Professional Traders vs Retail Traders

     Everybody knows that 90% people loose money in the stock market. However do you know what this combination means "90/90/90"? Have you ever seen this before? This is industry statistic that is always talked about. It stands for 90% of Retail Traders loose 90% of their money with in 90 days. However, the objective of traders is to make money. The main difference is the approach.

     The holly grail for Hedge Fund manager is to grow his fund. For example: manager has $100 million in assets in his Hedge Fund in year one, by year nine he has grown his fund to $1 billion. There will be value in this fund. There is standard industry metric that applies to selling fund. It is 1/10 of the value of the hedge fund. So they will sell that fund for $500 million. So they grow their fund from $100 million to $1 Billion and then sell it for $500 million and walk away- that is considered to be successful Hedge Fund manager. What is the lesson here... Hedge Fund managers use their own money to start and grow the fund, investment bankers do not use their money. So the Retail Trader has things that are in common with Hedge Fund manager. However there is a difference, Hedge Fund manager get's payed income salary, Retail Traders trade for income. This is how Retail Traders work. Let's say they make $10,000 in one month. Then they take out the money that they got for that month and spend it. In second month they loose $10,000 and then they take out some money from their trading account and spend it. So what it comes down to? When they make money- they take out money from their trading account, when they loose money- they take out more money from their trading account, therefore increasing risk. Retail Traders do totally opposite of what professional traders do. You should never ever take income from your retail trading account. It is not an income strategy. If you want an income strategy buy a bunch of stocks with dividend yield and hold them for decade. Go buy a property and rent it out to somebody. Go buy government bond, they will pay you an income. Trading is not for income, and every professional trader knows that. They know that this strategy is not for income, their objective is to grow their account to as big as possible so they can sell the fund. That is why they do not take any money of the trading account, they are reinvesting it because they want to grow their account to as big and as quickly as possible to sell their fund for as much as possible. They make money- reinvest. Loose money- don't increase your risk. The only problem is to misinformation and conflicts of interest that exists in this industry, vast amount of retail traders do not know these strategies.

#tradethetruth

Creating Trading Account

     Creating trading account seems to be a very easy task. However it is not true in my case. Since I am international it is harder for me to create trading account with the broker that is located in the United States, such as: Etrade, Ameritrade, Scottrade etc.There are couple of trading platforms and brokers out there that are worth a look. However if you will be creating an account that will be relatively small you need to look out for commissions, otherwise they will eat up your trading account. Also, many people do not know that there are SEC regulations agains small accounts such as the ones that are less than $25,000. That rule called PDT rule and has a lot of confusion with in the community of beginner traders.

     PDT rule, or as it is also known day trader rule prohibits small accounts, that is to say accounts that have less than $25,000, from making more than three trades per five working days (a week). If you do more than three trades per week your account is subject to being blocked for a month and there is no way that you can make trades during that time. The solution is that to open multiple US accounts, or open an offshore account. For me it is easier to open an offshore account, and I did that with SureTrader. With them I will be able to freely trade more than three times per week. Even though their routing fees and commissions are lower comparing to others $4.95/trade, there is also conflict of interests. What it means is that when you will use market orders they will use the prices to their advantage in order to compensate on such low commission. From that knowledge using their platform Das Trader Pro I will be trading scared, which is a good thing! Trade scared! Otherwise I am looking forward to funding my account, setting up the platform and making my first real trade.

Whether or not this broker will be right for you I leave that for your decision. My goal it to give you information which is valid and credible.

#tradethetruth

Why trading?

     So why trading? In my opinion trading is the fastest way of growing your account. That is right, growing your account and not source of income, nor increase of wealth (about that later). By compounding percentage earned month by moth in steady growing account you can reach limitless gains, and sooner you start sooner you will start gaining. Do you know how many years it will take you to grow your account from $10,000 to $1,000,000 if you will be gaining 2% each month? You will not believe me. It is seven years only. So potentially each one of you can make one million in seven years just by starting trading with such small account as $10K. No other market tool allows you to do that, not even CD's, bonds and of course not even savings accounts with their joking 0.01% gains.

     My goal by starting this blog to provide help to beginner traders with my insight on the stock market and all the things that I am going to be undergoing while creating my trading account, funding it and making my first trade up to a point when I will make millions and maybe start a hedge fund, or open university for traders. Soon I will be creating my account on Profitly.com and post a widget on the side so you can see my verified gains. I will lead this road by example and believe that it is the right way on shady market full of lies and tricksters who want to grab your piece of wealth. I am hoping that by providing details of my own experience and mistakes you can learn and avoid them in this very dark and tricky market. If you have questions along the way, don't afraid to ask them. If you cannot understand something, that means someone else has the same confusion.

     As time will go by I will tell you my opinions about brokers, fees (hidden fees) and much more about the life of retail trader, or as it also called, day trader. In time I will give some insights on the trades that I have made and my picks for future dates with reasoning why they will be on my watch lists on future dates. I encourage everybody to keep learning from others and never stop, as I will to.

#tradethetruth

Disclaimer: All of the information that will be provided on this blog is strictly educational purposes only, I am not accredited investment adviser, nor I will tell which stocks to buy nor sell.