Share trading is one of the most popular ways to build wealth, but there can be a lot of issues if you don’t go about it the right way. Josh was joined by Louise Bedford from The Trading Game to discuss everything that has to do with share trading in Australia.
Is Share Trading Risky?
Everything involves risk, including leaving money in the bank without proactive steps in place to use it. During Christmas time when I was working in the corporate world, there was a lot of job insecurity during retrenchment periods. Share trading during this time gave me the opportunity to have a residual income and control over my financial future if I were to lose my job.
Share trading can provide huge benefits like generating a side income so you can have the freedom to say no to unfavourable opportunities and instead enjoy the emotional freedom it brings. It is a path to financial independence and gives you the ability to have a recurring residual income that provides stability even if the business is closed or time off is taken.
Different Risk Profiles
There are plenty of different risk profiles you can choose, but I recommend medium-risk, medium-term investments using weekly chart analysis. Avoiding investments that make you feel uncomfortable is vital to share trading. Because of their ability to diversify across different markets and time frames, medium-risk and medium-term strategies are suitable for many individuals.
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How to Become a Trader
how to become a traderIn terms of learning before becoming a trader, I suggest reading books such as Trading Secrets and Charting Secrets as well as Chris Tate’s book The Art of Trading. These resources provide knowledge on market analysis, trend analysis, entry and exit strategies, and position sizing. I can’t stress enough how important conservative trading and continuous education in the field is in order for you to find continued success.
Brokerage firms like CMC offer demo accounts, which allow individuals to practice trading with virtual money. These demo accounts serve as a playground where traders can test their strategies and get a feel for the market without risking real money. However, I think paper trading, where individuals track their trades on paper without actually executing them, can be less effective because people tend to overlook their mistakes and only focus on their successful trades.
Start with small position sizes and using a small amount of real money, as it provides a different learning experience compared to paper trading. The emotional aspect of having real money on the line can teach valuable lessons.
Trading Vs Gambling
It’s so important to rely on reliable data and evidence when making trading decisions. I follow a scientific mindset and use a systematic approach based on tested strategies. Charts, price, volume action, and chart patterns inform my trading decisions and managing position sizes and keeping them small to mitigate risk. Louise believes that trading is different from gambling because it involves analysing data, testing strategies, and maintaining a balanced and evidence-based approach. She introduces the concept of the anti-martingale approach, which involves increasing position sizes during winning streaks and decreasing them during losing streaks, emphasising the importance of adapting position sizes based on performance.
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How Do You Measure Success?
I think I am being successful when I stick to my trading plan and follow it without deviation. For me, adherence to my plan is a measure of success, focusing more on discipline and execution rather than just financial returns. I aim to consistently duplicate successful trades using my own trading methods as a guide. I value discipline and recognise that sometimes shiny opportunities may tempt traders, but sticking with the plan and maintaining focus is the way to go.
In terms of time commitment, I think you need to allocate a minimum of 2 hours per week for medium-term trading. However, don’t expecting immediate success, you need to be patient. If you can break even in the first year and then aim to achieve market returns, which in Australia range from 12% to 14% per year, you will be doing great. Having a mentor or someone with more experience to provide guidance and support is vital, since it allows you to learn from their insights and accelerate their learning process.
The Trading Game
The Trading Game is a company I co-founded with my business partner Chris Tate. Together we have over 50 years of experience in the Australian stock market. We offer a Mentor Program which is a repeat for free course. We’ve been running our Mentor Program for the past 23 years. This program provides ongoing support, community involvement, and education for traders. If you are interested in trading, visit Trading Game, where you can download our free trading plan template. While you’re there, register to get my “Trading Made Simple” course for free, which emphasises the value of developing trading skills to create a side income and have more life choices.
What Business Built Freedom Means to Me
“It is the ability to say no. I’ve got 2 kids I did not want to work full time in the corporate role that I used to have. To be able to trade and bring up my children where neither child has ever had to have a full-time working parent is a big deal. That ability to choose your direction and to not have anybody else call the shots is right up there with oxygen for me.”
– Louise Bedford, The Trading Game