Let me guess:
You are female
Age 25-30, maybe low 30âs
You are unemployed or underemployed.
You are smart and not lazy.
You like fast cars and good clothes
You have a strong mother and/or an absent father
Some, if not all your wealth comes from a risk-taking venture â and I donât mean the lotto (part could be the sale or equity in your home).
You are an entrepreneur and not a bureaucrat.
You may be bi-polar, or at least manic.
You have traded before, but not consistently or full-time.
Probably with only a couple of positions at a time.
You may have what it takes to be a successful trader, but you must reconcile your manic tendencies with the reality of the hard work and grind that a good, successful, consistent trader endures.
The number one trait of a successful trader is simply experience. Nothing, except pure luck (and that wonât get you long or far), supplants experience.
No book, web-site, or even mentor will replace the trial and error (and you will error) of good experience.
Trading is a grind. A daily grind. A multi-year grind. A multi-decade grind. If you are good, and in a uptrending market, there can be extraordinary upside pops.
You can trade your entire bankroll, but only if you make capital preservation (and not maximum or fast profit) your number one goal. That means diversify and diversify intelligently.
If you get good, and I mean consistently good over an entire economic cycle (read multi-year), you can use leverage. In the mean time, imagine that you could/would have doubled your gains and your losses and magnified the effect of compounding.
Unless you have some inherent information edge, you should go long equities to start with. If you do have an information edge on some commodity or currency, triple that edge, ie. Research, research, research.
The overhead in derivatives can slowly squeeze the life out of a beginnerâs bankroll. A lopsided information edge will wipe it out. Learn the equities market first, then branch out to derivatives if that suits you.
In regards to bankroll, a couple of ârules of thumb:â A goal of 2-3X the market (S&P 500), or 2-3X your largest downside risk. These would put you in the range of 20-30% upside goal, or $30-60k/Yr â and that assumes trading full-time. There are ways to increase that, but for beginners, donât count on doing much better than a burger-flipper in the beginning â and thatâs if you can avoid the downside or a complete wipeout. Many successful traders started at the bottom of some trading firm and gradually built up enough capital to strike out on their own. On the bright side, most of the best are self-taught â starting with much less than you have. You will learn faster if you use your own capital.
Your IT background could help in a significant way: to learn, you must track. Track all your trades and learn from them. Build a relational database of all your transactions. Learn to manipulate, sort, and graph the results. You will see patterns, find and minimize mistakes, and optimize your trading and money management strategy. If you swing trade, your cycle will be short - weeks or months, instead of the years and decades of an investor. That could be a real advantage. In a year you could experience what investors see in a decade.
It does help to read. I suggest studying both fundamental and technical. Can you read, and thoroughly understand financial statements? Thatâs a beginning. Do the Graham, Buffet, Lynch thing on fundamentals. Murphy, DeMark, every book you can find on candlesticks for technical. Peruse the wizards and masters of Train and Schwager. Absorb money management tips and rules from Elder and Tharp.
Good luck
