What makes trading hard?
All right. So lots of reasons why trading is hard and I’m going to give you my opinion. It may not be the best opinion, but it has 11 plus years of history behind it, 15 plus thousand hours of application time inside the markets, teaching, educating people. I’m not going to give you my base upon me, Joshua Martinez experience, I’m going to give you my experience based on feedback of thousands of thousands of people.
Over risking their accounts
A couple of things. Number one, people simply put, they’re over risking their accounts. Success is over time, not one time. When you have the freedom and the ability to invest all your money, greed and temptation are very powerful emotions. When you really believe the market’s going to go one way, it’s really easy to keep piling on the risk.
We don’t think of the risk, we think of all the good things. Think of temptation as like a person. Temptation’s going to whisper in your ear. They’re going to tell you all the good things that can happen. They’re going to let know, Ooh, if you just put on more money, more risks, just keep adding to it, you can make 10 times what you’re normally used to.” But temptation will not tell you all the bad things that could happen either. So ends up happening is people. They get a little bit greedy, they get a little bit tempted, and then what ends up happening is they will invest more than what they should. So therefore, if the trade goes against them, they lose more than what they should. So remember, success is over time. Not one time.
I’m a big believer in a 70-30 split. I think it’s very healthy to lose 30% of your trades, very healthy to try to win 70% of your trades. You’re able to control your risk. What that means is you have staying power. You’re able to cut your losses and you’re able to win because you have a decent strategy. Okay, that’s number one.
Trading the wrong market
Number two, you may be trading the wrong market, and may not really know too much about the market. You may be trading options and really not know anything about the Greeks. That’s kind of crazy if you think about it, because there’s so much involved inside the option side, that you need to be a little bit more sophisticated and I’m just going to say it, you do. Maybe you’re trading futures and you don’t really know the margin changes. You don’t really know how that works. And so you get margin called and you’re not really educated. Maybe you’re trading cryptocurrencies, and you’re just going on the hype or maybe you’re into Forex or stock market, I don’t know. Maybe you’re just picking the wrong market.
For me, I’ll give you my history. I’ve traded Forex for 10 years, dabbled in cryptos for a couple of years, really focusing in on futures last two years, last year and a half really focused in on stocks and options. What do I think is the simplest thing to do? Well, simplest thing to do is just do like buy and holds, right? NASDAQ 100 S&P 500.
And that’s really the two S&P 500 and NASDAQ 100, just put some money in there, let it make money over time. Some years you make the money, some years you’re going to lose the money, but what you’re doing, you’re betting on growth.
A lot of that is just because inflation
The fed reserve naturally is going to devalue the US dollar by 2%. So naturally everything’s going to go up by a minimum of 2%. So that’s kind of like the thing that people have been doing for tens of years, decades, is just buying those symbols and letting it go up.
But there is a different way. And I think a lot of it is just over risking, and so I like to trade futures on the indices. So I like to trade futures on NASDAQ on S&P 500 and on the E-mini Russell 2000 and here’s my philosophy, if naturally those go up on average five plus percent a year, like naturally, and this is how they have a history of naturally going up, I don’t really worry about selling the markets ever. I just don’t. I sell to exit a position, but what I do is I look for low prices and then I like to just buy. Because think about it, the market’s going to go up over time like this, and you’re going to get a minimum 5% move on average and your indices, then just find the lows, buy it, take the ride up, and repeat. Buy low, take a ride up, exit, wait for the low price again, buy it, take the ride up, exit. Just do that. And realistically, in theory, if you do it right, you can make more than 5%. You can beat the market.
And that’s really what everybody’s trying to do, anyways. They’re just trying to beat the market. And if you have history of the market’s going up over time, then just buy the lows. Go to the daily timeframe, find low prices, buy the low, learn some technicals, Fibonaccis, trend lines, buy zones, sell zones, and you really, basically should be okay.
But even people with the greatest strategy in the entire world, they win 80, 90% of their trades, they still lose money. And here’s the reason why. They’re over risking their account. The fact of the matter is if you don’t have staying power, the market goes against you, you lose all your money, you lose all your money. And that’s not a strategy issue. And that’s really what I think is making this a very hard for most people. People just naturally, they’re just emotional. They’re just emotional. And you have to be able to hold a position and you have to be able to take a loss. Because at the end of the day, close your eyes, put a blindfold on flip a coin, guess the direction, you got a 50-50% chance of being right or wrong.
The mark can only go up and the mark can only go down.
Here’s what you’ve got on your side. Markets tend to go up over time. So if you just really look at the S&P 500, NASDAQ 100, just those two symbols, they go up over time. They’re designed to do that. They’re literally designed to go up. For example, the stock market, you buy first and then you exit selling. So you buy low sell high. But if you sell first, you have to exit second by buying, which brings the market back up. And if the market falls too much, guess what? It’s called the circuit breaker. They literally stop all trading to prevent the market from falling. So there’s a lot of rules designed to have these indices to go up over time continuously. Plus the fed reserve de-valuing the US dollar naturally, so that’s going to make things more expensive, which will drive these right back up.
So for me I look at it to where, if someone’s very emotional, they’re over risking, they’re in the wrong market. They don’t really have a plan. That’s going to make everything super hard for them. But you really try and make things simple, got a 50-50% chance of being right or wrong. Markets go up over time. Just find the lows, buy them. Use some basic techniques. Don’t try to make all your money in one trade. Understand you’re probably going to lose three or four trades for every ten trades you place. And you have decent risk management, even if he plays 10 trades and you just win six. That’s all you do, just win six trades. That’s it, just six. Six out of 10 trades, it’s one more than you lose. As long as you have good risk management, you’re going to make money over time. And as long as you can repeat that, you make all the money in the world. It’s silly to say that, but math is math and formula is formula.
So why do I think trading is hard? I think it’s because people are emotional. I think they get greedy. They get tempted. They’re in the wrong market and they’re not skilled.
How do you relatively make things simple? I don’t know. Maybe view it simple. You have 50% chance of being right or wrong. Markets go up over time. You look for the low prices to buy, you under risk. And you understand that this is not a short-term game, this is a long-term game, and you make money over time.