@drader77 , whatever you do... don't do what this guy is doing: https://www.elitetrader.com/et/threads/ym-magic.307470/#post-4420406
Reality for an Individual Trader
- Thread starter drader77
- Start date
Lol, you surely pick up fast on new threads or is that alias #5?
Wait... who's alias #5 would that be?
Do pros REALLY receive market-breaking news like NFP numbers, Fed rate decisions and etc. faster than individual traders? To me the speed of receiving critical market information IF the pros really have an advantage and trading capital are pretty much the only advantage that pros have over individual traders.
An investor will never be able to compete with the returns of a potentially good trader.
But if what you meant was a Trader, then yes...you can compete/beat the so-called pros.
The so-called pros are way overrated, in my opinion. They are not even traders, per se...but more of order processors.
'Decades of experience' doesn't necessarily equate to skill. alot of people are still basically dumbasses in this game. their heavily guarded secret returns will otherwise put them to shame if it ever came to light.
Infact, you have a huge advantage as a retail trader...because you are not limited by rules and regulations that their employers restrict in their strategies. and you're nimble, you're much less likely to move markets.
The suits of wall street likes to make the public believe they are pedigreed, superior geniuses...who will make money rain down on their investors and clients.
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Its good your willing to put in the hard work and educate. Because to be profitable in the long run , you will have to do both.
I agree with Bone Crusher. Number one trade small, small, small.
Figure out what you products you "seem to like" trading and then concentrate on them.
Find a trading " style" that you feel comfortable with and then find your own edges by trading small, small, small.
Know when your system works and when it does not work, ie Know when to sit out or trade even smaller, likewise know when to press the bet. This takes a lot of trading, but you will learn every method has times when it is out of sync with the market or needs a modification added.
Do all this UNDER serious Risk Control, risk only a small amount on each trade especially while your learning. Implement serious NO COMPROMISE rules on how much you can lose on a trade, each day, per month, etc.
Always Always know your outstanding risk, and do not delude yourself by discounting the full risk with "risk free" hedges, diversification's, or non correlating positions etc. that tempts you to oversize. Everything has Risk, fully account for it. Eventually you will witness the " impossible" and all your shorts and longs will go against you at the same time. This is the only place in the world where lightning can strike the same place twice. If you feel ridiculously undersized in your trading positions , your probably sized right.
If you do this you will avoid the DUMB DUMB DUMB start I had. After reading a single book, and with a minor amount of previous experience, I funded an account with a home equity line, had three good months in a row netting 25k in gains on "my plan". So added all my available cash and maxed out the home equity line to further fund my account. I traded way to big in effort to maximize gains. I got destroyed, within 6 months I lost all my gains plus 120k of the home equity line/savings, to leave only 32% left of my total funding.
I learned a lot in a long slow recovery. I added my "start" story to simply say I think long term profitability ( which starts with survival ) has more to do with avoiding the DUMB zone than anything else. I think with your concern and willing to work and study , your chances are better than most.
Because the beginner has a few big advantages that the hedge fund PM does not have. First, the beginner can go from 0 market exposure to 100% market exposure and back to 0 again in a few seconds without the market even noticing. A large money manager does not have that agility.
Second, the individual trader can take deeper drawdowns for longer periods of time that would cause all investors to flee a fund. If an individual investor is falling behind on a given year, he won't feel the pressure to play catch up to try to match a benchmark like a fund manager will feel.
Third, the individual investor can lean more heavily on his best ideas. My performance would be better way better if I only had a $10k account to manage. Why? Because I can go all-in 100% on my best ideas. With a larger account, I can't bet the farm on my best idea. I have to put money into my #2, #3...#70 best ideas. But if I'm just starting out, have a good job that pays $70k or more per year, but do not have much money saved up yet, sure, I'm fine putting the entire $10k in my brokerage account on one or two trades...my best ideas. A fund manager would get fired for doing that.
Fourth, if the previous best idea turns out not to be such a great idea, then I have the flexibility to wait until the position recovers. A fund manager does not have that ability. Hopefully, the idea was not completely terrible and maybe I only have to wait a month or two for the trade to turn profitable. The point is that the individual investor or trader has more flexibility to take risk than the fund manager. He or she might feel that two sectors are undervalued, all the rest are overvalued...I don't want equal exposure to the market, I want to get overweight in those two areas only because the other sectors are over-priced...screw the balanced portfolio. I don't recommend betting the farm on every trade, but sometimes the risk / reward makes sense. Especially if I have industry knowledge about a given sector or company that most people do not have...my day job could be working at a small tech or biotech company and knowing something that the rest of the market does not.
Fifth, somewhat related to previous, a retail investor can more comfortably stay in cash or lower risk assets for a longer period of time because he's not trying to match a benchmark or keep up with his peers. The aim becomes taking risk when it pays to do so and reduce exposure when it doesn't make sense.
Sixth, it's your money. No one cares more about your money than you...or at least a successful trader / investor feels that way.
In hindsight, these points relate more towards investors than day traders.