Week 2 - Stocks
The best idea and the one I'm most likely going to stick with is trading stocks. The reason for this is because I cannot see myself successfully doing any of the other ideas as they all seem less scalable, more time consuming and less rewarding. Reselling items would be the second best option however there are some downsides to doing it such as, you have to do a lot of research beforehand to find the right products that can be bought for a discounted price that sell fast. Then you have to work out all the fees to sell the items and there is already so much competition on every marketplace. This doesn't seem scalable either unless I can find expensive items that have a huge return and are quick to sell on such as cars.
Trading is probably the easiest to setup and have access to however it is one of the riskiest to do as many people see it as gambling. However I believe with the right plan that you promise to stick too, it can be possible to make money. There is lots of evidence of people making money trading and once I have figured out a formula that works over a long period of time, I can add more money and it will compound much faster. Also I already have some knowledge of trading stocks and I enjoy keeping an eye on the news and working from home. I need to learn all the fundamentals and start paper trading again. Once I have re-learnt the basics I will deposit £250 and try and make some money.
My first idea is to make 1-3 trade per day and the things to look out for are:
- Lot Sizes - I only want to risk 1-3% of my total account each trade e.g. £2.50-£7.50
- R Multiple - I want each trade to have a risk and reward multiple of 2+ so if I risk £2.50, I want to earn £5 minimum. This means in 10 trades I only have to be right 5 times to breakeven.
- Setups - I need to learn price action of the candlesticks to work out when it's best to go into a trade. Doing this is crucial as it will help the stop loss getting hit from spikes.