It’s true that the commute for a home-based trader is hard to beat. But whether you are leaving the comforts of your financial firm to strike out on your own, or are a home investor looking to make a go of it on a more full-time basis, there are other practical considerations to take into account, and also some potential pitfalls to avoid when it comes to planning your new home-based trading business.
So what is encouraging more people to trade financial products such as spread bets, and currency trading. The money? The excitement of day trading? Or simply the convenience of working from home? Particularly in the current times, people are increasingly looking for a way to work from home. Spread betting may not be the first thing that you think about, but albeit a high risk activity, could be one way to generate an income.
There are so many offers, not to mention scams, circulating the Internet, and promising that you will earn a certain amount every month. The trouble is that many require you to get others interested in the scheme as you are in order to get paid, and others are unrealistic in the amount of work that is needed for a certain income level.
On the other hand, if you work from home spread betting, hopefully you are using a proven and real money generating trading system, rather than someone’s idea of what may work at the moment, but may equally well fail in a few months. When I started I was really interested in any day trading strategies anyone was willing to share. Of course I understood that it would be at my own risk and I would need to test the system before risking any money. But the thought of sitting in front of my computer for 8 hours sounded quite appealing to me as I used to work 12-14 hours a day away from home.
Spread betting, although comparatively new on the financial trading scene, is basically about predicting a market’s future direction and in this respect can work if you get the market direction right. For many people, selling or cold calling is one of the issues with working for themselves at home. After all, many income producing methods rely on you making a sale of goods or services so that money changes hands. Because spread betting is a form of trading in the financial markets, it can be done over the Internet, and never involves having to ask someone else to buy anything. In addition there is very little red tape required in trading and you don’t have to deal with people you don’t like!
In case this sounds too good to be true, and therefore worthy of relegation to the list of ideas that you cannot believe in, it should be pointed out that you do not just turn up and spread bet profitably with no effort. It is not an automatic money generating engine, but you must take time to learn how to spread bet for an income. In general there’s not much that’s bad about spread betting these days. Spreads are reasonable and platforms are pretty good etc. I’d guess the main reason spread betting tends to get such a bad wrap is that most people trade not so well and its much easier to shift the blame than accept it.
There are many resources on the Internet, both paid and unpaid, for you to learn more about spread betting and decide whether it is right for you. As it is based on the financial markets, it is appropriate to research more about trading in general and what causes the stock market to move. But it offers so much more than traditional short term trading, and the barrier for entry is much less. For instance, there are many different markets that spread betting providers offer for you to bet on, so you should be able to find one that interests you and in which you have some knowledge to help you. Apart from the well known markets of stocks and shares, market indices, foreign currencies , and commodities, you can also spread bet on items such as how much house prices will change in the next six months, which will suit you if you have an estate agent background.
Add to this diversity the fact that you do not need to have a huge amount of cash to invest, as with many trading programmes, and you may find that to work from home, spread betting is one possible way for you to earn an income. But its not by any standards an easy way to make money. Beware in particular that its true what they say that over 80% of wannabee day traders lose money and pack up. Even given a proven strategy its very difficult to make money and many winning traders also pack up. In fact strategies are two a penny and are probably the least important issue to long term gains. One of the best day trading books for the novice trader is The Complete Guide To Day Trading by Markus Heitkoetter. In the chapter ‘There’s More To Trading Than A Strategy’ he cites the Ralph Vince Experiment. He took 40 Phd doctorates and gave them an exercise with $1000 each and a winning strategy of 60%. After all 40 had completed their 100 trades only two of them had made a profit.
In spite of it being one of the best day trading books with lots of ideas and strategies he doesn’t give the odds of win:lose on any of the strategies so to use them would be like betting on the horses without being given the odds. You are onto a hiding to nothing until you at least know your chances & expected size of a winning trade at various levels of market volatility. Apart from that you are faced with the psychological pressures which are very real. That’s why people lose.
If you accept the statistics regarding day trading and still want to try to make financial trading to work for you then its okay to give it a fair try. Its really more than just making money at the end of the day and even if at the end of the day you make less money trading than you do now chances are that you will still be better off since you will have more time to yourself and in general a better quality of life. You might be looking for something that you can do regardless of your situation now or in the future. I’m not saying that you should give you day job tomorrow – that wouldn’t be sensible but instead focus on building your skills and income, then decide whether its worth it to carry on with your day-time 9 to 5 (hopefully!) job. If you treat sitting in front of my computer at home as a job which you could, given enough time become good at as you might have been at your last job. If you fail then so be it but at least you have given it a go. I have often been told I have patience of a saint which I think should help. Don’t believe the doom and gloom scaremongers either there are always plenty of opportunities to profit from markets going up and down!
“If you feel like giving up a job now think twice about it. I manage my substantial portfolio in about half an hour a day. I know several who gave up jobs in the dot com era and lost their shirts. I knew enough about the market to largely avoid those crazy prices.”
Your Trading Room
As much as we love our kids, they are probably not going to be the best source of investment advice. If anything, the noise of their play and favourite television programmes will prove an expensive distraction, and will come – without fail – at the most critical moments. Therefore, if you do not already have a dedicated offce in your home, it is time to consider creating one.
A trading room need not necessarily be large, but it does need to be private, preferably with a physical door that you can close. Spare bedrooms work wonderfully for this. If you presently have a guest room, ask yourself how often it is typically occupied versus how often you might need it for trading or other work. Guests can always spend a night or two on your couch (and this has the added benefit of reducing the duration of their stays), or an air mattress can easily be brought in when needed.
If there are no spare rooms available, what about the attic or a walk-in closet? Working in your garage may not be the most appealing option, granted, but is there anything else which can perhaps move into the garage to free up additional working space in your home, for example your washer and dryer? Worst-case scenario, you can always put your desk in a smaller closet, and sit facing into it with the doors open – three walls are still better than none.
The idea is to have a designated space for your work in order to create the feeling of actually going to work. No matter how short
the commute, even if it is just down the hall, I have found it is still important to have that commute. It is a way of refocusing your brain, telling yourself that the next couple hours have a definite purpose. Otherwise it is all too easy to get lost in e-mails, browsing websites, and other distractions.
“The idea is to have a designated space for your work in order to create the feeling of actually going to work”
Office Hours
Like any professional offce, yours should have designated working hours. Left to our own devices, most of us would watch the charts or read news reports into all hours of the night, very often trading in dangerous, choppy markets with little to no liquidity.
Once you select the main instruments you intend to focus on, do a bit of historical research and find out during which hours of the day they have their biggest moves and the largest amounts of volume. This is when you want to be near your screen, and these hours
need not necessarily be consecutive.
Besides the mental separation mentioned previously between focused work with a purpose and just going to your computer to check e-mails or “look something up”, keeping a fixed schedule has one other main advantage – your family will be much more likely to respect your needs for periods of quiet concentration if you also respect their need to spend time with you. This way, everyone is clear on what happens when.
Your family is not a distraction from your work – your family is why you work. Reserving set hours for your activities, and also theirs, is one great way to show them exactly how much you care about them. You can also set goals together for certain purchases or holidays together, based on revenue targets, just like any other business does.
Treat it like a Business
If I may offer one final piece of parting advice, it would be to treat your new trading venture as a business. Too many people view it as a “get rich quick” scheme, and their unrealistic expectations can lead them to take on large positions, which go devastatingly wrong when the market does something other than what they anticipated. Highly-trained and experienced fund managers are thrilled when they manage 10% per year; why would you expect to double your money your first few months out?
Successful business are always minding their books – so keep a trading journal. Don’t just record your entry and exit prices, but pay attention to why you took the trade, and if that opinion held or what happened to change it, as well as your feelings before, during, and after the trade. Over time, certain patterns will begin to emerge about your thought processes and behavior. This information is invaluable in charting your future adjustments and progress.
We may think it is the markets that we are trading against, but the secret that most professional traders know is that in the end we are really trading against ourselves. May your new home-based business be an educational, enjoyable, and profitable one!
“This is not like a normal job were when you go to work as soon as you clock on you have to do something, this is different you clock on and look at the market and write down your trade plan and sit and wait, and wait and wait and when the market shows you its hand jump on it hard and fast. Not easy to do but that is what separates the winners from the losers in this game. I know others want to trade all the time and that is fine, nothing right or wrong in this game other than what happens to your account…”