How anyone can make money trading shares on the stock market
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In this animated video we present The Naked Trader by Robbie Burns.
Robbie is a writer, journalist and investor come trader. He is believed to have turned £50,000 into approximately 1 million in 12 years. This gives an average annual return of almost 28%!
The subtitle says ‘How anyone can make money trading shares’ and that is exactly how the book is presented.
Robbie Burns arguably brings investing (or as the title suggests, trading) back to basics with his ‘armchair’ investing approach.
In his previous career as a journalist between 2002 and 2005, Robbie wrote a column called ‘My DIY Pension’ and it reported gains of over 100% turning £40,000 into £80,000 during this time. A few years later he is said to have turned this into £250,000 and thereafter increased his profits to a tax-free gain of over £1,000,000.
So, what style does Robbie approach the stock market with?
In his own words he says;
"I strongly believe charts are very important to look at, but I also believe it’s simply crazy to buy and sell shares on the basis of looking at a chart and nothing else at all".
We can take it from that statement that Robbie takes a hybrid type approach, not a pure ‘trading’ or ‘investing’ style but rather a combination of both. He does however say that he holds shares from anywhere between 3 months and 2 years, it is therefore a personal judgement of where you think Robbie’s style falls.
Additionally, trying to replicate Robbie’s strategy is difficult due to the subjectivity that is used throughout the book, for example, the interpretation of financial statements is used to look for positive or negative lines of text. Likewise, interpreting whether a company will have continued growing demand for its product is difficult to determine.
Nonetheless, despite not being systematic, the approach Robbie takes certainly seems enjoyable and we hope to unfold some of his thoughts in this video.
We will skip the beginning chapter which gives an hour by hour approach to a typical Robbie Burns day but let’s just say it involves a lot of toast being consumed….
Robbie makes a pertinent point when he says;
“Make more money by not relying on the markets”
His message suggests that if the stock market is your main source of income it is harder to make money.
Without the necessity to make money your investing decisions can be made in a more patient manner. Try to seek out other income streams before committing everything to your investing returns.
A common question from beginners is “how much do I need to become a fulltime trader”, Robbie suggests that £500 is not enough to even dip your toe in the water, suggesting that a £50,000 pretend paper account will set you in good stead before putting real money into the markets.
To provide some calculation to the original question we must first understand what a realistic return per year looks like. Robbie suggests 20 to 25% per year is achievable, therefore if you have £100,000 as a trading account you could return between 20 and 25 thousand pound per year.
Using a smaller account to achieve such returns is just too risky, in other words the use of leverage is a no no.
Remember, using £20,000 to control a £100,000 trading account might amplify your profits by five times as much, but it also means you might amplify your losses by the same amount.
Robbie’s view is to never use credit or leverage, use only the cash balance that you have made available for your investing endeavours.
There is simply no need to force the returns using leverage, a £20,000 account would turn into one million over 20 years by compounding an average 22% return per year. Patience is key.