John: Patrick, how do I trade to pay my bills / upgrade my lifestyle and at the same time set me and family up with wealth and independence?
Patrick: Ok, this is going to come down to creating a reliable income and building wealth. These two outcomes cannot be done in the same account. To do this, you will need two accounts. One account for your immediate desires/ needs and a separate account to create your family’s financial legacy.
John: Which trading strategy do you recommend I do in each account?
Patrick: I would do something that was aligned with you as a person.
In the monthly income account, I would look for something that has a relatively higher frequency of trades. I would aim for anything above 5 trades per week.
The goal is to be consistently profitable every week and extract profits at predetermined points in time. Understand, the account growth will be stunted because of the extraction of profits.
I shall tell you now, this style is possible, BUT… only 1% of traders are able to make this style work to pay their bills. Why? Because the pressure of being right to pay an upcoming expense will be a huge psychological disadvantage.
Also note, I have no idea how free you want to be from your desk, but this style will mean you are tied to your desk. Furthermore, this style of trading does not pass the financial freedom test.
What is the freedom test?
Imagine your eyes were closed for 6 months. Would your income still come in from your assets? If the answer is no, then this is a job. You have to keep working for the income stream to deliver.
In terms of style, you could do any of the following, but the style must fit you.
scalping, day trading, short term swing trading, options selling.
In the financial legacy building account, I would look at what some of the greatest traders in history have done. They took between 3 – 20 trades per year. Many times they were able to turn 25k to millions in a few years taking an average 8 trades per year. How? The trades they took made huge asymmetrical returns. This style of trading requires looking at larger time frames and compounding the profits over time. This style will mean you are free from your desk and are able to do your passion, career, run your business, spend time with loved ones.
John: Which style will help me to be consistently profitable faster?
Patrick: The style that is more akin to who you really are. Think about it this way. If you had between $5-10m in your bank account, and the condition of keeping it was you had to trade, which style of trading would you do, scalping, day trading, swing trades, position trading, trend trading?
Whichever answer you say is most likely the style that suits your lifestyle, beliefs and trading psychology. Thus, this is the style you should be doing now and is most likely how you will achieve a $5-10m trading account.
John: How much money do I need In each account to achieve the outcome?
Patrick: If I was trading to pay monthly bills, I would first ensure that I had a high 5 or 6 figure account to pay for my immediate desire/needs. If you do not have that amount, like 99% of traders trying to achieve this outcome, they end up risking too much on each trade. When the trade does not work, it screws up their psychology. They then are suspectable to every trading fear. Fear of losing, missing out, being wrong, leaving money on the table. These fears then cause them to get in too early, late, not take their stop, moving their stop too early, taking profits too early or not taking any, etc. So the big take away is you need a high 5 -6 figures to do this to pay for your bills.
To build wealth I would recommend that you start in the 10’s of thousands zone. Because you are not relying on the money, you can allow it to compound over time. Jesse Stine started with $46k and turned it into $6.8 million in 28 months.
Nicolas Darvas did this style and turned a small sum into $21m adjusted to inflation.
John: What if I just want to do the financial legacy building, can I create an income from that to pay for my bills?
Patrick: Sure, you just do the same strategy in both accounts, but rather than taking a weekly or monthly income, you might have a rule of taking a quarterly, half-yearly or yearly income. You would do this because the frequency of trades is lower, but the amount you could extract each year would most likely be higher due to the huge possible returns.
John: Thanks Patrick
Patrick: Pleasure to serve.
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