Trading for a Living: The Truth Nobody Tells you

Last Updated on December 5, 2019

Trading for a living, that’s your dream, isn’t it?

You can trade from anywhere in the world, have the freedom to do the things you love, and never worry about money again (as long as you have an internet connection).

So, what’s the catch?

Well, check this out…

A group of researchers did a study on Brazilian day traders between 2013 and 2015.

They wanted to find out how many % of traders made money consistently.

And do you know what they found?

• 97% of them lost money
• 4% earned more than a bank teller (about $54 per day)
• The top trader earned $310 per day

Clearly, the odds are against you.

So forget about the fast cars, hot chicks, and relaxing beaches — those are comforting lies to distract you from reality.

If that’s what you prefer to hear, then you can close this page now.

But if you want to know the real truth about trading for a living, then get ready for what I’m about to share with you…

You must have an edge in the markets

You might have heard the saying…

“Trading is 80% psychology”

That’s BS.

I don’t care how good your trading psychology is or whether you have the best risk management in the world.

Because without an edge, none of it matters.

Not convinced?

Then go down to a casino, bring along the best psychologist and gamble with proper risk management.

It won’t take you long before you start losing.

Clearly, this won’t work because you don’t have an edge over the house — and it’s the same for trading.

So if you want to trade for a living, focus on finding your edge before anything else.

Moving on…

You need money to make money

Sorry to burst your bubble, but you need money to make money in this business. Here’s why…

Let’s say you make an average of 20%/year.

• On a $1000 account, it’s $200/year
• On a $100,000 account, it’s $20,000/year
• On a $1m account, it’s 200,000/year

Now, you might think 20% a year is too low, and you can do 100% a year.

Sure, that’s possible with huge risk-taking. But I’m talking about making consistent returns, not “the go big or go home” kind of returns.

Don’t believe me?

Then ask yourself… “Why do hedge funds raise so much money? Why not just trade their own money so they have no one to answer to?”

Because you need money to make money in this business. Still not convinced?

Then go find out who are the richest traders in the world. You’ll realize most of them owns a hedge fund that has raised millions (if not billions) of dollars. Why? To make this world a better place and eradicate poverty in this world.

Why you can have a winning strategy and still be a losing trader

No, it’s nothing to do with your risk management or discipline. It’s something you probably didn’t think of (and I’ll tell in a while).

But first, here’s an example…

Let’s say you have a $50,000 trading account.

You make an average of $20,000 a year from day trading.

But, that’s not the amount you take home because you haven’t factored in commissions.

Now, let’s say your commission on a round trip (buy & sell) is $40, and you trade 1000 times a year.

In total, you pay $30,000 a year in commissions.

Now let’s do the math:

You make $20,000 in profits and pay $30,000 in commissions.

Net result? You lost $10,000 for the year.

But, what if you reduce your commission to just $10?

Now you make $20,000 in profits and pay $10,000 in commissions — and you’re a profitable trader!

Now can you see how deadly commissions can be?

Most traders neglect it and simply go with any broker they come across.

But the math doesn’t lie. If you pay high commissions, your equity curve won’t go high.

Next…

The true cost of trading for a living

Here’s the thing:

If you make $50,000 a year from trading, did you really make $50,000?

Now if you previously had a job that pays $100,000 a year, then you didn’t make $50,000 from trading.

Instead, you lost $50k from trading.

I’ll explain…

If you’re not trading, you could be working elsewhere earning $100,000 instead of $50,000. That potential loss of $50,000 is an opportunity cost to you.

So, don’t look at how much you made from trading.

Instead, ask yourself what could you accomplish (or earn) if you were NOT trading for a living?

That’s the true cost of it.

The secret to making profits every day

Take a guess…

Best trading strategy?

Risk reward ratio?

Winning rate?

Nope.

Do you want to know the secret?

It’s this… the frequency of your trades.

Yes, you read me right.

If you want to make money every single day, you must have a high frequency of trades — so the law of large number can work in your favour (within a short period of time).

Confused?

No worries, I’ll explain…

• Imagine you have a special coin in your hands
• If it comes up head, you win $2
• If it comes up tail, you lose $1

But here’s the catch, you can only toss your coin once a day.

Do you think you’ll make money every single day?

Of course not.

Why?

Because in the short run, your coin toss results are random — you could get tails many times in a row (and thus losing many days in a row).

Now, what if you can toss your coin 1000 times per day, how will the results change?

Well, you’ll get close to 50% heads and 50% tails after 1000 tosses — which means you’re guaranteed to make money every day because your edge can play out within a short period of time.

So, the “trick” here isn’t your winning rate or risk-reward ratio but, your trading frequency.

Does it make sense?

Great!

Because this concept is the same as trading.

If you want to make money every day, you must have a high frequency of trades.

But is this feasible for a retail trader?

In my opinion, the odds are stacked against you because commissions run sky high and it’s unlikely you can spot so many trading opportunities using your naked eye (consistently and profitably).

That’s why this field is largely dominated by high-frequency trading firms and yes, they can make money (almost) every day.

One example is Virtu Financial who had 1 day of trading losses in 1,238 days.

So, does it mean you can’t trade for a living?

Nope.

It means you shouldn’t expect to make money every single day. And that’s not to say you can’t make money every quarter, or every year.

If you want a long-term trading career, do this…

I don’t care how good you are, but the truth is, you won’t make money every day (unless you’re Virtu Financial).

Why?

Because the markets are always changing. (It can move from an uptrend to a downtrend, low volatility to high volatility, etc.)

So if the markets are always changing, it means your trading strategy won’t work all the time (and that’s how you enter a drawdown).

So, what can you do about it?

#1: Keep your profits during the good times so you can pay for your losses during the bad. The key is to play good defence so you can survive and see the good times again.

#2: Set aside 12-months of living expenses separate from your trading account. This way, even if you have losing weeks or months, you can still pay the bills and put food on the table.

Cool?

A new way to trade for a living

At this point, you’ve realized trading for a living is not what it seems.

You must have an edge in the markets, sufficient trading capital, opportunity cost, and the right expectations.

And you can’t trade like the hedge funds because they have access to a large pool of capital, can pay themselves a salary (whether they make money or not), and opportunity cost is negligent.

Clearly, the odds are against you.

So now the question is, how do you level the playing field?

That’s what you’re about to discover…

Share your knowledge and get compensated for it

This is what I do.

I educate others on how to trade the financial markets, and in return, I get paid when they purchase my premium courses.

And what do I do with the money?

After paying all expenses, I use it to increase the size of my trading account!

Remember, the larger your capital size, the more profits you can make (without increasing your risk).

Also, this doesn’t have to be trading related because if you have skills which are in demand, you can offer that as well.

For example…

• If you are skilled in using Microsoft Excel, you can create a course on it
• If you specialize in creating viral videos, you can teach others how to do it
• If you specialize in training dogs, you can set up a program around it

The possibilities are endless.

Pro Tip:

If you’re not sure how to get started, the easiest way is to offer 1 to 1 coaching (through skype or meetups).

It takes less work to set up and you still get paid the same (or even higher).

Be an affiliate for products (or services) you believe in

But what if you have no skill or specialize knowledge people are willing to pay for?

No worries.

Because you can also be an affiliate for products or services.

Now you might be wondering:

“What’s an affiliate?”

An affiliate is someone who earns a fee (or commission) when someone signs up for a product they recommend.

Need some ideas?

Then here are some products (or services) that offer affiliate partnerships…

(Note: I’m not endorsing any of them. These are just examples for educational purposes.)

Brokers – ICMarkets, AxiTrader, Blueberry markets, etc.

Platforms – TradingView, CQG, Trading Technologies, etc.

Tools – TraderVue, Edgewonk, Forex Tester, etc.

Again, the possibilities are endless.

All you need to do is reach out to the service provider and ask them if they offer any affiliate partnerships, and that’s it!

Now, a word of warning.

Never promote products you don’t believe in just for the sake of affiliate fees — it’s not worth burning bridges for short-term gains.

At this point…

You might be thinking…

“You’re not a real trader. You’re just a salesman.”

If that’s the case then the hedge fund guys are the best salesman in the world. They raise billions of dollars managing other people’s money — taking a cut of their profits without paying any losses.

The best part?

You call them real traders.

So, let’s get real shall we? (pun intended).

Moving on…

Let me ask you…

What do you want to get out of trading? Why do you want to trade? What’s the end goal?

I’m guessing it’s probably one of these reasons…

• Financial freedom
• Escape from the corporate world
• Not having to stay at a job you hate
• Peace of mind knowing you have another source of income

In other words, trading is just a means to an end, right?

So…

Would you stick to the old way of trading for a living — save up a lump sum of money, grind it out, and hope for the best?

Or, adopt this new way of trading, so you can reach your goals quicker, safer, and with less risk?

Now before you go, I’d like to hear your thoughts on this.

So leave a comment below and let me know what you think.