In this article, I will be sharing how I successfully began trading at home for a living! Here’s the first part of my trading plan for beginners.
This is no financial advise, all the content and the ideas present in this page and all the other pages of the website do not guarantee financial success and may lead to a loss of your money. You should always do your own due diligence before trading or seek professional advise.
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The number one trading strategy for successful traders
Before you begin putting your money at risk, it is essential to adopt the right mindset towards the exchange and your capital in general.
I am sorry, but if you were looking for the quick way, a recipe or a special hack that would unlock the golden path to becoming filthy rich – with no effort or retroactive effective dates whatsoever, then this article is not the one for you.
So, if you are still interested in acquiring successful trading strategies, it is time to find out how to do so in a nutshell:
Treat trading like a business
Without this, it doesn’t matter what you do in the exchange, the odds will never be in your favor; you will just end up gambling rather than trading (investing or speculating), as opposed to making money.
What do I mean when I say to treat trading as if it was a business?
Well, firstly, it is important to note that this is a proper business if you want to be a professional home trader – and I have written ‘professional’ in bold for a reason, otherwise, it would simply be considered a hobby, and not a business. Regardless, you should treat this profession seriously if you want to make any substantial profit.
Successful entrepreneurs are very good at knowing their numbers!
You would be surprised to know how much studying and preparation goes behind launching a fresh start-up business or a new product being launched in the market – at least for those that ultimately become successful.
The same should be said for trading, seeing as there is practically no difference. Entrepreneurs need to know exactly how much money enters and leaves your account, then use this information to calculate, then compare all the potential profit with their costs.
Every action that you take should have a purpose towards your goal and every money that you intend to spend (or move to buy or sell in the exchange) should be thoroughly studied. When you run a business, you must earn a certain amount of money within a given period of time, even when you are investing or speculating (which is what I am doing) in the exchange, you must be profitable and/or attempt to lose the least amount of money (if any) when the set amount of time has passed, or when a certain loss tolerance is reached.
The most important thing to acknowledge is that running a good business takes time and practice.
If trading was a video-game, you would eventually become a winner… Though you have to consider, after how many hours of practice and lives lost?
This same perseverance should be applied to any new things you do, the only difference being that you should (figuratively speaking) try not to ‘die’, as you won’t be able to respawn and restart like a video-game.
The Number One Trading Strategy For Successful Traders
- Trading is not an effortless and safe way to make money.
- Trading is a proper business that requires a business strategy.
- Successful traders know their numbers!
- Trading has a learning curve.
Trading vs gambling
Trading vs gambling
- The definition of Gambling mathes what is done in trading.
- The definition of Gambling also matches with what is done in business.
- Gambling doesn’t allow to manage capital, Trading does, if done properly.
Trading compared to other business models
Once we understand how to invest in the exchange for a profit, it could be a good time to consider quitting your 9 to 5 job – since trading should be treated as its own serious ‘business’.
I would like to compare this notion with other models that I have had the opportunity to explore – some of which I am currently conducting.
I must admit that trading is still my favorite business model, despite it appearing to become rarer since it seems to be based solely on luck. Personally, however, trading for me is the least stressful of all!
Let’s talk about selling on Amazon; there are people out there making billions on Amazon, so please, consider the following content as my mere feelings towards it.
Amazon allows essentially 3 types of models:
Private Label involves dealing with manufacturers (and possibly scammers) in countries where prices are insanely low – a prime example of this being products from China. This kind of procedure requires you to pay an upfront sum of money (usually thousands of dollars!) to have a product exported to your country or target country. Paying amazon to advertise your product should be simple a step in the process, this allows you to sell for very low prices until the product ranks (without the promotion being necessary), so you can start diminishing such costs and increase the value of the product – without which, one would not sell anything, resulting in the loss of a great deal of money, both for the manufacturing and storing of products at the Amazon warehouse.
Once your product starts selling well, you can increase your prices and reduce the advertising costs to start making money from then onwards.
During this period of time, dealing with negative reviews and refunds can be very taxing on one’s feelings, without mentioning what other competitors can do to your business which is very scary if you have invested all your savings on this model.
Getting in contact with a manufacturer that you don’t know or cannot even visit in person has a multitude of costs and risks, as you never know who you really are dealing with – and if you are not an expert in writing contracts with them, there is a high probability that you will end up losing money, and quite frankly, even if you are an expert, the chance of losing money is still very much present.
Exporting products also costs money, especially if there are customs issues arising, which would not only cause you to be charged the usual taxes and fees of exportation, but could also result in a loss of business, with the possibility of batches being delivered with a delay – an extensive delay may result in your stocks running out, hence halting any money-making; this may also have a detrimental effect on all the promotion you did before (to advertise your product).
However, the worst complication you could face is if you finally have your product in the designated country, at the warehouse, ready to be sold; then somebody, richer than you has patented your own idea has now prevented you from selling. This could be the same manufacturer you trusted and assigned with the production of your goods, who simply starts selling your products after you finally reached the stage of generating income – this should be an acknowledged threat since manufacturers can actually market these items at a cheaper price, after all, they are the ones making a profit from your purchases, meaning they could absolutely sell the products for less, even benefiting from your advertisement payments!
So, this is definitely not a hassle-free business model at all; the most noticeable thing is that sometimes it doesn’t even matter what you do, and rather depends on how much money you can afford to lose, or how much you can spend to protect yourself from any possible threats in this industry.
- Create your own brand under your own label.
- Find manufacturers in countries with low cost production.
- Export products from manufacturer country and import them in the destination country.
- Sell your product for a loss until the product is known and gradually start reduce costs and increase your margins.
- Can make you millionaire
- Manufacturers can be reached via internet with no need to travel
- You need to deal with other cultures in foreign languages.
- Chances to be scammed as agreements are done remotely.
- Several potential issues from the production until the sale.
- You need a big capital to invest.
Arbitrage is much simpler; it is basically the process of re-selling goods at a higher cost. These products are usually already well-known, and something that you are more than likely to find from wholesalers and stores in your own country.
The arbitrage business would probably never make you insanely rich, but it is also the least stressful and risky out of all the options.
Regarding Arbitrage, I can only say that having to deal with Amazon and customer returns is not always a pleasant experience, as well as handling people who are completely incapable of calculating profits, which eventually leads to them competing with you in regard to the same product – this can become an extremely difficult and frustrating situation as they are selling these below market price (somebody has tagged these people with funny nicknames).
Globally, it is a good business model if you know what you are doing, but still, there are many factors out of your control that can affect your business, or at least your mood.
- Retail products manufactured by other companies.
- Find wholesalers or retailers with good deals and resell the products that you purchase from them.
- You don’t need premises as you would use Amazon’s warehouse and their fulfillment center.
- Doesn’t require a big sum to begin selling.
- Relatively easy.
- You don’t have a unique product, expect other competitors selling the same products.
- Your only leverage is price, sometimes other competitors can go lower than you because of their deals with the distributors.
- It’s not extremely profitable as private label.
I have no clue how drop-shipping works in detail, because I don’t have any experience with it, but it involves selling something that you would never see, hence you are unaware if there are defects, if it is exactly what you thought you were selling.
It is indeed an interesting business model as you basically only receive orders, forward orders and take money for that, but it involves investing in advertisements and an e-commerce website to say the least, the only problem is when one of these products is faulty or unwanted, in that case you must absorb the cost as you would refund it to the buyer and it is very unlikely that you would like to return it to the Chinese (very likely you would buy from there) manufacturer, plus this business model is mostly profitable in the USA and if you are not in the USA you would not want the returned product to be shipped back to you.
- Sell products that you don’t physically own by having the manufacturer shipping the products directly to the customer.
- Find a niche that you want to sell, find the manufacturer in a low cost country.
- Creating an e-commerce platform through which you can reach your customers, and fill it with the products sold by the chosen manufacturers.
- Pay for advertisement of the products that you want to sell.
- Very low initial costs.
- No need of premises, or offices, this business can be ran from everywhere.
- High profits potential.
- You don’t see what you are selling and don’t know the quality of the product even if you buy a sample from the manufacturer, because you never touch the product that the customer receives.
- If you sell in a country where you don’t live, you would never be able to inspect the returns of your customers.
- Delivery times are usually incredibly long.
My personal preference
Definition of speculator
A speculator is somebody who wants to exploit the market for higher profit, yet at a higher risk. In reality, there is a very thin line between an investor – who is usually alright with making smaller profit percentages (facing less risk), and a speculator – who may very likely start an investment while investors would leave it (more risk).
I have always been a blend of both, and honestly, you will probably end up being like this too. I have always taken opportunities that present themselves to me, but I tend to be an investor otherwise, closing a position when I am happy with the profit, before trying to enter with very low risk – which is why I don’t do much intra-day trading and prefer to leave my investments for days, weeks, or sometimes even months, as I enjoy my free time, instead of constantly waiting for a signal to buy or sell something.
Definition of Speculator
- A speculator is willing to take more risks.
- An investor is ok to make less profit for less risk.
- A speculator may start an investment right when an investor would be ready leave the investment.
What is the exchange in reality?
Even though I believe it is nearly hassle-free, I don’t want you to think that this is a safe place. Actually, while with other business models you may be able to get away with some of your invested money (maybe even the majority of them), even if things go terribly wrong, with the exchange, you truly risk losing EVERYTHING you have invested in.
I have categorized in 4 main groups, the types of people in the exchange:
- People who think to be smart
- People who hope to be lucky
- People who make informed actions
- Filthy rich entities who determine the trend (with exceptions that we will discuss later as the content grows)
Now, which category do you want to belong to?
I would certainly love to be one of the ‘Filthy rich’ ones, but unfortunately I am not, and I suppose that if you are here, neither are you.
Between the remaining three, I certainly want to be the informed guy!
Wouldn’t you agree?
If your presence in certain securities (regardless if they are cryptocurrencies, bonds, currencies, stocks, or others) is massive, you can influence the market in several ways, one of them allowing you to sell a huge amount of your securities, which can potentially cause a ‘domino’ effect, leading the products’ value to drop; another is pretending to sell a huge amount of your security, but we will go over this topic a little more in the future ‒ the reaction would be the same however.
Whether you are selling securities or are pretending to, any negative news over the exchange can be spread throughout the media, and/or invoke panic amongst traders, who will subsequently close their position voluntarily or not (and this will be covered in a more advanced article), leading to even more sales panic, and eventually, a huge drop of security in question value. This results in a ‘domino’ effect, since you start to think your security value is too high like other sellers.
Bitcoin is good example, and is a security accessible to those who need to find an exchange. If the exchange is reputable, this diminishes the chances of a scam drastically as you can’t buy or sell false bitcoins.
Our task, as informed traders, is to spot whenever big investors (usually called wales in jargon) are about to sell or buy something, and therefore take action to receive a little of the profit, almost like ‘little dolphins following the waves’.
Let’s not forget that the exchange, in a nutshell, is a place where basically everybody tries to take each other’s money.
What is the exchange in reality?
The exchange is made by the following categories
- People who gamble becasue don’t know what to do
- People who make informed actions
- The exchange is the place where everyone tries to take money from everyone else.
Emotions involved when trading
When you first begin trading in the exchange, you will inevitably experience the terrible feeling of losing money, and unless it’s not YOUR money, these emotions can really weight you down.
Even if this is the shortest chapter, I really want you to try and imagine what I am trying to describe. I am sorry, I am not a professional writer, but I can ensure you that such feelings have tested my coronaries!
Before you embark on this exciting journey, I think it is only fair to let you know that you WILL lose money ‒ it is simply unavoidable; and at the beginning (if you are resilient enough to continue) it takes a huge toll.
I remember when handling a fraction of the money I am playing now, and spending my whole day and night watching, growing anxious if things were not going as expected. I fell in debt with my wife since I was taking family money, and was foolishly losing them, as she had agreed that I could take a part of our hard-earned savings and play with no experience at all.
Now, I can go to sleep without thinking about what I have purchased (I, however, still am concerned when I sell for a profit, but I will explain this in the future). It takes time and it’s really tough to see your money vanish. These emotions can be controlled with time and experience, almost as if they were a muscle, you would be able to train them whenever you went to the gym (metaphorically speaking).
Unfortunately, despite there being possibilities present to trade with no real money (and no real victories or defeats), this would only entice you to play with real money as you won’t get to face these feelings without risks, hence you would not be shaped by this experience.
My recommendation is to change the way you see money.
If you are desperate for money, this type of work is probably not ideal for you ‒ yet if you are willing to see money as a tool to generate more income, and can develop an emotional separation from it, I guarantee that you will be able to train your responses much more easily.
If money was a hammer, you would be hammering your fingers a lot in the start, but then, you learn how to use it ‒ and even if it slips and still hits your finger, you will be able to dissipate the stroke as it wouldn’t be as painful.
And with that, we can conclude this article. If you made it until here I sincerely thank you; it was a long one, but I hope it was worth it.
Please, bear in mind that I am not an expert trader by any means and am most certainly not a financial advisor. What you have read today is my mere opinion and lessons I learnt during my one year experience; doing what I did may or may not yield the same results.
Before you decide to start this path of investment, you should really have made your own due diligence!
Emotions involved when trading
- Be prepared to lose money.
- Losing money requires lots of emotional strength.
- You should change the way you see money, when money is seen as a tool things change in your favor.