Have You Been Here? Need Your Wisdom

traders have leverage...
investors usually don't. Leverage kills....
...so you are better off being an active investor than a daytrader. You can aggressively manage your money - using vanguard, fidelity and profunds (where you can actually be short) with very limited leverage.
This is what I do. I have my small trading account, a 401K at Merill Lynch, and my IRA at Vanguard, PLUS I also have a publishing business that gives me a monthly royalty income whether get up in the morning or not. :)
Visiting this site is for (day) "traders" and they are a different animal from active investors. Having said that there is much information here for an active investor like me.
Quote from Pondering Man:

This is my first post obviously. I need your help and wisdom. I am a small business owner and am in the process of selling my company. I’m in my mid 40’s with a beautiful wife and 2 beautiful kids.

Here’s the issue: the proceeds from the sale are not enough to retire comfortably and I’m left with no single avenue to support the family after the sale. I have an undergrad in Finance and an MBA and good industry (non-investment field related) experience but I detest the very idea of re-entering the corporate world. My wife is highly desirious of me working for The Man and I can see her point, as it provides a safety net. And so herein lies the conundrum.

So what I’m really getting at is: have any of you been in a similar situation (ie, midlife with retirement savings in progress but not quite there yet and needing to find a source of income)? I have been reading ET for a while as well as reading books on trading but am not a trader nor have I ever traded. I know all the failure statistics yet see myself as having most of the core competencies of a trader: analytical, passionate, hardworking, willing to put in the time/effort, realizing this is a business and not a hobby, etc, etc. Have any of you made the switch to trading mid career and are successful in relative terms? My family and I could live off the monies from the sale for a year or so easily while I continue to prepare myself for trading.

Oh, and a big point: my wife would want at least some degree of assurance that trading could bring in incremental income over and above what I could obtain merely by investing.

If not trading, is there any other type of investing you would recommend if you were in my shoes? Swing trading? Anything else?

Thanks so much for your constructive feedback.
More...
 
Strong and well articulatedl responses. Many thanks.

FWIW I would put only 200k (approx. 8-10% of sale proceeds) in risk capital should I choose to trade. Nontheless, I have read many cautionary tales on ET, including the ones here, and am taking them seriously.

And I do plan to mull over many different avenues regarding taking care of my family. That is so hugely important to me. Family first.

The best of luck to all of you.
 
Quote from Pondering Man:



Thanks so much for your constructive feedback.
More...

I was in a very similar situation, having sold a small company that yielded a nice payoff, but not enough to 'retire' on. So I began trading 10 years ago.

Here's what you need to understand. The odds are very small that you will ever succeed in consistently profiting from trading. And the path to any profitability is a long one. Trading is a tough game that will extract a lot from your account before you see the light of day. And may ruin your marriage. (God, the thought of having to support 2 kids and a wife looking over my shoulder while learning to trade gives me the shakes.)

So get real. Update your skills and hit the pavement. You are young enough that you can still do it. Waste another 5-10 years trying to become a trader and it will be too late for you.

(And regarding what to do with your funds, two words: Diversify and Dividends. Good luck.)
 
"traders have leverage...investors usually don't. Leverage kills...."

Had to bag out for my biggest loss ever, today. Humble pie tastes bad. Leverage hurts. Would be hard to explain to the wife and kids.
 
Quote from Pondering Man:

* * *
I know all the failure statistics yet see myself as having most of the core competencies of a trader: analytical, passionate, hardworking, willing to put in the time/effort, realizing this is a business and not a hobby, etc, etc. * * *
More...

Buddy, you are greener than green. A person who starts out in trading has no "core competencies" of a trader. None of the things on your list will help you despite what the books say. The "passionate" part is a real puzzler. When I hear a person say he is passionate about trading I'm thinking this guy ain't gonna make it.

You've received some sound advice here, which is mostly discouragement.

However, it sounds like you have the bug and I know that's hard to resist. I think your best bet is to get a job and do some stock trading on the side with a SMALL account, certainly not the $200,000 you're setting aside for "risk capital." I'd say do no more than $20,000. You can't daytrade with that because of the PDT rules, but that may not be a bad thing in your case. Trade small, small, small. The point is to learn without regard to the money.

Good luck.
 
You have something very rare right now, capital. Taking the time and effort to learn to trade, is a mistake. If this industry is where you want to build a business around, take the same capital you were going to trade with, and consider backing 1 to 2 traders. Find someone knowledgeable to help you find traders with a good systematic approach and at least a 12 month track record trading with real money. Look for consistent monthly returns with small draw downs.

You'll be risking the same capital, but with a younger trader that has tested his trading techniques and has the skill you lack, and the capital he/she needs. I would recommend a maximum 20% draw down as a cut off and a set of strict risk controls.

Good luck.
 
Drum roll.......

"Real stock prices will likely decline until 2021, to about 13 percent below the 2010 levels and will not return to their 2010 levels until 2027, according to the researchers' model, based on historical patterns."

"according to research released Monday from the San Francisco Federal Reserve Bank."

http://www.cnbc.com/id/44230121

----------------------------------

Now if you go long you're living on hope. Go short, you're living on fear.

Religion works too....:D
 
Quote from Pondering Man:

This is my first post obviously. I need your help and wisdom. I am a small business owner and am in the process of selling my company. I’m in my mid 40’s with a beautiful wife and 2 beautiful kids.

Here’s the issue: the proceeds from the sale are not enough to retire comfortably and I’m left with no single avenue to support the family after the sale. I have an undergrad in Finance and an MBA and good industry (non-investment field related) experience but I detest the very idea of re-entering the corporate world. My wife is highly desirious of me working for The Man and I can see her point, as it provides a safety net. And so herein lies the conundrum.

So what I’m really getting at is: have any of you been in a similar situation (ie, midlife with retirement savings in progress but not quite there yet and needing to find a source of income)? I have been reading ET for a while as well as reading books on trading but am not a trader nor have I ever traded. I know all the failure statistics yet see myself as having most of the core competencies of a trader: analytical, passionate, hardworking, willing to put in the time/effort, realizing this is a business and not a hobby, etc, etc. Have any of you made the switch to trading mid career and are successful in relative terms? My family and I could live off the monies from the sale for a year or so easily while I continue to prepare myself for trading.

Oh, and a big point: my wife would want at least some degree of assurance that trading could bring in incremental income over and above what I could obtain merely by investing.

If not trading, is there any other type of investing you would recommend if you were in my shoes? Swing trading? Anything else?

Thanks so much for your constructive feedback.
More...

How do you know the core compewhatever are if you have never traded full time before?
 
I'm not trading yet, still learning. My off the top of my head response....

Not trading related:

- Spend quality time with your family!!
- Find a full-time or part-time job (afternoon if possible, most action happens in the first few hours of trading) to slow the burn rate of your cash. Anything is better than nothing!
- Most everyone will not see your trading or studying trading as a "real job" ever.
- Lower your monthly expenses. Eliminate any unnecessary monthly bills. You'll need that cash for your new trading "habit". For example, your wife might not like the idea at first, but I've lived on a TiVo HD DVR and OTA HDTV via an antenna for several years now and loving it!! You can still download movies via NetFlix, Amazon, or Blockbuster. I recommend this to everyone. Besides sports, I see cable/satellite as a huge money pit and brain/time drain. My time is better spent learning. Its worth a shot IMO. Keep the high speed internet: cable or fiber is best.

Trading related:

- Review the video series Jack Schwager Winning Methods of the Market Wizard.
- Decide if trading is really for you and what style fits your personality: fundamental, technical, or quantitative analysis.
- Read, read, read, read....up on your decided style without wasting a ton of money: Find free info: blogs/papers/forums, read book reviews first, find "free" e-books/PDFs via google. Being new you're going to waste a lot of time, hopefully not money, but thats part of the deal.

- Download NinjaTrader for free.
- Download futures replay data via NinjaTrader for free. Start replaying this data and get familiar with NinjaTrader.
- When you're ready sign up with Kinetick for $50/month for live market data (stocks and futures). Record this market data for future playback/replay.
- Study the market and practice your trading style using NinjaTrader. You'll be training in the morning (live) or late evenings (replaying market data).
- Learn to create custom indicators/strategies using the wizard. Learn to customize them using C#.
- You can consider other software packages but they will cost more, have limited trials, or require more costly and/or less quality data feeds. You'll know what you do/don't like about NinjaTrader to help you decide on a different platform when you're ready.

- Don't spend more than a few hundred dollars over 6 months on mentoring or you'll probably regret it. There are some big ripoffs out there. Look for reviews before purchasing.
- Learn money management with regards to trading.
- Learning to trade can take a year or two before you even begin to be confident to pull the trigger.

I'm sure I'm forgetting a lot. Feel free to PM with any questions.
 
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