Jumping off from the other article about why you would consider Trading – that it is a way to multiply your returns through “buying low and selling high” or “selling high and buying low”. Mainly I think, Trading is making money with your ideas.
We can form our ideas that will be profitable even just from our everyday lives. Say I have the idea that more and more people are going to be able to buy cars (because of the booming population in Asia for example and India is even producing low-cost cars at $2000) there will be more demand for gasoline that make the cars run. I now have an opportunity to make money from this idea. Big money can buy the Oil itself. But as a small investor, I can buy shares of companies that extract the oil, or the refiners (oil need to be processed to become gasoline) or the petrol company. I recall the widespread complaints at buying petrol when Oil reached $147 in Jun 2008. I was not too worried because I have an oil stock. I liked that I am “protected” from these price increases, because the oil stock price went up as well. Same goes for food. To make plants grow, we need fertilizer. And there are companies who make it. To fatten cows, poultry etc we need corn feeds for example or other grains that need to be grown. Since population continues to grow and people will need basic necessities , I can make money from this idea by buying the companies that produce or sell them (the retailers) . There will be more and more ways to communicate, is another idea . Even a fridge can now communicate about not having enough food right? Now that’s a cool fridge. Nowadays, you can’t live your life without a phone and there are companies who make the phone, sell the phone as well as companies who provide the communication service. Another idea is that Women are a booming market and increasingly powerful demographic, all sorts of products are aimed at women (see the pink cars now!) . By buying shares of the companies aiming to cash in on women’s buying power you can now have a stake in the growth of the company. It’s like getting a “refund” from buying all those make-up, clothes, shoes and bling! Trading is a chance to make money off people who make money from you!
To be able to trade I only need a computer, pen and notebook, internet to connect to an online broker (they place your buy and sell order for you and hold your funds). To form my ideas I need trading education and market knowledge from books, go to seminars, read news, articles (blogs) and newsletters. That’s basically it and all within my control.
I am soooooo thankful that this business exists! Unlike a restaurant business, for example, apart from money , you need people, real cooking skills and knowledge of food, suppliers, place of business , advertising to get customers etc. I don’t have to have / do an inventory of products. I don’t have to go anywhere I don’t want to go. I was recruited in a network marketing business before and gosh have to travel all the time even on weekends and even at night. I was pregnant by then and didn’t think it was a good idea to be on the road that much. Back when I was active in real estate, there are legal and taxation issues that really have to pay attention to as the consequences are severe. I think this is the least stressful business I have ever done! (Hint: If you are stressed, need more trading education)
I have an Indonesian friend who asked me to teach her, and I asked her what attracts her about it. She said she doesn’t have to sell or influence anybody, because she’s basically a shy person. I thought I “wasn’t artistic enough” to create beautiful products, but I can sell them so trading is a good fit. Another person I met, Jewish guy from South Africa is very friendly and outgoing and has his own store, he trades because he imports what he sells (he pays for the goods he gets from Germany/ HongKong etc in US Dollars) and trades currencies piggybacking on his current business.
Trading is simply making money from your ideas. I think it’s a beautiful thing!
On Trading Education :
There are tons of material out there and most are confusing, conflicting and outright wrong. Allow me this shameless plug for Dr. Van Tharp — see www.vantharp.com. The education program is a bit advanced — for trader with some experience already — but IT WORKS people!