Last weekend I set up the swimming pool in the garden for the kids.
I call it a ‘swimming pool’, but that’s rather generous. It’s one of those glorified paddling pools, about 3m across, with a healthy layer of insects floating on it, and a temperature akin to glacial meltwater.
However, the kids happily strip off after school (and sometimes before school too), to leap into it, and can only be coaxed out when they’ve turned blue.
It’s a kind of reckless abandon that most of us grow out of. And that’s a good thing when it comes to making financial decisions.
However, it’s easy to let a natural caution keep us on the sidelines forever. I frequently speak to ‘traders’ who aren’t trading at all, either because they’ve tried and been burned, or they’ve never quite managed to take the plunge.
So, how can we get involved with trading, without doing something daft?
“It’s a mug’s game”
“You’ll never make a penny from it.”
“You might as well waste your money on scratch cards”
“You’re only making the broker rich”
Have you ever heard these kinds of comments about trading?
I know I have. When I began trading, I can remember friends and family making well-meaning comments like those. And (in my darker hours), I’ve sometimes wondered if they were right!
But the reality is that the only way to make money from trading is to actually start trading …
But what about all those worries and concerns that have been holding us back …
I don’t have enough money
Having no money may seem like a tough one to argue with – and I’m certainly not interested in persuading anyone to trade with money they can’t afford to lose.
However, if you’ve no spare money to be trading with, then it could be the best thing that ever happened to your long-term trading career.
Most traders start out with a small bank … they make a few mistakes (as you’d expect any novice to) … and they lose that money.
And often that’s the end of the story.
They’ve been put off.
If you’ve no money to trade with at the moment, then you can learn the ropes without risking a penny.
I’m talking about demo accounts here.
Some people are a bit sniffy about demo trading. I really can’t think why. They’ll say that can’t learn the cut and thrust of trading without having the pressure of trading real money.
So what? There’s more to trading than just the psychology of winning and losing.
With a demo account, you can test out strategies … you can hone your skills with technical indicators … you can learn how different forex pairs behave …
And when you do have some money to invest, you’ll have already and learned from many (well, hopefully not too many!) mistakes.
And there’s no reason why you need a huge sum to invest. Many spread-bet firms will allow you to start trading with very low stakes – just be realistic about making money slowly.
It’s just too risky for me
New regulations mean that spread-bet firms will soon have to advertise exactly how many of their clients make or lose money, but the predicted figures for traders losing money is between 80 and 90 per cent.
So, we shouldn’t be under any illusion that trading is without risk, and that many traders are left out of pocket.
But risk is everywhere – I’m not just talking about crossing the road here, I’m talking about big financial risks that we all take, day in, day out. Stuff like buying a house … taking out insurance (if you’re not going to claim, have you wasted your money?) … booking a holiday to somewhere new …
Starting up your own business always involves risk – financial outlay, plus the time you put into it. Put into context, I believe that trading (as long as you start small) can be one of the best ways to “branch out” on your own.
Plus, the best thing about trading risk is that it’s very easy to measure – how many other areas of life and business can you say that about?
I don’t have enough time
While there are plenty of people who trade by spending almost every waking moment glued to their screens, watching candlesticks … checking economic data … and generally fiddling with their trades … there are other ways.
First off, there are set-and-forget strategies that allow you to spend just 5 minutes at your computer each day.
There are also trading techniques that use automated signals that will either alert you when you need to check your trading account, or can place the trades for you (I’ll look more closely into automation in future posts, as I’d urge people to be cautious of methods that trade too much on their behalf.)
And finally, there are longer-term trading strategies. As we’ve seen, some of the most successful traders are following longer-term chart patterns. And these strategies can require very little time – even just once a week, or once a month.
I don’t have the knowledge
The best way to learn and improve your trading skills is by demo trading, either with your own trading ideas or with a system someone else has created. But always monitor your results, and stick to clear rules – it’s impossible to learn from our successes and our errors without keeping track of what we do, and the results we achieve.
I’m waiting for markets to settle down
If you’re waiting for the markets to “quieten down” or “get back to normal” – you might as well wait for the sun to burn out.
Markets are unpredictable by nature – and anyone who tells you otherwise, is simply stringing you along.
The only “right” time to get stuck in, is as soon as possible
However, none of this means that you should risk cash before you’re happy with demo trading, and – even then – always keep risk levels low as you build your confidence.
Across the pages of Trader’s Bulletin, you will find enough trading ideas to build a system of your own, or to follow one of my recommendations … start out with demo trading, monitor how you get on.
Don’t let a few losses put you off … successful trading is all about keeping with it and being consistent, and if you’re not risking real cash, or you are staking very low, you shouldn’t need to sweat any losses along the way … it’s all part of the learning process on the road to making some genuine wealth.