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Sean Cassidy wrote:
> to ease my conscience, i am a recently failed (ie ran out of risk
> capital!) trader, and am discouraged but still want to eventually get
> back into trading, can everyone out there give me an idea of how long
> it took most of you to begin making a living as a trader, and if you
> dont mind, how much money was lost prior to this point, the first
> firm i was with was a bunch of scalpers (i know) and the second was
> better but they ran out of space for me when advertising started to
> bring in kids with $500,000 acounts (22 years old either they were in
> menudo, or their parents gave it them), also what is a general profit
> objective/stop among successful traders, and how long are these
> positions generally held? both firms were targeting 1/2 point with a
> 1/4 point or less stop (again, i know) also are their any other
> related professions out there that i may want to look at? (without
> being a broker-hello ms. gruver i have some wonderful opportunies in
> stock-click-market)
>
> thanks in advance for the insight
>
> sean,
I have been a full time professional trader since 1975. I started
as a market maker on the CBOE and pursued that for 12 years. I think day
trading and scalping are the hardest ways to make a living as a trader.
Only a very small percentage of all successful traders have the
personality make up to be successful at such short term trading. On the
other hand, when one looks at the list of Hall of Fame super traders,
i.e. George Soros, Warren Buffett, etc., very few if any scalpers appear
on the list. In fact, most of the super traders have multi month if not
multi year trading time frames. I think the big money is made jumping on
exceptional opportunities and sitting on those until they come to
fruition. For example, last summer, when everyone was bemoaning the
demise of all the Asian economies, I bought some shares in Fidelity Asian
Emerging Advisor closed end fund for 6 1/2. I was a little early and I
watched it drop to 5 1/2. But, I waited and earlier this month I sold the
bulk of my position for 13 3/4 for a nice double in less than one year.
The point is that you don't have to trade your butt off to make a very
good return on your capital. A high volume of short term trading will
only make your broker rich.
My annual average goal is to make 50% on my total trading capital.
Every few years I have a bad year and may just about break even. Other
years I may make 100% or better. Given these parameters, one's personal
requirements in terms of how much money you need to withdraw from your
account to pay your bills, and the fact that you should plan on trying to
build up your account over time, one then can figure how much capital one
needs to meet their required living expenses. This conjures up the old
traders' joke about the way for a trader to make a steady living is to
have a spouse with a good job. If you are married or have to support
others, a supporting spouse can be a big help in getting started in that
it will take pressure off you to withdraw capital from your trading
account. The alternative to this is to be single and live frugally. The
good news is that if you can wean yourself off the scalpers needle,
you can put on positions of at least a multi-day time frame, not be tied
to a quote machine all day, you can trade and pursue another financially
rewarding pursuits at the same time. I think this last plan presents the
greatest probability of success both in terms of overall financial
rewards and also purely as a trading strategy. In addition to a greater
probability of success, the last plan also offers a much lower stress
profile vs. scalping or being married. <G>
Lastly, before you hook up with anyone again, i.e. that day trading
firm, ask yourself if their incentives are in the same place as yours or
if there is a conflict of interest. For example, with the day trading
firm, they probably made money on every trade you made, so they had an
incentive to get you to trade as much as possible. Whereas, I gather that
your income was derived from trading based on profit from trades. So you
can see that the incentives in this situation were not in mutual
harmony. If you are a novice trader, find a successful veteran trader
to be your mentor. Be sure this person has your success as their goal in
teaching you. A good mentor can save you ten of thousands of dollars, a
tremendous amount of grief, and many years in the school of hard knocks.
Good Luck,
Norman
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