4 Steps to Getting Money Work for You

Money TreeOne of the greatest benefits of trading the financial market is that there are so many ways to take money from the market. Some traders like being a scalper and cashing in via the tick charts. Others might even go to the extreme of slowly dripping money out of the market through the weekly and monthly charts.

Irrespective of how you trade the market, it is important to remember that, as a market trader, you want to free yourself from having to work for money. In other words, you want to let money work hard for you. However, before you get too excited, I just want to clarify that the term letting money work for you does not mean NOT doing anything and hoping that money will pop out from no where. Instead, it just represents the potential of allowing the financial market to help you build income while you spend time on other opportunities.

With that, I will be talking about the idea of letting money work for you and how to go about doing it.

1. Identify What the Other Opportunities Are

Before you decide to spend less time trading and more time on other opportunities, it is imperative to know what the opportunities are and that these opportunities (what ever they may be) are important to you too. Opportunities can vary and can be a personal thing, without getting into too much detail here are some examples of what I refer to as opportunities:

  • Spending time with family and/or dear ones
  • Identifying new money making opportunities
  • Spending time with hobbies
  • Travelling or volunteering
  • Taking lessons on skills you’ve been dying to learn E.g. Cooking, Interior Design etc

As you can see, opportunities can be in the form of financial or non-financial activities. As mentioned, it is crucial that these activities are important to you because while you are not watching the market, you are losing small trading time that could help you make extra income. Hence, the opportunities must be worth your time. In other words, by combining the right opportunities and trading less, you are able to generate greater returns when compared to trading all the time.

Net Return = Opportunities + Trading (Less)

> Trading (All the Time)

The formula above should be a good way to summarise my point. With that, our objective is to find the right opportunities so that we can get the formula working in our favour.

Another point to note is that the Net Return can be in tangible as well as intangibles forms. For example, by trading less and spending more time with family, you are a happier person.

2. Adjust Your End Goal

changeIn everything you want to do, the most important aspect of it is to first identify the end goal. Without knowing where you want to go, you will struggle to see the road map. The chances are, before you read this article, you’ve already do a trading goal in mind (I hope). If you don’t have one, then you might want to consider starting one. If do have one, then you will need re-adjust it to include your opportunities in there.

This may involve re-adjusting your trading system or trading rules. It can be challenging and that’s fine. Take your time to do it but what ever you do, you must adjust it. Do not hope to trade less using the same rules or trading system and expect to achieve the same goals.

For some traders, they like the idea of letting money work for them but they neglect that, sometimes, they need to make certain sacrifices. If your opportunities are financially less rewarding, you need to ask yourself – is that ok? Will you be comfortable making less money but be happier? Alternatively, are you ok risking more per trade? These are some of the questions that you need to validate and be comfortable with when you re-adjust your goals. Again, you need to focus and remember that the net return will be greater then trading (all the time) in the longer term when adjusting your goals.

3. The Key Ingredients to Letting Money Work for You

When adjusting your goals, remember to include ingredients that will help you achieve your goals – these are just some suggestions and are not absolute rules. In my view, you will struggle to spend less time watching the market without the following ingredients. Without them, the chances are high that you will be building an active income instead of passive (or partially passive) income. Anyway, the ingredients are as follow:

Using Orders

When entering the market, use Limit Orders, Stop Orders or Take Profit Orders. It does not matter which one you use, the key is to be able to enter the market without you having to watch the market actively.

Improved Stop Loss Management

Since you will be spending less time in front of the market, you will need to place your stop orders where it will completely invalidate your trade. In other words, you might need a wider stop loss so that you will not get stop out by intraday volatility. For example, if you are a technical trader, you might consider placing your stops using daily charts instead of hourly charts.

Routine

Pending on the type of trader you are and the system you use, having a good trading routine is crucial. By doing so, you can are actively managing your time between trading and non-trading activities. The advantage of that is that you are actively managing your time and balancing your priorities.

Disclaimer: In my view, these three ingredients are very useful for most trading systems. However, while I have traded many systems in the market, I have not traded all them. Hence, please be aware that these are just my view and there could be systems that I have not covered.

4. The Balancing Act

Now here comes the most important part of today’s article.

After going through step 1-3, many traders become idealistic and make goals that are ambitious without realising the difference when spending less time trading. For example, traders who use to spend 4 hours trading will find it rather difficult when they shrink it to 30 mins a day. They are battling because they have moved outside their comfort zone and they are faced with uncertainties.

For others, they feel uncomfortable because they are stuck on to the belief that money doesn’t come so easily. In their view, trading 30 mins a day will not lead them to same rewards unless they increase their risk per trade. Of course, that becomes a new issue which they are struggling to overcome.

goalsIn short, the chances are, you will end up in loop (between Step 1-3) when finding out the best way to let money work for you. You will reevaluate the benefits of the opportunities (identified in Step 1) and then readjust your end goals (in Step 2) countless number of times before you find the right balance.

With all honesty, making changes is normal and being outside your comfort zone is a good thing. However, make sure to be patient and make gradual changes (instead of leap changes). Believe in yourself and, before you know it, money will be working hard for you.

Conclusion

Letting money work for us is one of the greatest benefits of being a market trader, so make sure to take advantage of it. Trading 30 mins a day is only an extreme (but not impossible) example and you don’t have to use that as your aim. Instead, find something that works for you and, more importantly, find something that will ensure that you’ll remain profitable.

Thank you for reading and do send your feedback or questions via the comment box below.

 

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