00:00So what have you not got if you're a retail trader, I'm talking about a guest in the market,
00:14a person with finite capital, relatively small amount of capital, you're not perhaps doing it
00:22all day long, you look at the market when you can, all those sorts of things. So what have you not
00:27got, what's your disadvantages? Well number one is money, it is a big boys game and if you think
00:34about it, if you have a small amount of money it's relatively easy to lose the lot and for many
00:40people it's game over when you've lost the lot of it and so people do feel that they can make a
00:48living and give up their day job and this sort of thing and with my money and they say well I've done
00:54well with trading and so I'm going to give up my income and exchange it for trading. But think
01:00about this and do this little calculation in your head. Think about okay I'm going to give up my job
01:08and I'm going to become a trader. What do I need to live and keep my family and to pay my rent and all
01:14those kind of things and have the not an improvement in my lifestyle just the same lifestyle. Hopefully
01:21I'm going to improve it but let's just say the same lifestyle and say say it's x amount of money. Now
01:28let's say then what return do I need to generate x and don't forget x is only to be the same as I am
01:38now and let's just take some round numbers just say let's say a hundred thousand pounds only because
01:44it's a big you know it's an easy number for me to work with and so how um how let's say I need a
01:50hundred thousand pounds to pay my mortgage to put my kids through school and all those things which
01:54I'm happily doing with my existing job um as a property developer or as a whatever I'm I'm doing
01:59and I'm going to swap this for this other risky job where I won't get paid every month if I'm ill and
02:06get the flu you know and I have to stop working nobody pays me nobody looks after me all those sort of
02:12things but let's say I've got this amount and I've said it's a hundred thousand so what would be a
02:18reasonable expectation of of return uh for me as a trader so do you think it's reasonable to feel
02:27comfortable that if I traded for myself with my experience as I've been doing um you know as part time
02:34and I'm going to want to do it now full time that I could make a return of uh 25 percent 50 percent
02:42something like that I feel comfortable uh that I could I could do that now that's a very big return
02:48isn't it um those sort of numbers but let's say you do feel confident that you can do that then you
02:55must also look at uh the drawdowns that you've seen in order to get that uh kind of comfortable 50
03:00presumably sometime you made more than 50 percent because that's just an average uh number for you
03:06so what sort of drawdowns um could happen how many months were you not positive did you have to sit
03:13through negative returns uh in order to finally eventually end up with this really large number of
03:20of 50 percent so then um to get let's say that you're happy and you're convinced and you're confident
03:27that you are that sort of person and that is a tall order incidentally I hope you realize that
03:32so it's very difficult to make 50 percent believe me it is and to feel confident I'll do it next year
03:37and the year after and the year after that it's a tall order uh to do that but let's say you think
03:43confidently you will be able to do that so then you say well 50 percent is now my 100,000
03:49so how much do I need capital in order to um produce the uh 100,000 so what's the answer to the
03:57question 200,000 so I need 200,000 now but hold on 200,000 and but um that won't be enough because
04:07what about the drawdown and and so um uh I will need some multiple of 200,000 if I for example the
04:15drawdown was a 50 percent or something like that on it so I might need twice 200,000 so let's say
04:22it's uh it's 400,000 500,000 so people really really underestimate what they need to start with
04:30and they say but I've really worked hard and doing my job every day and I turned 10,000
04:35into 50,000 and now I'm ready to go no you're not ready to go and one thing is actually very certain
04:43is you're going to lose all your money that's it you are you'll lose your money before you get
04:49into the profitable run it's it's most likely not enough money to to to to become a professional
04:57trader and in my experience and I have been a broker this is the main reason it's not to do with
05:04people not being good traders or not learning not working hard enough not any of those things
05:09it's being undercapitalized and it's just too near naught you know you're just too near naught
05:15you're trading in the big you're in a big boys game this everything's big and um and so you have not
05:21got many chances of losing not compared to an institutional trader who's got many more chances
05:27of losing and it's still game on uh for him so the number one cause I think of um of disappointment
05:36disillusioned giving up all that kind of thing is actually there was no chance in the first place
05:42and of course the people were undercapitalized in the first place so and it's a big shame because a
05:49lot of people also let's say you might start with 50,000 which is a quite is a lot of money truthfully
05:55is a lot of money to have spare to speculate with it you know you have to be quite a wealthy person to
06:01actually have 50,000 uh to speculate with um that um uh people often it don't realize how long it takes
06:10to learn how to trade and they start trading and of course if you got uh you want to trade and you
06:17want a profitable trade to be meaningful to you and losing trade to actually hurt a bit as well
06:22and otherwise what's the you know what's the point of it so you might let's say that um a winning trade
06:29to be meaningful to you might be two three thousand dollars or pounds something like that
06:34and a bad trade might be five seven hundred pounds or something that ouch uh sort of trade if it's if
06:41it's 20 pounds well who cares but you know it's got to hurt a bit now the problem is you don't get
06:46many of those type of trades before and you don't have to have an unusual bad one in order to run out
06:53of money and it's a big shame because the beginning is the learning process and i've watched people
06:58um uh learning and getting better but their capital has been so depleted and their 50 has become 10
07:07and now they're beginning to get the hang of it and actually understand it but of course from getting
07:1410 back up even to 50 where they started five times as much is very tough proposition if they double
07:21their money that'd be terrific but they've only got 20 it's only 20 000 so i think if i you know i know
07:28this is maybe disappointing news to a lot of people you know but this is real world you know the fact is
07:34that the size of the of the business you're in here is large and um it's unforgiving and um if you don't
07:42start with enough or start small enough that's the other thing and you see people want to trade bigger
07:48particularly at the beginning because they've got the money so i'm a 10 lot trader or 20 lot trader
07:54but you can learn as much from trading one lot and two lots and start small and realize that most likely
08:02in any business when you're learning at the beginning it's a learning process there's a cost
08:08in it and the learning in this business is to lose money really that's how you get the experience and
08:13skill from it and you need lots of opportunities there and if you keep at it it is possible to
08:21come out the other side as a winner but not possible to come out the other side of the winner
08:25if it's if you've run out of money okay so if you are one of those people starting this game
08:32have a pot of money trade small you know really trade small trade for real like i'm not a big fan of
08:40practice trading because you've got to feel it it has to leave your account and ouch yeah you know
08:45but uh you know it's too easy when it's just a pretend trade you can just ignore it because it
08:49never really happened uh there so it's got to be real but you know losing 100 pounds and then making
08:55500 pounds and losing 150 and making 300 you can learn a lot from that sort of operation there and
09:02basically realize that you're on a learning game um and you've got to go through the apprenticeship
09:08and there's the if you happen to be lucky and win a lot at the beginning you know be smart and
09:14realize that that's um just the run of things you know you could have started badly or you could
09:19have started well but these are sort of random events there it means nothing it doesn't mean you're
09:25a great trader you just started with a good run uh there that's another uh thing so the second the
09:33second thing is that the um uh the uh typically in these um uh institutional operations where you
09:41have got prop traders so genuinely people trading like you but in a larger scale and what happens is
09:48that people are given an amount of money or amount of credit to trade with and their job is to trade
09:55it's not to protect the money and uh come back and say i i um you gave me um half a million to trade with and
10:04here is i've looked after it and you've got half a million back no that's not what they want they want you to
10:09go and put the money at risk and and and trade large and trade aggressively and make significant amounts of
10:18money with it they understand that you may lose the half a million but then they'll give you another
10:24half a million if they if they still feel that you will do it now that isn't the case with a private
10:30investor so they'll be recharged they'll probably be recharged every year unfortunately for many people
10:37they're given more money so it was half a million this year they did well they made two million with
10:42half a million then the then the institution will give them another five million and now go do it
10:48the same bigger there and this causes big problems for people because people can be good at one amount
10:55of money and not good at another it's you think it should be in your head just a multiple but did you
11:02know you say well a normal loss for me with my half a million is 30 50 60 000 but then you make it 10
11:09times bigger and it's 300 to 600 000 it doesn't feel proportionally the same it feels a lot lot more
11:19in you know human minds can't think proportionally like that so a lot of traders come unstuck
11:24unstuck because of the level that they're at these changes of levels which often the boss will reset you
11:31at a new level of um of money so um uh so they've got if you like that advantage but they're under a lot
11:41of pressure of course their job is to make money um people want to sit in their seat there are other
11:46people and if you're not doing it somebody else will be sitting in your seat and you'll be gone
11:51that's how it is but you can make unusual amounts of money uh if you do well in it
12:01you
12:02you
12:02you
