Trading financial assets from home and working entirely for yourself sounds like the dream. You don’t have a boss, coworkers, clients, or customers, but how easy is it to make a living this way, and is it all too good to be true?
Koroush Khanegah has successfully made a living through trading financial investments, and he explains how you can make money trading and why it’s not always as easy as social media makes it out to be.
LinkedIn: Koroush Khanegah
Podcast: Market Meditations
YouTube: Koroush AK
Koroush Khaneghah is a trader, investor and entrepreneur. He is also the founder of Market Meditations, one of the fastest-growing cryptocurrency newsletters with over 30,000 regular readers and followers.
Koroush is well known for publishing free, comprehensive and easy to interpret cryptocurrency and finance-based education across various social media platforms, and has received over 1,000,000,000 impressions through his YouTube and Twitter accounts.
What you’ll learn in this episode
- [1:41] The businesses Koroush has and how he helps people enter the cryptocurrency market.
- [2:38] How Koroush got into trading and started to make a consistent profit from it.
- [4:32] The difference between trading and investing.
- [5:55] The difficulties involved with making money through trading and why there’s such a low success rate.
- [7:10] The type of assets individuals can trade and why crypto markets provide a unique opportunity.
- [9:52] Why it’s important to specialise in a specific market.
- [10:47] How to choose which market to specialise in and why immature markets have so much potential.
- [13:24] The different types of trader and the skills you need to succeed in this world.
- [16:07] The maths a trader needs to know.
- [17:17] The importance of having the correct mindset when trading.
- [20:23] Where you can learn trading fundamentals and strategies for free.
- [22:42] The personality types that are most likely to succeed at trading.
- [24:27] The solitary nature of working as a trader.
- [26:22] How having a mentor can help you avoid mistakes and progress faster.
- [27:20] The advantages of part-time trading and how much money you need to get started.
- [29:17] Actions you can take to minimise your losses when starting out.
- [31:54] Other opportunities in cryptocurrencies outside of trading.
- [35:33] Good entry points to start learning about creating passive income within crypto markets.
Resources mentioned in this episode
Please note that some of these are affiliate links and we may get a small commission in the event that you make a purchase. This helps us to cover our expenses and is at no additional cost to you.
- Karoush’s YouTube Technical Analysis Course For Beginners
- Trade Your Way to Financial Freedom, Van K Tharp
- Alameda Research
- Market Meditations Passive Income Guide
- DeFi Dad YouTube channel
- Episode 3: I know I need to change career, but where do I even start? – with Tom Harris of Tom Harris Coaching
- Two exercises to help you find career happiness
To see the resources recommended by all our guests, visit the Resources page.
Episode 104: Can you earn a living from trading stocks and shares? - with Koroush Khanegah of Market Meditations
Jeremy Cline 0:00
How does the idea of working entirely for yourself by trading sound to you? You don't have a boss, you don't have co-workers, you don't have any clients or customers. You make your living from buying financial assets and then selling them for profit. And then buying them and then selling them for profit. Can you make your living that way? Does it sound too good to be true? And how would you go about doing it? That's what we talk about in this episode. I'm Jeremy Cline, and this is Change Work Life.
Jeremy Cline 0:40
Hello, and welcome to Change Work Life, a podcast where we're all about beating the Sunday evening blues and enjoying Mondays again. Now, is it possible to work entirely for yourself? I mean, literally for yourself. No boss, no co-workers, no clients, no one who's expecting anything from you, apart from you, yourself and perhaps anyone you've got depending on in your family. No, I'm not talking about retirement. What I am talking about is trading, buying and selling things, usually something financial, like stocks, shares and living on the profits. Is that even possible? Can you make a living that way? If so, how do you do it? Well, to help answer these questions, I'm delighted to be joined this week by Koroush Khanegah. Koroush is a trader himself, and he's also the founder of Market Meditations, through which he publishes cryptocurrency and finance-based education by his newsletter and podcast. Koroush, welcome to the show.
Koroush Khanegah 1:34
Jeremy, thank you so much for having me on.
Jeremy Cline 1:35
Can you start by telling us a bit more about the businesses that you have? So, Market Meditations and Koroush AK.
Koroush Khanegah 1:41
Sure, I'd love to. So, as you said yourself, I'm a content creator under the name, a pseudonym, Koroush AK. Market Meditations is our newsletter, where we like to act as a gateway for people entering into the cryptocurrency space, and then provide them content and education, so they can dive down the rabbit hole and use the incredible opportunities in the space to build wealth, as we like to say. I'm also a very active trader and investor. I have been specifically in cryptocurrency since very late 2016. And I'm also the co-founder of Solstarter, which is an IDO platform and one of my main projects right now.
Jeremy Cline 2:25
Koroush Khanegah 2:25
Initial Decentralised Offering platform. It's like a launchpad for cryptocurrency-based projects where they can launch their tokens.
Jeremy Cline 2:33
So, trading, how did you get into that in the first place?
Koroush Khanegah 2:36
Well, I left university as an entrepreneur, and I got lucky, I started a business with a friend, and it went pretty well, because normally people's first ventures don't. And I got a little bit addicted to it. But what I found was, as soon as one opportunity would dry up and not become like a long-term business, there'd be this limbo in between, where I'd be looking for the next one desperately, and trying to find where to go next. And what was happening was a lump of money would be made, and then that money wouldn't do anything for me, or I wouldn't have any way to really scale it. So, the options were, obviously, build your own business and try to get something that's going to work long term. But what I found, which seemed to grab my attention, was trading, because having a mathematics background, it seemed to leverage a lot of the skills I already have, a good understanding of probability, I've always been decent with my emotions as well. And when a friend in 2016 told me about this new internet called Ethereum, I dived down that rabbit hole and the trading journey began.
Jeremy Cline 3:45
I'm certainly interested to dive into sort of the maths background, and also the emotional sort of side of things. We'll come on to that in a bit. But let's start with a real baseline question. People will be familiar with investing. So, they'll probably have, if they're in the UK, pensions, ISAs, if they're in the US, they'll have IRAs and that kind of stuff. So, they'll be used to putting aside an amount of money every month, which will then go into some kind of an investment platform, whether it's funds or whether it's individual stocks or shares or whatever it might be. So, how does trading compare with that? What is trading, if you're comparing it with that sort of type of investing everyone's used to?
Koroush Khanegah 4:32
I would put trading in a very difficult category, because when you trade, normally it requires a direct investment of time, every single time you want to generate income. So, when you put stuff into these passive funds and investments, you can set and forget almost. Every quarter, you can come check, rebalance your portfolio, make sure everything's in order, reassess your goals. But trading is a lot more active. As a trader, you look for an edge in the market, some sort of inefficiency that you can exploit in order to generate profits. And this requires one stage where you have to develop a system, you have to form a hypothesis for why there's this edge in the market and how you can take advantage of it, you have to go through some extensive testing, and you have to test it in the real market, then finally, you have your trading system, and you have to keep playing it out until the market conditions change enough, to which you either have to create a completely new system, or you have to adjust, tinker and change your system to continually maintain that edge in the market. So, trading is much more of a skill you develop in order to generate income, rather than something that generates income for you, if that makes sense, Jeremy.
Jeremy Cline 5:47
I think I know the answer to this question, but is it something that you can potentially, with the right tools and skills and resources, make a living from?
Koroush Khanegah 5:55
Absolutely, yes. But I want to preface that with, it's extremely difficult. And social media right now likes to present an image where trading is this activity that is extremely easy, lucrative and results in setting up on a beach, living off two hours of work a day, when in reality, it's an extremely competitive game with a very low success rate, not because of the difficulty of developing the skill, but because of the high risk attached to any emotional mistake you make.
Jeremy Cline 6:32
I'm going to be interested in talking about risk management later on. But first of all, let's deal with some of these, if you like, more basic topics. So, if you want to go into this as an individual, so you know, you're not a great big investment bank, you're not Goldman Sachs or Merrill Lynch or whoever, what can you trade? I mean, are we talking equities? Obviously, you're into cryptocurrency, normal, fiat currencies, bonds. I mean, are there any particular types of assets which you can't really trade? Are there any typical types of assets which an individual who wants to do this for themselves will trade?
Koroush Khanegah 7:08
That's a fantastic question, Jeremy, one I love answering, because there's definitely a misconception that the average person cannot compete with the big banks or funds, investing hundreds of millions into getting a 0.001% increase in their execution speed of any trade. Now, while I don't personally trade traditional markets, my focus has been very much in crypto, I do have my own podcast and we bring on a lot of people who trade both markets. And a recurring sentiment is that crypto can be viewed as the easiest poker table to play out right now. It's a very immature market, with a lot of immature participants, and this creates inefficiencies. So, as a trader, your job is to find these inefficiencies, and crypto is one of the markets with the most inefficiencies that I've seen, especially in the current market conditions where people are, Jeremy, I had someone who turned $1,000 into $12 million in 20 days. That's how insane the current crypto market is. So, yes, it's a very easy poker table to play out. But remember, that's an edge case story, for every one win like that, there's going to be 1000 losses. Now, to circle back to your question on how a retail trader can compete and make money in trading, there's a few places where you can find edges. One of my favourite ones to share is, liquidity is an issue that all traders face. And the larger the amount of money you're trading with, the harder it's going to be to find a market that has sufficient liquidity for you to enter and exit. Now, for those listening who don't know what I mean by that, liquidity just means there's enough people to buy when you want to sell something, and there's enough people to sell when you want to buy something. So, for every buy or sell, there needs to be someone on the other end of that trade. If a market is very liquid, there's going to be loads of people on the other end of that trade. Now, if you're trading with $1,000 or $10,000, you're going to be able to enter markets that the big institutions cannot. In crypto, this is the mid to small cap cryptos. So, if you go to a website called CoinMarketCap, and you go and look for coins outside of say the top 30, you're going to find things which are a lot more illiquid and a lot more difficult for larger players to trade. Now, that's one place where you can find an edge. And then, outside of that, there's countless success stories with retail traders, if you find a system that you can continuously execute, you can compete with other retail traders. You don't have to be taking money from the funds. So, there's opportunity within that as well.
Jeremy Cline 9:43
Is it best to focus on a particular asset class, be it stocks and shares, currencies, cryptocurrencies, whatever it might be?
Koroush Khanegah 9:52
Absolutely. Every market has ebbs and flows to it. And if you remember when I talked about developing a system, you're looking for an inefficiency. Once you find that inefficiency and you start exploiting it, the market will naturally start to change. And if you're trading similar asset types, or even better, the same asset types, you're going to start to see how that market changes, see how sentiment changes when the news changes, when the market structure of the charts, if you're analysing those, change, and you can start adapting your systems to it. However, if you were trading multiple markets at the same time, for example, gold behaves completely differently to how Ethereum would or any comparison you want to take. So, you really want to learn the ebbs and flows of one market. And that can be a part of developing your edge.
Jeremy Cline 10:37
So, if you're starting at this from a complete blank sheet, how would you choose which market you might be interested in getting into?
Koroush Khanegah 10:45
I took a second think about that question, because the answer for me is pretty simple, it's crypto. But say someone's listening to this podcast in three years' time, and crypto is no longer the easiest poker table to play out, if you will, how would they choose which market to go to? I would look for trending markets, markets which have a lot of volatility, and ideally, immature markets. The reason is because it allows you to learn very quickly. Don't go in with a lot of money. No one should start dumping a lot of money into the market and start trading. If anything, paper trading is one of the best ways to get started. Paper trading means you just imagine you're trading with money, and you have a fake portfolio, and you see whether or not you can succeed in that market. Now, the reason immature trending markets are so good is because you get to experience multiple market cycles very quickly. Markets are cyclical by nature, they tend to have bear markets, neutral markets, bull markets, and you get to see how the masses behave at each different phase. And if it's an immature market, you're going to go through those phases very quickly. Especially in crypto, it's a 24/7 market. So, there's no open, there's no closed, it just runs 24/7, so you get to build up a lot more experience in a much shorter amount of time.
Jeremy Cline 12:01
So, it sounds like you wouldn't necessarily want to start trading in say FTSE 100 stocks.
Koroush Khanegah 12:08
So, again, do note that I've been very focused on crypto. So, what I'm sharing with regards to should you start in those markets or not, well, a lot of it will be second-hand information here. And I'd like to clarify that when it is the case. But from everything I've heard from those who are in this position, they have moved away from those markets to crypto. And this has been the case for the last three and a half years, where there's just been immense opportunity here, there's more volatility, there's less institutions in place, because you're looking for inefficiencies, a lot of those inefficiencies get taken up. That is literally what happens when a market matures, more people spot opportunities, and then they create large processes and infrastructures around those opportunities, even outside of trading, any industry that gets built, you get these little monopolies built up that take a lot of the profit, and for the newer entrant, there's going to be a lot more barriers to entry. So, having those low barriers to entry is the best thing to look for when choosing that starting market.
Jeremy Cline 13:07
Let's talk about the sort of person that trading is suited for. I mean, first off, you mentioned that you had a math background, what sort of skills qualifications ideally do you need in order to pursue trading as a way of making a living?
Koroush Khanegah 13:24
I'd start by saying there's more than one type of trader. So, you could be a day trader, where you focus on intraday positions. These last, say, five to 60 minutes, you enter the market very quickly, and you exit very quickly. This is very suited to people who, like myself, have a strong need for instant gratification. They like to do stuff consistently. I'm not very comfortable, at least I didn't used to be when I started out, sitting out of the market and being hands off with my position. So, it was very suited to me to continually enter as many trades as possible. Now, there'll be other people who like to go for something like swing trading, they'll be a lot more patient. They like to look at the bigger picture, maybe focus a bit more on the news than the price data. This sort of fundamental approach might suit someone who has those personality types. So, they choose swing trading. Or you can go for huge, long timeframe trading, which would be position trading. Not quite investing, because you're a lot more active with it, and you do come up with strong hypotheses and set targets. So, there are multiple different trading styles for different personalities, but there are certain traits, which I believe everyone requires absolutely. Mathematics, to start there, if you do not understand ratios, probabilities, even how percentages work, it becomes very difficult to trade, because every trade you take needs to have positive expected value long term. If it doesn't have positive expected value, which just means how much you make if you win multiplied by the chance of success, and that gives you your expected value, if that is negative, then you're not going to win. Sorry, subtracted by your chance of losing, it needs to stay positive. So, if you cannot work that out, if you don't have an intuitive understanding of how that works, you're going to be at a huge disadvantage, almost guaranteed to lose. On top of that, if you do not understand percentages and how they work, you won't understand the power of compounding. Compounding your gains and exponentially growing a portfolio. You won't understand the ability to even size positions. So, mathematics is crucial and absolutely essential to anyone and everyone who wants to learn to trade. And I think there was a second part to your question, Jeremy, if you could remind me.
Jeremy Cline 15:37
Let's just first talk a little bit about the maths, because I'm sure some people are going, 'Oh, Lord, I need to be able to do maths to do this.' I mean, sort of what is this, you have to have done a degree in math, you have to be a rocket scientist, you know, this really is rocket science? Or is this something that you can pick up, you know, maybe you didn't do it beyond sort of GCSEs age 16, or something, but this is something that even with that sort of fundamental school level of understanding, you still can build and develop these skills?
Koroush Khanegah 16:05
Absolutely, Jeremy, as with most things, you get 80% of the benefits from just those basic core principles. So, you do not need to touch degree level mathematics at all. Obviously, it can help if you want to become a quant trader and start developing sophisticated algorithms. But you don't need to do that. As long as you go back, and so, if anyone wants to brush up on their skills, this is what I'd do, go back to GCSE and make sure you understand everything from first principles. Then, if you can, just move up to A-level, and this is for our UK listeners, and do the statistics modules and the first two base core modules. This will give you everything you need, as long as you understand it. And then, I keep saying the word 'understand', because there's a big difference between just memorising and passing a test and understanding them. So, when you look at a percentage, you really know what it means, you understand it as a fraction, you understand it as a decimal as well. And you know how these things interact with each other. You understand the basic algebra behind it. I think most people are capable of doing that, and that's all you need. You really don't need to go beyond that.
Jeremy Cline 17:08
You touched on the emotional side as well. What sort of a mindset does one need to be able to do this sort of thing?
Koroush Khanegah 17:16
It's so often overlooked, the mental side of it. And if I were to break trading down, it'd be about 10% your technical or fundamental analysis, the means with which you form your hypotheses for a trading system, the next 20% would be your risk management, and then everything remaining, that final 70% is psychological. Because even if you have the best risk management in the world, even if you have the absolute best means of forming up analyses, you're always right about the market, if you can't control your emotions, and you get into a fight with a loved one, and you come to your trading desk, and you make a very angry trade, you just want to make a bunch of money, and you throw your whole portfolio into something, no one's stopping you doing that, especially if you're trading as an individual. And one mistake can wipe out years of gains. I've spoken to people who have traded for three years successfully, with the best risk management and the best systems. One mistake cost them everything they've made. So, if you want to trade successfully for years, you need means of managing your psychology. And that's a very personal thing. I use good sleep, meditation, a lot of journaling and good diet in order to maintain that as best I can. And still, I make mistakes. But what I like to do is, every time I make a mistake, I'll journal it, and I'll implement some sort of countermeasure and continually improve that to, as much as I can, reduce the probability of that happening again. To give a tangible example, I noticed every time I was hungry, I was very likely to deviate from my system a bit, be a little bit more greedy, be a little bit more fearful when things went wrong. So, what I did is I just got a bunch of food and kept it by my desk, just little protein bars. And I have a part of my checklist before entering a trade, 'Are you hungry?' If I can't tick that off, I eat something before taking a trade. And it seems so simple, so benign, when everyone's just looking for what's that magic strategy that will make me money, but these little tinkerings and improvements are what allow you to trade successfully for a career. And you'll see every single successful trader that has been on my podcast, that has traded for more than five years, prioritises mindset as the number one thing to survive the game.
Jeremy Cline 19:29
So, you actually have a checklist for every trade, where you tick off things like, 'Are you hungry?'
Koroush Khanegah 19:35
Yes. I mean, that's just one of them. That's my emotional checklist. I've also got different checklists for whatever system I'm going to be trading. And you know, funny, I've worked with some pilots before, and they make great traders, because they're so used to being systematic and going through extremely strict checklists before they make any sort of decision.
Jeremy Cline 19:56
So, we've talked a bit about the fundamentals in terms of the maths, understanding percentages, probabilities, basic level of statistics, that kind of thing. Then you've talked about all the analyses that you've done and designing your model and all that sort of thing. Where do you start to learn how to do stuff like that? Where do you even start to begin to understand what you need to do in order to create these sorts of things?
Koroush Khanegah 20:23
It's actually pretty difficult for trading, because it can either be really expensive, because the best content tends to cost a lot of money, or you might actually spend a lot of money and end up with something which is garbage, because it's so hard to tangibly prove the success of anything that you use. That's why I try to advocate people only trust what they've tested themselves and have seen work. And if you have that basic understanding of mathematics, you'll know what it takes for whatever number you have to go up, because you'll be able to work that out. And what I've created, actually, if it's okay to plug my own content, Jeremy.
Jeremy Cline 21:03
Koroush Khanegah 21:03
It's on YouTube, it's 100% free, I've got a complete technical analysis and risk management course, that will take you from knowing absolutely nothing to learning how to trade. And the way it's done is that you don't need to trust any of the information I give you. If you run the numbers, and you test your systems, the numbers, the maths will show you irrefutably whether or not what you're doing is going to work or not. And I'll synergize with any other materials people want to use. And I've actually got this mini goal of building the best free or paid trading educational content on the internet for my YouTube. So, that would be a great place to start. And then, to give other options for people, to show that it's not just my stuff they can use, a great trading book that I recommend is, let me get the exact name, Jeremy, Trade Your Way to Financial Freedom. It's a really, really great book that focuses on how there is no magic holy grail to trading, how it's personal, how to go from knowing nothing to start building your own trading system. So, those would be two resources for someone who's at ground zero, wanting to dip their toes into the trading waters.
Jeremy Cline 22:11
Awesome. I'll certainly put links to those in the show notes. Would you say that there is a particular person who is well suited to trading? And is there a particular person who's not well suited to trading? Are there any particular personality types, which you think, you mentioned airline pilots, for example, they make a good trader, are there other personality types? Is it possible to generalise in that way to say, here's what a good trader looks like, here's someone who maybe shouldn't think about trading?
Koroush Khanegah 22:40
Another fantastic question, Jeremy. We've covered enough mathematics. So, I'll start with that, again. Having that basic understanding of mathematics, if you like numbers, you're likely going to be good at trading. But also, are you impulsive generally? Are you an impulsive person? Are you aware of your emotions? Because you don't need to be in control of your emotions, you just need to be aware of them and when they're influencing you. And if you're able to do that, then you're likely going to make a much better trader. Now, there's also lifestyle factors which are very important to consider. Trading is a risky career, because you're not always guaranteed to make money. In fact, the way probability works is that, even if you have, say, a 70% chance of winning every single trade or making money, month to month, 30% of the months, you're going to lose money. And that 30% chance can occur multiple times in a row, which means you could lose money multiple months in a row. So, if you're in a position where you have a lot of responsibilities, and you need your income every single month, you're not going to be able, trading is going to be a terrible route for you. Because you are guaranteed statistically over a long career to go through those losses. So, you really need to know how much, you need to be good with managing your budget, know how much money you need, and be able to somewhat forecast whether your trading is going to be able to cover that. If you have less responsibilities, if you have more risk tolerance, which I'm sure, as you've talked about investing on this podcast, you've educated people on, if you have that sort of risk tolerance, trading is a lot more suited for you, at least suited for you to go try and see if you can pull this off.
Jeremy Cline 24:15
Is trading very much a solitary activity? Is it something which you're going to kind of do shut up in your own office or in your own bedroom, and really not have very much contact with other people?
Koroush Khanegah 24:25
That's what I used to think, actually, Jeremy. So, this is how maths was actually a bit of a disadvantage for me, I isolated every single variable, except the charts, the numbers and my own data. And it was going well for me. For two years, I was doing really well and making decent money while the market wasn't doing too well. It was a bear market. I mean, all the crypto was going down, but my systems exploited that and managed to find inefficiencies there. But I capped, I reached the position size where, both emotionally and liquidity-wise, I wasn't able to go higher. And after a lull of about six months, I started speaking to other people, looking for mentors in the space, people who I see doing better than I was in trading. And from that, Jeremy, I learned so much. And it became essential to find mentors. There's so much I don't know about trading still, there's so much I learned from them. They told me to start analysing market sentiment. They said, 'Listen, you've got a large social media audience, you've literally got the market talking to you on a day-to-day basis, start using that information. Start paying attention to the news. Use that as confluence with your existing systems and just see what happens.' I did that, and my win rate went up through the roof compared to what it was before. I started finding new opportunities, outside of even trading, with similar principles where they were creating money. That's actually how my newsletter Market Meditations came about. I hired a team of researchers to keep me up to date with the market and give me reports, and they were doing that work anyway. So, I thought, 'Why not turn this into a newsletter?' And then that started iterating and going off in its own direction.
Jeremy Cline 26:01
I think this is a really valuable point, just in general, about the worth of finding mentors, just getting out and finding the people who are doing or have done what it is that you aspire to do. I don't know whether there's a particularly sort of British reserve that we don't want to go out and ask people for help. But it makes such huge difference.
Koroush Khanegah 26:21
Why make your own mistakes and learn from them, when you can learn from the mistakes of others? You can find the route to get to, you can look for a proven route. And what's going to happen? So, a mentor will give you a proven route to get to where you want to go to. And either you'll find improvements to that route, or you'll, say, just follow that route and guaranteed get to your outcome, and 'guaranteed' I use loosely, but it just makes all the sense in the world. And it requires a lot of humility because people get attached to doing something right, especially like trading. Jeremy, imagine every day, I'm going into the market, and I'm making money. And the market is rewarding me, saying, 'Hey, good job, you're doing the right thing. You know everything. You're winning here.' And it's easy to let that ego build up if you're not careful.
Jeremy Cline 27:05
This is probably an impossible question, but how much do you need in order to get started? Or perhaps I'll refine the question. On what does it depend when you're trying to figure out how much you need to get started to make a living from trading?
Koroush Khanegah 27:20
That question assumes, I don't think it assumes, but it implies perhaps to a listener that you need to trade full time, when in fact, I like to recommend part-time trading to most people. Because part-time trading can actually give you an edge. The disadvantage is you won't be able to be as in tune with the market as someone who's full time. They'll be able to improve at a faster rate than you. But knowing that the psychology is the most important determinant of whether or not you'll succeed long term, think of how much easier it is to accept the loss when you aren't reliant on your trading income. Think of how much easier it is to continually improve and focus on the process, rather than the outcome of each trade, if you're not reliant on it. So, the part-time aspect makes a huge amount of sense. And to focus in on how much money you need, well, for part time, you can do it with any amount. You focus on developing the skill if it's a small amount, or use a little bit more if you want to accept that it's gambling, and you may lose money until your data shows that you're profitable. Now, to go full-time trading, that's a much bigger question. So, the first thing you need is data to show how much money you can make month to month. Then, you need to take into account the variance and the potential drawdowns. So, if you have a 30% chance of losing money in a month, how many months can that go on for? Will that shrink the size of your trading portfolio? How will that affect your ability to live month to month? So, you need to run all those calculations to see how much money you need to trade full time. And what I like to do is run those calculations, and then make sure you have double that, because that gives you the psychological comfort, the cushion, to make sure you can make enough money from your trading to be able to survive mentally and financially.
Jeremy Cline 29:07
And what sorts of things, I'm sure there's all manner of things, but what sorts of things can you do to try and protect your losses, so that you don't basically end up losing your shirt?
Koroush Khanegah 29:17
Well, start on paper, start trading on paper. Wait for the paper to show you're profitable. Then, increase the amount. How much you increase it depends on your income. So, right now, you might earn $1,000 a month. If you earn $1,000 a month, $500 is going to be quite a lot of money to you. If you earn $10,000 a month, you can use a little bit more. So, use an amount of money where you have no emotional attachment to the gains or the losses. And I keep talking about focusing on the process, because a good trade is not one where you make money. A good trade is one where you follow a process that will over a course of hundreds of trades make you money. So, every time you get very comfortable with an amount, increase it. So, start at 500. You've been comfortable for a month, take it up to 1000. You've been comfortable for another two months, take it up to 10,000. You feel uncomfortable suddenly with 10,000, bring it back down to 5000. Just manage your emotions consistently while developing your skillset and building up your data, proving that you can be profitable, if that's the case.
Jeremy Cline 30:24
I definitely think we run the risk of putting a lot of people off the idea in this episode, and perhaps that's possibly a good thing. What about other opportunities as, switching tack slightly, but other opportunities within crypto? I mean, you've mentioned how it's a very undeveloped, immature market. And you know, I'm seeing things in the news at the moment about decentralised finance, and there's these things called NFT's, and there's all these things coming out. So, I mean, aside from trading, are there other things who, people who perhaps are not that financially savvy, but not necessarily interested in going the trading route, are there things that they might want to look into, in this or in any other sphere?
Koroush Khanegah 31:07
Absolutely. Before I do answer, Jeremy, I'm trying to be as realistic as possible, because there's just too much information out there glorifying trading, and it is beautiful, it's a lot of fun. For me, it replaced video games. I absolutely love playing this game of poker against the computer screen, as silly as it sounds. And it can be very rewarding. It's a beautiful art to master over your lifetime, if you so choose. But it's not something to get into purely because you want to make money. It's something you should get into if you enjoy it, and you think you have some sort of edge in it. So, that's why I may have come across a little aggressive in terms of explaining the risks which are often overlooked. Now, with other opportunities in crypto, Jeremy, it's unbelievable. Even to me, who was in the crypto space, I struggle to fathom the new opportunities I find every single day. There are decentralised financial protocols, and decentralised finance is similar to centralised finance, except in centralised finance, you trust the bank to handle your transactions, manage your money and take a fee for it, in decentralised finance, you're trusting computer code to do that for you. So, it's not inherently better by any means. It's just more transparent, and subject to different risks. For example, the people who wrote the code may not have written it that well, but you can clearly see what they've done. There might be bugs in it. However, because it doesn't require a huge number of people, just code, and once it's set up, it can run itself, there's a lot more reward for the people using these protocols. Now, the way you use them, firstly, there's opportunity to lend. I'm sure your audience know about peer-to-peer lending markets, and they've been hit pretty hard by the recent past year with COVID and all the tap in there. I think a lot of them in the UK specifically have gone bankrupt. And the rates they were giving us was 5% to maybe 15%, something like that. In crypto, right now, you could get anywhere from 5% to 300% in the right protocols. And these returns sound absurd, because anyone who can run the maths and do some compound interest will think you'd be richer than Warren Buffett in about 10 years. But these returns are temporary. They are so high right now, because the cost of customer acquisition in crypto is very high. And a lot of these lending protocols are using their inflated funds to pay people who are investing into their platforms. And your investment can be in US dollars, or Great British pound or stable coins, whatever you want to use. And you can generate these sorts of returns, if you spread it across multiple different platforms. I had someone from the biggest trading fund in the world, one of the biggest crypto trading funds in the world, Alameda Research, on my podcast recently, and he attached 1 to 2% chance of failure or loss of funds to most of these DeFi protocols. Judging by those numbers, you can calculate a very high expected value for anything that can give you 10 to 300% returns. So, there is huge opportunity in decentralised finance right now. Outside of lending, there's also something called liquidity providing, where you give people money, so they can trade on these decentralised protocols. And for that, you can also generate returns. So, I don't know if you can feel me getting excited, but this gives immense opportunity with one of the lowest risks in crypto right now. And the barrier to entry is taking the time to learn how to use it. And some of them are a couple clicks away from most people's computers, and they've even insured some of them, you can get insurance on these things. So, the opportunity is immense. And I've been tempted. I've held back because I know it would be a wrong decision to liquidate my entire ISA and just throw it all into these protocols, because of how crazy it is. Obviously, I've held back, because I have the emotional control. But that's how much opportunity there is right now. And I think it'll last for at least a couple years. And most people who know how powerful those sorts of returns can be should participate, or at least look into it.
Jeremy Cline 35:21
And for someone who is listening to this and thinking, 'This sounds very exciting, but I don't have a clue what he's talking about', where's a good sort of entry point to start learning about all this?
Koroush Khanegah 35:33
So, I'm going to give two resources, one me, and one not me, where people can learn about this. Number one will be, if you search 'passive income guide market meditations', we've made a complete passive income guide that breaks down every single protocol, we talk about the risks attached to it, the potential returns. And as you've seen from this podcast, hopefully, I try to keep it very realistic. And you'll see not only what platforms you can use, but what currencies you can invest into them, what sort of returns you can expect, and step by step instructions on how to do it. Another great YouTube channel is DeFi Dad. He's got some amazing tutorials teaching people how to get involved in this insanely immature, but wonderful new space.
Jeremy Cline 36:18
Brilliant. Well, I'll put links to those in the show notes. Koroush, thank you so much for this conversation. It's been absolutely fantastic. I love the fact that you have approached this in a very realistic way, in a very down-to-earth way. So, thank you for that. One more time, if people want to check you out, where's the best place they can do that?
Koroush Khanegah 36:36
@KoroushAK, you can find me on Twitter. Market Meditations is the newsletter. I'm also on YouTube, those would be the best places to find me.
Jeremy Cline 36:42
Awesome. I'll put links to those in the show notes. Again, Koroush, thank you so much.
Jeremy Cline 36:47
Okay, hope you enjoyed that interview with Koroush Khanegah. The strong message I got from Koroush was that it's definitely possible to make a living through trading, that can effectively be your day job. But it's clearly not an easy thing to do. You don't necessarily need to have a particular education, but you clearly need certain skills, especially math skills, if you want to make it work. And that's as well as having the right emotional temperament. So, it's definitely doable. It just might not be right for you. Koroush did raise a couple of wider points, though, which were also quite valuable. One was factoring in what sort of a lifestyle you want to support. And this isn't just relevant to trading, this is relevant to whatever you want to do. What is it you want your job to do for you? It's a question that we raised way back in Episode 3 with Tom Harris. And that's got to be one of the first things you think about when you're contemplating a change of career. The other point was the value of mentors. Again, this just reinforces a point which has come up on the podcast before. If you have a particular goal in mind, something that you'd particularly like to achieve, well, talk to people who've already done it. Talk to people who've already achieved it. Find out how they've done it. You don't necessarily need to reinvent the wheel, but you can learn from other people who are maybe a couple of steps ahead of you. You'll find a full transcript of the interview, together with a summary of everything that we talked about, and links to the resources that Koroush mentioned, and they're all at changeworklife.com/104, for Episode 104. And you'll also find a couple of exercises on the website which will help you figure out just where your strengths and weaknesses lie, and also to help you answer that question of what is it you want your job to do for you. You can use these exercises to help you figure out whether trading might be something that's right for you, or if not, what else might be. You'll find these exercises at changeworklife.com/happy, that's changeworklife.com/happy, H-A-P-P-Y. So, do check them out. There's another great interview coming up next week. If you've ever thought that there's a disconnect between what you do and your true genuine self, then you definitely want to listen to next week's interview, because that's what we're going to be talking about. So, make sure you subscribe to the show, and I can't wait to see you in next week's episode. Cheers. Bye.
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