Financial freedom is defined by everyone in a different way. For the purposes of the article, we will assume that it allows you to have sufficient funds to cover the cost of living and meet additional needs. Many people think that the stock market game is a good way to achieve independence, although it is only available to a small fraction of people. What are the stages of the road to achieving financial freedom? Where are you currently located?
Table of Contents
Total financial dependence.
You get up for work every morning.
Every month you receive a salary barely enough for your needs.
Your job allows you to support yourself enough to keep working.
That probably sounds pretty familiar. However, you should realize that many people, and in fact most of them, will remain at this stage for the rest of their lives. Since you are reading this article, you would probably like to move towards financial freedom. So it's time to take the next step.
Becoming aware of the style of the current way of life.
At this point, you probably show a strong desire to break with your current lifestyle. So you decide to learn as much as possible about ways to invest in the stock market.
You read about the possibilities of passive sources of income. This is just a prelude to the next and most difficult step. Contrary to what you might think, many people are aware of what flaws the system has. Still, there is no desire or opportunity to free oneself from it.
Practical use of the plan.
As it happens, the beginnings can be difficult. If you have tried it yourself, then you already know why only a small group of people turn words into action. This stage will involve giving up old habits and developing new ones.
In addition, you will have to sacrifice your time and money to start your adventure with the stock exchange. For this reason, you will learn the basics of technical analysis and ways to manage your budget.
The Kruger Dunnig effect means that the more you learn, the more you see how much knowledge you still have to master. Books pile up to the very ceiling. Getting to know more advanced stock exchange platforms and building a step-by-step stock exchange strategy will make you test different classes of instruments: Forex, cryptocurrencies, indices, futures contracts and stocks of companies on the stock exchange. Time will tell that in the future you will use only a few of them.
It's time for the first profit.
The previous stage, where mainly education took place, began to give results. Playing on the stock market brings a satisfactory profit. With beginner optimism, you begin to see how many mistakes you make.
You correct them on an ongoing basis and keep your trading journal. You continue to test your strategy, learn and get used to favorable attitudes.
Consider whether this is a good time to take the next steps towards professionalism. Perhaps it will be good to test with prop tradingcompanies? With them, you can get money for serious trading. If you pass any of the tests, let it be a positive surprise for you. If it fails, don't break down. Success consists of many details. It is worth working on them to improve them.
Apparently, it is easier to climb to the top than to stay on it for longer. If you entered the stock exchange with little capital, then your path may require a little more time to go. If you claim that you are already close to the top, then you need to realize that the stock market game requires consistency and long-term thinking.
By consolidating your success, you should implement further ways to earn. If you have any ways to earn passive income, it is worth being patientso that they can pay off in the future.
The longed-for financial freedom.
Still don't have your dream car? It has nothing to do with it, because you can already afford it. You can also take a lease. You now have a good amount of free time. You can expand your trading account and develop earlier plans.
Suddenly, you find that the stock market game opens the door for you to the next chapter, where you encounter further opportunities to invest money.
Have you thought about your own business? If you want to, you don't have to work as hard as you used to, but habits push you further. You decide to create more plans. They don't have to be about making money. For example, you can devote yourself to an old hobby again.
Stock market tricks.
Increasing profits from the stock exchange does not have to be associated with expanding your budget or increasing the effectiveness of entries. You can also make a change of attitude or other seemingly insignificant details.
The average stock trader often has a problem with an extremely offensive attitude. Of course, stock market investments are aimed at making money, but pushing too much for profits leads to making too unreasonable decisions and leads to a series of debilitating losses. Respect money. When opening a position, ask yourself if your risk is controlled and if a possible loss is acceptable?
Increasing the average return.
If your average return is large, so will your chance of making money on the stock market. Increasing the Risk Reward Ratio is nothing more than quick cuts in accumulating losses, using the potential of valuable transactions. Obtaining a high return can become a share of transactions in less stable markets, such as cryptocurrencies or not very liquid currency pairs in Forex.
What are the bad sides of strictly sticking to a fixed RRR? In the event that you want to extract maximum profits from your trades and at the same time cut the wrong inputs, then in theory this should bear fruit in the form of better results. However, it turns out that taking the RRR too seriously with the desire to use the potential that is unavailable for a given position will expose you to severe losses. Therefore, remember not to demand more from the market in case it does not have so much to offer you.
Analyze the strategy.
It is impossible to earn more without knowing what mistakes you are prone to. The basis is to connect your trading platform account to analytical portals to get the most important information.
MAE, MFE, Trade Outcome.
The IEA is a very useful statistic showing the largest loss created when opening a position. It is compared with the result of a specific transaction.
MFE is the variant that examines the highest profit generated.
The role of both tools is to test the strategy and its proper interpretation, allowing you to achieve more and more profits.
Consider such a case. The highest loss recorded on a trade is -$250, but you closed it with a profit of $125. Unfortunately, it is still bad, because the return of entry was 0.5:1. Catching this type of errors and their subsequent analysis allows you to draw emphasis on weaknesses, which allows you to work on them.
Backtesting, Forwardtesting, simulator.
One of the popular mistakes of a beginner is to deposit money into the account of a stock broker too quickly. Far too many people ignore strategy tests on historical data, assuming that trading on a demo cat is pointless. This belief comes from thinking about the lack of emotions accompanying real investing. Such common mistakes should be a lesson to you. Check your ways regularly,as well as use a simulator whose role is to recreate the market in real time. It can be on an exchange platform or be available as a separate application.
Structure of price fluctuations.
This is a kind of construction created by the market during fluctuations. It is able to convey the most important information about where the price may be in the future. The fact that it has been broken does not necessarily mean that there will be a trend reversal.
On the contrary, most of them have their source in manipulation and its purpose is to drive the movement in the opposite direction to the expectations of the average broker on the stock exchange. If you deepen your knowledge of the structure of price fluctuations, you will be able to avoid pitfalls and recognize the right moments to enter.
Different time frames.
The instrument should be analyzed from the perspective of different time frames, which will give you the opportunity to look at it from many perspectives. It is a mistake for many people to choose one particular range and disregard the bigger picture of market events. Your goal should be to define the potential direction of each framework in order to find a compromise and the possibility of concluding a one-way transaction. This can be achieved by building the market context using the "top-down" method, by analyzing all charts from high frames, for example monthly, through weekly, daily, to minute.
Do you want to increase your returns and make money on stock market investments? You need to look at the market more comprehensively. In the event that you have learned some aspect of chart analysis, go even further and learn newer and newer issues. Let you not be alien to the techniques of retail traders.
Proper marking of candlestick formations or trend lines may be needed and give you an insight into the current expectations of most market participants.
Or maybe you shouldn't invest in the stock market?
Unfortunately, the stock market "hates" people looking for easy and quick money. A quick stock market profit is possible if you have an absurd amount of luck. Unfortunately, in such cases, most often they do not end well. The stock market quickly receives an easy win,driving the trader into debt. If you're in financial trouble, this is a nasty way to solve problems.
If you invest with borrowed funds, this is an excellent way to fall into material and psychological ruin. Stay away from stocks of listed companies and cryptocurrenciesif you have out-of-touch beliefs. You also need to keep in mind that you will have to allow yourself to devote a huge amount of time to learning. If you have a bad attitude and lack the means, it will be very easy for you to develop harmful habits and fall into a dangerous gambling addiction.
Stock market gambling.
Do you open a position solely on the basis of the belief that it will end in profit? I have bad news for you, because in this case you are an ordinary stock market gambler. Making the effects of actions dependent on happiness means that you will not be able to do better in your field. If you rely mainly on the advice of people claiming to be stock market experts, you will surely learn that what counts is faith in victory.
In practice, it will turn out that nothing could be further from the truth, because they do not have valuable rules to pass on, and they prey on your hard-earned money. Their ways do not work, and any failures will be thrown at you and your lack of stock market discipline.