In today’s episode, you’ll discover how you can build an amazing trading career.
So tune in right now…
Hey, hey, what’s up, my friend? In today’s episode, I want to talk about how you can have an amazing trading career.
What I’m about to share with you is just my point of view, they are the things that made me have an amazing trading career, which might be different for you, as you might have different goals etc.
Take it with a pinch of salt, and if it makes sense for you great, then it’s something that you can aspire towards. If it doesn’t, then you can watch something else altogether. Okay?
To have an amazing trading career, I break them up into five stages.
Stage #1: The newbie stage
At this stage, you want to learn everything and anything about trading. This is where your hopes are high, your expectations are high, thinking you’re going to be the next world-class trader.
And at this newbie stage, you’re soaking up everything that you come across, be it day trading, position trading, scalping, chart patterns, everything.
Then you progress to the next stage…
Stage #2: The mastery stage
During the mastery stage, you’re focusing because you’re kind of realize that you can’t trade everything and anything, at least not at this current stage, because your resources are limited.
And you’ll find yourself leaning towards a certain trading methodology. For example, if you lean more towards quantitative trading at this stage, you will focus entirely on quantitative trading.
You’ll ignore everything else and discard all the stuff that you’ve learned in stage one. You will discard price action trading, you will throw away your candlestick patterns knowledge, you ignore the chart patterns and whatsoever, and just focus on quantitative trading.
What happens at this stage is that you will focus on one trading methodology until you become profitable with it right and it’s your bread and butter. This is the second stage, the mastery stage.
Stage #3: Scaling up stage
At this stage, right, you kind of realize that you are a profitable trader, but there’s still a limit to how much you can potentially earn and that’s when you realize that you need money to make money in trading.
For example, let’s say you make an average of 20% a year on $1,000 trading account, that’s about $200 a year. But if you have a million-dollar trading account, that’s $200,000 a year, which is a huge difference.
And when you realize this, you’ll start to find ways to grow your trading account. You might rob a bank. I’m just kidding.
But you might get money from your family and friends to trade for them. You might use the money from your part-time or full-time job to increase the size of your trading account, you do as much as possible to scale up your trading account so that you can make more money from trading.
Stage #4: Use your trading knowledge to make money
At this stage, you’re pretty much proficient in your trading and you’re getting consistent results, and you realize that trading is just one way to make money and it’s not the only way.
Because you can use the knowledge that you have and make more money. For example, you could offer trading courses. That’s where you mentor other traders.
Or maybe that’s where you start to promote or recommend trading products and services that you believe in, like brokerage trading tools, or whatsoever.
That’s the fourth stage where you diversify your earnings away from trading itself. And at this fourth stage, you’ll realize that it’s actually also part of scaling up because when you diversify, you’ll have more money and you can grow your trading account further.
Stage #5: Adopt multiple trading strategies
At this stage, you might have a six-figure or seven-figure trading account.
But you kind of realize that you’re not very comfortable just trading so much money on one trading strategy. Because you understand that a trading strategy goes through a period of drawdown.
For example, let’s say you trade a trend following strategy in the stock market and if the stock market is bullish, it will make you money. But if it’s bearish, then you’ll go into a drawdown, where you might lose 20%, 30% of your portfolio returns.
So at this point, you’re starting to think, “What if I employ multiple trading strategies, which are uncorrelated to one another to reduce your overall drawdown?”
For example, let’s talk about the earlier the stock trend-following strategy, let’s say you don’t just trade the stock markets, but you also apply a trend following strategy to the Forex and futures market.
Let’s say the stock market is down 30%, but because of the fact that you also have another trading strategy for the Forex and futures market which is up 30%. And when you trade both strategies, you’ll breakeven for the year.
And that’s much better compared to just trading that stock strategy which is down by 30%, during a recession. That’s the beauty of trading multiple, uncorrelated strategy because the strength or weakness of one strategy can be compensated by another different trading strategy.
In the grand scheme of things, it does two things. Firstly, it reduces your overall drawdown as you’ve seen earlier. The second thing is that your returns will be less lumpy.
Instead of putting all your money into one strategy, in which your equity curve will go up and down in a zig-zag fashion.
If you trade multiple, uncorrelated strategies, your returns are less lumpy, it’s much smoother over time.
When you’re trading a larger amount of money, you can sleep better at night. It matters a lot. And that’s what the fifth stage is all about – the ultimate diversification.
Here’s a quick recap…
- The newbie stage is where you learn everything and anything about trading, you’re hyped up, you’re excited
- The mastery stage is where you develop your bread and butter trading strategy and become consistently profitable
- The scaling up stage is where you add funds to your trading account to make more money
- Using your trading knowledge to make money, like through courses, mentoring, coaching, affiliate marketing, etc.
- The ultimate diversification stage – where you trade multiple uncorrelated trading strategies to grow your portfolio
That’s it. I wish you good luck and good trading. I will talk to you soon.