Getting Rich Fast from Trading?

Q. I started with £300 and now make an average of £100 pounds a week I have a target of £20 a day with £1 a point...


A: Not sure how I can comment here - what's your background - how much do you know about technicals, how much do you know about fundamentals, what are you planning to bet on (indices, commodities, individual stocks), what's your risk capital?

In any case, let's take a look at what you've got and what you're using -:


£1pp (per point)

20 point target per day (£20)

Now at £1 per point depending on the market although the margin will be no less than half the account, i.e., £150 plus. Assuming a stop loss level of 10 points (half your target) this amounts to 3.3% of your total account (assuming of course that you do not pay any spread and don't suffer slippage) so this inevitably falls in high risk territory.

1 loss = 3.3% of account. Now if you keep the same stop level of 10 points you risk more on each losing trade, if you lessen the stops to keep in line with 3.3% risk-reward ratio then you have a far greater possibility of being whipsawed out of the trade or the winners become less because obviously you have a lower trade value to counteract the stop loss policy.

Here are the factors:

10pts stop

1 loss = 3.3%

2 loss = 3.4%

3 loss = 3.7%

4 loss = 3.8%

5 loss = 4.0% etc...and so on

As you can see this is a very high risk strategy and you could easily end up blowing your account dozens of times before you make any money this way. Honestly ask yourself - How long have you been doing this? How many accounts have you blown? What is your stop loss policy?

Money management should be central to any trading system. Risk management is all about normal statistical variations, and when these hit you in the wrong direction, and you are not covered you will end up wiped out. So long as you understand and accept the risks you're taking and have a plan in place to gradually reduce them as your capital base grows - then there's no problem. Not only that but if you take excessive risk with small sums and win you might think you could do the same thing with much larger amounts and inevitably end up blowing your main account as sure as eggs are eggs.

Q. Is it possible to earn a living from this without any qualifications/experience in this field of business?

I have read in forums that investing just £150 here and there will never really get you anywhere as fees will eat your profts?

A: If you open a spread betting account with just £150 or so, then spread betting is the easiest way to lose your money make riches beyond your wildest dreams...

If you are starting out I would strongly recommend that you start out with small stakes. Whilst learning, you WILL make mistakes. This way, your losing trades won't wipe you out but will still make you take note of your mistakes. Once you have traded for a period of time (minimum 2/3 months) and documented your results, you will have an idea of the stakes/capital needed to make X pounds a week. It is doable to make a living spread betting but I cannot stress this strongly enough - LEARN YOUR TRADE FIRST. My first day 'real' spread betting, I made £750 and was over £2k by day 4, by the end of day 5 i had given back 75% of this profit. This is very common. You need to trade through good AND bad days/weeks to learn your trade. It seems very easy at first.

You mention using £150... that's a pretty small amount. Even at 10p per point on the FTSE, you're not giving yourself much room to breathe with that capital. In these setups where you're risking, say, x to make 2x, the x should be around 2% of your capital. 5% at the most, but that's pushing it in my opinion. So if you have a £150 account you should only be risking £3 per trade (2% of capital). You could be wrong 50 times in a row before you ran out of money. But trading the FTSE at 50p per point, you'll only be able to have a 6 point stop. Even then, you've got the spread to consider, so if it moves against you by 4 point you'd end up getting stopped out. So...maybe put a little bit more cash in the account if you have it and keep the maximum risk on a trade to around 2% of account capital. I'd also recommend that when you're starting out, to focus on longer term periods - like days/weeks as opposed to very short-term trades. Just concentrate on the general direction rather than having to panic about an index moving a few points against you.

Honestly though, if you are just starting out you should expect to take about 2 to 3 years to start making consistent profits. If you're making big moolah within a month, expect to blow out massively within 6 months. Thing is you need to develop a trading style that can cope with different market conditions; which means that you must be able to adapt what you are doing to focus on the market conditions at that particular moment in time. The beginner's luck in stock market trading is the worst kind of luck you can have as it will inflate your ego and you will go in big style. And that's when the market will slap you hard. Getting rich quick is not an option and, if it does happen, it's down more to luck than good trading. Slow and steady is the way to go!

I recall back in the dotcom boom days, people were buying stocks in the most stupid of companies. You could set up Isellmy*** and investors would rush in to buy shares in your company. All dot com stocks soared as people dived into these stocks in big could only go one way, right? And bang!!! Suddenly, stocks plummeted and these same people lost most of their savings...

Remember also that traders who make consistent profits spread betting are also able to trade the normal stock markets with relative ease.

 ...Continues here - How much Time do I need to Dedicate to Trading?

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