This question is very subjective and everyone has their own take depending on their experience as well as their assumption based on other’s experiences. Going with the facts, almost 90% of the traders lose money in the markets and only 10% manage to make consistent returns on their investment. There’s a huge difference in the numbers and the only reason behind this, is lack of knowledge and awareness. Due to which, we have decided to divulge the information on trading through our Blog Posts.
What is trading?
To start with a very basic concept, for those who have no clue what trading is all about, you may understand this as a simple process of Buying and Selling of Securities. Securities can be in any form which includes stocks, commodities, currencies, indices, bonds, etc., whenever there is a fluctuation in prices.
Misconception about Trading
Trading is often misconceived with gambling and is considered as an easy way of making money. Majority of the people think that trading is all about luck and gut feeling (including me when I was not in this field), rather trading is a proper study of probability; where we try to maximize our chances of winning and minimize our chances of losing.
Like I mentioned, Trading is a study; which requires a detailed analysis of the markets in the form of Technical analysis or Fundamental analysis or both (which will be explained in detail in my upcoming blogs); and if all this analysis is done, then the question of gamble shouldn’t come into consideration.
Trading as a concept is very Individualistic, it depends on how you consider trading as; if done on the basis of your gut feeling or sheer luck without proper risk management is a gamble whether you make profit or loss, this doesn’t come under the definition of trading.
As a matter of fact, I would define Trading as “Making consistent returns with calculated risk”
The Three Pillars of Trading
Now, coming back to the question, “Do people really make money Trading?” and my answer would be a big fat ‘YES’, provided you focus on the three pillars of trading .
The three pillars of trading are as follows:
1. Strategy
2. Risk Management
3. Psychology
I will be explaining all the three concepts of trading in detail in my upcoming blogs but what you need to understand is that, if you want to make money through trading then you have to master all the three pillars of Trading.
“The more you LEARN,
the more you EARN”
-Warren Buffet
I hope the information shared in this blog was helpful for you to understand the basics of trading. But hey, there’s more to come, so stay tuned and Happy Trading!