Suppose you could only follow one principle for all investing decisions. Would you chose Price to Earnings, Price to Sales, Free Cash Flow, Long Term Debt, Price to Earnings Growth Ratio, something else?
Before you even think about trading for a living you have to know how much money you need to live on, that is, how much cash do you need to generate every month in order to survive. As a financially minded person you already have good home accounts, or are at the very least vaguely aware of where the money goes. So take the annual figure (monthly is no good, you need to account for annual recurring items like insurance premiums, car servicing, and vacations), add 40% and divide by 12. Why add 40%? Because there will always be unexpected expenses, and as traders we are always prepared to expect the unexpected.
In its most simplified form, the real trading secrets of the institutions and professional traders fit into at least one of the areas below…
1) A well developed trading system that has proven itself to profitably work over and over again in real-life trading
2) Knowing which trading strategies work best in which markets
3) The role of the Market Makers and how they use their influence to control the market and how you can use this to your advantage
4) What trading indicators are actually reliable
5) Which trading patterns are worth using, and when
6) Proper Money Management techniques, Money Management, and Money Management (note the emphasis here)
7) How to take advantage of margin
So, contrary to what they want you to believe, this is what they are selling you. I’m not saying that all of these trading products out there promoting unknown trading secrets are not worth the money, but quite the opposite. If they can provide you with truthful advice about any of the above areas, AND this advice is not easily accessible or publicized, then their product may greatly benefit your trading results.
But, if they are simply selling you generalized trading information that you can learn from any basic trading book, perhaps your money is better spent elsewhere. Buyer beware.