Adrian Reid explains why retail traders should start with stocks instead of forex or futures. Stocks have lower leverage, tighter spreads, and lower costs, giving beginners a better chance to survive long enough to learn systematic trading principles they can later apply to other markets.
So systematic trading can apply to all financial instruments. So stocks, futures, forex, even options.
So you can apply the principles of systematic trading everywhere. The difference is. So the rules that work across the different markets will differ. So why do I trade stocks and why do I teach and.
Encourage stock trading as the first step into, into trading for your own account? The main reason is that stocks is the easiest and most reliable place to start. It's the easiest place to protect yourself and stay in the game. And stock traders have a much longer expected survival rate at the beginning than forex traders do. And the reason is Forex traders, when you start off, the brokers encourage you to use.
Very high leverage so that you can make money fast and take pretty high risks. They also encourage you to use very short term trading strategies and trade very frequently. And the reason they do all of that is so they the broker makes a lot of money out of your account before your account blows up and you lose everything. I've spent time with a lot of brokers and a lot of advisors. And one of the advisors I spoke to, who's a big introducer for forex brokers, told me that the average lifespan for a retail forex trader before they blow up their account and lose everything is about three months. Now, some people are going to last longer than that, some people are going to last less than that, but frankly that's pretty terrible and it just doesn't need to be that way. And the reason it happens is because people aren't taught the right skills and they're in an environment which is very highly leveraged and the odds are stacked against them. In stocks, very simple rules with low leverage can make you very solid returns and allow you to build a lot of wealth.
I'm not saying that you can make double your account every month or every week or anything like that, because frankly that's impossible in any market. But stocks is a very easy place to start trading. You don't have to worry about leverage. You've got lower correlation than in Forex, the commissions. Contrary to popular belief, the commissions are actually lower in stocks in many cases because when you buy stocks you don't have to use 50 or 100 times leverage. And that little spread you pay in Forex when you lever it up 50 times or 100 times is actually a really big cost. Whereas in stocks the spreads are really narrow, particularly if you're trading liquid. Stocks and commissions are close to zero depending on which market you're in. So I just like stocks. I've had a lot of success teaching new traders and it's a really great wealth building tool. So that's why I am, that's why I talk about stocks primarily rather than Forex. But if you learn about systems, you can apply systematic thinking and the processes to all markets.
