Well, I guess this will be a long post as I have been trading and doing a job for over 20 years.
At first I thought, Why should I respond to this and then I realised that I actually have something to offer. Judge me as you will. I have tried to be as honest as possible.
I trained as a software engineer in the UK and refused to take the common route of being employed and then becoming a contractor so I went straight into contracting.
At the age of 21 I was driving (like an idiot) a BMW and went from earning ZIP to £50000 per year (this was 20 years ago). Having more money than sense, I started investing (read losing)
First off, my drug was just shares and tips and then through the early nineties I started trading commodities (scale trading). At this time I was working for banks in the City writing trading software so I figured I had an edge (wrong!).
Initially it went well and I took my pot from £30k to £90k. At JP Morgan for compliance I declared to the bank that I was trading on my own account and initially they took no notice. Then someone in compliance picked me up on it and I lost my contract (even though I'd been honest).
I then went to another bank and continued trading in the evenings. Everything went tits up in 1997 and I lost the lot. Now given the fact that I am foolhardy I started again but in a different arena.
In 2000 I found a fund manager who managed my pension for me and to start with he did well, taking my pension from £90k to £350k. Then the crash came and wiped out all of the gains. He then made it back to about £200k and then another crash came in 2002 and I was back to my starting level again. With the stress of it I developed testicle cancer (my theory anyway. I got over it as you can see)
At this point, I decided to manage the funds myself and hooked up with a group of about 15 guys some of which used the same fund manager above. They all had different ideas about trading options so I followed their advice by selling puts on certain stocks. I made a bit of money but nothing amazing.
Meanwhile workwise, I had moved to France with my family and found my first permanent job with a software company. After two years they paid me off to leave and I devoted myself full time to trading.
This time (end 2004), I focused on selling options on the Dax but this was one of the worst times to do it and my redundancy money got wiped out. At this point, I decided to give up trading and go back to work as a freelance programmer.
After a few successful contracts towards the end of 2005, I changed my mind as I could find no-one I could trust to manage my pension and my cash I went back to selling puts on stocks I had analysed to death and regained some of my funds. Then, a sudden plunge in one day and even though I had excellent stocks, a bizarre intra day dip on one of them almost bankrupted me. I can still recall the cold fear cursing through my veins as I went for a walk to clear my head.
Luckily it was a glitch and I got out unscathed. My homework on the stocks had paid off and I got out ok a few months later.
In 2006 a new chap arrived at my brokerage and I was discussing the state of the market after a Palestinian foray had caused the market to drop 200 points. He was selling puts. I couldn't understand why he would do something so risky at such a point and then he gave me the benefit of his wisdom on this and told me I might want to look at another way of trading options, using a less risky formula.
Having spent a lot of money on tipsheets and trading manuals over the years, I was sceptical but I decided to try it out.
I put on a position on the Dax as he suggested in June 2007 it went against us straight away but when the position expired, I found that we had not lost any money but made a small amount. I was dumbstruck
After years of searching for a system or at least someone who knew what they were doing I had found a lower risk method of generating cash. Luckily for me the next few months in the markets were very volatile and in two months I had made over £400k !!
Then a problem with the margin system at the brokers surfaced and I could no longer trade this method on the index and so I had to go back to trading options on stocks again until the problem was fixed.
To cut an even longer story short, I ended up giving back a substantial portion as I was long the banks in 2007 and 2008. Once the problem was fixed, I managed to restore my fortunes.
So since mid 2008, I have been working on a system to improve my operational execution and keep my risk as low as possible. I have purchased Option management software as well as written my own programs to monitor my risk for me. I am virtually finished.
For the first time in 20 years I am happy with my trading and my level of risk. I know exactly what I am doing (even if I donât what the outcome will be). I am still alive and still have my job as a freelance programmer.
Questions
Will I ever be a full time trader ?
The type of trading I do, does not require this. Personally, I can think of nothing less I would rather do that watch a graph all day waiting for an entry point. But thatâs me. I may become a hedge fund manager but it is a big step as I still really enjoy programming.
What is the most important thing about trading ?
Without a shadow of a doubt it is money management. I KNOW I can make money but I could get wiped out if my money management isnât right. As the markets moved against me over the last three months (Apr-Jun 2009) I took a £500k kicking because my money management wasnât correct. Now it is. Even though I would have still lost money, it would have been less. But unfortunately I ONLY ever learn from mistakes and even some of those I havenât really learned from.
What is your daily routine as a part time trader?
Basically, I have about 3 or 4 calls a day to the broker and a backup notebook with all my positions in. I update my notebook if I trade in the day and in the evening I load my positions into my risk software. If there is a position that needs changing, my software sends me a mail at work.
Do you ever use technical analysis ?
Its been a love hate relationship with this for years, but basically no. My broker talks about levels, I talk about risk, margin and money management. I have trader friends who have lost the lot because they believed the TA.
After 20 years are you happy now you have succeeded?
I am happy that I have finally found a trading technique that works for me and despite all of the negativity from friends and family, it gives me great satisfaction, even though itâs not my idea. Perserverance does pay off but also I had sufficient funds to try things out too. I suppose if I had had less, I would have lost less too.
Is trading really about the money ?
Sort of.
In one month I made £280k which is 3 times my annual salary. I thought great, but I didnât really celebrate. There again when I lost £500K over 3 months, I was miffed but I certainly didnât feel suicidal. As other people have already said, success is about building your life to a certain level (4 day week ,3 ski trips and 3 summer holidays a year) , a paid off house, a good stable family. I also choose to help family and close friends who are in financial difficulty and sponsor children abroad. At least then if I lose the lot from here, there will have been at least some benefit of the money I have had pass through my hands. I drive a 2003 Nissan Micra.
As a footnote, of the original 15 who were option traders like myself, I am one of two left.
