Yes life in the corporate world can be a rat race but so can life as an independent trader. Three of the most consistent traders I know personally admit that they don't see themselves trading for the really long haul. They're just trying to make and save up as much money as possible to move into something else. They are very risk averse - hence they don't lose very much or very often AND they do realize that there is a tremendous amount of risk/uncertainty in trading no matter how experienced you are as markets can change drastically and thereby either significantly cutting or eliminating your profitability.
Trading is a business - and as a sole proprietorship, it usually fails eventually. Primarily because:
1 You can't learn trading by yourself. How many years of trail and error are you willing to put up it. At the end of the day its all about ego: you want your own system that doesn't work rather than someone else's system that does, don't want to reach out for help, think you're smarter than everyone else, or can't afford to hire a trading mentor or coach.
2 As a sole proprietor, you're likely trading a single strategy that is likely to fall in an out of market favor. All strategies either: lose or give a sideline signal - during these times a sole proprietor is likely to lose his discipline because its all on him to pay all the bills.
3 A sole proprietor can't watch his own back or lift himself up by his own bootstraps. The greatest athletes of all time have all had coaches. What makes traders think they can go at it all alone and reach the pinnacle or stay there. Any top athlete can get knocked off the number one spot if he's not continually on the top of his game and disciplined (with a lot of help from his couch, of course).
4 No sole proprietor, faced with the daily pressure of eating what he kills everyday can control his own emotions or whatever. They are there as warning signals and trying to control and repress them only makes them stronger and sets up and even bigger drama eventually.
But of course most traders are forced to be sole proprietors because most hedge funds and IB prop desks only hire:
1 Rich kids who's daddy paid for the IVY league admission with university donations, paid for the 250k tuition, and had the right connections post-graduation.
2 Uber-geeks with PHDs in physics or some science totally unrelated to econ/finance because the state of econ/finance theories in predicting and explaining market action is so dismally poor.
Now I refuse to believe only rich kids and uber-geeks are cut out for the kind of trading that is sustainable for the long run - trading within an institutional context. But that's just the way it is right now, too bad.
Here's another option, start you're own fund but now you have the following challenges:
1 Consensus estimates for starting a viable hedge fund is that you need 20 million dollars. And that's after taxes so good luck trying to come up with that amount of cash.
2 Every fund needs accounting, admin, and marketing resources. And if you try to do all this yourself or try to micro managed too much of it as others do it - then that can really take its toll on your trading.
3 Lots of good funds go underfunded and lots of bad funds go overfunded. That's just the way it is, funding has more to do with connections rather than performance.
Now imagine a multi-strategy fund that is a true partnership between traders with good track records and enough money to invest in. You can have couple of great market makers + a couple of great trend traders + a couple of great mean reversion traders + a couple of great scalpers + a couple of mad scientists constantly devising killer algos + a couple of great value investors. Now you have a situation where you have synergies emerging and the whole is greater than the sum of its parts. The whole institution now also takes a lot of pressure off each individual trader enabling them to get more comfortable, learn more from others, and size up. When some guys fall behind, others pick of the slack and vice versa. And when some strategies go out of favor for years, those traders can learn other strategies directly from other traders. Learning happens best in person from a master, not by reading books or googling. And with that many traders the admin, accounting, and marketing is a lot more manageable in house during periods when traders get the sideline signal.
That's really the only way I see myself trading for the long run. Until then I'll be content running the corporate rat race as fast and hard as I can cause it'll only motivate me to take my swing trading/investing to a whole other level so I can buy a Quiznos (LOL). No, seriously I'd like to pursue trading for the long run but only in an institutional context.
Trading is a business - and as a sole proprietorship, it usually fails eventually. Primarily because:
1 You can't learn trading by yourself. How many years of trail and error are you willing to put up it. At the end of the day its all about ego: you want your own system that doesn't work rather than someone else's system that does, don't want to reach out for help, think you're smarter than everyone else, or can't afford to hire a trading mentor or coach.
2 As a sole proprietor, you're likely trading a single strategy that is likely to fall in an out of market favor. All strategies either: lose or give a sideline signal - during these times a sole proprietor is likely to lose his discipline because its all on him to pay all the bills.
3 A sole proprietor can't watch his own back or lift himself up by his own bootstraps. The greatest athletes of all time have all had coaches. What makes traders think they can go at it all alone and reach the pinnacle or stay there. Any top athlete can get knocked off the number one spot if he's not continually on the top of his game and disciplined (with a lot of help from his couch, of course).
4 No sole proprietor, faced with the daily pressure of eating what he kills everyday can control his own emotions or whatever. They are there as warning signals and trying to control and repress them only makes them stronger and sets up and even bigger drama eventually.
But of course most traders are forced to be sole proprietors because most hedge funds and IB prop desks only hire:
1 Rich kids who's daddy paid for the IVY league admission with university donations, paid for the 250k tuition, and had the right connections post-graduation.
2 Uber-geeks with PHDs in physics or some science totally unrelated to econ/finance because the state of econ/finance theories in predicting and explaining market action is so dismally poor.
Now I refuse to believe only rich kids and uber-geeks are cut out for the kind of trading that is sustainable for the long run - trading within an institutional context. But that's just the way it is right now, too bad.
Here's another option, start you're own fund but now you have the following challenges:
1 Consensus estimates for starting a viable hedge fund is that you need 20 million dollars. And that's after taxes so good luck trying to come up with that amount of cash.
2 Every fund needs accounting, admin, and marketing resources. And if you try to do all this yourself or try to micro managed too much of it as others do it - then that can really take its toll on your trading.
3 Lots of good funds go underfunded and lots of bad funds go overfunded. That's just the way it is, funding has more to do with connections rather than performance.
Now imagine a multi-strategy fund that is a true partnership between traders with good track records and enough money to invest in. You can have couple of great market makers + a couple of great trend traders + a couple of great mean reversion traders + a couple of great scalpers + a couple of mad scientists constantly devising killer algos + a couple of great value investors. Now you have a situation where you have synergies emerging and the whole is greater than the sum of its parts. The whole institution now also takes a lot of pressure off each individual trader enabling them to get more comfortable, learn more from others, and size up. When some guys fall behind, others pick of the slack and vice versa. And when some strategies go out of favor for years, those traders can learn other strategies directly from other traders. Learning happens best in person from a master, not by reading books or googling. And with that many traders the admin, accounting, and marketing is a lot more manageable in house during periods when traders get the sideline signal.
That's really the only way I see myself trading for the long run. Until then I'll be content running the corporate rat race as fast and hard as I can cause it'll only motivate me to take my swing trading/investing to a whole other level so I can buy a Quiznos (LOL). No, seriously I'd like to pursue trading for the long run but only in an institutional context.
