Trading is often glamorized as a pathway to financial freedom, complete with promises of fast cars, luxury vacations, and “making $10k in 10 minutes.” The reality? It’s a business—grueling, complex, and requiring immense discipline and consistency. Let’s dive into what trading is really like and how you can approach it with a realistic mindset.
1. The Hype vs. The Reality
If you’ve browsed social media, you’ve seen influencers promising secret strategies or selling overpriced courses that guarantee wealth. Here’s the truth:
- Hype: Gurus with Lamborghinis claim to have cracked the code to effortless trading.
- Reality: Trading is a skill that takes years to master. There are no shortcuts.
Many of these so-called experts profit more from selling courses than from actual trading. Always question why someone would sell a “magic strategy” if it works so well. Real traders are too busy focusing on their craft.
2. Consistency Over Flashy Gains
The goal of trading isn’t to hit a home run every day—it’s to stay consistent over the long term. As traders, we aim to generate income steadily, month by month. This requires:
- A clear strategy.
- Risk management.
- The discipline to stick to your plan, even during losing streaks.
3. How I Trade: A Practical Approach
Start With the “Heart” of the Market: SPY
I trade stocks, focusing on both swing and day trades. My analysis always begins with SPY (the SPDR S&P 500 ETF), which acts as a barometer for the entire market.
- Why SPY? Most stocks are correlated with SPY. If SPY is bullish, it pulls many stocks up with it. If bearish, it drags them down.
- My Process: I analyze SPY first and then look for stocks that are outperforming or underperforming relative to it.
Focus on Liquid Stocks
I only trade stocks that meet these criteria:
- Liquidity: At least 1 million shares traded daily.
- Price: No stocks under $5.
- Volume: Ensure strong institutional activity.
The Strategy
Here’s how I execute trades:
- Analyze SPY’s Trend:
- Wait 30 minutes to 1 hour after the market opens to observe SPY’s price action.
- Identify support, resistance, and overall momentum.
- Scan for Stocks:
- Look for stocks outperforming SPY (e.g., trading above major moving averages like the 50, 100, or 200 SMA).
- Draw support and resistance levels on their charts.
- Wait for SPY’s Pullback:
- If SPY pulls back, the stock should either hold steady or pull back less.
- This shows relative strength, indicating institutional buying.
- Enter on SPY’s Recovery:
- When SPY finds support and resumes its trend, the stock should accelerate with volume. This is the entry point.
- Manage Risk:
- Exit if SPY reverses significantly or if the stock loses its relative strength.
4. Why Relative Strength Matters
Stocks that outperform SPY often have institutional backing. This means large funds are buying into these stocks for reasons the public might not yet know. Following their lead can put you in a favorable position.
5. The Harsh Truth About Trading
- It’s Not Easy: Trading isn’t about quick wins; it’s about building a sustainable process.
- It Requires Mastery: Success demands technical knowledge, emotional control, and a deep understanding of market dynamics.
- Losses Happen: Even the best traders lose money. The key is managing risk to ensure your losses are small and your wins are larger.
6. Words of Advice for Beginners
- Be Skeptical: Don’t fall for flashy marketing. True trading knowledge isn’t sold in gimmicky courses.
- Focus on Learning: Invest time in understanding the markets, reading charts, and backtesting strategies.
- Start Small: Use a demo account or trade with small positions until you’ve developed consistency.
- Be Patient: Mastery takes years, not weeks.
Conclusion
Trading is not a get-rich-quick scheme—it’s a business. To succeed, you need a solid strategy, strict discipline, and realistic expectations. Forget the gurus and their Lambos. Focus on developing your skills and managing risk. With time and dedication, trading can provide financial independence, but the journey is anything but easy.
Stay skeptical, stay disciplined, and remember: Consistency is the true measure of success in trading.
