Think Like A Trader Blog

Thursday, 29 October 2015

'Professional' Traders Who Don't Make a Living from Trading

Reading Time - 5 Minutes

This is a BIG problem in the trading community. What makes it all the worse, is that it is so difficult to spot, especially if you’re new to trading… And even when you’ve been trading for some time!

So what do I mean by ‘professional’ traders who don’t make their living from trading? Quite simply, these people - and some of them have become quite wealthy using this tactic - make the vast majority of their money from selling courses, seminars, one-on-one training, trading rooms etc. If all of that dropped away and they were left with only trading as an income, they would go broke.

This is very dangerous because they advertise themselves heavily over YouTube, websites, blogs and every other medium they can think of. People get lured in and think they are joining something which will earn them a living ‘once they get their account up to £250,000’ or something equally crazy.

So how do you spot these people? There’s a few methods you can use to figure out who isn’t really making their income from trading (they are most likely profitable at trading, but not enough to live on).

The first one is their advertising. They advertise their services ALL the time. This could be the annoying YouTube adverts that play before your video or it could be traders who plug over and over and over in their actual videos about how well their clients are doing. Some of them will say things to entice you like ‘I don’t need more people in my room, but I’m going to give this offer right here anyway…’

The second one I see all the time. Traders will promote themselves on HOW MANY PIPS THEY MAKE. This is a big no no for anyone who understands trading and has been trading long term. You shouldn’t care if someone makes 500 pips per month or 1000 pips or whatever it may be. The higher the timeframe, the more pips you are likely to win at any trade. But more than that, if someone is risking enormous amounts of capital to make these returns then it isn’t a sustainable business plan. What is much more important is – Return On Investment. This figure will show you in a percentage form what they are returning on capital per month. So if the account is £10,000 and they make £1,000 for the month, then their return on capital for the month is 10%

The very best returns, from the very best traders, are 20% per month but this will likely drop lower as the results average out over the year. Return on investment matters, NOT how many pips someone makes.

Thirdly you need to know the risk they are taking per trade. Professional traders wont risk more than 2% per trade. They just wont do it, because they know the risks are too high. So if someone is telling you they’re making 1000 pips per month, or perhaps 15% Return on Investment, but are risking 10% per trade then guess what – they have no idea what they are doing. One bad month will destroy their accounts.

Fourthly, for the real con artists, they will do lots of YouTube videos or have plenty on their website evaluating markets. They will take you through their system pointing out all of the winners but none of the losers. There will also be very little proof – think live trades, P&L info etc.

Hopefully this helps you guide your way through the minefield that is sadly out there. I fell for lots of the rubbish on offer at the very start so don’t worry if you have also.

If you want someone as a mentor or for accurate information then look for the ones who provide the proper information. Lots of people have become rich from teaching trading but a lot less from actual trading itself.

I hope you’ve had a great trading week!

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