If you are new to the market and to trading, then this video is for you. My name is Robert Roy, founder of WealthBuildersHQ.com and a trader for over 20 years. And in this video, I want to answer the 10 most common questions new traders have. Let’s get into it.
So the very first thing, I hear it all the time, “Isn’t trading just gambling?” Here’s the way it gets explained to me, “Rob, the stock market is just like Vegas. The only difference is in Vegas, you get a showgirl and a drink.” Well, okay. But that’s not true. I have a very good friend of mine who is a Texas Hold’em player. He is amazing. He told me that it takes him 20 minutes at a table to identify the donator.
I’m like, “Whoa. Rick, what’s the donator?” He said, “The donator is the guy that is going to be giving me all his money today.” I said, “What if you can’t identify him in 20 minutes?” He goes, “Then I got to find another table because I’m it.” Gambling and the stock market, could it be gambling? “I don’t know what I’m doing. Close my eyes. Throw the dice. How did the trade work?” Yeah, it could be. But that’s not how we trade. We trade using very specific methods and systems to make sure that it’s not gambling.
Next, aren’t investing and trading the same thing? They’re not. Think about this. An investor is very long-term. Warren Buffett defines an investment for you’d be willing to hold it for at least 10 years. If you want to buy it today, you got to be willing to hold it for at least 10 years. That’s an investment at least to Warren Buffett. To me, an investment is longer-term, maybe not 10 years. But trading, I could be in and out in the same day. Heck, I could be in and out in the same hour. I could be in and out in the same five-minute candle. That’s trading. It’s very short-term.
What is technical analysis? Technical analysis is taking the chart. I use candlestick charts primarily, but there are other types you could use. Taking the chart and adding indicators on there. Volume is an indicator. On top of volume, you have things like MACD, which is moving average convergence divergence. You have RSI, a relative strength index. You’ve got ADX. See where I’m going with this? Technical analysis is looking at the chart using indicators to add strength to the pattern that I see. If I’m just looking at the price action, that’s fine, but I need some other pieces to give me validity to what the price is doing right now.
What training tools should you use when you first get started? You need a chart. Now, could you use free charts on Yoo-hoo? I mean, Yahoo or Google or from your broker? Absolutely, you can. I use advanced charting services. Now I’m a TradeStation trader and I use TradeStation for my intraday, but I also have TOS. I also have Tastyworks. I have a lot of students that use others like Interactive Brokers. They use Schwab. You use who you’re comfortable with, but for me, the most important tool for me is my chart.
Now I do use a charting service that is our service. It’s called Omega Chartz. And I love the tool because I don’t need to be on the internet to be able to see my charts. I love doing it on airplane. I’m reading my charts, looking at my charts on the plane. I can set filters up to say take every stock out there, bring it down to only the optionable ones. Bring it down to the stocks that are between 100 and 200.Bring it down to ones that have at least a million shares in volume. Bring it down to ones that have a beta or … You see what I’m going with this? I can use my charting service, my Omega Chartz to help hone in and finitely define what I’m looking for and will find that for me every single day.
Now, what about brokers? What brokers should I use? You know, again, open question. I like brokers that are for traders, not investors. There were many companies that have come and gone that have been good, bad and different. Today I mentioned some of them already. TradeStation is a trading firm platform that is for traders, not what the average person would go and use. It is a software program that you install on your computer. I use it. I have now for over 20 years, I love the program. I think it’s, to me, one of the best platforms out there. Are there things I would change about it? Absolutely.
TOS, which is Thinkorswim, which is an Ameritrade product. If you have Ameritrade, you just have to download the TOS platform, but same user ID, same password. Everything is the same. Tastyworks, newer platform that’s out there. Good platform. They still have some work to do on their advanced order types, but otherwise it’s a great platform to use. You use any broker that you’re comfortable with, just make sure that they are options-friendly.
Next is what is the first pattern that I should learn? I don’t really want to pin it down to say this is first. You have to learn a double top. You have to learn a three outside down, a three inside up, a hangman. I don’t really want to pin it down to a pattern, but are there patterns that are higher reliability? And the answer is absolutely. Double tops and double bottoms are very high reliability patterns. A head and shoulders pattern, very high reliability pattern.
When it comes to candlesticks, I mentioned one already. It’s a three outside up and a three outside down are my favorite patterns. They work off of other patterns or they build on other patterns like in golfing patterns. But should you focus on just one? I think you need to start getting familiar with recognizing and seeing patterns. And then you can learn how to trade them. So analyze your charts and start looking for the pattern structures themselves.
So how do people make money from stocks and the market? Whether they are stocks, options, futures, Forex, doesn’t matter. Basically take a stock. It’s sitting at $10. You buy it. One share you spend 10 bucks. The stock moves up to 12. You sell it for $12. You make the difference between those two. The money is made by identifying a pattern, taking action and trading that pattern and executing your exit based on a trigger. It’s going to hit a resistance level, a ceiling.
Think of the ceiling above your head if you’re in a room, you might be outside then the sky’s the limit. But think of that ceiling in your bedroom, your living room, your kitchen, that is your resistance up there. The floor is your support. You trade the markets and as the position moves, stocks, options doesn’t matter. That’s where the money is made.
How much money do I need to trade? I love this question. “How much money you got?” “Well, I got 500 bucks in an account.” “Then you need $500 to trade.” “How much you got?” “I got a million dollars in account.” “Good. Then you could trade with a million dollars.” See, there is no amount you have to have. I have traders that have started with just a few $100 and learned how to successfully trade the markets. Don’t get hung up on, “If I had more money, I can make more money.” You know, that’s true. If you have $1,000 and you can make 10% in a month, you make a 100 bucks. If you have $100,000 and you make the same 10% and you make 10,000.
“See, I need more money.” No, no, no, no, no. If it went against you and it cost you 10% of your portfolio and it went down $1,000 or went down rather a 1,000 account when down 10%, that would be a $100 went against you. But a $10,000 account, would’ve gone down $1,000. See what I’m going with this? A 100,000 account would be $10,000. Having more money doesn’t mean you can only make more money. You can also lose or cost you more money along the way. So start with where you’re at, but you could put a 100 grand into an account, you could trade five of it, two of it, $500. You don’t have to trade at all. I never trade all of my portfolio. I never have my entire trading account at risk ever, ever.
Next one, should I start off day trading first or swing trading first? And I think swing trading has less emotion attached to it than day trading does. There was a commercial when I first started, well, I started in ’97. It was probably around 2000 this commercial came out and there’s a guy sitting in a room in a house. And you’re looking at him from the standpoint of here’s the computer, he’s sitting here, the camera is here and this is his window. Or this is his window on this side. And he’s watching his chart and all of a sudden he goes … and he jumps out the first floor window and lands on the sidewalk, which is right there with the mailman coming by like, “Huh.” And that was the day trading.
He’s freaking out with a little-bitty room. It moved this much on the screen and it’s eight cents because it’s a day trade. I think swing trading gives you a little bit of an opportunity to pullback, analyze the position and not have to react very quickly. So I like swing trading as a start. Now with that being said, I’ve got students that have come right out of the box and jumped right into day trading. It’s just a comfort level.
Lastly, is it possible to replace my income trading part time? And the answer is yes, it is possible. It absolutely is. I just had this conversation with one of my students from our inner circle. And he’s about to leave his job is what he told us in our last inner circle meeting. When he said that to me, I said, “Great. Before you do, you need to have a conversation with me so I can help you understand the things that you may go through as a person that is transitioning over to trading full-time.”
So he and I are going to set that up in the very near future because he’s ready. He’s there. He’s talking about January 1 to be gone. That’s his New Year’s resolution. We got a month and a half-ish to that point from when we’re doing this recording. So he’s at that point right now. So can you replace it part-time? Yes. The goal is to learn how to do this, put enough money away that you’ve got six months of income saved up. So when you do leave that job, God forbid something you happens, you’ve got some cash to cover yourself.
What questions did I miss here? Let me know in the common section down below my team and I will answer them for you. We may even make a follow-up video just for you. Until next time, make it a profitable day. Stay focused on the quest to becoming a great trader, keep crushing it. And remember, you’re just one trade away. Take care, folks. I’ll see you at our next update.