Career trader's perspective on living off trading profits vs living on salary?

istoptime · Jul 31, 2014

butterfacetrader said:
For sure you should just focus on what makes you happy. But actually I find people have different perspective for a home trader vs a hedge fund or bank trader. If you are working for a hedge fund as a trader, thats viewed upon positively. So if someone thinks when you say "you trade stocks" that you mean in WS, thats looked upon positively. But if its "I trade at home in my PJs with my own money", thats very often viewed upon negatively. Depends if people know what is meant by "i trade stocks".

The negative connotation is based on the 'lack of job' aspect, the 'risky' aspect, and the 'likely earns very little' aspect of the @home trade their own money trader. Usually that is true. An @ home trader likely has less capital and their yearly profits are likely not high unless you are a super trader or have large capital to work with. If you are working as a WS bank trader, you'll get all sorts of salary and bonuses so you probably do make more than a home trader.

you are right. at home trader is viewed as an unemployed loser. loner. less money and likely not smart enough to trade OTM. But if you do have money (my house is paid off, car paid off, no debt, nice area) then the conversation goes nowhere. Why? Lifestyle. I can buy what they buy, go where they (the employed) go, do what they do, etc....so then who cares? if you are insecure, this won't work. yes this is risky, but i don't risk now what i used to. don't have to. less stress. more time to stay active.
i see groups of friends for a few hours a day for exercise or dinner or whatever. we talk about work maybe 1% of the time. nobody cares in my circles. but if i said i can't go to france because i am broke....well, now i'm the loser unemployed moron.

butterfacetrader · Jul 31, 2014

istoptime said:
you are right. at home trader is viewed as an unemployed loser. loner. less money and likely not smart enough to trade OTM. But if you do have money (my house is paid off, car paid off, no debt, nice area) then the conversation goes nowhere. Why? Lifestyle. I can buy what they buy, go where they (the employed) go, do what they do, etc....so then who cares? if you are insecure, this won't work. yes this is risky, but i don't risk now what i used to. don't have to. less stress. more time to stay active.
i see groups of friends for a few hours a day for exercise or dinner or whatever. we talk about work maybe 1% of the time. nobody cares in my circles. but if i said i can't go to france because i am broke....well, now i'm the loser unemployed moron.

OTM?

Yeah, well depends how someone obtained their initial trading capital. If someone started with nothing to their name or something small like $10K, the likelihood of making a real career out of trading at home is pretty small. I figure people need $30K/year income to live anywhere factoring in rent and food etc. If someone has worked for a while and saved a big amount of cash to fund a trading account (my opinion is a serious account has to be at least 6 figures), and go from there, then they may be able to make something of it. But someone with $10K, trying to earn $30K every single year is just insane. And you wont even grow net worth like that so youre back to square one every year fighting the same fight even if you do make triple gain on the $10K.

Out of curiosity, mind sharing your story? Did you have a job and how much starting capital did you start with? How much have you gained after how many years?

istoptime · Jul 31, 2014

butterfacetrader said:
OTM?

Yeah, well depends how someone obtained their initial trading capital. If someone started with nothing to their name or something small like $10K, the likelihood of making a real career out of trading at home is pretty small. I figure people need $30K/year income to live anywhere factoring in rent and food etc. If someone has worked for a while and saved a big amount of cash to fund a trading account (my opinion is a serious account has to be at least 6 figures), and go from there, then they may be able to make something of it.

Out of curiosity, mind sharing your story? Did you have a job and how much starting capital did you start with? How much have you gained after how many years?

Other People's Money, OTM.

i won't share my story, it wouldn't help me at all. i did have a 10k, 20k and 30k trading accounts while working. no way that is enough money. i think you need 4k a month for mortgage (most people have one), expenses, food, life, etc...and you are not turning 30k into 78k after one year. oh wait, you spent 48k on life. so 30k to 34k every month. no way.

my advice is to work, invest in one stock for around 25k, trade another 50k to learn, and keep the retirement plan going strong. there are guys i know in their 40's who trades 5 million. sold 2 businesses for a lot more. this is a game of having big money. i have no idea what that is like.

butterfacetrader · Jul 31, 2014

istoptime said:
Other People's Money, OTM.

i won't share my story, it wouldn't help me at all. i did have a 10k, 20k and 30k trading accounts while working. no way that is enough money. i think you need 4k a month for mortgage (most people have one), expenses, food, life, etc...and you are not turning 30k into 78k after one year. oh wait, you spent 48k on life. so 30k to 34k every month. no way.

my advice is to work, invest in one stock for around 25k, trade another 50k to learn, and keep the retirement plan going strong. there are guys i know in their 40's who trades 5 million. sold 2 businesses for a lot more. this is a game of having big money. i have no idea what that is like.

Yeah. I think anyone contemplating a career as a home trader needs a six figure account to even be serious about it. A good trader may get 20% doing the relatively lower risk stuff though still higher risk than the market or risk free rate. So automatically we're looking at $150K account to sustain $30K living cost (already low balled). And all those gains will be spent on living alone and thats if you are lucky enough to pull 20% per year. There are lots of snakes oil salesman on this site that will tell you how they make a living trading $10K accounts flipping futures on full leverage and how they time the market perfectly. I just can't imagine anyone getting 300% return year over year consistently to support living costs without a normal day job to generate a stream of income.

Basically yeah, get a job, at least save enough for a big six figures account before even contemplating a career as an @home trader. And if you lose it all, your damaged CV will mean you probably only qualify bagging groceries or flipping burgers after your trading account is drawn down to $0 and youre on the job market again. Thats the risk @home traders have to accept. Which is why the hedge fund model is attractive. They get a guarenteed salary and upside from the market.

istoptime · Jul 31, 2014

butterfacetrader said:
Yeah. I think anyone contemplating a career as a home trader needs a six figure account to even be serious about it. A good trader may get 20% doing the relatively lower risk stuff though still higher risk than the market or risk free rate. So automatically we're looking at $150K account to sustain $30K living cost (already low balled). And all those gains will be spent on living alone and thats if you are lucky enough to pull 20% per year. There are lots of snakes oil salesman on this site that will tell you how they make a living trading $10K accounts flipping futures on full leverage and how they time the market perfectly. I just can't imagine anyone getting 300% return year over year consistently to support living costs without a normal day job to generate a stream of income.

Basically yeah, get a job, at least save enough for a big six figures account before even contemplating a career as an @home trader. And if you lose it all, your damaged CV will mean you probably only qualify bagging groceries or flipping burgers after your trading account is drawn down to $0 and youre on the job market again. Thats the risk @home traders have to accept. Which is why the hedge fund model is attractive. They get a guarenteed salary and upside from the market.

exactly, exactly. i wasted maybe 2 years of my life thinking 20k was enough to strike it rich. i was so stupid. now it's clear the commissions kill most retail traders. makes it almost impossible to win if you trade more than 1-2 times a day. fees are everything. took me longer to figure that out. and the HFT and dark pools make it harder for stocks.

if anyone says they can turn 10k into a lot of money, make them show you they did it.
luckily i never fell for that one.

trust me you can make a lot of money taking positions of 1-5,000 shares of a company. may take a year to wait, or longer..but you will be working so it's ok. the slow game is much better i think.

butterfacetrader · Jul 31, 2014

istoptime said:
exactly, exactly. i wasted maybe 2 years of my life thinking 20k was enough to strike it rich. i was so stupid. now it's clear the commissions kill most retail traders. makes it almost impossible to win if you trade more than 1-2 times a day. fees are everything. took me longer to figure that out. and the HFT and dark pools make it harder for stocks.

if anyone says they can turn 10k into a lot of money, make them show you they did it.
luckily i never fell for that one.

trust me you can make a lot of money taking positions of 1-5,000 shares of a company. may take a year to wait, or longer..but you will be working so it's ok. the slow game is much better i think.

Depends on the price of the company and the fundamentals. I think anything more than 30% of your total AUM in a single position is very heavy. Mostly I try not to go higher than 10% in a single position tops and most are on average maybe just 0-5% of AUM. But my style is more conservative. Sure, if I go 50-100% AUM or something ridiculous on a single name, and they move in my favor, I can make big gains. Or maybe I go 50% AUM long options, then I can probably score triple digit % gains. This is sometimes the kinda stupid stuff I do on my paper account, but I will never do that on a real account.

No matter what anyone says, any company can go under. There is no guarantee. Nobody would have believed you if you said GM would file for bankruptcy a few decades ago. Or that citigroup would lose 90% of its value and still hasn't recovered today. So all these guys thinking they can't lose by piling on big blue chips are just drinking the koolaid. Company's prospects can change, so any position you enter you should not discount, no matter how black swan it is, that it can go to $0. So I don't know if piling it all into one name is such a sure win. However, I woudln't buy ETF's either because an index is a basket that comes with the good & the bad.

istoptime · Jul 31, 2014

butterfacetrader said:
Depends on the price of the company and the fundamentals. I think anything more than 30% of your total AUM in a single position is very heavy. Mostly I try not to go higher than 10% in a single position tops and most are on average maybe just 0-5% of AUM. But my style is more conservative. Sure, if I go 50-100% AUM or something ridiculous on a single name, and they move in my favor, I can make big gains. Or maybe I go 50% AUM long options, then I can probably score triple digit % gains. This is sometimes the kinda stupid stuff I do on my paper account, but I will never do that on a real account.

No matter what anyone says, any company can go under. There is no guarantee. Nobody would have believed you if you said GM would file for bankruptcy a few decades ago. Or that citigroup would lose 90% of its value and still hasn't recovered today. So all these guys thinking they can't lose by piling on big blue chips are just drinking the koolaid. Company's prospects can change, so any position you enter you should not discount, no matter how black swan it is, that it can go to $0. So I don't know if piling it all into one name is such a sure win. However, I woudln't buy ETF's either because an index is a basket that comes with the good & the bad.

you are correct, no guarantees. we will trade differently. i like to fall in love with a company or two or three, put at least 25k into a position, add if it goes up. sure, it could go to 10k and that would be a risk i understand. but they have tripled in price over time before more than once so the upside is worth a few losers. never bought a stock under $10 but that is just my style. i like etf's for retirement. spy mainly. 55% of my account.

rwk · Jul 31, 2014

I think we're talking about two approaches to trading, either of which can work. But they feel very different. I started out as a high-performance trader wanting to make as much money as possible as quickly as possible. I had some success with that, but as I have gotten older, I have become much more risk-averse.

Taking big risks can work if you use good risk management, but there is also a lot of drama and a greater chance of blowing up. We hear about and remember those people who took big risks and succeeded. That's called survivorship bias. It's not a bad way to start when you're young, but traders who survive that phase eventually scale back their risk taking and settle in for the long haul. The ones who strike it rich either go buy an island or give it all back.

tom_czr · Aug 1, 2014

butterfacetrader said:
Good point about having money to live outside of funds in a trading account. But, will you actually leave it segregated outside in a savings account or something, or will you be deploying almost 100% of your capital into your account and draw from it when you need living expenses?

Outside.

SIUYA · Aug 1, 2014

I always took the more conservative route and put aside living expenses each year and often think that from a purely economic point of view it simply not worth most people trading full time - invest while working yes.

there are 2 other issues that many forget to take into consideration.
- inflation, you need to grow an account of have some saving unless you expect to constantly trade till you drop.
- taxes - and an example will sum it up - say you start with a 100k and make 1 mil - you pay taxes of 30% - you have 700k .
Lets say you loose 700k ---- you have still actually made 300k - not a bad result but you are back to where you started ----- but with a tax credit.
However, your acct balance is still 0 - you have to make money again but have no base from which to do it.....and it reinforces the issue of being consistent and not just lucky.