During a congressional hearing in 2009, head of the Federal Reserve at the time Ben Bernanke responded to Rep. Don Manzullo's complaint that he could not get a yes-or-no answer to his question by saying "It’s a poorly posed question.” In honor of Dr. Bernanke, below are some uncomfortable answers to common questions about trading.If you have to ask, then you don’t have enough. The better question to ask yourself is how many months of normal living expenses can you cover with what you have in your bank account? The answer had better be at least three, ideally six, before you start actively trading.
You should trade what you know and understand the most. If you have no experience with any asset class, then go with the one you are most intrigued by. Like any other endeavor, if you don’t find the subject matter interesting you will not be good at it.
OMFG, if there was one strategy that was clearly "best" then everybody would just do that, wouldn't they? There are many strategies that work, at least some of the time. At a minimum, you need to use tactics that make intuitive sense to you. Can you explain it to someone else? You also need to use strategies that are aligned with your risk tolerance.
The most effective way to avoid a big loss is to sell when you have a small loss. If you are trading something that is prone to sudden large swings in value, then you will not avoid big losses.
Yes.
This is the king of poorly posed questions about trading. Can you earn a living playing guitar in a band? Yes, it is possible. Can you make good money from Tik Tok videos? Yes, you can. OTOH, if you have asked the first question on this page then you surely do not have enough capital to rely on trading as your only source of income.
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