Ever thought of making crypto trading your business?
“Reving” of living the chart life? Sitting in front of the laptop screen or mobile phone catching price swings as a full-time job? You need to take note of some very important things.
Just like every business, trading has a cost. If you want to trade full time, you must first consider the opportunity cost.
Let’s say you leave a ₦3.6m/year job to trade full time. Perhaps you choose a low-risk strategy that’ll earn you ₦2.4m/year. You didn’t make ₦2.4m, you lost ₦1.2m!
If you’re running a physical business, you’re going to incur some cost like rent, paying staff, electricity bills and so on… As a trader, you may not incur some of these bills (of course if you choose to work from home).
However, there’s still a cost. Losses! You have to handle losses. It doesn’t matter if you trade with a capital of ₦10m or ₦10k, you will lose every now and then. Reason: trading is a zero-sum game. For every win you’ll have, someone loses; for every loss you’ll incur, someone wins. That’s how it is in the money markets.
There are lots of businesses out there to make you money - offline and online. Some businesses have a small profit margin but you earn fast so there’s high turnover. Some other businesses have a low turnover but a high-profit margin.
Compare selling Louis Vuitton to a box of cheese!
How does this apply to crypto-trading?
Some traders prefer to take several trades and catch small moves. Some take longer-term trades which means they have to sit it out and wait to capture big moves.
As a trader, you’d have to figure out what your preferred strategy is. This way you don’t spend years chasing the wind.
Here’s the catch. You need money to make money – especially in trading. The more money you have, the more you can make (if you already have a good strategy).
Let’s say you start with $100 account, if you take 1% per day, you’d have $30/month
$1000 = $300/mo
$5000 = $1,500/mo
$10,000 = $3,000/mo
From the calculation above, you can see we’re using a very modest return of just 1%/day (assuming we have 30 days in every month). Although you can make a lot more, you’d be better off reducing your risk to the barest minimum.
What’s even more important about bigger capital is that it helps you reduce your market risks knowing that you can trade with very little leverage and still make decent profits.
You’d notice that the monthly profit on a $100 account at 1%/day isn’t much; such situations can make you take on too much risk and lose everything.
You know, the general idea is to make sure that at the end of a specified period, whether a month, 3 months, 6 months, you ended up with a bigger balance than you started with while protecting your capital.
I understand that you want to make consistent profit daily, weekly, monthly, but there are times you won’t make money. Sometimes, the market won’t just be favorable to trade. Other times you’re emotionally disturbed or psychologically off.
Here’s what you must do: ensure that you have a job that takes care of your basic expenses. This will help put off pressure during bad trading times.
If your 100% hope for the next meal is on the next trade, chances are you’ll make mistakes more often.
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