Am I a Fool For Wanting To Be a Speculator?

[Laissez Faire]

I really don't want this to be another "trading is a waste of time thread" but more of a reflection on my experience while looking for honest opinions.

Results are everything and Circumstances reveal you to yourself...

- In 2019 I was unemployed and decided to pursue my dreams of being a trader. I invested HUNDREDS of hours in instructional videos while reading several books on trading. I deposited ~$75k from my savings to trade with, (already had some long term positions in my account equaling ~$25k).

What's the total timeline and hours spent pursuing trading?

Hundreds of hours in instructional videos and 'several' books on trading ain't much effort spent to succeed in this game. Not one single year either. Being down 25K ain't that much either. I'm not suggesting that you should need to lose 25K of course, but there are people who paid a far larger 'tuition' than that. The best would be to not risk live money until you actually have a methodology with a positive expectancy and only then go on to trade with very low risk.

It seems like many or most who pursue (day) trading have too high expectations of the returns they'll be making and too low expectations on the hours and preparations needed to make those returns.

To sum it up, you need HUGE dedication, motivation and ambition to succeed in this game. And even then - you're really alone in the end without any guarantees.

If you read about great traders - quite a few of them experienced huge obstacles and even worked themselves into debt before eventually succeeding. You never hear about those that experienced the same obstacles and never recovered.

Deciding to pursue trading is a very personal question and goal that you need to find out for yourself. If you find the markets interesting and don't mind the challenge even if you know the chances of success are small - then go for it. If not - maybe find something else?

Wishing you luck whatever you decide.

PS: Should you pursue trading - consider wiping your slate clean and start from scratch. Spend time learning. Don't just sit in front of the screen and click on a mouse.

 

[Specterx]

I really don't want this to be another "trading is a waste of time thread" but more of a reflection on my experience while looking for honest opinions.

Results are everything and Circumstances reveal you to yourself...

- In 2019 I was unemployed and decided to pursue my dreams of being a trader. I invested HUNDREDS of hours in instructional videos while reading several books on trading. I deposited ~$75k from my savings to trade with, (already had some long term positions in my account equaling ~$25k).

- The results: I will spare you the details of what trades fucked me the most and get down to business...my income for 2019 is around -$20k (negative twenty thousand dollars). Im not 100% sure on the exact amount as i haven't gotten my annual statement but its ballpark. I honestly have no clue what to even do with that...my CPA is going to slap me across the nipples when he sees this shit.

The question i have wrestled with for months now is: Should I throw trading away since i obviously suck so bad at it and pursue something else...or dump more effort and energy into it? I lurk mostly here and see so few people actually making it at trading it is discouraging. and then i wonder if those few who are making big money...did they get their initial millions via trading at home?

My inability to make a decision and move forward either way is a weakness and has completely crippled me. On one hand i want to be a trader on the other I doubt the possibility. I have spent so much time meditating on the pursuit of what is meaningful: what would i like to make a living doing more so than trading, only to come up blank.

I am curious what the ET community has to say after reading my embarrassing story. I am especially curious to hear from any members who are making consistent annual profits.

thanks

First off, the fact that you lost money in 2019 should be irrelevant to your decision - it doesn't by itself say anything about your potential (or lack thereof). I don't think there's ever been a successful trader in history who didn't experience losses at first, even Livermore started out with losses and got cleaned out a few times.

That said, you should be well aware of the harsh reality: making it as a sole operator is close to impossible. Of the low single-digit percentage who eventually succeed it's normal to take 2-5 years to achieve profitability, and some take >10 years. Aside from having the necessary personality characteristics and mental equipment, you need to be adequately capitalized in order to survive the learning curve and have a mathematically realistic shot at covering living expenses, while still being able to grow your account at a reasonable pace. The amounts needed to have a genuine shot at this are vastly greater than the 15k-50k sums the typical new trader has in play - don't be fooled by survivor bias and anonymous Internet claims of world-beating success.

Consider that making 20%-25% per year with 15-20% drawdowns is a fantastic return, in line with top CTAs, but doing that on 500k capital means earning 100k-125k before taxes - and from that you need to pay all your living expenses, plus have something left over to build up your capital base. On the other hand, a 20% down year knocks you back to 400k (before any withdrawals for living expenses), and now you're struggling just to cover your monthly nut - either treading water till another DD knocks you out for good, or going on tilt and blowing up.

My advice would be to keep working (or go back to work), save as much of your gross income as your possibly can (at least 30%), and focus on medium- to long-term speculation combining fundamentals with technicals/price action - view it as a hobby that could become a new career in 10-20 years, if you do well.

 

[gaussian]

I really don't want this to be another "trading is a waste of time thread" but more of a reflection on my experience while looking for honest opinions.

Results are everything and Circumstances reveal you to yourself...

- In 2019 I was unemployed and decided to pursue my dreams of being a trader. I invested HUNDREDS of hours in instructional videos while reading several books on trading. I deposited ~$75k from my savings to trade with, (already had some long term positions in my account equaling ~$25k).

- The results: I will spare you the details of what trades fucked me the most and get down to business...my income for 2019 is around -$20k (negative twenty thousand dollars). Im not 100% sure on the exact amount as i haven't gotten my annual statement but its ballpark. I honestly have no clue what to even do with that...my CPA is going to slap me across the nipples when he sees this shit.

The question i have wrestled with for months now is: Should I throw trading away since i obviously suck so bad at it and pursue something else...or dump more effort and energy into it? I lurk mostly here and see so few people actually making it at trading it is discouraging. and then i wonder if those few who are making big money...did they get their initial millions via trading at home?

My inability to make a decision and move forward either way is a weakness and has completely crippled me. On one hand i want to be a trader on the other I doubt the possibility. I have spent so much time meditating on the pursuit of what is meaningful: what would i like to make a living doing more so than trading, only to come up blank.

I am curious what the ET community has to say after reading my embarrassing story. I am especially curious to hear from any members who are making consistent annual profits.

thanks

Yikes.

If there's one thing I've learned in my ~5 years of trading it's that speculation on small time frames is not for me and I prefer some fundamental reason for my trades. No amount of books or videos prepared me for the market because, as much as I hate to say it, "market sense" is something that can't be taught.

If your stomach is turning thinking about your losses you can justify giving up. Perhaps it makes sense. The first thing you want to do is spend some time going over all your trades and combing over them for mistakes - then don't do them again. To lose that much it seems like you got panicky in the market when you were losing cash (you weren't ready for the risk) and were taking profits too early (you were scared of losing). You can't really follow instructionals to fix this psychological specter of trading. You have to keep trading.

You'll also find risk is important. $20k is fine for speculation. But you must understand what you're risking.

Without going into a dissertation - basically start over again. This time learn from all your mistakes, write them down, and know why you're getting in and out. Experiment with different instruments, styles, etc until you feel okay falling asleep with a trade on. For lack of a better term I didn't start becoming profitable until I developed market sense. It's something I can't describe. It's a feeling.

So consider this a lesson learned. Stick to small cash and single lot trades until you understand what you're doing. Jumping in balls to the wall is how stories of massive loss happen. Listen to Market Wizards. Just about every wizard in every single type of instrument lost a ton before finally catching their stride. The trick is to lose just enough to be painful - not enough to blow you out. You certainly overpaid Mr. Market for this semester's classes. Perhaps find a cheaper school.

 

[murray t turtle]

example being that I was buying and selling cars as soon as I was 16 and had my dealers license when I was 18 years old to go to private vehicle auctions. I have done some type of buying and selling for a profit whether it be a vehicles or whatever most of my life.

the biggest difference is that I am really good at selling things and stocks or derivatives don’t give a.... % how friendly or personable you are lol.

%%
Congrats on auto buys/sells zgh;
but hoping it works is not a plan, as Do8 warned .The thing about trading/investing in stock /ETfs is prior business success is worth about 0% goose egg, or even negative.
But since millions/billions are made as investors+ market makers/ specialist$;
its sure possible. Wisdom is profitable to direct.
BUT bid/ ask spread is much, much better in stocks /ETFs than autos.I don't get to trade as much as I like, 'cause I do trading as a % of investing profits. One big problem I see; you are WAY under invested in trading/investing books+ time invested. The multimillionaire or billionaire @ InvestorsBusinessWeekly newspaper founder noted , ''new traders want to much, with too little work'',

 

[canoe]

you're not a fool for wanting to be a speculator but you're a fool for thinking you can make a career out of this after watching "HUNDREDS of hours in instructional videos while reading several books on trading."

profitable speculation is difficult. too many of the brightest minds compete in this space due to how lucrative it is which means markets are increasingly efficient. so generating alpha is getting more difficult.

and even after generating alpha, due to how efficient markets are getting + the fact market conditions change all the time (even day to day), alpha erodes and it's difficult to realize it's not working any longer until you've already lost money. so having the intelligence and plasticity to be able to constantly and actively adapt to differing conditions is integral to making this into a long-term career. you could be the greatest quant in the world but if you don't know how to trade, aka read the market, you won't make money.

gaussian hit the the nail on the head with his comment about developing "market sense" and how it can't be taught, at least not through "instructional videos" or "books." at minimum, it requires years of experience coupled with deliberate practice.

if you've ever studied mathematics in college or beyond, you realize that although many of the upper division or grad courses list prerequisites like calc, multivariable calc, linear algebra, etc., the real prerequisite is having this thing that they like to call "mathematical maturity."

when you're taking real analysis, you probably won't remember how to solve that complicated integral that you learned to do in high school or freshmen college calculus but as long as you have "mathematical maturity", you'll be able to understand and deconstruct new mathematical concepts and solve proofs with the help of mathematical intuition which is what matters.

it's kind of the same thing with speculation. i hope this at least convinces you to give the respect that this profession deserves and realize it's like any other respectable profession like engineering or medicine where years and years of study and deliberate practice are required for success.

 

[murray t turtle]

you're not a fool for wanting to be a speculator but you're a fool for thinking you can make a career out of this after watching "HUNDREDS of hours in instructional videos while reading several books on trading."
... "mathematical maturity."
.... "mathematical maturity", you'll be able to understand and deconstruct new mathematical concepts and solve proofs with the help of mathematical intuition which is what matters;it's like any other respectable profession like engineering or medicine where years and years of study and deliberate practice are required for success.

%%
That;
+ medicine got much, much tougher with ACA TRAINWRECK=============================================================================== But @ least they now built plenty more of smaller clinics/cash clinics. ZGhorner did pretty good for first year; some blow up or like me, ground it down to zero/goose egg. Another possibility; find some like Fidelity Contrafund which beats SPY/S&P500 for 10 years. Should be able to make money in 10 years, or simply go back to full time auto buys/sells. NOT a prediction of fund/ETF tip.

 

[Snuskpelle]

Solve your living expense problem in some other way, then keep speculating if you _enjoy_ doing so. Preferably, don't bet too much money before you're on a positive derivative. That's all there is. (Sustainable) speculation for a living without putting in serious time at first doesn't really happen.

What you absolutely don't want is towards the end of your life have regrets about how you spent your time in this world. I suspect failed and unenjoyable speculation that additionally got you into financial trouble could be a contributor on that point.

 

[zghorner]

I appreciate all of the input everyone and although i am not going to reply to each comment i am reading them all taking them into consideration. Ill say a few things that can address some questions/comments.

1. I was obviously very naive...but I don't want to give the impression that I was expecting Livermore status in my first year. I think losing 20% in a market that i could have made 25% just by parking my money in the S&P 500 is a huge kick in the balls. The metaphors people are throwing out about time & effort it takes to be successful in other professions (so why should trading be different) does make sense and I agree with them.

2. A few questions about my financial situation have been asked so i will say that I am 34 with a wife and 2 kids. We have no debt at all, very frugal etc...I grew up more or less poor but hated it enough to educate myself on basic finance. My only asset is a small boat/RV storage facility that only brings in about $15k a year but it is low maintenance and has proved itself a worthy asset. total liquid right now is down to about ~120k not counting a $70k 401k.

With nothing coming in any loss outside of living expenses hurts bad. This is why i have stepped away from trading and continued trying to educate myself before reentering the market.

3. as far as what videos i have watched and books i have read i'll give a list to the best of my memory. I am currently reading Options, Futures, and other Derivative by Hull at the recommendation of a forum member Destriero(sp?) who seems to be a really sharp dude. Love it so far and glad it is organized like a college textbook.

I've watched everything at optionalpha and OCC, lots of livetraders, Rayner Teo and tasty trade tons and tons on individual indicators or anything i needed an explanation on etc...books include stuff from Taleb, Phil Town, Mark Douglas, Soros, Rem. Stock Operator, The intelligent Investor, and im sure there are more i am missing.

thanks again everyone.

 

[ironchef]

This, @zghorner is the first rule you need to follow unless you are a born trading genius:

1. Go find something to support your lifestyle.

This on the other hand is not quite true:

You can only support your lifestyle with trading when you are consistent profitable.

You don't need to be consistently profitable, you can trade full time for a living if your earning >> your living expenses on average so an occasional deep drawdown won't wipe you out.

Most of us retails will not be consistently profitable, we need reserves to survive the lean years. For me, it was 2011 and 2018.

5. A good system trades from the bigger picture, where you zoom in to control the risk you are going to take

Think about this carefully. You lost money in 2019, perhaps you were trading counter trend?

Finally, you read Hull that means you are a fellow option trader. It is very difficult to make money trading options, it is the playground of mathematicians, statisticians, computer scientists, physicists, finance PhD, institutional traders....

Unless we can find a structural edge and get the secular view correct we are liquidity providers, i.e., dead meat.

 

[Nobert]

Contradicting title of the question.

Speculator, comes from Roman Latin - Speculari,

meaning a scout or a spy.

Noone would send a fool, for scouting mission, on which relies the whole legion.

Tho the expectations, might be foolish.