One of the most important things a new trader should do before putting their hard earned money into a trading account is define a valid reason why they want to trade.
It’s very easy for new and inexperienced traders to be sucked into the big world of trading and all its perceived glory. There is a lot of bravado in trading and all day long we are pounded with how many billions people and companies make and lose and the amounts become meaningless numbers in context with everyday life. We are constantly bamboozled by adverts and sale pitches promising riches beyond our wildest dreams from people who can’t put a foot wrong. Believe the hype and you’ll be living in gold palaces and your only daily life problem will be deciding which Ferrari or Aston to drive.
It is all bollocks.
It is very important to start your trading life by defining why you want to do it. Are you looking for a career change, do you just want to supplement your income, is it for fun, are you purely a gambler? Whatever the reason having discipline in why you want to trade will help you keep your discipline when trading.
Let’s delve into that a bit deeper. I would say that probably 95-99% of us are small time traders who are either trading to supplement an income or for full time income and so we are not competing with the big institutions for a slice of ‘the billions’ floating about, but to live our everyday lives and get through the grind. Therefore you should start from the point of what defines that in everyday amounts.
When I first stepped into the pit with my own money I saw competition amongst traders. It’s part of the bravado I mentioned earlier and a natural competitiveness that is part of human nature. Some people were even happy to boast about a massive loss like it was an achievement, like it didn’t matter. I was brought up to know the value of a pound note and so my trading wasn’t based on competing with my fellow traders but with the real world. If I walked in at 7am and was £300-500 up within a couple of hours I was straight back out the door. How many jobs paid that in an hour or two? That sort of figure was a monthly mortgage payment to the average man or even most of the (then) average monthly pay. It was that world I needed to compete with not the world inside the trading pits.
That has been the basis of my trading since. Every trade is not for a new boat or villa in some sunny location or a new car. It’s to put a roof over my families head and food on their table. That is my number one thought every time I switch on my PC. I have my target for the month which is the minimum I need to do that. After that then everything else is a bonus and goes towards life’s luxuries. Yes I have built up a decent amount in my accounts over the years and have lived relatively comfortably in that time, but to this day I am not a big sized trader.
You need to ask yourself how much makes a difference to you in real monetary terms and it is that which you should base your trading on at first. If someone offered you £1000 a month pay rise in your job 99.999% of you would be over the moon. In trading that’s just £50 a day, which when you look at it in that sense, isn’t a lot. It’s all about scale. Why try to make every trade thousands when such relatively small amounts can make such a big difference to your life?
If you can identify your everyday living needs and a plan to achieve that, and stick to it then you can earn a lot of money from this game. If you can gain the ability to be disciplined in life then you can apply that discipline to trading. Eventually you can build your account up and cover your life’s bills for a month, 6 months, a year, 5 years, build, build, build. If you shoot for the stars early in your trading life you’ll likely just end up eating dirt.
This isn’t a casino, this isn’t a get rich quick scheme, this is a great opportunity to help you get through your financial life. You may find the fortunes and fast cars but you need to begin it in the right frame of mind and with what matters to you most.
