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Neal:
When I read a post here from someone talking about their $6000 trading account,
it makes my stomach hurt. That money will be gone. Period. Being under
capitalized is a sure trip to a closed account. I know people think that they
have to make money and that futures traders make lots of money, ergo: they will
trade futures to make lots of money. But trading futures when you are well
capitalized is extremely difficult; when you are under capitalized, it's
basically impossible.
I read this gentleman's brave admission and recount of his journey into futures
trading and unfortunately, it hit very close to home for me. My older brother
lives quite a ways away from me and called me one day to ask me what data vendor
I use and how much they charged. When I told him, he asked if there was a
cheaper way to get daily prices, and so I told him about an end of day data
vendor--still too expensive. Then he hit upon getting a daily Investors Business
Daily or Wall Street Journal. So I asked him what he was doing: He had purchased
Ken Roberts trading course and was about to start trying to trade! After all,
his little brother has been making a great living for years and years trading...
I was at a quandry here. I wanted to help him, but I didn't want to insult his
intelligence. I asked him if he was paper trading and he was. I asked him if he
had done well and he said it was mixed and he didn't plan to trade until the
results improved. I told him to call me if he needed more information or had any
questions.
The next call came a few weeks later. He wanted a broker and wanted to know what
I paid in commisions. He had called one the course listed and they wanted $99 RT
and he wondered if that was a good rate for a $5000 account. I didn't know where
to start. I wanted to tell him that he should take the $5000 and buy a bond
or...but not wanting to offend him, I helped him poke about for a useful broker
that wasn't near as expensive and was not affiliated with Ken Roberts.
The last shock came when he called to ask me about rolling an Orange Juice
contract. For the answer to this question, I faxed him a chart of the last OJ
trade I made: I was [naively] long 10 OJ in the early 1990's into a crop report.
I remember that I was so ignorant, I was out with my wife shopping when the crop
report came out that afternoon. The report was expected to show something like
175 million boxes and instead came in at 136. When I got home, my broker had
left about ten messages, and the first one was something like, "Congratulations!
Only you and the Smithsonian have any oranges!" I still didn't get it. Next
message: "Juice will be limit a few times tomorrow." Now I started to get it.
The next day, Juice opened limit up and we sat through five more limits. At that
point, I took my profit by spreading out a back month.
Now most people might have been happy with that profit, and in one sense, I was
very happy. But after the glow of the trade faded, I realized that I *might*
have been short into that report and when I thought of the loss I would have
been exposed to, I nearly threw up my lunch. I haven't traded OJ since. And now
I had my brother on the phone and he was trying to trade OJ with a $5000
account...
I explained it best I could and we went over the charts and the risks. He told
me there was a crop report out in two days [I was glad he at least knew it was
oming out] and he asked me if I thought he should get out. I managed to stammer
that, yes, I thought he should be flat into the report. And I then asked him if
he looked at any other markets. I spent as much time as I could talking to him
about markets like soymeal, mid-am currencies and grains and bonds-markets
better suited to his capital levels. And I went through my library and started
sending him books and tapes of an educational nature.
I think it's hard for those of us that do trade for a living to realize just how
unrealistic the view people outside the business or even on the fringe of the
business have. I don't know how we can better help people that are new to
trading have a realistic view and approach, but because trading has provided me
with so much, I feel a responsibility to do so.
Tim Morge
Neal T. Weintraub wrote:
>
> Thanks for your response.
> I wish more people were this direct. People tend to think all they need is
> software and a system and they are on their way to Easy Street with Easy
> Language. Hey, maybe that could be a new slogan...Easy Street with Easy
> Language.
> You know when you consider that the Vanguard Funds are up nearly 100% in
> three years, it is hard to understand why people even fall prey to commodex.
> The Merc has a course called before you trade. But I can tell you this.
> Anyone with less than 20,000 in trading cash should not be in Futures.
> Period. End of Story. I am tired of hearing about people saving $7500, then
> buying software for $3500 and using the balance to trade.
> And anyone with more than $10,000 in credit card debt can never trader
> themselves out of debt.
> Take the $7500.00 and buy a vending route.
> -----Original Message-----
> From: Conrad Bowers <cpbow@xxxxxxxxxxxxx>
> To: Neal T. Weintraub <thevindicator@xxxxxxxxxxx>
> Cc: Omega List <omega-list@xxxxxxxxxx>
> Date: Sunday, August 02, 1998 3:23 PM
> Subject: Trading as a way to financial success (a reply)
>
> >Neal T. Weintraub wrote:
> >>
> >>
> >> wHAT DO YOU THINK OF TRADING AS A WAY TO FINANCIAL SUCCESS.
> >> PLEASE POST YOUR RESPONSE TO THE LIST.
> >>
> >
> > For a minute I thought this was a joke (in light of my very recent
> >post) but I believe it's not so here goes:
> >
> > I think you have to have a method that actually makes money and the
> >capital to withstand the drawdowns that will occur before you succeed.
> >That makes it not a very good way to go for someone of limited means or
> >anyone who is emotionally attached to money. The brochures that say,
> >we have a great system, and then show it on 20 commodities, often go on
> >to say, "you can trade this on a more limited portfolio with $5000".
> >Even tho they may have been honest in their testing, I believe the
> >chances of the smaller portfolio having acceptable results is much
> >lower. Primarily because the drawdown numbers for a smaller portfolio
> >will be more prone to being inaccurate or the portfolio "cherry picked".
> >
> > It's not the easy street it's made out to be either. Unless it's a
> >small portion of your net worth and NOT your way of making a living,
> >it's hard to see how it could not be anything but stressful to some
> >degree.
> >
> > For many of us who have other careers, it can become a second job in
> >itself, maybe even supplanting our original one. In effect my original
> >goal to pay off some debts has become a goal to succeed in trading. And
> >that goal has distracted me quite a bit from my first career. I can
> >tell you why I don't like my current job, but was the transition to
> >spending a lot of time on trading well thot out? Nope, it evolved. For
> >those of us who seek to make a transition (or by default are making the
> >transition) from our current career to trading as a means of making a
> >living or being sucessful, maybe we should step back partway along the
> >way and ask, was this the right thing to do?
> >Even if it was a means to $ sucess for an individual with another
> >career, it might not be right for them. I guess everyone has to ask
> >themselves what success is.
> >
> > Also I think your emotions have to favor you being in it. If you have
> >conflicting feelings about it, it's less likely you will succeed.
> >Recently, I built up my small account from about 3K to 6K, patiently
> >grinding out small losses and a few larger wins in options and
> >mini-contracts. But a number of emotionally charged issues have come
> >up, at times introducing frustration, discouragement, and even guilt
> >into my thoughts. After being rigorous (perhaps too much so) about
> >kicking back options that werent' making money, I suddenly stopped
> >looking at options i had altogether, same with most potential new
> >positions. What was going on? The only thing I can think of, is that
> >my ambivilence about some of my decisions, including getting into
> >trding, was being manifest by actions that might take me out of it. I
> >used to scoff at some of the stuff in M. Douglas book about how you may
> >defeat yourself - seemed crazy, why would anyone do that? But now, I
> >think I've seen it in my own trading.
> >
> > In short then I think it is a way to financial success for a few people
> >- The ones who either find a method and/or have the talent to succeed
> >in this field. It's a low-probability route for someone who does not
> >have a fair amount of capital already. I think its a way to financial
> >success for someone who:
> >
> >1. has a positive expectation system or talent, and has confidence in
> >it.
> >
> >2. has the capital to back that up.
> >
> >3. has a risk mgmt plan consisntent with 1+2.
> >
> >4. Doesn't have conflicting emotions about the money at risk; doesn't
> >have conflicting emotions about other issues or people that are in any
> >way impacted by the decision to trade.
> >
> >
> >What % of people in this crazy arena do you think have all 4? For those
> >it's a good way to financial success. For the rest, nope.
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