A Career Transition into Trading

[niteflite]

Dont scare him away, we need liquidity in the market!

To be honest with you, If you want to make a real return on your money, I would actually go to trade school.

Example: my auto mechanic who also teaches classes part time in an auto mechanic program at the local community college told me that he will quit at the end of this semester to take a job as a mechanic out in the oil fields. His starting pay will be around 100k a year.

He has been freelancing around town in his off hours from his real job, he is making a ton of money in cash doing body work on cars. With his money he bought 2 houses and refurbished them, flipped them for a profit....but that's not even the best part. He sold his houses owner financed at a 10% per year financing for 13 years to people that are unable to get lending from a bank. Not only did he turn 50k into 70k in 3 months (40% return)...he also sold that 70k house on a owner financed note which gets him 10% a year on his capital.

True, its not like sitting in your office and walking out at 4pm with X amount of dollars in cash....but he also doesn't have to walk out with X amount of dollars negative either.

For someone who has money to invest I suggest picking up a foreclosed house put some money into it, and stick some tenants in it until you can sell it at a owner financed deal which looks good to you.



Unless you are really passionate about trading and don't care to lose money for 2 years while working 12 hour days, I would probably stay away from trading This stuff is harder then you think...

Yeah, i'm convinced it's not easy...i have no doubts about that. It's just one of those things I need to get out of my system. My goal isn't to make tons of $.. i could do that probably by being willing to travel and playing the politics game in my current profession. i don't want to take on a second job or go to vocational school. i already have a rental property and around here the time to buy investment properties was at least two years ago.

 

[bigsnack]

Try the TopStepTrader combine, that's the safest way to put a very small amount of money on the line and figure out if you have a chance.

Or just walk away now and spare yourself the years of anguish you are about to sign up for!

 

[Butterball]

i have got those other figures in mind. definitely not willing to lose up to 250k in any time frame, be it 3 months or 3 yrs. i was thinking a loss of $25k is enough to show that trading is not for me at this time.

Think about a brick and mortar business. What type of investing business could you reasonably start with $25k in capital that can net you $50k a year consistently for a 200% annual ROI? I hope you realize you have unrealistic expectations.

A McDonalds franchise takes about $500k in capital, you borrow $1m against it and invest a total of $1.5m. It nets maybe $150-200k before taxes. If you factor in the opportunity cost of your own labor we're speaking of say $100k net before taxes for a $500k investment or a 20% ROI.

If you have $25k to invest I think a reasonable return would be $5k a year from trading. Enough to take your wife on a vacation once a year, not more. That is if you run it professionally and treat it like a business, rather than gambling. Multiply by 10 to get $250k starting capital to get your $50k a year return. Sorry if this sounds like I am raining on your parade.

Capitalization is key to success and survival, just like in any other business.

 

[Alpha Trader]

here the time to buy investment properties was at least two years ago.

Which is where? Just curious.

 

[niteflite]

Which is where? Just curious.

dc metro

 

[Ghost_of_Blotto]

do i have a shot at this if i take a conservative and very risk adverse approach

The market attracts weak players who just want to have a go without any respect for the business they are in or the traders they are up against. So come ahead. Decide what you can afford to lose which will be your only restriction. The environment has few rules or restrictions except the ones you (don't) set for yourself. At the end, you will have your answer.

How can you describe pure gambling in the markets - the deliberate creation of risk for yourself - as "a very risk adverse approach". This is delusional. Perhaps you confuse risk control with losing only a small portion of a small amount of capital with each (poor) trading decision. A speculator assumes risk based on an educated analysis. You don't know how this business works yet. You don't know what you don't know. So how do you have any concept of risk?

for someone like me, if i use something like IB, what would i do once i'm all set up? just pick random stocks or does the software suggest hot stocks to look at?

Surely this isn't a serious inquiry. The very worst thing which could happen to you is some initial success guessing at picking random stocks. Then you wrongly connect your guesses with the outcome, building the pride barrier even higher until you blow up.

I would say that if you took an analytical approach and were somehow able to add about 50 points to your IQ you might have a chance. A minimum level of intelligence is necessary but not sufficient.

If you doubt me, look at my other post. How do you expect to compete against people who can read the market like this? And you think 3 months is enough to learn? And that mediocre returns are something to aspire to? Smacks of laziness and lack of ambition. Be honest with yourself - are you really cut out to compete in this environment, or do you have the delusion that it is easy money? Picking stocks at random. Please.

Everyone ultimately gets what they deserve in this business, and we must all live with the outcome of our decisions.

 

[niteflite]

Think about a brick and mortar business. What type of investing business could you reasonably start with $25k in capital that can net you $50k a year consistently for a 200% annual ROI? I hope you realize you have unrealistic expectations.

A McDonalds franchise takes about $500k in capital, you borrow $1m against it and invest a total of $1.5m. It nets maybe $150-200k before taxes. If you factor in the opportunity cost of your own labor we're speaking of say $100k net before taxes for a $500k investment or a 20% ROI.

If you have $25k to invest I think a reasonable return would be $5k a year from trading. Enough to take your wife on a vacation once a year, not more. That is if you run it professionally and treat it like a business, rather than gambling. Multiply by 10 to get $250k starting capital to get your $50k a year return. Sorry if this sounds like I am raining on your parade.

Capitalization is key to success and survival, just like in any other business.

i don't quite look at trading the same way. especially when you've got extra leverage from a prop firm. even without it, it's not like you're permanently or semi permanently putting up $200k to be in business for a week, a month, a year. you put up only your deposit but it's as if you've put up 200k, or if you supply your own buying power, you're temporarily risking up to 200k but you can take your losses or your gains if you want to think positively right away and get the balance of your capital back in an instant. that doesn't read very well but i hope you get my point.

i didn't know the trading combine thing existed. perhaps i'll look into that. if only a couple hundred bucks i'd be willing.

 

[ramora]

Hi niteflite,

About 4 years ago I decided to transition to trading. I knew my dayjob was going to end and I had plenty of time to prepare.

As a programmer I developed my own charting software that works with InteractiveBrokers. Probably better to use off the shelf product, but I like my software and how it is integrated charts and order entry. This also forced me to look into the mechanics of order entry and markets more than most people. Good.

I live in California and would trade ES from market open to 8:30 and go to the office. In the evenings I would trade K200 which is the South Korean Stock Market Index. It trades a lot like ES.

I also opened an Oanda account which allows me to experiement with FX. However, I have had no success with FX at all. In spite of a lot of hours trying.

Before leaving the dayjob I had at least 4 years part time trading experience. I did not consider myself a rookie but not a pro.

In the last 3 months I have been trading full time ES and K200. It is very difficult to trade every day and focus without making mistakes. I am making money week over week but way under what I expected. I am being very careful not to make a 'end of game' mistake that would set me back week or months. I am trying to not put stress on myself which could 'play out' when trading.

My suggestion: Keep the day job, find something you can trade around your schedule. With IB you can always find something to trade. Get evidence you know what you are doing by keeping records. Review each video on BigMikeTrading site and YouTube. Study/prepare and it will still not be enough in the beginning. Paper trading means nothing. When you are ready, simply make the change to full time. Treat trading like a business - business plan - trading plan, put your thoughts down on paper to review later when things do not go as you expect.

Good luck,

Good luck

 

[Ghost_of_Blotto]

What type of investing business could you reasonably start with $25k in capital that can net you $50k a year consistently for a 200% annual ROI? I hope you realize you have unrealistic expectations.

Not unrealistic in this industry. In fact, quite pedestrian. Of course, not everyone can do it. The caveats given here certainly apply: http://www.elitetrader.com/vb/showthread.php?p=3801411#post3801411
Interesting that the trainees manage to make $1k/day on $25k margin after about 3 months. Perhaps this suggests that there are certain characteristics required, coupled with the correct training and infrastructure, which can allow one to compete successfully. Does the OP have these advantages? Can he acquire them? How would he know?

Sadly, as common on ET, there are quite a few people giving advice and presenting analogies without much of a clue as to what they are talking about. One exception is the gentleman who posted an academic paper on post #2 of this thread.

I am an independent trader and semi-recluse, and for better or worse ET forms part of my social life. However, I've found that most here either object to my views (as it takes away their hope?) or the manner in which I deliver them. Also, it appears that everyone and their point of view is "equal" here whether they know anything or not. Whereas in trading opinions do not matter and there is no pretended equality.

I suspect this all falls on deaf ears, but for those interested here are some relevant examples which might show whether I know what I'm talking about:
#1 - April 11, 2014 - end of day rally in stock index futures (you can make your $50k target on that 1 trade, 200 lots, if you understand it) - http://www.elitetrader.com/vb/showpost.php?p=3965177&postcount=849
#2 - May 22, 2013 - the same trade as in #1, nobody was interested in fleshing out the reasons or asking the questions which would have allowed them to take advantage of the condition last Friday - http://www.elitetrader.com/vb/showpost.php?p=3807215&postcount=3531
#3 - March 5, 2014 - 2 cents a pound in hogs (and the other posts in that thread warning against shorting too soon or staying too long) - http://www.elitetrader.com/vb/showpost.php?p=3948686&postcount=810
#4 - May 10, 2013 - a series of posts forecasting the gold market for a day including trades - http://www.elitetrader.com/vb/showpost.php?p=3798308&postcount=86

By no means do I get them all right. Just offering an alternative point of view. The rest is up to you.

 

[d08]

Dont scare him away, we need liquidity in the market!

That's fairly terrible...but was also my second thought.

for someone like me, if i use something like IB, what would i do once i'm all set up? just pick random stocks or does the software suggest hot stocks to look at?

This sentence really sealed your faith if you should proceed. It's akin to running 60 meters in the Olympics and asking which way should you run, moments before the race.