I think it’s fair to say that we have all felt some degree of envy when looking at people living a lavish lifestyle, travelling around the world and seemingly not work hard. How do they do it? Some are actors, athletes, retired business owners, and some are trading for a living.
Some will stay in bed longer and keep dreaming about it while others wake up early and try to make it a reality, but let me kick things off by saying this: yes, it is possible to earn a living by trading the markets, and even become immensely rich doing it.
How Are You Going To Do It?
Would you start playing tennis and expect to beat Roger Federer? Same thing applies to trading; do not expect the same results as a mature trader who has been mastering his craft for years. Instead, start with baby steps.
After learning the theory, finding an edge over the markets and developing a profitable strategy, maybe you’re starting to make enough money to pay for your car. A couple of months go by; you’re now making enough money to sustain your lifestyle with Forex. Congratulations, you are now trading for a living. What? Were you expecting to be driven around in a Rolls Royce at this point?
Compound – It’s a Good Advice
Here’s why paying for your lifestyle with your Forex earnings could be holding you back from becoming very wealthy: you are not taking advantage of what Albert Einstein referred to as the “eighth wonder of the world”; compound interest. When you start defining your risk and profit in percentages, you start noticing that the more money there is in your account, the more money you make. The more money you withdraw from your account, the longer it takes for it to accumulate. While that is an obvious statement, you may not be realizing how big of a difference it can make.
Let’s start talking numbers a bit. For the sake of this example, I will be assuming a consistent return that should not necessarily be expected in a real life scenario. Let’s say your account size is $20000. You make, on average, a 3% return per week, but withdraw 2 out of the 3% to pay for your expenses, leaving you with a 1% addition to your account. If you trade every week of the year and compound your account with that 1% return, you will end the year with a $33500 account; a $13500 growth from your starting capital.
Now, let’s take the same example, but only withdrawing 1 out of the 3% to pay for your expenses, leaving 2% to compound your account. Do you think you’re going to be ending the year with a $27000 increase from your starting capital (twice as much as in the previous example)? You would be wrong if you said yes; your account balance would be at $56000 by the end of the year, a $36000 growth from your starting capital.
Moral of the story?
What’s the moral of the story? The more money you leave in your account, the faster it’s going to increase. Chances are, most very successful traders had to make some sacrifices and focused on exploiting the compound interest to grow their account exponentially.
Sometimes, A Good Strategy Is Not Enough
What if some rich old man knocked on your door, told you he made his fortune trading Forex, and gave you a piece of paper with his entire strategy written on it. No catch, no hidden detail.
Do you think his strategy would make you as rich as him? Probably not. Why? Because you’re not mentally ready for it. It’s easy to apply a strategy when you’re risking a couple dollars, or even a couple hundred dollars. What makes or breaks a trader is when they start trading thousands and thousands of dollars.
Mentally, winning thousands of dollars is easy, losing thousands not so much. It takes a lot of mental preparation to be able to withstand a large string of losses without making a trading mistake and losing your edge. Although certain concepts are very abstract, reading trading psychology books and backtesting your strategy can give you the confidence you need to go through a losing streak without deviating from your plan. Once you have your emotions under control, you can start thinking about becoming as rich as the old man.
Mentors, Mentors Everywhere
Why are these so called professional traders trying to sell me a course, signals, and copytrade subscription plan if their trading is so lucrative? Why is everyone trying to sell me their strategy if it made them rich? Now, I cannot vouch for every Forex mentor and provider out there. Sure, some of them are scammers, manipulators, or whatever you want to call them. Some of them are real traders making real money, though.
All successful traders have something in common: they want to make money. It’s the only valid reason for trading. If you’re not making money in the long run, there’s no point in doing it. You’d be more productive flipping burgers at your local McDonald’s.
Why do it then?
What does that have to do with mentors? Well, people are willing to pay for their experience and wisdom. By the way, that money is not the same kind of money as in Forex: it’s guaranteed income. Once you start trading for a living, you get used to making different amounts of money every week or every month. Sometimes you make more, sometimes less. It can complicate certain purchases, such as a house, which is why mentors welcome multiple streams of income that can help stabilize their finances.
Most of the time, these coaches don’t even have to add hours of work to their schedule, they can just do some live commentary over their already established trading schedule. Say a hundred people pay $50 a month for your advice and recommendations: that’s $5000 in revenue monthly for not so much additional work.
I also believe that there is an untold story about certain trading gurus; the gratification. Wouldn’t you feel gratified if you woke up every morning knowing that some people admire and respect you enough to pay for your advice? It can be quite enjoyable to share your passion and help people at the same time, so why not get paid doing it?
It’s Going To Be Hard, But Push Through It
I have never heard a successful trader say that their trading journey was easy, or that they started off making consistent profits. Everyone has to go through a learning phase, which for some people could take years.
The only way you are possibly going to make it is by constantly improving and by learning from your mistakes. Whenever you start thinking about giving up, think about the life you could be living. Seek to be the person that has their plane ticket paid by unprofitable traders all around the world, not the opposite. Above everything else, always keep this in mind: it’s all going to be worth it.