Why Your Trading Account Cannot Be Your Insurance Policy

Why Your Trading Account Cannot Be Your Insurance Policy

We live in uncertain times when every extra buck counts. At the same time, we want to multiply that same buck to provide ourselves and our family safe future and carefree golden days. Pension funds, stocks trading, insurances of all kinds – these are all forms of money management and investments that can help us enjoy the life without feeling the burden of financial troubles.

Unfortunately, the enjoyment is possible only if we know how we invested and why, but also if we have realistic expectations about the possible outcome. Nowadays, when information is accessible to everyone, one would expect that everyone knows what they are getting into and what to accept, but the internet has become a playground of wrong information, false advertising, and unrealistic promises.

Many online trading services, unfortunately, tend to advertise online trading as the best investment for the future. They are promising high payouts and excellent trading conditions accompanied by fast withdrawals without any additional conditions. Sometimes they even offer great bonuses on the first deposit. It is natural that traders want to grasp such opportunity, but unfortunately, the reality check hits hard.

Financial Trading Contains Risk

Besides the fact that there are many scams lurking around, it is important to understand how trading should never be seen as insurance. Insurance is one thing and trading completely another. While insurance allows us investing smaller amounts that accumulate during a certain time period so we can use it when needed, trading in financial markets (online and offline) contains a high level of risk and doesn’t necessarily need to be profitable. No matter how long you trade, there is no guarantee that you will end up with high profit in the end.

“Financial trading is great, but many people confuse it for a safe investment. It’s not. The risk is high even when all the odds are in your favor. For that reason, it is important to trade with extra money you have and can afford to lose in case of a bad decision, and not with your life savings.”, explains John McKannister from binaryoptions.co.nz

But even when it comes to trading that extra money you have, you should never put all eggs into one basket.

How to Succeed in Financial Trading?

Always try to diversify the trading portfolio as much as possible, and trade with multiple assets if possible. Be patient and don’t expect great profit the next day you start trading – it takes the time to become a successful trader. Also, try to focus on repurposing your profit. There is no need to invest all the profit into trading. You can Add a part of the money to the savings account. It is agreed that every trader should invest a maximum of 20% of what he has in the savings account so he can avoid unpleasant scenarios that can ruin his future. Another good advice is never to trade the money you don’t have, or the money you need to survive. Utilities, housing, food and other costs of living should be first on the list of priorities.

Why is Trading Account not a Savings Account?

Trading account, in case you decide for this type of investment, should contain only the money that is meant to be traded. Don’t generate large amounts on your trading account as it is easy to forget about any limits and trade all of it. Every time you make enough money to be able to withdraw – do so. That way, you can be sure that your money won’t be manipulated.

Withdrawals are not something that will affect your trading results in the future, but they can prevent you from forced trading. Also, the money can then be invested in less risky investment opportunities and even multiplied or at least increased thanks to interest rates. Keep an oversight over the money you own, the money you owe, the money you trade and money you plan to spend in the future.