Is Trading Profitable?
I get asked this question all the time.... Is trading profitable?
The real answer is.. is any business profitable? Let's see if we can analyze if trading the market is profitable or not.
This is an important question. This is because most investors have had bad experiences with trading and there have been a lot of questions on whether it is profitable. But let me ask you how many people go study to become a doctor and never make it? How many businesses fail because of X and Y reasons? It is important to note that there is a lot of money in trading and therefore this means that trading is profitable. Just like any business, there is a supply and a demand, with trading this can happen faster.
The most important thing is to find out whether it is trading still profitable and why.
It is imperative that you should first seek to understand the risks involved so that you are able to make profits and avoid losses when trading. The biggest mistake that most people make is to pour their money into trading just because someone else did the same thing and they made profits without first seeking to understand how those profits came about in the first place.
In order for you to first make a profit you need to understand how the market works and the factors that will be important for your success. Trading is profitable but you first have to research, have someone who can mentor you and teach the ways based on both theories and experience. You might not be able to afford a mentor or if you want to see how others trade, you can also join a trading chatroom to get an idea of how trading can fit in your life.
Trading is high risk and you must have the capacity for high risk. This is very important to note. You must also have a stomach for losses. Human nature does not like losing. If you push someone to a swimming pool, just how many people will try to grab the other so they don't fall? Losing has this same affect, and many traders fail because they don't understand that losing is part of trading. If you were 100% successful, you will eventually fail at some point, think of gravity always prevail.
You must keep going even after making losses. It happens even to seasoned investors.
Do your due diligence so that you are aware of what you are getting yourself into. This rule is just the same for any other business.
Always trade with money that you can afford to lose. Of course, there are some people who went all in, just like any other business and they either succeed or fail. In order to mitigate risks by having other revenue streams. Do not depend only on one thing. If you are working, DON'T QUIT! Get substantial proof if trading can work for you!
Develop a trading strategy. It will enable you to stay focused as you trade. Remember to keep your strategy flexible so that you are able to change it according to market demands. Always question the strategy and test them so that you can constantly foolproof them. Strategy we use has a 100% chance of profiting 3 ticks but 1 point is 90%, as we shoot for one point target, trading the future emini. We might lose on some trades because of how the market is reacting.
It will also help you to avoid emotional trading which has resulted in the downfall of many traders. Overtime you will find that this strategy will get better and better. When you are starting out trade on a virtual account to practice and to gain knowledge on how the market operates. When you do this over a long period of time you will be able to eventually make profits.
The best way to make trading profitable is to buy low and sell high as they say, but there are other strategies out there that are successful. Learn more about our Day Trading Academy.
Keep in mind that it is not easy. You have to be patient. Most traders lose money while trading. It's not get rich quick, you will not become a millionaire overnight, there are also human errors, market crashes, greed, emotions that play huge role in all of this.
Some of the mechanisms that you can use to make trading profitable for you are:
1. Always use a stop-loss with your trading strategy.
This is used for every trading strategy. It determines the closing price of your trade and the trade will be closed at this level automatically. The best thing about it is that once you place a stop-loss you will not be worried about losing more money when your trades are going down. Keep in mind that you may not use it all the time because the market may behave in an unpredictable manner. This is why we focus on the futures market since there is only one exchange that handles all the order and spillage is tighter than regular stocks which can take your stop loss out. Contact us if you want to know more!
2. Avoid being emotional trader.
This is very crucial, as previously explained. Emotions mess up your thinking and you become prone to making mistakes. When some people start making losses when trading they start to make even more mistakes. Trading is not a life and death situation and you should always keep that in mind. It is an exercise that requires internal fortitude and discipline. You should not start getting worried once you start making losses. This is the point in which the trading strategy should kick in. Once you do this you will be on the right track to making profits through trading. Emotions get in the way and this is why it is imperative that you keep them at bay. Do not allow your emotions to get in the way of your trading. They can cloud your judgement and result in you making losses.
3. Keep side by side of current market trends.
This is a good way of making profits from trading. A lot of information that is out there will provide you with the data that you need to make informed trading choices. This is known as fundamental trading. When you are trading you should keep a keen eye on current events, patterns, moves, volume as they may impact your trading moves. They make things change in a heartbeat.
In order to make trading profitable you should make sure that you have more profitable trades than losing ones. In simple terms you should minimize your mistakes so as to make profits.
The profitability of trading depends on your trading strategy and the amount of risk that you are willing to take.
Remember that the size of your trades can be higher than the size of your deposits (margin and leverage). This means that you can trade a lot more than you have. This will enable you to post high profits when trading. On the downside the same principle applies to losses. It all boils down to the amount of knowledge that you have acquired about trading, your trading strategy and your risk appetite. Be patient and in time you will start making profits.
One way of making trading profitable is to trade less. A lot of people make losses when trading a lot.
Our chatroom trades between 9:10-12pm EST. We try to trade 1-3 per day and no more. The more we trade, the more likely we end up trading outside of the strategy. If you're not doing the waiting game versus trying to pick action, then you will end up losing. Its about finding the right opportunity versus trading every opportunity.
Another way of making profits is by concentrating on getting as much out of your winning trades as possible. In simple terms less work can often lead to better results. Depending on your strategy, this is most likely the case. Our chatroom and online day trading academy has a specific strategy that makes us win 90% of the time which then helps us gain a higher chance of winning versus losing, even with one point target of the emini futures.
In order to make profits when trading the average profit should be more than the average loss made. This means that any loss should be kept as small as possible and any profit should be made as big as possible.
You can use the Average Profitability per Trade to enable you to know how much profit you can make from a trade. This means that it should come up positive and that your overall profits are more than your overall losses.
You'll want to keep track of each strategy so that you can identify just how many times you can be successful trading based on that alone.
If you prefer to buy low and sell high, what most people call these days "BTD", "BTFD" (Buy the Dip or Buy the Fkn Dip). It is a strategy that a lot of people rely on. It should be noted that this strategy should be implemented with caution, since you never know just how low the market can go before you're at a loss and margin requirement is depleted. Will you always win? Absolutely not, but understanding and implementing risk management, position sizing, have set criteria's of what not to do before getting is crucial to success.
You should also keep in mind that market timing plays a big role in determining how much profit you can make from trading. Most, if not all trades do take time, you might watch the market for hours and feel like you've wasted your time. Finding a strategy where you can get in and out quickly and a high probability or finding a long term strategy and see what works for you can help you both psychologically, and physically.
Market timing is a key pillar for success. This entails making the right moves at the right time. If you prefer getting in and out and be done with trading 2-3 hours a day, CLICK THE BUTTON BELOW!
You should also have a keen eye for stocks that are trading below their market value so that you can buy them at that point in order for you to sell them at higher prices. This strategy calls for a lot of patience and discipline.
Coming back to the same question... Is Trading Profitable?
We've covered most of the answer. Basically, are you ready to dig deeper in how everything works before trading? Join a community and ask questions, learn from other professional traders. Don't think of trading is like going to school and learning theories and hoping you end up getting a job that you had to learn everything from scratch. Most importantly, see what you might be missing and try to fill every single gap so that there are no room for error. You won't open a business without learning about the demographic, average income, supply/demand, cost of business, etc. Treat trading the same.