Trading is one of the most challenging career paths one can ever choose. You can lose millions of your investment capital, but at the same time, you can make millions in seconds. No career path with this much upside can come easily.

Emotions have no place in financial markets

Emotions must be put aside when you trade, and you must be willing to persevere no matter what negative situation you find yourself in. If losses are mounting, you should be emotionally fit to emotionally absorb and process it all, and then move on.

Furthermore, absolute belief in financial markets is crucial. You simply must believe that you can actually make money in the financial markets—and you must banish any doubts. Seek out appropriate education and don’t give up when the going gets tough.


Emotions have no place in trading. Absolute belief in the financial markets is essential.

Things are a bit different nowadays

The truth about the financial markets is that most people view trading as an endeavor that requires high intellect, and that this capacity must be accompanied by large amounts of capital to invest.   

This is an old-school perspective. Nowadays, things are a little different, mainly because of the technological advancements, which have generally affected and influenced market regulations, leverage and the availability of information.

Trading in the financial markets has become more accessible to investors and the general public. Now, almost anyone can invest in financial markets, be it in stocks, forex or currencies. Better still, the Internet and online trading have made it possible for one to trade from the comfort of one’s home. This has the advantage of giving you full control over your trading account, and it allows you to have the same information that banks have.

Now, almost anyone can invest in financial markets—be it in stocks or currencies.

Are the financial markets only meant for the wealthy?

Large amounts of money are no longer needed to trade. You can start with as little as $100. This has been made possible by the additional platforms and the leverage available to trade with. Almost anything can now be traded, as long as it has value.

Always take precautions when using leverage, and if you do start with a small account size, consider limiting your risks in proportion and not exceeding 2% loss on any particular trading position. That is, if you start with $100, your loss should not go beyond $2 on any given trade. The same applies with profits. In short, you should not expect to make a lot of money when trading with small amounts.    

A concept known as stop loss is used to limit your risk. We will explore this term and concept in a different module.

Being smart is the key to making profits and avoiding any unpleasant setbacks. Capital preservation is essential for long-term success. A profitable trading strategy cannot be implemented if there is no capital to go with it.

Be careful when using leverage, and if you do start with a small account size, consider limiting your risk in proportion

You don’t have to be a rocket scientist

When it comes to financial markets, intellect can actually be your downfall. What you must have is emotional intelligence, which is much different than intellect. A strong emotional intelligence helps you to keep your emotions in check, and stops them from clouding your judgment or decision-making, especially when you are faced with a stressful situation.   

Here is an example of when intellect may become a downfall: Most intellectual people tend to be right in their daily lives, and this may provide them with a lot of ego reinforcement. So, when things go wrong when they trade, they find it harder to accept loss.

This fear of being wrong prompts some heavily intellectual investors to hold onto their stocks when they shouldn’t. In turn, they incur bigger losses than they should. In some cases, they end up wiping out their entire trading capital. Some professional traders even seek psychologists to help them control emotions.

A strong emotional intelligence helps you to keep your emotions in check, and stops them from clouding your judgment or decision-making.

What About Online Brokers? Are They Reliable?

One of the popular and most cost-effective ways to invest in the financial markets is through an online broker. However, you will most likely experience some kind of an issue with any broker you choose. Some of the frequent issues include the following:

o   Price slippage

o   Broker platform crash

o   Margin issues

o   Prematurely executed stop losses

o   Account withdrawals taking longer than expected

Brokers are out there to make money, just like any other commercial company. They sometimes make mistakes or have platform issues. Be on the lookout and react quickly when such issues occur, for they are sometimes overlooked or missed by traders.

Brokers will usually correct these issues quickly, as they may become liable for a trader's loss. When you are choosing a broker, a good approach is to ask yourself, “With which broker will I have the fewest amount of issues?”.

Take your time when choosing a broker, and research the broker fully before opening an account.

Don´t be fooled

Many websites and brokers offer a 100%-success guarantee. Some even promise that they will double your trading capital in a few days. You will hear traders on blogs and websites stating that they have made over 100% returns in a few weeks.

Yes, it is completely possible to achieve such a feat—but don’t be fooled. The same traders may also lose millions over the long run.

Enticing offers of these kinds are very convincing, and most traders (especially the newbies) will go to the extent of leveraging a larger percentage of their trading accounts. This is risky, since a slight movement in the market could wipe out an entire trading account.  

The reality is that professionals and financial institutions consider a successful year to be one when they make 20% returns on their initial investments. So, it really depends on how much initial capital you start off with. If you start with $10,000, a profitable year could give you a gain of about $2,000.

The reality is that professionals and financial institutions consider a successful year to be one when they make 20% returns on their initial investments.

Bottom Line

The truth about the financial markets is simple—you can make millions and you can lose millions. The main difference between the two is what you know, your trading experience and how you handle your emotions.

Full awareness of this information will help you become more confident when approaching the markets. Trust your instinct. But always remember: your instinct is mainly influenced by what you know and your previous experiences.

Summary

P

Emotions have no place in trading. Absolute belief in the financial markets is essential.


P

Today, almost anyone can invest in financial markets, be it in stocks, forex or currencies.


P

Be careful when using leverage, and if you do start with a small account size, consider limiting your risk in proportion.


P

A strong emotional intelligence helps you to keep your emotions in check, and stops them from clouding your judgment or decision-making.


P

Take your time when choosing a broker, and research the broker fully before opening an account.


P

The reality is that professionals and financial institutions consider having a successful year to be one when they make 20% returns on their initial investments. 

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