Let's think together what novice traders should do if they want to make money from the beginning, and they don't want to blow up their capital?
First of all, we need to describe who novice traders are. You may guess the following: - a novice trader is a boy or a girl who starts trading in the financial markets from scratch, - a novice trader dreams about making money from thee 1st step and financial independence in the future (but as soon as possible!) - a novice trader doesn't have knowledge, experience, and tools for reaching his or her goals!
There are millions of novice traders in the World! The majority of them fail!
It is obvious that if novice traders start trading using real money at the beginning of their trading carrier, they will have 99,99% chances to blow up their capital. It is just the question of time.
If you are a novice trader and you can make several successful traders in any market, don't be so happy! It means nothing! In the long run, you will destroy your profit and the capital as well. So, if you really hope that you will make money in the financial markets without knowledge, experience, and tools - you are a very naive person! My congratulations! Markets will tell you who you are)
But what to do if you are dreaming about the first profit as soon as possible??? What should you do if you don't want to blow up your money in several trades???
From my point of view, you have two options!
If you have a lot of money, like several millions of USD, you can invest this capital in a solid hedge fund and allow their professional traders to manage your capital. You will get a small profit and low risk. You will be able to get income and avoid additional risks. As you don't need to trade by yourself, it means that you have free time. You have the amazing opportunity to invest your free time in getting knowledge and prepare yourself for trading. Yes, this approach is not for everyone. What if you don't have a lot of money? What should you do?
If you don't have a lot of money, the 2nd option is for you. Social Trading must be your choice! I guess not all of you faced with such a term. But it is really simple! I'm talking about copy trading.
What is Social Trading with mode details?
Here is the definition from Wikipedia: Social trading is a form of investing that allows investors to observe the trading behavior of their peers and expert traders and to follow their investment strategies using copy trading or mirror trading. Social trading requires little or no knowledge about financial markets and has been described as a low-cost, sophisticated alternative to traditional wealth managers by the World Economic Forum.
It works like this: you connect your trading account with traders' accounts and copy all their trades on your account automatically.
Sounds great, right? So, social trading, or copy and mirror trading as alternative terms, it is a good solution for novice traders!
It allows you to avoid stupid mistakes trading by yourself when you have nothing for profitable trading. It allows you to start getting income from the beginning. You just need to read several tutorials about how to pick the right signal providers and allocate your capital properly.
Social trading is a really good solution for novice traders, which can protect your capital from your stupid mistakes and give additional income at the same time. And again, as it is with the 1st option, you have the amazing opportunity to invest your free time in getting knowledge and prepare yourself for trading!
Another important thing is in getting trading experience with your real money under the control of experienced traders. Yes, you will watch how your equity will change when trades from your signal providers are copied and managed on your account. You will see the real trading with all ups and downs. You will see that real trading is not about the profitable trades all the time! You will face with losing trades, periods of drawdowns, profitable periods. You will see real trading as it is, and this experience will help you in the future with your own trading!
Of course, social trading won't make your rich very quickly. There are not so many ways and opportunities that can provide such results even for professional traders with many years of experience behind them. But social trading can become your starting point in the financial World. It can help you not to lose money as many novice traders like to do, but keep them and get experience and profits at the same time. I advise you to think about this way as it is a very good solution for novice traders.
If you know any other options, how novice traders can start profitable trading without knowledge, experience, tools - please, write in comments! I will add the most interesting and workable options below this post in updates. Let's discuss it! Thanks for your attention!
P.S. as I don't use like-bots and other solutions that show great "interest" to my posts, I will be grateful if you support my work by your LIKEs and comment. Of course, if you can do it. The feedback from REAL people is priceless!
Disclaimer! This post does not provide financial advice. It is for educational purposes only! You can use the information from the post to make your own trading plan for the market. But you must do your own research and use it as the priority. Trading is risky, and it is not suitable for everyone. Only you can be responsible for your trading.
Is this an advice you would give yourself, when you started trading many years ago?
DLavrov
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@John_Florence, yes, if I did it, I would keep at least 10 000usd.
John_Florence
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@DLavrov, hm, if you want to learn, you need to trade with your own money. if you copy someone else, it won't make you think about the trades as much as when you make your own decisions and potentially loose some money. paper trading cannot substitute for this. the learning curve is quite long, some say it's 3 years, some 5. anyways, the best advice I would give to novice traders is to start small, actually that's what I have been doing for months. if you are able to grow a small account, you MAY be able to grow a bigger one.
DLavrov
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@John_Florence, there is a problem, if you have nothing for trading, if you have not ideas what is proper trading, if you are not ready to trade - you will lose money. The question is what for you need to destroy your capital if you can trade in demo account, and prepare yourself to real trading step by step?
John_Florence
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@DLavrov, I understand the rationale behind this of course, however, I dont see copying someone else's trades as a way to improvement. sure, you cannot as a novice just start trading right off the bat, but given that you have spent some time on analysis already, I would definitely open an account with few hundred $ and start trading. you cannot replace real life trading experience with anything. but it's ok not to agree on some things, just wanted to share my 2 cents.
DLavrov
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@John_Florence, again, I have nothing against your opinion. Thanks for sharing! It makes sense as well. For you, maybe it is ok for you to start real trading from the 1st step and destroy several deposits. Some people have a lot of money and they can spend thousands of dollars for nothing just trying to find workable strategies and the way how to trade.
I wrote this post just to show the alternative for those, who want to save money. I got many direct messages where traders ask me what to do with their several hundred dollars which they want to protect.
For such traders, there is a very good alternative as social trading.
It is obvious - if you are not read and if you have nothing for profitable trading, you will blow up your capital. But with social trading you can keep this money, get even such experience like from watching how other traders work in markets. These benefits, from my point of view, they also make sense.
DollarBuddha
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@DLavrov, I've always respected your trading ideas over the years, but on this issue, I have to agree with @John_Florence ...
Simply put, it's still very easy to loose all of your trading capital on Social Trading if you're a newbie and have no idea who to trust your $$$ with...
Trading "gurus" and signal-callers are plentiful, but only a (sacred) few really have good, actionable advice.
And yes... Every newbie trader wants to be profitable ASAP,
But... it takes time, effort, and the proper mindset to achieve success in ANY area of life.
So I DO engage in Social Trading by scanning/evaluating the Ideas section in T.V. on a weekly basis,
But, I DON'T engage in Social Trading by allowing others to "trade for me"...
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FUN FACT: Over the years, I've listened to 80-100 independent traders (i.e. not affiliated with a bank/broker/hedge fund) who actually live off their earnings.
With only a few exceptions, they all say it took them 3-5+ years to REALLY understand trading, develop a profitable strategy, and maintain a positive equity curve.
Based upon these testimonials from people who actually trade for a living, I don't see any way to 'sidestep' this truth, no matter what anyone else says.
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BUT... I also see a middle way between the both of your views...
I'm certainly not advocating that newbies immediately start trading with real money.
Rather, as long as you take it SERIOUSLY, Social Trading on a DEMO/Paper account can help you (quickly) develop a feel for trading without risking any real capital.
REMEMBER: It's not the profit (or loss) of a trade, but the experience that's the true value..!
If done over a 3-6 or even 12-month period, Social Trading can definitely help traders 'level-up' their skills by sampling many different strategies & viewpoints...
IMHO, This approach is the 'Best Practice' for newbie traders as well as experienced traders who want to explore totally new markets/strategies.
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Wishing you both Peace and Profits...!
- Buddha
DLavrov
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@DollarBuddha, thanks for your comment! Make sense! Yes, sure - the priority must be your own trading. but again, even you wrote that it takes 3-5 years to prepare yourself for trading. I work with a lot of novice traders and they don't want to wait. The Financial industry teaches them that everyone can become rich very quickly and you don't need to work hard for reaching this goal. Believe me, when we worked under "The Path to Success in Trading" the program, where you have to spend 1 year for learning the main principles, it was not interesting for novice traders. They did not want to spend 1 year.
That's why I try to show the alternative. If we talk about the options where on the one hand there is the perfect chance to blow up the deposit, and on the other hand the opportunity to save it and start making some profit, I vote for social trading. It is a good solution for the majority. Of course, there must be a priority to prepare yourself for real trading.
Also, there is another question, what if you have a full time and you can't trade by yourself, or you don't want? There are traders, but there are investors as well who want to get additional income. For them social trading is a good solution.
As for knowledge, of course you must have knowledge in order to allocate your capital properly. But mainly there are a lot of tutorials from the projects, which can teach you how to search for signal providers and manage your capital properly. And you will need to spend for learning this stuff 1-2 days.
So, again, social trading looks like a good solution for different situations. It is not the best, but it is absolutely not the worst solution. Everyone must know about such an opportunity and use it if other options can destroy the capital.
Jay3000
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Nice advive Dlavrov! Please check out my chart on XRP.