You will not get rich by trading overnight. This is why

There is a common mistake there about trading, that it is an easy way to get rich quick. But the data shows something very different. Before the pandemic, retail traders or traders buying and selling securities for their own accounts accounted for about 10% of total stock market trading volume.

Enter the pandemic and that percentage has increased to 30% by mid-2021 according to a Estimates from Citadel Securities and Themis . Exchange. A large segment of retail investors has begun to participate during the pandemic. However, they don’t seem to make it rich at the rate that many of them have come to expect.

The proliferation of online trading platforms including Robinhood and TD Ameritrade has made it easy for anyone to trade with just a smartphone. But the hard truth is that 70% of day traders lose almost all the money they initially invested under Research by the North American Association of Securities Administrators (NASAA). And in fact, only 11.5% showed the possibility of making a profitable short-term trade. It seems that trading is not a get-rich-quick strategy as many new traders think.

You will need to evaluate your risk strategy and limit your maximum loss

As I began my journey as an independent trader, failure quickly followed my early successes. My losses were substantial and I began to question my ability to make a living from trading. Gradually, I realized that I would need more than expert opinions if I wanted to make money long term as a trader. I will need data to know when to enter the market and more importantly when to exit.

Ignoring my investment strategies and letting the system guide me what I should put my money in – is a good place to start. Past experiences have taught me that I can lose substantial sums of money very quickly. So as part of a hedging strategy, I limit my losses to a certain amount. While the amount I’m willing to lose will vary depending on the investment itself, I think 2% of the total invested is high enough.

Don’t be fooled by instant wealth

Minimizing risk is a good start but certainly not enough to grow a rich business. Often, I find that what separates successful traders from those who fail over time is the scientific mindset that former traders have in common. They are patient, disciplined and systematic in their approach to trading. They know that trading is very risky, and they do not ignore the warning of even the smallest loss.

On the other hand, outsiders and newcomers tend to see trading as a hard game. In general, they have two main motives for investing in the market. They want to improve their family income or to create wealth quickly. Both reasons are wrong because the illusion of instant wealth drives them.

I often get people interested in online forums like Quora asking if they should buy cryptocurrencies. These people believe that they can trade and make money from the materials gathered here and there on the internet. They won’t realize their mistake until they lose their hard earned money too often.

Here are 4 reasons why you can’t get rich overnight as a day trader

1. It is easy to fall victim to scams.

Too many people put their trust in scammers swindling their money after classic calling tricks. In my opinion, the reason so many people fall victim to scams is that their desire for instant riches makes them prone to fall. The people behind these scams have taken advantage of our greed and our belief in the gurus of the moment.

Their phone calls often begin with questions like your interest in the stock exchange, your source of income, and investment opportunities in specific areas that are trending. They will follow up with PDF documents full of logos showing that they are fully compliant with trading laws. This is a red flag because real documents usually don’t have too many logos. Another warning sign? If they promise a steady 10% return on your investment every month, you should run for your life.

2. Experts’ predictions often give false information.

Whenever you receive a tip as a trader, you need to evaluate its validity. First, identify the errors and cross-check and identify the causes of the miscalculation. If you are a discretionary trader, you can test these tips through demo trading. In systematic trading this is easier because you can test ideas and strategies before investing money in them.

Systematic traders are similar to football coaches, who can analyze, track and monitor the performance of their teams. They must understand which algorithms can be applied to which markets. For example, what applies to a highly liquid market will be different from what applies to an illiquid market.

3. People are quick to join trends like cryptocurrencies without being educated on how to be successful.

Opportunities in the crypto market are similar to gambling if you don’t have enough trading education or take the wrong approach. The high volatility and stories of people getting rich with Bitcoin offer opportunities for speculation, but the downside is that rapid volatility can drag a person from rich to ragged. With the explosion of trading, many companies have suffered significant losses since the end of 2021.

Bitcoin has lost almost 40% of its value since November 2021. It used to be at $67,000, then dropped to $30,000, and then rallied back to $60,000 before falling below $30,000. Experienced traders are often careful when it comes to cryptocurrencies. It is important to diversify and invest only a small portion of your portfolio in cryptocurrencies.

4. Many traders underestimate their risk and lose big.

Many traders focus solely on acquiring tools that allow them to better analyze the markets and make faster decisions. They often realize too late that the most important thing in trading is not the goals you have set, or even the resources at your disposal, but that you have a sound risk control strategy in place from the start. . Trading is a marathon, not a sprint.

The real secret to success is persistence

The real secret to trading success is patience and persistence. I have experienced many failures in my career as an independent trader, and each time I failed, I refused to give up because my passion for trading pushed me to keep going. Slowly, I turned failure into success, won the Trading World Cup 4 times and set a world record that remains undefeated to date.

You may not get rich quickly if you choose a systematic approach to trading, but you will become independent as you learn how to build your own trading system and make a living on the stock exchange. . You will look forward to getting the best from future economic fluctuations.

Image credit: David Mcbee; Bark; Thank you!

Andrea Unger

Andrea Unger

Andrea Unger is a full-time professional trader, President of Unger Institute and author of the Unger Method. Andrea is the only four-time world trading champion (2008, 2009, 2010 and 2012), he is an honorary member of SIAT (Italian Association of Technical Analysts, an affiliate of IFTA) and speaks throughout Europe, America, Australia and Asia.

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