This morning, someone requested me to answer this question on Quora. Reading the question over, the first thing that jumped to mind was the structural factors that we discuss in the IOI 101 course on Behavioral Biases and Structural factors. Making a living by trading stocks is easy, but there are a few conditions that must be met first…

Oh yes! You can make a great deal of money trading stocks. You can make more money in one year as most people in the U.S. make over their entire lifetimes. The steps are easy:

  1. Be born into a family where your father and / or mother are Managing Directors or partners at a large investment bank.
  2. Do well at the Groton School or another elite East Coast boarding school, then make your way into Harvard, Yale, Princeton, or Stanford (don’t go to Columbia or U Penn unless you want to work on the buy side).
  3. Make sure that your father and / or mother set you up with internships at their bank (or, if they have the connections, at a better bank than they work at).
  4. Be a team player as an intern so you’ll be offered a job post-graduation.
  5. Spend a couple years working as an assistant on one of the desks and make sure the head of the desk gives you a good recommendation to an Ivy MBA program.
  6. After finishing your Ivy MBA, hope that your father and / or mother is a Senior Managing Director at an influential bank.
  7. Leverage your previous banking experience, your superlative education, and your connections to land a job as a junior trader at the bank where your father and / or mother works.
  8. Now, you have a base salary of a few hundred thousand dollars and a call option on all the trade flow that goes through your desk. This is worth high-six or low seven-figures after a while, especially if you’re on the right desk (don’t trade stocks by the way – bonds or derivatives are best if you want to make money).
  9. Live frugally so you have plenty of money to retire when your job is eliminated by an automated crossing engine that has already replaced a third of the traders on Wall Street.

A mere nine steps to financial freedom through trading.

Can you make money by “trading” as an individual investors? No. Absolutely not. If you have traded your way to some money, quit now before you lose it – statistically, you will not be able to keep up your winning streak. (Make sure you have set aside enough winnings to pay capital gains tax, by the way – the tax man gets testy when he gets short-changed.)

If you are interested in investing, be a true contrarian. Invest in your education, live frugally and make a point of wisely spending what you haven’t already saved (rather than the other way around). Live below your means and look for opportunities to develop ownership interests in strong, unique businesses that focus on serving their customers.

Doing this, you will be much better off than if you sunk time or money into half-baked Day Trading schemes using “Technical” indicators that have been refuted through years of rigorous academic studies.

Invest Intelligently!