Can a Normal Person Make Money Trading?

note: This is a lesson in our Total Newbie Trading Course

Absolutely they do! I have been actively trading for several years, and I have tried many trading rooms and spent hundreds of hours reading books and online forums. There are many regular people that make money trading; some make millions per year. But it’s also true that a lot of people struggle and fail (which is true of most endeavors).

One of the main reasons so many people fail is that it is hard to find good education and training resources. Most colleges and business schools don’t have courses in trading stocks and so people end up trying to find online courses; but I estimate at least 50% of the trading rooms and courses online are junk (You can read our article on avoiding scammy trading rooms here).

To be a successful trader you basically need 3 things:

  1. A trading methodology with a statistical edge
  2. Discipline to follow your methodology
  3. Ability to use basic risk management principles.

For example, let’s assume you know that when you see a certain pattern in the market there is a 60% chance the price goes up 1% before going down 1%. That’s a statistical edge. But you could still lose money trying to trade that pattern if you buy the stock and it goes down half a percent and you get scared and exit just before the stock turns around and goes up 1% to your target.

By risk management I just mean that you need to limit your amount of risk per trade. You could trade the above pattern with discipline, but if you risk 10% of your portfolio on each trade and end up with 7 losses in a row (which will happen occasionally even with a 60% chance of winning each trade) your portfolio would be down 70% will cause most people to give up and means you need to increase your portfolio by 200%+ just to get back to breakeven.

in one sense, successful trading is simple but that doesn’t mean it’s easy.

So there’s basically 3 things you can do to make money trading.

  1. The easiest way is to give your money to someone else who either has the skill to successfully trade or runs computer programs that trade successfully.
  2. You can subscribe to a service that sends out trade alerts which hopefully provides you with a successful trading methodology, but your still need to be able to be disciplined and implement proper risk management techniques (although you could run computer programs to follow alerts).
  3. Learn or create a trading methodology and trade it yourself manually or with the help of some software.