Trading and Financial Freedom

The great majority of people, who enter the world of trading the stock markets, think that they may find financial freedom by trading.

The problem is that 99.9999% of that people will never have financial freedom as a consequence of their success trading the markets.

However, the number of traders longing for that is bigger than ever.

Trading financial freedom

The indisputable fact is that most people, who attain financial freedom through the financial markets, are those who promote them, not those who trade them.

When we start trading, we dream of being the best trader and find the Holy Grail of dominating the intra-day moves.

There is a huge industry that exists to encourage the candidates to trading.

Dealers, Market makers, brokers, coaches, systems developers, mentor, account managers, programmers, et cetera, who do not stop preaching the message of profitable day trading.

Financial freedom day trading HFT

In this way, the great majority of people believe these fantasies that financial freedom can be achieved through frequent trading. After all, we are in the Era of High-Frequency Trading (HFT).

Everybody is willing to join the ranks of High-Frequency Traders.

The problem is that it is not as easy as it seems.

The main business of HFT is market making and arbitrage.

The HFT firms make the most money from their liquidity providing business. They are providers of efficient day trading that is done by their “customers”: the “wanna” be day traders.

It is those millions of traders who make possible the good business of so many prop firms or even binary brokers. Two extreme examples of market making, but in essence not very different.

Those who approach the world of trading should understand that they are not going to achieve the magic recipes of day trading mastering by trading in the retail side of business.

In day trading they are guaranteed to lose almost all of their accounts.

In leveraged swing trading, the “death rate” is big, but at least, you have a chance there.

Financial freedom trading Forex and Stocks

Normally, nobody who has less than half million $ or € can say that he makes a living out of the stock markets. And, even so, there are not many people who have that amount and make a 20% average profit every year.

That is why the first step to reach financial freedom is to build up a good capital. But, if we are able to make $500.000 without the stock market, would not have we reached financial freedom already?

Almost nobody is going to make a living out of trading without previously accumulating a nice capital base. Then, you can live out of dividends or speculative trading in a professional way.

Jim Rogers and George Soros did not reach financial freedom starting with a $2.000. They did it by managing customer’s funds for many years and collecting good commissions.

When they had built their capital, they could trade for a living.

That means, the stock market is not the easiest way to financial freedom if we start with little accounts (less than $500.000).

Most cases, even those who start with a big account will end up going bust due to lack of experience.

The best Hedge Fund managers make a 10, 20 or 30% annual return on average during some years.

Why would we make much more than them?

Even if we managed to make a 100% return per year, if we started with $5.000, it would take us many (10) years to reach financial freedom (remember that the tax revenue is going to rip us off during that process).

How to Achieve Financial Freedom with the financial markets?

To reach financial freedom there are other ways much more likely than through trading our own capital.

When we start trading our objective should be learning and not losing too much. If we are lucky we will have learned enough for the day we can have a big capital to manage.

Financial Freedom is more easily reachable by:

  • Like Jim Rogers or Soros. If we are good traders and manage customer´s funds. This is only just a few can do.
  • Own your own web related to the financial markets and promote any service or product there.
  • Programming trading systems. Although, I have to say that 99% of systems in the market are useless. Some of them are even pure scams. If anyone is interested in developing automated trading systems, I think swing automated trading is the way. Just like William Eckhardt did. Just forget about day trading.
  • Being a mentor or a coach if you are a good trader. There are also cases of people who sell courses that are scams.
  • Opening your own market making or dealing agency, whether it is a forex, stocks, CFDs or binaries broker, or even a prop firm. It is not easy to do this, but some ex-employees of brokerages always manage to create their own dealer firms.

There are more ways surely. But, the general idea should be clear: the way to financial freedom is to start your own business, whatever it is.

Financial freedom business

The term freedom could be deceptive since we will never be free of our commitment to our business.

The same can be said about the term passive income since there is no such thing as passive there. The only passive income is when you have an inherited one.

When someone builds up a “passive income” is through extremely active activity that is called entrepreneurship. And, even when someone has achieved to build a “passive income”, that income has to be constantly controlled in an active way.

Whoever wants to reach financial freedom, not depend on a boss, and have his/her own timetable would do well not to consider trading the financial markets as the direct way to it.

The financial markets may provide with a base that we can use to reach it by different paths.

Trading is the most difficult one.