Social Media VS Trading Reality

In this Wolf of Wall street era, society managed to produce a whole generation of new breed “Traders”. Based on what they see on the net, many people have the impression that traders promote a flashy lifestyle, wear nice suits and make thousands in less than 5minutes. To an extent that may be true, but if that individual is genuine, the last thing you’ll see them do is consistently indulge others to pay him so they can “Learn how to trade”. Before you get defensive, here’s three reasons why trading is not what you think it is.

1)    It’s not as easy as it looks – Trading is simply the action of buying and selling, this means that anyone that buys or sales is a trader, for instance your local corner shop owner is a retail trader, bet you didn’t think about that did you. Now, the type of trading you see all over social media, is called spread betting.

After seeing a few figures on a screen, or a flash life style, people tend to believe that spread betting is the Holy Grail. This is where reality kicks in, if it was that easy, everybody will be doing it, literally. Spread betting itself provides unrealistic returns with high risk, so in the eyes of sophisticated investors, spread betting wouldn’t be the secret to their wealth. On the other hand, opportunities to capitalise do present themselves on a day to day basis. In order to profit from those opportunities, an individual needs to be disciplined, aware and have the necessary experience. This takes months to get the hang of, so be ready to stay committed if you’re willing to see the results you’re expecting.

2)    Fast money can leave you with no money - In order for an individual to make that amount of money in that amount of time, they implement a spread betting style called scalping. This is a form of high risk trading, which could possibly generate high returns whilst leaving your account exposed to PAINFUL losses. Scalping is not classed as a bad style of trading, but if you’re looking for longevity whilst actually trying to build capital, that won’t be your first choice.

In addition, consistent traders have a risk management strategy that protects them from any source of financial injury, this means that every time they place a trade, they understand how much there willing to lose.

EG. An account with £1,000 could allow you to possibly do £80 per stake. Even if you aim to make £800 (10 pips) from one trade in 5min, some brokers won’t allow you to place a trade without a minimum stop loss. Less say that stop loss is -6, you’re initially accepting to lose -£480 of your money, forget about what your take profit is, every time you place a trade, -£480 is lost if all goes wrong, that’s an entire 48% of your overall investment. So before you want to make thousands in minutes, think about how much money you’d like to lose first.

3)    It’s not for everyone – If you’re looking to get into it, understand that it may not be for you. Characteristics that will allow you to assess if trading is meant for you is your initial motivation to start. If that motivation comes from the urge to make big money and live beyond your current means, you will not last and quit faster than your expecting. This is because your mental environment has already produced impulses that are based on inner needs, and if those needs aren’t met, you now fall in a state of imbalance. If that imbalance is not reconciled, this triggers behaviour patterns that will cause an individual to act out of character and put his/her capital at even more risk. In over words, if you place a trade, hoping to make money, then end up losing, something inside you won’t feel in place, and you’ll have the urge to “make your money back”, thus creating habits that will expose your capital and have you losing more money than you lost in the first place.

"Trading is not a skill you can learn over night, it takes time and consistent dual diligence" - #MG13

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