I fully agree with you. These small traders need to go to a school like Yale first and then work for a big firm, like Lehman Brothers and MF Global. Then start trading with $5 million. Personally, I think $7.5 million will make it more likely to succeed, because the extra $2.5 million act as a cushion.
Becoming an independent trader
- Thread starter sdd80
- Start date
I fully agree with you. These small traders need to go to a school like Yale first and then work for a big firm, like Lehman Brothers and MF Global. Then start trading with $5 million. Personally, I think $7.5 million will make it more likely to succeed, because the extra $2.5 million act as a cushion.
OP, let me be upfront with you. I feel that you have slim chance of success in trading.
After five years of "reading" materials on trading, you can't even find a good enough set of belief on market behavior and trading to work on? You should ask yourself honestly whether you are serious in trading.
There are a number of good profitable traders here sharing their wisdom selflessly. There is no need to re-invent. Pick one you are comfortable with and try in small token. Develop the chosen belief with reasoning and mathematics. Get into the network of the followers. This process of becoming a better trader requires you to use your brain. If for some reasons the chosen belief is not as strong as you thought, continue to look for another one. Man...this is a process of learning and is the short cut. If you can't find one you are happy with, I believe the problem is within you. Is it because you are too lazy to practise? too lazy to use your brain? chasing the rainbow? Or you are using completely incompatible set of old belief to look at the new belief?
Do not ask me whom I follow. Many people will warn you not to bite, hehe. If they ever appear here, mark them as no brainer.
After five years of "reading" materials on trading, you can't even find a good enough set of belief on market behavior and trading to work on? You should ask yourself honestly whether you are serious in trading.
There are a number of good profitable traders here sharing their wisdom selflessly. There is no need to re-invent. Pick one you are comfortable with and try in small token. Develop the chosen belief with reasoning and mathematics. Get into the network of the followers. This process of becoming a better trader requires you to use your brain. If for some reasons the chosen belief is not as strong as you thought, continue to look for another one. Man...this is a process of learning and is the short cut. If you can't find one you are happy with, I believe the problem is within you. Is it because you are too lazy to practise? too lazy to use your brain? chasing the rainbow? Or you are using completely incompatible set of old belief to look at the new belief?
Do not ask me whom I follow. Many people will warn you not to bite, hehe. If they ever appear here, mark them as no brainer.
Great post GOC.
The late great Steve jobs sums this up exactly in this video, he is talking generally, but it so sounds like he talking specifically about speculation and trading:
<iframe width="420" height="315" src="http://www.youtube.com/embed/gxo2rGr7Yfg" frameborder="0" allowfullscreen></iframe>
Quote from sdd80:
Dear all - I appreciate all feedback and suggestions on my questions and thoughts. Apologies in advance for the long post - just thought it useful to summarize my full situation to get best advice.
For 5 years I have been interested in becoming a independent trader. I am drawn to the flexibility of lifestyle, not having a boss, having geographic independence and so on.
I have read most of the classic books on trading, technical analysis, money management, psychology and so on. However, I have not executed a single trade, ever. From a theoretical experience I'm not a newbie but from a practical experience I am a total newbie.
What do you suggest as a next step in my education/path to becoming a trader? I think I've done enough reading and need to move on to something more practical. Should I sign-up for a training class; or hook-up with a mentor; or start experimenting on my own? I am fairly comfortable with experimenting on my own though I am not sure where to start in terms of developing a trading system. Perhaps the practical experience I lack is what's preventing me from having practical ideas to build into a trading system.
In terms of capital - I have around $300k in savings - yes I can lose all this money without impacting my life. I have read that insufficient capital is a problem for many new traders so am curious whether people think my capital is anywhere near sufficient. I guess it would be necessary for me to also state my goals, and please feel free to tell me my dreams are crazy or unrealistic if you really believe this.
In about 10 yrs time I'd like to be making $1million/year as an independent trader. To get there, I'd like to gradually transition from my current career into full time trading, without experiencing a significant impact on my annual earnings/lifestyle. I am currently in a successful consulting career and I make roughly $200k/year and if I continue in my current career I'll be making roughly $1 million in 10 yrs. This career choice is relatively safe, and the probability of my achieving that level of earning within 10 years is fairly high. However, I absolutely hate what I do and I will not be happy if this continues to be my life.
I am 33, single, no kids (that I know of), no mortgage or debt.
Thanks in advance for all feedback, suggestions, and criticism.
Your first mistake is thinking of earning 1M a year from 300K of capital.
Does your lifestyle require you 1 MM a year to live? How much does your lifestyle require in terms of cash outlay to live?
As long as you fully understand the risks, you should be fine. You are single and have a $200k job. Just don't quite until you have a pretty good idea of whether you'll be successful or not. A couple years of live trading will show you exactly where you are and what you need to do to become successful.
Don't quit your day job, unless you're fully prepared to start over at half of your current salary should you fail in a couple of years. That is a very likely outcome, so you need to accept that possibility.
Also, don't dismiss longer term trading/investing. You might find that you are better suited for that, and with $300k + a good job, you could make some very serious coin over the next 25 years if you can figure out a way to squeeze 15% pa out of the market. Obviously you won't be making $1mm/yr with that approach for several years, but if your income keeps increasing in consulting, and you can achieve 15%, you wouldn't be as far away as you think. That is actually the path that I'm trying to take.
Don't quit your day job, unless you're fully prepared to start over at half of your current salary should you fail in a couple of years. That is a very likely outcome, so you need to accept that possibility.
Also, don't dismiss longer term trading/investing. You might find that you are better suited for that, and with $300k + a good job, you could make some very serious coin over the next 25 years if you can figure out a way to squeeze 15% pa out of the market. Obviously you won't be making $1mm/yr with that approach for several years, but if your income keeps increasing in consulting, and you can achieve 15%, you wouldn't be as far away as you think. That is actually the path that I'm trying to take.
Quote from sdd80:
Dear all - I appreciate all feedback and suggestions on my questions and thoughts. Apologies in advance for the long post - just thought it useful to summarize my full situation to get best advice.
For 5 years I have been interested in becoming a independent trader. I am drawn to the flexibility of lifestyle, not having a boss, having geographic independence and so on.
I have read most of the classic books on trading, technical analysis, money management, psychology and so on. However, I have not executed a single trade, ever. From a theoretical experience I'm not a newbie but from a practical experience I am a total newbie.
What do you suggest as a next step in my education/path to becoming a trader? I think I've done enough reading and need to move on to something more practical. Should I sign-up for a training class; or hook-up with a mentor; or start experimenting on my own? I am fairly comfortable with experimenting on my own though I am not sure where to start in terms of developing a trading system. Perhaps the practical experience I lack is what's preventing me from having practical ideas to build into a trading system.
In terms of capital - I have around $300k in savings - yes I can lose all this money without impacting my life. I have read that insufficient capital is a problem for many new traders so am curious whether people think my capital is anywhere near sufficient. I guess it would be necessary for me to also state my goals, and please feel free to tell me my dreams are crazy or unrealistic if you really believe this.
In about 10 yrs time I'd like to be making $1million/year as an independent trader. To get there, I'd like to gradually transition from my current career into full time trading, without experiencing a significant impact on my annual earnings/lifestyle. I am currently in a successful consulting career and I make roughly $200k/year and if I continue in my current career I'll be making roughly $1 million in 10 yrs. This career choice is relatively safe, and the probability of my achieving that level of earning within 10 years is fairly high. However, I absolutely hate what I do and I will not be happy if this continues to be my life.
I am 33, single, no kids (that I know of
Thanks in advance for all feedback, suggestions, and criticism.
What are you waiting for? Get to it...
I'm pretty sure the 5% are not willing to lose their life savings, so they never risk it to begin with.
Even Jack Schwager, after interviewing dozens of these 5%'ers, noted that they all had one thing in common - they were able to trade low risk ideas.
If your gameplan is potentially to earn 1 million per year in 10 years of trading . and then you post that you can open a account with 5k but choose not to trade until you can figure out your approach in making a trade . you said you have 300k in capital to trade but sound scared with opening a account to get your feet wet. all this makes no sense for someone that is serious about trading
You should stay with your full time career . it seems that a small decison is too difficult to make at this point . your totally lost in what you want to trade or how to approach trading then maybe trading will not fit your personality. procrastination in daytrading will kill you !!
whatever your doing now as a career works why mess that up with taking a shot to trade
The main reason Iâve never done a single trade is that I promised myself that I would not make a single trade until I can clearly explain exactly why Iâm making that trade. I am nowhere near that at this point; hence why trade. I can quite easily open a $5k account and start trading. Even if I blow it up, Iâll save that money next month so it wouldnât be a big deal. But why do that? I agree with some of the points about having to experience trading with real money in order to work on my emotions, but I really think Iâm still far away from that. My understanding is that first I need at least some sort of a âbeliefâ, and a âmethodâ so I can at least answer âWhy am I taking this tradeâ. Am I wrong?
You should stay with your full time career . it seems that a small decison is too difficult to make at this point . your totally lost in what you want to trade or how to approach trading then maybe trading will not fit your personality. procrastination in daytrading will kill you !!
whatever your doing now as a career works why mess that up with taking a shot to trade
The main reason Iâve never done a single trade is that I promised myself that I would not make a single trade until I can clearly explain exactly why Iâm making that trade. I am nowhere near that at this point; hence why trade. I can quite easily open a $5k account and start trading. Even if I blow it up, Iâll save that money next month so it wouldnât be a big deal. But why do that? I agree with some of the points about having to experience trading with real money in order to work on my emotions, but I really think Iâm still far away from that. My understanding is that first I need at least some sort of a âbeliefâ, and a âmethodâ so I can at least answer âWhy am I taking this tradeâ. Am I wrong?
I have been in your shoes about 13 years ago when I was 50.
I became disabled and had to figure out a way to at least make a supplemental income. I didn't have a large sum of money to start my account with, so I choose option trading because the leverage made it eventually possible to have a supplemental income account.
If I could just give a new trader one piece of advice, it would be
"Money Management." That's what makes it possible for a newbie to last long enough to (1) first stop losing money....(2) then breakeven for a while...(3)and eventually makes a few bucks. Those 3 phases I just mentioned can take years before getting to the final
phase.
Think about it in terms of pure mathematics:
Initially, how many consecutive loses can my account absorb before I wipe it out and have to re-fund it (or quit)?
Here's the survivor formula for newbies that I came up with:
Lets use a easy math value for a Hypothetical Account to help in understanding:
$10,000 Account
10% invested per trade = $1,000
2.5% Stop = $250
$20,000 Account
10% invested per trade = $2,000
2.5% Stop = $500
$30,000 Account
10% invested per trade = $3,000
2.5% Stop = $750
$40,000 Account
10% invested per trade = $4,000
2.5% Stop = $1,000
and so on........for every multiple
That means you would have to have nearly 40 consecutive losing trades to wipe out an account!
With any kind of working system at all, that would be very difficult.
Profit Level per trade is based on your W/L Record for a given system:
If your Profit Goal (2.5%) is equal to your Stop Level (-2.5%), you can make money on a W/L Record of 66%:
6 wins at....2.5% = 15.0%
3 losers at -2.5% = -7.5%
Net...........................7.5%
If you Profit Goal is twice (5.0%) the size of the Stop (-2.5%), you
can make money with a W/L Record of 50%:
5 wins at.....5.0% = 25%
5 losers at -2.5% = -12.5%
Net...........................12.5%
"Stay mathematical my friend"
I became disabled and had to figure out a way to at least make a supplemental income. I didn't have a large sum of money to start my account with, so I choose option trading because the leverage made it eventually possible to have a supplemental income account.
If I could just give a new trader one piece of advice, it would be
"Money Management." That's what makes it possible for a newbie to last long enough to (1) first stop losing money....(2) then breakeven for a while...(3)and eventually makes a few bucks. Those 3 phases I just mentioned can take years before getting to the final
phase.
Think about it in terms of pure mathematics:
Initially, how many consecutive loses can my account absorb before I wipe it out and have to re-fund it (or quit)?
Here's the survivor formula for newbies that I came up with:
Lets use a easy math value for a Hypothetical Account to help in understanding:
$10,000 Account
10% invested per trade = $1,000
2.5% Stop = $250
$20,000 Account
10% invested per trade = $2,000
2.5% Stop = $500
$30,000 Account
10% invested per trade = $3,000
2.5% Stop = $750
$40,000 Account
10% invested per trade = $4,000
2.5% Stop = $1,000
and so on........for every multiple
That means you would have to have nearly 40 consecutive losing trades to wipe out an account!
With any kind of working system at all, that would be very difficult.
Profit Level per trade is based on your W/L Record for a given system:
If your Profit Goal (2.5%) is equal to your Stop Level (-2.5%), you can make money on a W/L Record of 66%:
6 wins at....2.5% = 15.0%
3 losers at -2.5% = -7.5%
Net...........................7.5%
If you Profit Goal is twice (5.0%) the size of the Stop (-2.5%), you
can make money with a W/L Record of 50%:
5 wins at.....5.0% = 25%
5 losers at -2.5% = -12.5%
Net...........................12.5%
"Stay mathematical my friend"