risk tolerance, etc. that works for you so that eventually you will be able to do the other things in life that make you happy - other than sitting in front of the screen for hours!
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