If you would like to generate a Passive income from the financial markets as a private investor then it’s going to take a little more than a few passive hours of learning to be able to achieve the gains and passive income you are looking for. There also needs to be a change in mindset in what really happens when you trade and invest yourself vs putting your money into a managed fund. A passive income infers that you will receive a consistent income stream of approximately the same return on investment each month, quarter or year. If you invest your money in a managed fund you know all too well that some years are better than others and a passive return on investment is achieved by averaging the return over 10 or 20 years. Most balanced managed funds as an example average over 20 years around 6% to 7% per year. This could be considered a passive income but it is unlikely you are reading this article to learn how to invest in a managed fund passively. You are likely looking to accelerate your returns and build a more meaningful passive income per year.
Investing and trading your own money is an exciting and potentially extremely lucrative opportunity however it is not realistic to expect a consistent passive income of 5% per month as an example. Some months you may exceed your target of 5% per month however in other months you may come up short or even lose money. Therefore, if you are looking to create a passive income from trading, your results should be averaged over time and you should expect to have losing months along the way.
Generating higher returns on investment and ultimately achieving something meaningful every year for the rest of your life is going to require you to learn how to trade. You are going to need to…
- Decide what market you want to trade. E.g. Stocks, Currencies, Gold, Oil, etc
- Find a trading system that will give you an edge to apply so you can profit.
- Decide on how you will manage your risk so you don’t drawdown your account too much.
- Find a trading education company that can offer you the level of training and support that is required for long-term success.
Sadly, most novice investors get lured into the “passive income” opportunity and are then left to try and figure it all out on their own. If you want to give yourself the best chance of success here are my top 5 tips for generating a passive income from trading.
- Don’t quit at the first sign of failure. When it comes to your success it won’t ultimately come down to the system or market you are using because you will make mistakes, you will lose money when you are learning and therefore it is imperative you fail gracefully. Generating passive income from trading will come down to how you manage risk and how you apply a risk and reward strategy to your trades and how disciplined you are with the execution. No one market is better than another it comes down to how you apply risk and reward in the market you are trading and ensure whatever market you do trade it fits into your lifestyle.
- Invest a very small sum into your trading account (e.g. $1000) to begin with and prove your success before you trade with any more money. Why would you ever consider putting $10,000 or even $50,000 or more into a trading account without proving to yourself with a smaller sum that you can trade successfully.
- Ensure you have joined a licensed quality training organisation that can teach you more than just technical analysis. Ensure they are not a broker and that their training also includes extensive training on risk management and they will teach you about the key fundamentals that drive price in all markets and when investment banks and hedge funds will likely trade.
- Every trading system will perform differently under certain market conditions and therefore you should expect that if you want to make a passive income from trading there will be weeks and perhaps even a month here and there that you do not make money. You must accept this as part of your trading business.
- It is not about how many times you are right or how many times you are wrong. Making passive income from trading is all about how much you make when you are right and how little you lose when you are wrong. A success rate of 50% is acceptable provided each winning trade is greater in value than each losing trade. For example, if you win $500 on each winning trade and lose $250 on each losing trade then you only need to be 38% successful to break even. If you are correct 45% of the time you will be making money consistently over time. It’s a numbers game.
Learning how to generate a passive income from trading is an exciting opportunity for a number of reasons.
- There is very minimal overhead in running a successful trading business.
- You can keep your trading account small and limit any losses until you are successful.
- There is very minimal outlay to get started.
- You can trade with a demo account first until you learn the ropes.
- Once you are successful you can live anywhere in the world and trade.
- As a trader you can make money when prices rise in value and also make money when they fall. This makes trading a recession-proof investment opportunity.
Here at LTG GoldRock we trade the Forex market every week along with our clients. We tell them specifically what we are buying and selling and provide them with daily fundamental and technical reports along with risk management advice on how to manage their positions. For new traders who are entering the Forex market we provide weekly live coaching and trading sessions live online demonstrating in the live market how the Forex market works fundamentally and technically as well as sharing how we manage our risk exposure to approximately 2% on each trade. You can register to join one of these free live coaching and trading sessions by clicking here
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
If you would like to speak to one of our Senior Client Advisors regarding the relative client opportunities offered at LTG GoldRock and how you can follow along with our Professional traders each day in our live trading room please contact us today or you can register for one of our a live coaching and trading webinars by clicking here.
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