Five Tips To Invest Like A Full Time Trader

The Commitment of Traders Report . . . What Your BroTrader On Youtube Doesn’t Tell You

But I Will

Ahh the traders. The day traders. The options investors. And the Youtube gurus dispensing invaluable investing advice. You’ve been listening to and watching them for months if not years but you still have your day job and don’t quite see the same returns the Gurus seem to get.

What do they know that you don’t?

Easy. They understand the behavior and trading patterns of institutional investors.

The stock market isn’t driven by Millenials and Gen Z-ers by individual stocks on Robinhood as much as the influencers and advertisements would like for you to believe.

1) Using A Real Trading Platform

No plug or kickback here. Most pro traders use Think Or Swim which is powered by TD Ameritrade. Robinhood just pays more to influencers so you know their name. Brand recognition can be a great thing. For the brand. And sometimes, a bad thing, for you the investor.

Think or Swim has a website and an app that work in nano-second real time trading. In addition, the resources that Think or Swim offers to traders is invaluable. From market history to industry trends, Think or Swim covers it all.

2) You Need $25,000 USD at a Minimum That You Can Lose

Not $1,000, not $5,000, I’m talking 25 G’s. Cash money. Not from your retirement account or emergency fund. Not from a cash advance. $25K liquid to invest. Any trading platform that will allow you to invest less is doing you a tremendous disservice. You will spend more in trading fees than you will make most likely (exceptions are always present but I’m advising by the average).

If you don’t have $25,000 that you are ok with potentially losing . . . Don’t begin trading full time.

3) We Don’t Outsmart the Banks, We Come In Behind Them

Everyone at any uppity cocktail party likes to talk about how they “know” what a stock is going to do. Best example comes from 2020 when people bought travel industry stocks while they were down and are holding on for the rebound. That’s fantastic for them but for a full time trader, it doesn’t work exactly like that.

What you need to know

Institutional Investors (like the big banks) move the markets. Jerry in the office down the hall with his 401(k) does not. Many people try to outsmart them. There is no point. If you were that smart, you would have your own hedge fund by now. Humility can be a great thing especially for a trader.

Each week on Friday, large Institutional Investors must disclose what is referred to as the “Commitment of Traders” report which is a disclosure of any holding they plan on buying or selling for the following week.

Based on that information alone, full time traders can accurately predict whether a security or currency will go up or down with almost 80% accuracy.

Sounds too easy? Let me make it even easier for you. You can google the report and read it for free. That’s right. Free. No course. I’m not becoming your mentor for $1,000/month. That report is accessible for free. Use it to your advantage and tell a friend.

4) Effective Traders Make Money Whether the Market Goes Up or Down

Crash course in basic, rudimentary Options Trading here. I will never forget, a hundred years ago in 2007 when I was sitting in my wealth management training class for Citigroup (that’s what Citibank and Traveler’s were called before the Great Recession when they were one conglomerate) we learned the basics of options.

Options are like a bet on what a stock will do.

There are two basic types of options.

1) Call

2) Put

The best way to distinguish the two options is this.

1) You “call” someone “up”.

2) You “put” someone “down”.

A call is a prediction that a stock will increase in value. A put is a prediction that a stock will decrease in value.

Unless you are a savvy, seasoned investor, it is always advisable to write what is called “covered calls” and “covered puts”. This means that when you bet the stock is going up you are also betting that the stock may go down in order to hedge your bets.

Bankrate has a further explanation you may find valuable:

How does a call option work? A call option gives you the right, but not the requirement, to purchase a stock at a specific price (known as the strike price) by a specific date, at the option’s expiration. For this right, the call buyer will pay an amount of money called a premium.

Pay attention to premium. It’s going to be important.

5) A Majority of Full Time Traders Use Premiums

See #4. A vast majority of full time traders will use premiums collected from options to cash flow their day to day expenses. They never remit ownership of their security unless they are on the losing end of an options trade.

It is also how many traders are able to acquire large amounts of securities, by winning options trades. Once they pay the premium, if they are accurate, they collect the entire stock holding listed in the trade sometimes for pennies on the dollar.

It’s like a swap meet and the horse races had a crack baby and dressed it up and took it to church. Offensive? Yes. True? Also yes.

In Summary

1) Get a reliable trading platform like Think or Swim.

2) You need $25,000 (USD) initial investment at a minimum to have a realistic chance of becoming a full time trader without adding additional funds.

3) Don’t outsmart the banks, come in behind them.

4) Learn to make money when the market goes up OR down.

5) Use options premiums to cash flow your lifestyle and to acquire additional holdings at a discount.

Disclaimer: Always consult a professional before making Financial, Tax, or Legal decisions.