You Only Need $5000 to Make a Living

Quote from Jayford:

That is actually the definition of not having a system.
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Jayford,

Did I use the past tense (modified) ? :p

YES, I AM DONE WITH MODIFICATION.

OK, let me digress a little on method. Though I think method is the easy part of trading, there is something NEW traders need to know:

The process of modifying your method was not pleasant, and I am sure all growing or grown traders agree with me. It was not only unpleasant but also slow for two reasons: 1. New traders start trading without much knowledge, so it's difficult to come up with a sound method on the basis of ignorance. 2. Another reason is the discipline issue=a double-edged sword, meaning having discipline will kill you when you are ignorant and operate the wrong way, you need a little more discretion to avoid suicide (heard of hedge funds losing billions? because they stuck to their method, good luck if your method is wrong); but if you do come up with a sound method, the lack of discipline will not give you the opportunity to see the method's soundness. In other words, you won't see that you have finally reached a good method because you didn't try to stick to it.

You see, the discipline issue, with ignorance, starts messing you up from the very beginning of trading. It's just like my toothache: I thought it was the lower molar, but the top molar also hurts. Actually both hurt. And the result is a swollen face, wikipedia says it's tooth abscess. Yes, it's appropriate to say that before you become profitable, day trading is like tooth abscess=painful!
Fuck, I am on antibiotics and pain killers.
 
It was different for me. I tried something new did not know if it would work, but only with very small size for test purposes. I tested with real money since paper trading really is bs for the most part.

Next I noticed that I got 10 trades in a row all winners. Wow, never did that before following any guru or reading any book.

So next, I traded the system live for over a year and increased my real money trading account size 100%.

My next step is to write down some of the rules I use for the system since all of them are in my head right now.


Also, finally I got into some money management, and I am making what rich day poor dad calls otm or other people's money.


Quote from 4DTrader:

Jayford,

Did I use the past tense (modified) ? :p

YES, I AM DONE WITH MODIFICATION.

OK, let me digress a little on method. Though I think method is the easy part of trading, there is something NEW traders need to know:

The process of modifying your method was not pleasant, and I am sure all growing or grown traders agree with me. It was not only unpleasant but also slow for two reasons: 1. New traders start trading without much knowledge, so it's difficult to come up with a sound method on the basis of ignorance. 2. Another reason is the discipline issue=a double-edged sword, meaning having discipline will kill you when you are ignorant and operate the wrong way, you need a little more discretion to avoid suicide (heard of hedge funds losing billions? because they stuck to their method, good luck if your method is wrong); but if you do come up with a sound method, the lack of discipline will not give you the opportunity to see the method's soundness. In other words, you won't see that you have finally reached a good method because you didn't try to stick to it.

You see, the discipline issue, with ignorance, starts messing you up from the very beginning of trading. It's just like my toothache: I thought it was the lower molar, but the top molar also hurts. Actually both hurt. And the result is a swollen face, wikipedia says it's tooth abscess. Yes, it's appropriate to say that before you become profitable, day trading is like tooth abscess=painful!
Fuck, I am on antibiotics and pain killers.
More...
 
making a living, do you mean earning 1000 dollars a month ?

you cannot make a living with 5000 dollars on a margin account

on a 12 month period, that means you must earn more that 200% . possible but not probable.

i would say you need to have 30000 dollars plus a second source of income

and if you are a beginner, you may lose your money
 
Quote from oraclewizard77:

Here are the real 4 mistakes that will make you lose money.

1) Learning a system from someone or some organization who actually does not know how to trade, but makes money or gets some other benefit by teaching you something that does not work. I am sure to some of you here this will sound very familiar.

2) Revenge trading. No matter how good or experienced of a trader you are, when you take some losses, you are going to revenge trade. There is no way to avoid this totally, but you can try to decrease it, by making sure you are trading with your plan, have a plan for losses, and let your emotions cool down before trading with size.

3) Not understanding the concept of risk vs reward for the instrument that you are trading. For example, if you end up being wrong, how bad off are you going to be if the position goes against you. For example, will 1 bad trade wipe out your trading account?

4) Fear of pulling the trigger. This may actually happen at least to me after having a bunch of winners in a row, and you start to fear about having a losing trade, so you trade less. Whereas, if you have some losses, you will trade more to try to get back to even.
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This is a very good post. Especially #'s 2 and 4. I had the same problem for years, and it held me back big time. I was finally able to get to the point where I completely forget about a trade as soon as I am out of it, whether a winner or loser, and don't let it affect my next trade. Made a huge difference. Especially the revenge trading part.

I do still have a few related problems, however, but more minor.

A) I do get defensive when up quite a bit, but only if its the latter part of the day. This can keep me out of closing rally, etc. Overall not that big of a deal.

B )Boredom trading. I usually look for only about 5 setups per day, so lots of downtime. So I start trading just for the hell of it. I try picking exact tops, etc. I know its risky when I am doing it, so only play with single contracts. In the long run, definitely a losing proposition. I just mark it down as the cost of entertaimnet, and it does keep me in front of my screens, whereas I am prone to go to the coffee shop or out to lunch while markets are still open, but slow.
 
Quote from Jayford:

This is a very good post. Especially #'s 2 and 4. I had the same problem for years, and it held me back big time. I was finally able to get to the point where I completely forget about a trade as soon as I am out of it, whether a winner or loser, and don't let it affect my next trade. Made a huge difference. Especially the revenge trading part.

I do still have a few related problems, however, but more minor.

A) I do get defensive when up quite a bit, but only if its the latter part of the day. This can keep me out of closing rally, etc. Overall not that big of a deal.

B )Boredom trading. I usually look for only about 5 setups per day, so lots of downtime. So I start trading just for the hell of it. I try picking exact tops, etc. I know its risky when I am doing it, so only play with single contracts. In the long run, definitely a losing proposition. I just mark it down as the cost of entertaimnet, and it does keep me in front of my screens, whereas I am prone to go to the coffee shop or out to lunch while markets are still open, but slow.
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After so many years of trading, you are still making the two entry mistakes of the 4 mistakes.

Do you know why? For your first mistake, it's fear to enter. For your seond mistake, it's greed to enter. If you have a large trading capital, it's ok. But if you have $5000 and need to make a living ($200-$500 per day), you just cannot afford these two mistakes, because missed opportunities=money on the table.

Tell us about your ka boom 10 years ago, how did it happen? I assume you were already profitable at that time?
 
I think blowing up at some point during the early stages is a good thing for your career as a trader.

It forces you to respect your capital and your risk management rules.

I certainly did and although at the time it felt like a never ending agony, it was an invaluable lesson that I will never and cannot forget.

Anek
 
Quote from Anekdoten:

I think blowing up at some point during the early stages......
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Anek,

When I started, I told myself I would not allow that (blowup) to happen to me. I couldn't be more naive.

Now I realize I cannot escape the fate: A couple of weeks ago, I jumped from 1 contract to 10 contracts, hoping to increase my profit by 10 times. As soon as I did it, I lost control/discipline and ended up with big losses on consecutive days. It's a total mess and it happened so quickly (a careless entry and a little averaging in and a little holding the loser and before I knew, harm was done; and after repeating it a few times I was looking at a seriously damaged account).
 
Quote from SicilianTM:

Sick.

The biggest jump I will ever make percentage-wise is when I go from one to two contracts.
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:p :p :p

Jumping from 1 to 10 contracts is only part of the story, I once buried myself deep in a hole of 16 contracts (yep, refusing to take the loss and then averaging in). I was not myself when emotions took control of me.

Something good coming out of those losses is that I have come up with the concept of Precision Trading, which is to use a minimun amount of trading capital to achieve a consistent daily income on the condition of avoiding all 4 trading mistakes. Hence the thread.

No More Mistakes!!! (only a slogan I came up with, I still make mistakes).
 
Quote from 4DTrader:

I jumped from 1 contract to 10 contracts, hoping to increase my profit by 10 times.
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Ever heard the phrase "...crawl, walk, run, fly".

Anek
 
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