How good of a trader do you need to be to make a living?
- Thread starter peilthetraveler
- Start date
Thank you for your post, sensational logic and analogies.
Trader198, I agree, sort of. The difference however in business is that each transaction always yields a positive net income. They wouldn't otherwise be selling the product unless its cost was less than the sale price. In trading we don't have that same guarantee.
Just because your business opened and you sold products, does not necessarily mean you made money.
Not only do you have high costs of operation but many times we must liquidate merchandise in order to obtain a cash flow.
When I started in 1978, I was in the Army working afternoons/evenings so I hung around the brokerage listening to the old guys about financials. So it was a hobby for me, something to do, I had rigid ideals, America was great, the government never lied cept for Nixon. There was no in/out trading, it was investing, buying and holding. It cost $125 bucks to buy 100 shares or one contract of corn. Brokers were making a killing and it was a life of wealth for them, they sell whatever the company told them to sell, seldom they knew nothing of charts. The home PC came out and life has changed in speed and cost, except for the small trader, most lose all their money and even faster than back then.
I have gone from rigid ideals to being a wet noodle. Went from my opinion being the only opinion to having no opinion till I need to actually do something. More education you have, longer it is going to take for most to make it trading. Markets move on emotions, most likely why musicians do better than most.
What most traders never think about, if they trade 15 times of a one lot of ES, they have controled over one million dollars. Do you have a trading plan to that equates to having a business dealing with one million bucks plus?
There is a difference between an opinion and skills, opinion will wipe your account out eventually but skills are education based on experience gained from backtesting or real time. Opinions are usually are thoughts and too often times untested or emotional.
A good trader will make more money each of their first five years and starting with doing three times what his salary was/is from work. You need to be conservative aggressive, when you know trend is your friend, need to push in volume, when time in doubt=get out.
I have gone from rigid ideals to being a wet noodle. Went from my opinion being the only opinion to having no opinion till I need to actually do something. More education you have, longer it is going to take for most to make it trading. Markets move on emotions, most likely why musicians do better than most.
What most traders never think about, if they trade 15 times of a one lot of ES, they have controled over one million dollars. Do you have a trading plan to that equates to having a business dealing with one million bucks plus?
There is a difference between an opinion and skills, opinion will wipe your account out eventually but skills are education based on experience gained from backtesting or real time. Opinions are usually are thoughts and too often times untested or emotional.
A good trader will make more money each of their first five years and starting with doing three times what his salary was/is from work. You need to be conservative aggressive, when you know trend is your friend, need to push in volume, when time in doubt=get out.
Trading for a living is a business. You buy and sell "inventory", and you have costs of doing business - hardware, software, data feed, internet connections, commissions, slippage (which could be thought of as shipping costs).
If you're a savvy business manager, you'll have done you're research and you'll know how to take advantage of supply/demand imbalances with impeccable timing.
Just like any business based on buying and selling inventory, you'll be able to net some great profits when you're on the right side of supply/demand imbalances, and you'll have to liquidate at a discount (loss) when your stuff goes "out of season".
It's the ability to milk those imbalances when they're strong and liquidate early (take the small loss) when they weaken against you that determine the success of your business.
The potential trader begins knowing two things:
1. The market is open 240 days a year.
3. The market is always correct and is always making an offer.
So a partnership agreement is reached and the potential trader picks a path at a fork in the road:
1. He tries to learn how to get rich (Greed Street).
2. He learns the systemic operation of the market.
Does it take 10,000 hours to learn the systemic operation of the market?
1. Some spend all their tuition in a short time and quit. Most ET members quit.
2. Some get smart and get mentored by a successful trader. From the beginning they trade in parallel with their mentor.
As nodoji says, you get a foundation. You pile building blocks on the foundation.
1. The market offers to anyone.
2. In CW there are many books to read.
3. Edges are found.
4. Statistics delineate the positive expectancies.
5. Targets and Stops are learmed.
6. Entry/exit trading ensues.
7. A net trading success occurs.
In parallel CW sets up emotional based controls:
1. anxiety (risk control)
2. Fear (diversity, Kelly)
3. Anger (Money management controls))
4. revenge (failure lack of control)
You measure your progress with stuff:
1. Sharpe Ratio.
2, W/L ratio
3. Yield.
So 90% failure is the word on the street.
As it turns out the CW doesn't take much of the market's offer as the RTH's form a year of trading.
How good do you need to be?
Here is the formula:
Annual life style expenses plus annual provision for retirement =
(Capital traded times PF)
Where PF = (profit per day times 240) / (total annual market's offer)
PF is expressed as a three sig fig times a power of 10. The power of ten is negative to be sure.
Thus success depends upon two trader created variables:
1. Capital traded
2. profit per day.
A nice example is William J. O'Neill who does CW trading.
Initial capital ( 1 + daily profit) ^ n = needed capital traded to be sucessful.
WJON's intial capital was 500 bucks. He got there in 27 months. Then he did what nodoji is planning. He went into forming his financial publishing empire.
1. The market is open 240 days a year.
3. The market is always correct and is always making an offer.
So a partnership agreement is reached and the potential trader picks a path at a fork in the road:
1. He tries to learn how to get rich (Greed Street).
2. He learns the systemic operation of the market.
Does it take 10,000 hours to learn the systemic operation of the market?
1. Some spend all their tuition in a short time and quit. Most ET members quit.
2. Some get smart and get mentored by a successful trader. From the beginning they trade in parallel with their mentor.
As nodoji says, you get a foundation. You pile building blocks on the foundation.
1. The market offers to anyone.
2. In CW there are many books to read.
3. Edges are found.
4. Statistics delineate the positive expectancies.
5. Targets and Stops are learmed.
6. Entry/exit trading ensues.
7. A net trading success occurs.
In parallel CW sets up emotional based controls:
1. anxiety (risk control)
2. Fear (diversity, Kelly)
3. Anger (Money management controls))
4. revenge (failure lack of control)
You measure your progress with stuff:
1. Sharpe Ratio.
2, W/L ratio
3. Yield.
So 90% failure is the word on the street.
As it turns out the CW doesn't take much of the market's offer as the RTH's form a year of trading.
How good do you need to be?
Here is the formula:
Annual life style expenses plus annual provision for retirement =
(Capital traded times PF)
Where PF = (profit per day times 240) / (total annual market's offer)
PF is expressed as a three sig fig times a power of 10. The power of ten is negative to be sure.
Thus success depends upon two trader created variables:
1. Capital traded
2. profit per day.
A nice example is William J. O'Neill who does CW trading.
Initial capital ( 1 + daily profit) ^ n = needed capital traded to be sucessful.
WJON's intial capital was 500 bucks. He got there in 27 months. Then he did what nodoji is planning. He went into forming his financial publishing empire.
That's not what I'm saying. In sales, your probability of buying low and selling high is greater. It's designed that way. Otherwise, you wouldn't attempt to acquire the product you intend to sell. Furthermore, your %yield per transaction is generally higher than it would be if you we're trading 100 times per day.
Comparing trading to an operating business is completely off base.
It's as dumb comparing trading to playing the lottery.
A low tech manufacturing business doing 10mm in turnover generates about 1-2mm in free cashflow. What's your pnl on your 25,000 account? Is it 1-2mm? Then clearly they aren't of the same scale.
It's as dumb comparing trading to playing the lottery.
A low tech manufacturing business doing 10mm in turnover generates about 1-2mm in free cashflow. What's your pnl on your 25,000 account? Is it 1-2mm? Then clearly they aren't of the same scale.