Registered: Jan 2011
01-07-11 04:48 PM
I just read this whole thread, and there are a lot of good replies.
I'm not sure exactly what step I lie at on fjpenny's list. As someone said, I suspect it will be easier to tell when I see it all in hindsight. At one point I thought myself to being just short of #37. Now I know I was wrong.
That was after 6 years of trading(three part time retail, three full time with a prop firm). I believed I was on the way to making it because for a full year of that I was averaging more in a day(losing days included) than my corporate employee friends were making in a week.
But things change.
The trading environment got more difficult, and I adapted but slowly. I was still making money, but the prop-firm costs were making it very difficult. I had money saved from my limited success, so I was not worried...until this went on for 6, 7, 11 months. You REALLY have to try hard not to get emotional about your trading when you have been living off of savings for almost a year.
I know you said you're single, and that is probably a good thing for what you are hoping to do. My ex had a hard time adapting to our smaller budget when things slowed, which was still higher than I should have set it. Long story short, with my trading only treading water, we blew through most of my savings. The rest she took with the split.
During that time, I took a sabbatical from trading. To re-evaluate, and also to get my head straight due to outside distractions as mentioned above. That was over a year ago, and I am only now planning my return to trading. It has been difficult to find a good job since I began my sabbatical, to say the least. I am an intelligent person, I have a Bachelors degree with a good GPA, but employers just don't take you seriously when they see that you have been trading for the last three years. No matter the levels of dedication, concentration, analytical thinking, multitasking, and risk management needed to trade- they just don't like you. Period. It's more true now than ever with the way the media and certain members of congress have used "traders" as a scapegoat for many things up to and including our entire economic situation here in the US.
But, I digress. The point of all this is...I would strongly warn against giving up your current job for trading until you have SUBSTANTIAL money saved up. For example- add up your current monthly expenses, and multiply it by at least 24. Then cut your costs to the bare minimum, live as cheaply as possible, and save that money up.
When you're financially ready to trade, a few tips from my perspective:
-Maintain that cheap living while you go through the pitfalls of learning how to trade. Don't get the spending bug just because you have a few good months, or even a good year.
-Stay single...you'll think it sucks when you lose 10k in a day, try hearing your spouse's reaction. Also it will help you keep your budget.
-Don't assume that you will be able to get your same job or similar if you decide to go back. Work on the assumption that you wont be able to. This will help you keep your costs low and avoid taking on things like car payments, mortgages, higher rent, etc...and it might be true. I'm serious.
-Start with small share size and keep it that way until you see consistent success. Then step up slowly.
-I really recommend equities over futures, especially for a beginner. I've seen tons of people who can't trade successfully and they think it means they should try futures-WRONG. Another friend had a knack for trading stocks but thought he wasn't making enough so he switched, and lost his shirt while everyone was making money.
-I would highly recommend maintaining some type of part-time employment while trading. Income is good for the psyche. If you are money driven like most traders and myself, not having some steady income will tend to affect your trading decisions negatively.
I know this is more conservative than some people's posts, but it's just my perspective. You're considering quitting a solid job to join a profession where many seasoned people are dropping like flies right now. Colleagues of mine that were making more than I did, several million a year, are now only making in the 100-400k range. I know that sounds like a lot, but that used to be an OK month for them, and they're pushing way more size than you will be for the next 10-20 years. It's all relative.
A couple of things to think about, some negatives of trading...
-No health/dental/life insurance, some props will provide but it's still not cheap.
-No 401k or any other tax-deferred retirement account. So take what you were putting in to your 401k or IRA per month, roughly double it, and that's how much you'll have to save for retirement in a regular non-qualified account.
-Self-employment tax, for most traders. 15% as opposed to the 7.5% you currently pay in SS tax.
-Losing years are not deductible as far as I know.
-On a lighter note- I don't know if you drink, but right now you may be able to work just fine with a hangover...try going out for drinks all evening and trading well the next morning
End of rant...