3 reasons you’ll never be rich

There’s no doubt that achieving wealth is an attractive principle.

Maybe because there are things that we want to be able to spend our money on … maybe it’s because we want some financial security for the future … or because we want to be able to provide for our nearest and dearest …

Whatever the reasons, it would be nice to strike it big.

We could hold out to win the lottery, or to come into some huge inheritance from a distant relative, or to get lucky on an investment.

But the reality is that we won’t get rich unless we stick our necks out … putting some graft in, and taking a (carefully measured) degree of risk.

But many people are nervous to step into the markets because they fear losing money. It’s a healthy, sensible fear – no one wants to lose money. And certainly no one wants to get wiped out. Others stand back from the markets because they’re worried that they don’t have the time, the money, or the know-how to get involved. All these issues can keep potential traders on the outside.

If that sounds like it could be happening to you, then you’ll never be able to move forward until you address these issues.

None of these factors need to stop you from making money … but the mere fact that you’re hesitating shows that you’ve recognized these important stumbling blocks – which is the first step to solving them …

1. Your trading fund

It’s one of the most common frustrations I hear from people, who get sick and tired of hearing about “great trading strategies” that are “raking in huge profits” …

It can be annoying when you hear about people making £500 on a trade … only to discover that they’re trading with a £25,000 fund, and that your own measly pot would give you £10 profit on the same trade.

It’s enough to make you wonder, why bother?

If you’re in middle age … with little funds … and an income that’s barely covering your outgoings … Perhaps you’d better give up on the idea of trading?

And just accepting your financial situation as it is?

The truth is that it’s exactly this kind of thinking that stops most people from trading.

It’s also this kind of thinking that stops people setting up their own businesses … or starting a new career path … or making any positive changes in their lives …

It’s disheartening to know that we’ll have to start right at the beginning, with tiny baby steps.

Feeling financially powerless is a trap that we can easily get stuck in – and it makes us want to blame others for our lack of fortune. I’m not trying to lecture you here – I’ve been stuck in this trap myself. I’m sure we can all recognize feelings of resentment towards others for their good fortune. However, if we stop looking at others and comparing ourselves to them – we can begin to win that power back.

The truth is, that the size of your trading fund may be a measure of your wealth … but it isn’t the measure of your financial power. Financial power is about a mindset that isn’t knocked back by failures or by the sometimes overwhelming feeling of having to start at the bottom.

It’s where most people have started out.

Which is why the first thing to do when you have a small trading fund is to roll up your sleeves and get stuck in.

How many times have you heard advice to “start small” … “don’t risk too much” … If you have a modest trading fund – you HAVE to start small. And, as your fund grows in size, so too will your experience, and (hopefully) your success rate.

Plus, traders with a modest fund really understand the importance of NOT LOSING that money. Let’s say that Trader A has a fund of £25,000 to invest, but starts trading with just £500 of that fund. Meanwhile, Trader B has just £500 to invest in the same trading strategy.

You can be sure that Trader B will have a very different attitude to risk, and will guard that £500 ferociously. Your trading fund is the most precious commodity in your trading armory – the most important thing you can do as a trader is to protect it from losses. If that means sitting out of the market when others are jumping in – so be it.

Traders with tighter budgets understand this principle far better than those with deep pockets. So, start small and reinvest your winnings. That way, you’ll be unleashing the power of compound investment, which (with time) is the most powerful money-making tool you can apply to your investments.

2. Your mental attitude

When we look at the markets, it’s easy to see pound signs flashing before our eyes, and to imagine that we can hit it big, with huge winnings, and have a work-free life of luxury ahead of us. Then we hit an obstacle … and we’re completely demoralized.

The truth is that big winners are only for traders with big trading funds.

If your means are modest, and you’re trading with a sensible risk profile, you should be looking for modest winnings. And you should be very happy if your trading fund has grown by a few percentage points by the end of the year.

Realistic expectations are essential to trading success and keeping on the straight and narrow.

If you expect too much, you’re likely to start using stakes that are too high and taking unnecessary risks with your money.

Also, if you expect too much, you’re likely to become disillusioned with trading pretty fast!

Which brings me neatly to the two other essentials you need in your mental armoury: discipline and consistency.

Successful trading requires: simple plans and clear rules that you can follow to the letter. And that’s why a trading strategy – whether it’s one you’ve developed yourself or have bought in – is so important.

And keeping that trading strategy up and running means keeping track of your results, so you can measure just how effective it is, and assess where it requires adjustment. If you aren’t keeping records of your results, then I recommend you download the Trader’s Bulletin journal which will get you started on the right foot. (CLICK HERE to download).

3. Your trading knowledge

It may surprise you that knowledge of the markets comes last on my list.

The truth is that all traders will experience rough patches – whether they are novices or pros. What separates the successful trader from the ones who get wiped out is how they deal with those rough patches – in terms of mental attitude, tracking results, and risk management.

As a much smarter man than me put it: “The only true wisdom is knowing you know nothing.” And I think that really gets to the heart of how traders should approach the markets. The more we think we “know” about how the market will behave – the more danger we’re in of making stupid mistakes.

The best we can hope for in the markets is to recognise behaviour patterns, and gain a statistical edge by using those patterns. To this end, I’m delighted to announce the set-up of the new Trader’s Bulletin Academy – this is a free series of trading lessons that we’re launching on the website, starting from the very basics. You can catch Lesson 1 HERE.  (I’ll be adding more lessons to the course over the coming weeks)

So, keep learning, keep disciplined, and keep plugging away. That’s the clear path to a profitable trading future.

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