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In today’s episode, you’ll discover 5 brutal truths about trading that gurus don’t want you to know.
So tune in right now…
Resources
Exposed: The Truth About Trading Nobody Tells You
How Long Does It Take to Become a Consistently Profitable Trader?
Transcript
Hey, hey, what’s up my friends? In today’s episode, I want to share with you the 5 brutal trading truths that nobody tells you. Are you ready?
Truth #1: You need money to make money in this business
I can’t tell you how many times I’ve seen comments from critics who say things like, “Hey Rayner, if your trading strategy is good you won’t be telling or sharing with us. You’ll be using it to make millions in the financial markets.”
Well, I could have the best trading strategy in the world. But if I don’t have any money or capital, then that trading strategy is useless.
Think about it this way, if you have the ability to make, let’s say 20% a year:
- On a $1,000 trading account, that’s about $200 a year
- On a $100,000 trading account, that’s $20,000 a year
- On a million-dollar trading account, that’s $200,000 a year
The same 20% a year, same risk management. But the only difference is the size of your account, and that affects how much money you can potentially make.
Ingrain this in your head – it doesn’t matter whether you have the best trading strategy. Because if you don’t have enough capital, then you’re not going to make much of money at all. This is the truth.
This is the same reason why you see hedge funds wanting to raise billions of dollars. Clearly, they already have a trading strategy that works.
But why do they want to take in other people’s money? Why do they want to answer to potential clients when losses come?
Because they know that you need money to make money in this business. It’s only the retail traders who are fantasizing about trading on a beach, sipping their pina colada, thinking that they can get rich with a $50 trading account within a few months.
No, that’s not going to happen.
Truth #2: The learning curve is steep in trading
If you asked me, anything worth pursuing will have a steep learning curve. Regardless of whether you’re a doctor, an engineer, or even a car mechanic, you’ll need years to gain proficiency. And in trading, it’s no different.
Stage 1: In the first stage of your trading career, you’re probably excited about pursuing your dreams, learning all the different trading strategies, or trading indicators from A to Z.
Then you realize that maybe you shouldn’t be focusing too much on the tools, or the strategies.
Stage 2: In stage two, you’re warier about risk management where you’ll only risk 1% to 2% of your account on each trade.
Stage 3: This where you start zooming in and focusing on the stuff that really matters.
Stage 4: Hopefully by now, you’ve become consistently profitable.
These are generally the four stages off what a trader goes through, and you can’t complete all four stage within three months or six months, you probably need years to complete the full cycle. That’s why the learning curve in trading is steep.
If you’re looking for shortcuts, like a weekend seminar to turn you into a pro trader, then you should spend your money elsewhere.
Truth #3: You’ll be in a drawdown most of the time
What do I mean by drawdown? For example, you put in $100,000 into your account. When your account goes up to $120,000 and let’s say that’s the highest point of your equity curve.
And from there, let’s say your account drops down to $110,000. That means that you’re in a drawdown because you are now below the equity high that you were in previously.
So most of the time in trading, you’ll be in a drawdown. If you ask me, I will say 70% to 80% of the time, you’ll be in a drawdown. You won’t be making new equity highs every week or every month.
You’ll be in a drawdown most of the time, and this drawdown is a function of your winning rate. The lower your winning rate, the longer you’ll be in a drawdown. That’s why for trend followers who have a low winning rate, they’re in a drawdown 80% of the time or more.
If your winning rate is higher, then the duration of your drawdown can be reduced. Nonetheless, embrace the fact that you’ll be in the drawdown most of the time.
Truth #4: You simply don’t have what it takes
I mean yes, you get your hopes up, thinking trading is a means to your financial freedom where you can finally fire your boss and earn passive income, etc.
But all this takes time, hard work and money before you can reap the rewards. And most of you just don’t have what it takes because you’ll probably just give up at the first obstacle you face.
Maybe a trading strategy isn’t working and you start hopping between multiple strategies before realizing those trading strategies also don’t work. Or maybe you would blow up multiple trading accounts before you decided that you had enough and want to quit.
After multiple setbacks, the number of traders who still want to pursue this endeavour will get smaller, kind of like a funnel. At the top, there’s a lot of people coming with all their hopes or dreams for the babes or the Lamborghinis.
But as the years go by, many of such traders get eliminated and all that’s left is that a few percent who continues to pursue this endeavour.
So I want you to be prepared that this is a long-term thing. We’re not looking at months or just one or two years. If you asked me, if you want to get good at trading, be prepared to invest 5 or 10 years or more. This is a long term thing, it’s like raising a kid.
You don’t have a kid for the sake of looking after them for the next three to six months. This is the kind of attitude that you should bring into trading, it’s long term and it’s for life.
If you can’t commit to it, then go do something else. Go watch Netflix or play some games or pretty much do things that make you happy. Why do something half-hearted, get unhappy, lose money and waste your time when you can you do something else that could make you happy without losing any money.
Moving on…
Truth #5: You must have an edge in the markets
This is something that you must know. By simply risking 1% of your account on each trade or having a minimum of a 1:2 risk-reward on each trade is not enough.
If your trading strategy doesn’t have an edge in markets, you’re not going to make money. Simple as that.
Don’t believe me? Go down to the nearest casino and apply the best risk management you can or even bring a psychologist with you. In the long run, you’ll still lose money to the casino.
Because the house has an edge over the players. So unless you have a way to extract an edge from the casino, else, in the long run, you’ll still lose money regardless of your risk management, your risk-reward ratio or your trading psychology.
Without an edge, all those are useless.
With that said let’s do a quick recap…
Recap
- You need money to make money in trading
- The learning curve is steep, be prepared for it
- You’ll be in a drawdown most of the time
- Most of you don’t have what it takes
- You must have an edge in the markets
If you want to learn a new trading strategy or system that has an edge in the markets then you can check out my book called the Pullback Stock Trading System.
This is a 31-page trading booklet where I’ll share with you a specific trading system that you can use to trade the stock markets.
You can go to pullbackstocktradingsystem.com and learn more about it.
With that said, I wish you good luck and good trading. I will talk to you soon.