Step 1 - Resolve to increase your wealth from trading


Do you really want to make money from trading?

I believe your answer is “Yes” else you won’t be reading this book. But wanting to make money from trading is not enough, you need a burning desire to make money from trading.

Hence, the most important step is to ask yourself whether you want to increase your wealth through trading. If so, you will learn in this book fast and simple steps that will help you increase your wealth from trend trading.

What I am talking about here is not day trading which basically refers to traders who sit in front of their computers everyday when the market opens to trade stocks based on intraday movements. In my view, this is not a good way to increase your wealth for most people as it probably destroys your health before it increases your wealth. There are successful day traders out there but they are a small minority as most people cannot afford the time for day trading.

However, trend trading by our definition will allow you enough time to enjoy other things that life offers but still make you loads of money when you are away from trading desk! There are many types of trend trading as people have different trading styles. You have to find yours. For example, some prefer to trade daily while there are others who prefer to look at charts only once a week. 

This book does not advocate a particular style as you really have to find the style that suits your personality, character, time, capital resources, returns expectations and risk appetite. It is highly important that you find a trading style that suits you and stick to it. This book will cover the various trading styles later.

A strong resolve to make money from trading ETFs and stocks is critical as people with weak desire usually give up easily after they encounter some setbacks. 

Persistence and diligence are crucial in the trading business, that’s why you really need to convince yourself that you want to do this. Even following the simple instructions in this book requires persistence and diligence.

Why master trend trading?

In order to have strong resolve, you need to be absolutely convinced about the benefits of trend trading. Hence, some key the benefits of trend trading are listed below for your reference:

  • Put your money to work– money deposited in savings accounts hardly earn any significant interest from banks nowadays. Furthermore, banks will almost always pay you interest rates that are lower than inflation rate. So you are losing money just by putting money in the bank. Whereas a good trend trader should expect to earn above the stock market index return which historically was about 10% per year. Besides, stock prices generally rise with inflation. Hence, making trend trading a reasonably good hedge against inflation.
  • Make money regardless of price direction– Worried about bear market? With trend trading, you should look at bear market as a money making opportunity, just like a bull market, because good trend traders make money whether the market is up or down. The price direction of the security doesn’t matter to them as long as they can establish a trend is in place. Just remember “The Trend Is Your Friend” when it comes to trend trading. Trend traders simply buy when the price is trending upwards and short sell or buy put options when the price is trending down. As long as traders know the price direction of the products that they are trading, they can make significant profits.
  • Time flexibility – With today’s interconnectivity, you can trade almost any time of the day as market opening times of American, European and Asian exchanges overlap. So even if you have a day job, you can find time after work to analyze and trade.
  • Location independence– you can trade at home, at work (not that you should or need to spend much of your working hours trading), during vacations and now even on the go. So you can increase your wealth anywhere in the world as long as you are connected to your broker.
  • Free up your time– if you focus only on high probability trades and big stories then you do not need to spend hours analyzing ETFs and stocks. With increasing popularity and proliferation of ETFs, it has made trend trading even less time consuming as ETFs typically require less complicated fundamental analysis. Furthermore, with a sound trend trading system, your trend trading should become more mechanical, saving you precious time.
  • Earn while you sleep– your trading portfolio can help you make money while you are away. The key to making outsized profits is from analyzing the opportunity before pulling the trigger to trade. Not staring at the trading screen. Of course, prices can move against you and you might lose some money but with proper risk management system in place, any loss should be manageable and you can take part in the market another time.
  • Little capital needed– some people have wrong impression as they think one need to have at least hundreds of thousands of dollars to trade. This cannot be further away than the truth. Regulators in the USA have imposed $25,000 minimum equity limit for day traders but if you are not a day trader, you do not need that amount of capital. Furthermore, many brokerages nowadays offer leverage – but use margin (equivalent to your brokerage lending you money) with care. Trading is perhaps one of the least capital intensive business that a person can start. For as little as a few thousand dollars, you can be on your way to be a part-time trader especially if you use many of the discount brokerages out there that charges very low fees. That said, the amount of capital does influence the absolute amount of profits you can make. For those who do not have multi-million dollar trading capital, you can do well as well because you can limit the number of positions you have. Furthermore, there are many free applications available to help you screen for trading opportunities.
  • Low cost – trading commissions are a direct cost of trading. We are fortunate to live in the digital age whereby there are numerous discount brokers that will enable you to trade ETFs, stocks, foreign exchange, commodities, etc at such low or even no fees. For most people, the costs you need to incur for trading are:

o   a computer - which most of us have anyway

o   a mobile phone – needed only if you need to trade on the move

o   internet connection -  good broadband connectivity is necessary

o   books – you need to learn about trading, technical and fundamental analysis

o   brokerage – there are many discount brokers. Refer to our website for some of them

o   online newsletters and trading systems subscriptions, some of the news subscriptions are free

o   continuous training and education – new events, trends, more advanced trading techniques and new applications are being invented all the time so it is important that you keep yourself updated


Action List for Step 1

1.      List down the reasons that inspire you to embark on trend trading on your “Dream List”. Set a profit target for yourself and dream of what you can achieve if you become a successful trend trader.

2.      Stick a copy of your “Dream List” on the wall right in front of the computer that you use to trade with.


TIP:  Every time you feel like giving up, take a look at the Dream List, close your eyes and keep repeating the reasons you stated in the list in your head. Do it at least 3 times. You will find yourself reenergized again!