Steve Ruffley gives insights into day trading – the way he makes an income.
I became a ‘time billionaire’ many years ago. Having the freedom to do whatever I want, whenever I wanted, was always more important to me than money.
That said, you need a good job to fund the freedom, don’t you? Not necessarily.
I decided a long time ago that a job was not for me. Why go to an office nine to five to make other people richer? So, I don’t. I’m a trader for a living.
Over US$5 trillion is traded every day, or about US$220 billion an hour on the foreign exchange markets alone, not including the stock markets.
Do you need to have worked in finance?
The finance world is broad and, although a financial background may help you, I find it’s mainly a hindrance, because trading is not investing.
With an investing mentality, everyone wants to be right. Stocks will go up, Bitcoin will go down.
In trading, it’s about being right at the right time, trading within the long-term view that people have. For me, the people who know the least about investing have the best chance of becoming successful traders.
What are the skills you need?
Trading could be another income stream for you, too. There are two main things you need: time and capital.
Being a successful trader needs discipline. You can make a lot of money quickly, but you can also lose it quickly.
As with investing, you take a view, you invest, and you wait. With investing, you wait days, weeks, months, even years. You have to wait to see any potential return.
In trading, this can be hours, minutes or seconds. There’s very little wait. However, if you’re not patient and disciplined, you’ll over-trade and invariably lose money.
Look for value. This is the key skill any day trader needs. Where is the money to be made, is it buying low or selling high? What in the short term justifies a high or low value? This can come from the price, the related markets, the news, the technical aspects.
There are no real rules in the very short term, so the ability to instantly assess relative value is a key skill.
Perseverance is also crucial. You have to keep at it. There will be highs and lows, but if you don’t stick at it, you’ll never make it. People are always searching for ways to get rich quick.
Risks and downsides
There are many risks and downsides. The main one is losing money. And as it’s not investing, and you’re leveraged, you can lose it very quickly.
The other problem is that you can lose more than your initial investment. If you don’t use stops and a market is changing, if you’re on the wrong side of the trade, you can lose more than the value of your account.
This happened to traders in 2015 when the Swiss government removed their peg from the euro. People who were on the wrong side of the trade had to pay the difference back to their brokers.
For companies like Alpari (UK), it was the end. It was forced into insolvency when its clients couldn’t cover the loss.
Learn about yourself
Trading requires patience and time. You don’t need to spend all day in front of the screens, but you do need time to invest in your own understanding. This does not mean becoming an economist.
A lot of traders spend all their time looking for the holy grail of trading set-ups, working on the idea that if you know more, you make more.
The reality is you have to understand yourself and how you interact with the markets. The more you understand yourself, the better a trader you will likely be. That can take time. It can take a lifetime.
Published 29 February 2019
This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.
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