Do we believe that it is easy to become a multimillionaire Forex trader using 400:1 leverage?
Why do we believe that so easily?
Well, because everybody wants to be a millionaire and when they tell us that you can achieve that through trading Forex, CFDs, futures or binary options there is no way you can prove they are telling you lies. Why would it not be possible to be successful day trading the markets?
After all we are humans and try things one time after another.
The problem is that reality is not really like that.
It is all part of an illusion to attract hundreds or thousands of people to an activity in which the probability of succeeding is close to zero, not to simply say zero.
The problem that the majority of so-called traders have is that they try to succeed in this world of trading by trying day trading since the beginning in a very aggressive way.
Some of them use indicators and think that with some paper trading and supposed profits they are ready to make a living in a few months or years.
Others think that by buying systems – of which there are thousands out there – that promise 300% annual returns, is the key to success.
People who have saved up 10000 euros or dollars in a couple of years open a futures, CFDs or binary options account and follow the merry-go stories they have read about in this gigantic world of trading illusions.
It does not take long since they realize those stories seemed not to work for them and their money.
What is the solution to this?
There is no such solution, actually, at least not from a day trading perspective.
You are not going to make 400% annually in average for 20 years.
Do you understand?
As in other aspects of life people usually learn the hard way. This is actually something good, since after all it is by experience that true knowledge comes. Those losses have their educational value.
After losing so much we will become more cautious.
Many of those who try the day trading strategies end up abandoning the markets forever or simply keep trying again and again.
There are very stubborn people in this world always.
Others learn that the good money comes in other ways and start selling courses, signals or similar things, something I have no objection to.
The problem is in the fact that many of those lie to us saying things they know that are lies, like selling a system that promise a 20% return monthly. Many of them fail to mention that those returns were achieved in simulated accounts.
Other people simply go to longer time frames like medium term trading, doing less frequent trades and using much less leverage.
This last method is more advisable.
It is even better if you just do the typical “buy and hold”, buying a group of stocks and maintaining them for several years or decades.
Not many systems, either from the trading or the investing perspectives will beat the last concept of “buy and hold” after 15 or 20 years.
However, do not expect to become rich doing so.
Also you can even see periods of decades where you will not win so much in certain conditions or countries, like the three lost decades in Japan from 1989.
The advantage of trading small accounts in day trading
So, what should we do if we are into day trading?
The best thing to do is using less money than originally planned.
For instance, let us say you have USD 10,000.
So you do not use them to day trade, but simply 1.000 of them so when you end up blowing the account you will still have 9,000 dollars left.
On the contrary if you tried to do the 10,000 since the beginning you would end up with nothing and with no capital to start over.
This is very important for the average joe who finds it difficult to save up money.
If you are Cristiano Ronaldo or Lebron James I suppose there is no need to worry too much.
Oddly enough, it is the small traders the ones that take bigger risks normally, since they want to become rich quickly and abandon their poor lives.
That is why bigger traders take less risk normally.
They are already rich.
That is why in the trading statistics you will find more big traders surviving than small.
If you have just GBP 500 you will bet the house day trading the market.
You will not last for too long though.
However, it is true that when you are trading big amounts the leverage is severely reduced in most of the brokers.
500 dollars accounts have different leverage than 500,000.
Millionaire day trader
As an example let us suppose you have GBP 5,000.
Instead of opening a 5,000 pounds account in a CFD broker you just open a 800 one.
When you have lost 500, for instance, you will still have 300, and adding another 500 you can try another strategy if you still want.
Once we kiss the floor again we will have, let us say, 300 pounds.
After that we should realize there is something wrong with expected “good” systems.
At that point you should have 4.000 pounds left.
It is a big loss but not as bad as if you had only 1.000 or so.
In the second case the pain will be even bigger and our learning curve will be almost the same as the former.
Doing day or frequent trading is not something we should regard in a light way, nonetheless many of us do.
The best, as with almost everything in life is start cautiously and go step by step.
Original article: ¿Cómo llegar a ser un trader multimillonario haciendo day trading?