Trading Guide - 7 Things to Understand About Trading

Trading isn't easy, but if you understand these 7 things, it will be. Trading is a disciplinary skill, not just something you do for fun, but we can make it fun, once you understand how wealth is created in trading.
by Yoaquim Boom
November 18, 2022

Key Insights

  • Trading isn't a get rich quick scheme.
  • You need a trading plan and Risk management strategy, here's how to create them
  • Here's what you can realistically earn in trading.
  • If you don't have time, Invest.
  • Create your Edge, Here's how.
  • Journal your trades, yes, journal.
  • Stop your human fears, here's how.

1.   How to get Rich Trading


Trading is not gonna serve as a get-rich-quick scheme. You’re mistaken if you think you’re gonna be successful immediately without effort.


Trading is gonna be hard to get into and take, weeks, months or years of your time, but has proven to be very lucrative for some individuals.


Nearly anyone who has attempted and failed at being a trader will either say trading is a scam or a form of gambling. At first sight, trading looks extremely easy, draw a few lines, buy when it's low, and sell when it's high, it's easy as that right?


Well not quite. If it was that easy everyone would be trading. Why would people even attend their 9-5 jobs if they could be making bucket loads of money with such ease? Because it just is not that easy.


Try trading with a small sum of money first, or even better try paper trading. Paper trading is trading with fake money, where you can test your skill.

Any time is a good time to start trading if you think you like trading, just take care and manage risk


2.   Risk Management and Trading Plan


Risk management is crucial to not blowing up your account. Risk management is the process of knowing what amount of your total capital you can ethically risk per trade if the trade does not go your way


A generally good risk management rule is to allow yourself to lose no more than 1-2% of your account per trade. More creating a trading plana nd risk management plan here.


The rules of your trading plan should provide you with a checklist of requirements that you should check before entering a trade. There are thousands of rules from which you can pick from. What your rules/requirements are all comes down to your preferred trading style.

The reason be is if you have no money, then you cant make money, that’s the reality of trading. The number one rule of trading is to survive.

So never forget the number one rule of trading, risk management. Here’s a quote from the legendary investor Warren Buffett.


Rule No.1: Never lose money.
Rule No.2: Never forget Rule No.1. 
Warren Buffett



3.   ‍How Much You Can Earn Trading

The easy answer is 95% of market participants fail, so realistically 95% of you reading this can make nothing. But there are many nuances to trading, therefore you should keep reading.

Another simple answer would be that the average successful trader makes 10% on their account year-over-year, but becoming average is hard…


The amount of trading capital you trade with has a massive influence on how much money you can make per trade. Trading capital refers to the amount of money you have available in your brokerage account. 

If you start trading with $2,000 your income potential (in dollars) is far less than someone who starts with $20,000.

More on this here.


4.       Difference between trading and investing

The reality of trading is complicated. One thing is for sure, it’s not a get-rich-quick scheme. If you think you’re gonna be successful immediately without effort, you’re mistaken. 

Why do you want to trade? If the answer is for quick money, stop it and reevaluate your decision. Trading and investing, bare the exact same results for most people. A 10% return on investments by the end of the year. The only difference is that in investing you’re waiting for the returns, while in trading you’re having to spend hours on learning while baring more risk. 


5.       Creating A Trading Edge


Which market you trade in greatly influences how much money you can make. Therefore experimenting and picking which market you like and your style is optimized for gives you an advantage is called your edge.


Do you understand crypto from top to bottom? Trade crypto. Do you like studying the internals and earnings of companies, trade stocks. If you understand the economy and the economic relations of countries, trade forex.  

Each market has different advantages. Although, stocks and Forex are generally more capital-intensive asset classes. Yet, don’t let this stop you from trading the markets, experiment.


The different time frames you can trade on are also crucial, these timeframes include day trading, scalping, swing trading, investing, and more. Pick your time frame, and get great at it, time frames are another aspect of your edge.


6.       Journal your Trades

Journaling your trades can often feel burdensome, but it is necessary for optimal execution as a trader. It gives you some calm away from the market, and time to reflect. Keeping track of your actions in the market, and your emotions. Enabling yourself to hold your past self accountable for your actions, a great method of learning self-reliance.


Journaling your trades is one of the most important things to do as a trader. It allows you to reflect upon your trades; losses and profits alike. Through this reflection process, you can see when, what, and how you executed well, and what there is left to work on.


There are many different trading journal methods that can be optimized and adjusted to fit your schedule and preference. In this article, we cover everything about journaling. 

"Trading without a diary is like shaving without a mirror" -Dr. Alexander Elder

7.       Control Trading Fears

We all experience the natural human emotion of fear. Yet, fear comes in many forms and is evoked by numerous external and internal factors. As a trader, it is crucial to be able to differentiate between what type of fear you are feeling and why you are feeling that fear.

The four different trading fears are fear of missing out, fear of losing money, fear of being wrong, and fear of leaving money on the table. Let's get into how to tackle them all.

The main way to not feel the usual fears is realize that there will always be more opportunities. Don’t think you have to take this trade now because it’s a ‘once-in-a-lifetime opportunity’, it never really is.

More on these fears and how to control them here.


Don’t rush into trading. It takes time to learn what works for you. Learn the basics, find your edge, and have the discipline to continuously follow your trading plan and not loose all your capital.