Ah, the 1% … that global elite who are symbols of unfairness and much reviled for their excesses and their tax-dodging …. We may like to sneer at them, but most of us would also like to be a step closer, up the ladder towards their fat-cat lifestyles.
So, what can we do to turn our fortunes stratospheric?
If you know me at all, you’ll know that I’d rather gnaw off my own arm than try to convince you to get involved in ‘get rich quick’ schemes, or to tell you that you can make a fortune from trading within the space of a few months.
But, much as I have to be the voice of reason, I also have to accept that I spend a good deal of my own time and money investing in the markets, and, the truth is, I’ve completely bought into the dream.
There aren’t many ways that people with modest means can rub along with the ‘big players’ … but spread betting gives us an incredible way-in to a different league of wealth-building.
Because of its use of leverage, spread betting allows us to take a small amount of money and take financial control over a much larger sum. So, you don’t need a huge amount of money to get rich from forex.
While I know the last paragraph to be true, I also know it to be a pretty dangerous statement
But I believe it’s important to be honest about our aspirations, and what we believe we can achieve from trading.
Yes, I can be sensible and practical, and talk about risk profiles and drawdowns … but the fire in my belly that gets me to the screens each morning is the belief that there’s serious money to be made.
I also know that I need to temper those thoughts with good money-management and achievable financial goals.
It’s a paradox right at the heart of every trader – how we need to be inspired about the future that trading can build for us … while also being meticulously disciplined, patient and cautious.
So, what are we aiming for?
Out of interest, I quickly Googled some advice on the internet to the question: “How do I get rich from trading Forex”.
I know … I was asking for trouble.
There was a lot of talk on the internet of aiming to make “just 1% a day” or “2% a week”.
These sound like such modest goals. That must be reasonable, right?
But that’s the kind of logic that leads someone to borrow money from a loan shark at a “very reasonable daily interest rate”!
If you had £10,000 and made 1% profit each day, and compounded those winnings on a daily basis … after a year, you’d have over £130,000. That modest “1% a day” equates to 1,300% annually (and that doesn’t even include weekends!)
So, where’s the reality?
The truth is that there will be days where you make 1% … there will probably be days when you make more than 1% … you might make 10% gains in your first week … you might be 20% by the end of your first month …!
But there will also be drawdowns … days where you lose money … and those can run into weeks, even months. Even the most celebrated investors and hedge-fund managers have bad years.
Those sunny ‘all you need to do is make 1% a day’ optimists never mention the dark feeling of a losing run! I suspect the reason why is that they’ve never actually placed a trade with real money in their lives!
So how do we find the balance?
We need to strike a balance between realistic expectations and still holding on to the dream that brought us to trading in the first place.
I always equate it to sticking with a diet or an exercise plan – we just have to keep going and keep the faith through the hungry days, and the dark early morning runs.
The best way I’ve found to keep my motivation may surprise you. It’s actually deeply sensible, and quite dull …
I stay motivated by looking at longer-term results, rather than counting my winnings at the end of the day. And it all comes down to keeping good records of our results. (I’m afraid I’m talking about spreadsheets!)
Just last month, I felt with my Heikin Ashi Mountain trading that I’d taken loss after loss … I felt that I was getting nowhere. But come the end of the month, when I tallied up the results on my spreadsheet, I was up by nearly 7% in October. A very respectable result.
(I won’t insult your intelligence by compounding a 7% monthly return over 5 years – it’s a LOT of money. Because, as we smart traders know, we’re not going to make 7% gains EVERY month for the next 5 years.)
Without good record keeping, we can’t see what’s working and what isn’t. It also allows us to look at the big picture of our long-term profitability – rather than just adding up our daily takings, like a gambler at the table.
But sometimes, if we’re struggling to stick with the program, a bit of dreaming … a bit of forward-projecting with compound interest … doesn’t hurt to keep us motivated and focused.
To enjoy more content and get it faster Follow @TradersBulletin