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Can you survive from trading? Or is it just a myth?

Can you survive from trading? Or is it just a myth?

Can you survive from trading?  Or is it just a myth?

Living exclusively from trading is something that few can do since it requires a lot of knowledge, experience and a high net worth. But if you are not among the first chosen, you will be able to improve your short-term investment operations and achieve very interesting results.

First of all, we need to know what “trade” is. The term trading in the financial markets is associated with short-term investment, but there are important differences depending on how short that term is, since we can look for a trade for operations of a few days, hours or even seconds (scalping), or do something called Swing Trading, which looks for strategies to invest for several days or even weeks if the market goes together with him.. The techniques used, the dedication time and the emotional stress can change fundamentally if it is operated in a temporary period or otherwise, it is a critical matter. In the shorter term, there is more demand and more professionalism in every sense.

Therefore, within traders, investors who work in the ultra-short term looking for small movements in securities, indices or other assets are called scalpers. By earning low returns per trade, your success will be based on making many trades to accumulate those small profits until you meet your trading goal. These investors tend to use highly leveraged products (futures, ETFs and CFDs) and if they are really professional they trade indices, commodities and currencies. They usually work from home, with a suitable broker (competitive commissions and reliability are a major issue) and a professional terminal such as Pro Real Time. On the other hand, private investors tend to look for the short term by acquiring very large and highly liquid securities futures or CFDs.

But investing is not an art, it is a methodology and discipline According to Javier Serres, director of training for Investment Strategies and academic manager of our Expert Level Trading Course. Most long-term investors have been proven to outperform short-term investors. Why is this happening? A study of Vanguard funds, which corroborates the assertion of its founder Jack Bogle, shows that investors abuse their products by making mistakes, which causes a clear decrease in their returns. So, the more a particular investor trades, the more mistakes he makes and the worse the results he gets. The relative worst performance of short-term investors is broad across all categories, increasing in those categories where volatility has been higher and investors need to be more able to control their nerves.

Therefore, it is important not to lose respect for the market and a few things to disclaim before talking about “trading for a living” professionally.

With 3,000 euros, you cannot live from trading or make capital gains of 1,000 euros every month. To survive exclusively from trading, we need a minimum amount of capital that allows us to withstand losses because, no matter how good we are, we will have bad fortunes.

– Leverage is one of our biggest enemies. The investor usually leverages enough to cover more capital in his operation, but when the market turns against him, that leverage can destroy his account if he doesn’t know how to manage it. And that management will depend not only on capital, but other factors come into play such as mastery of the applied technique (experience), psychology and monetary management. It is very glamorous to talk about “I am trading the euro-dollar with 300,000 euros”, although I am really trading with 3,000 and leverage 100 times. Using excessive leverage in the financial markets is reckless.

It is not always productive to perform many operations. Scalping some assets has become very complicated because of the algorithms and automatic systems of professional traders, who are able to recognize the orders of individuals and oppose them in the matter of nano-the-crimes.

Trading in such short timeframes is risky and professional investors who have been scalping for more than 15 years are focusing their trading towards slightly longer timeframes (2-3 days) away from the day interday, which is currently on the machine’s end. The success rate in scaling operations must be around or above 90% to be profitable since the objective per operation is very small and the costs associated with each operation must be deducted.

– Without a proven methodology for a long time you will not be able to earn by trading the markets consistently. You can have a good run, but over time the market will put us in our place. Fear is as dangerous as overconfidence, the investor’s constant daily struggle with his own emotions, so that he relies on a method that helps him work more rationally, so that he is on top and does not make erroneous decisions as a result his psychology. , without affecting the success or failure of the last operations. Training and methodology are needed to avoid falling prey to sharks and our own mistakes.

Mónica Triana and Carlos Gil, Professors of the Practical Trading Course, offer us some of their advice.

Before trading on the stock market, we need to be clear about these things so that they do not fall into the “siren songs” that the fearless people seek with a very attractive message of easy money and focus on the reality of the markets. The success of an investor who wants to survive the stock market will be based on reading the market correctly and for this it is necessary to know the stock market and the economic cycle in which we work, the types of charts we make. going to work, the main levels of the assets in which we are going to invest (support and resistance), indicators that we must look at in order to know the movements and signals that the financial markets offer us in the future.

The next thing we need to be clear about is our assets to invest, the time we need to be in the markets and our level of risk. All this will allow us to develop a system adapted to the needs of each operator to become qualified investors and to improve our decisions or even live exclusively on the stock market.

Many investors buy into the wrong message that they are a fast and easy trader., they choose the easy way to get rich but soon they realize the mistake they made and they suffer directly in their pockets. Yes, it is possible to live on the stock market or invest successfully as a complementary activity, to see how wealth grows, but always using a method with the necessary discipline to have winning strategies.

Before we pretend to live from trading, we must try our method, verify the results well and think that the market is very difficult in the long term, we will go through bullish, bearish or sideways phases and we must know how to identify. them before they start functioning.. Once identified, we can decide which asset we are going to invest in (indices, currencies, raw materials …), how we will do it (long or short), with the products (futures, ETFs, CFDs … .) and we always set some objectives for ourselves, and it stops for every trade.

We must understand that we can be very good investors in the stock market with proper training and properly manage our assets, and Only investors who meet certain characteristics (knowledge, assets, experience and dedicated time), will be able to survive from trading.

To control all these aspects and build a good trading plan adapted to each investor’s profile, we launched our next A Practical Trading Program for the private investora 100% practical program designed to be useful from day one that will allow rational decisions to be made to achieve the economic and vital objectives of each investor.

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