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Old Jan 2nd, 2011, 06:51 PM   #79
ammo
 
 
Join Date: Feb 2007
Location: chicago
Posts: 20,715
Quote:
Quote from kingfisher3210:

Where is the edge? If your trading cant handle QE 2 or FOMC, you need more experience to build a trading edge.

From my experience, a trading edge comes with 10 years of market study handling complete bear-bull-bear-bull life cycle at least 2 times and understanding mass psychology behind the prices.
i might remember 5% of what i've learned over the years,i know i can trade my way out of a loss and that the edge is getting harder to spot, i think edge might be knowing how not to lose which lately has been not to trade,the op at present is probably making more dough than a lot of traders,good thing about a real job ,you never have to give your paycheck back
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Old Jan 7th, 2011, 11:48 AM   #80
lowhigh27
 
 
Join Date: Jan 2011
Location: United States
Posts: 11
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...
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Old Jan 7th, 2011, 01:49 PM   #81
lowhigh27
 
 
Join Date: Jan 2011
Location: United States
Posts: 11
correction- self employment tax is only if you create a business entity
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Old Jan 7th, 2011, 03:01 PM   #82
lowhigh27
 
 
Join Date: Jan 2011
Location: United States
Posts: 11
edit- self-employment tax applies only if you choose to create a legal entity for your trading, like a corp or LLC
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Old Jan 7th, 2011, 05:57 PM   #83
Steven.Davis
 
 
Join Date: Jun 2010
Posts: 307
Quote:
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.
Health insurance is a definite issue. Let's see how Obamacare really works.
No need for a 401k. Almost the same as a Traditional IRA. Roth IRA usually better anyhow. Only negative is no employer contribution. Yeah, like there was one anyways.

Self-employment/carrying forward losses. I vaguely remember a talk once where someone made the case not just for creating a trading business, but for actually creating a new one each year. Something about that being a good setup to deal with the impossibility of getting your estimated withholding correct. You are only paying capped 15% FICA on the part that you pay yourself/take-out. If one is trading fairly large, I would expect the ability to treat positions as inventory, carry losses, and estimate your take-home rather than your profits, would outweigh the capped FICA.

My 2 cents.
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Old Jan 11th, 2011, 03:55 PM   #84
Laissez Faire
 
 
Join Date: Sep 2010
Posts: 4,540
Hello everyone,

I`m very grateful for all the good advice that most of you bring to the table based on your own blood, sweat and tears

Adding swing trading to my strategy is something that I already had planned to do in the future, but you guys might have accelerated the process. Diversifying with swing trades may keep me occupied and also reduce the pressure to day trade, especially on those days when nothing happens and it is easy to start initiating low probability trades.

I have now decided that 2011 is the year that I will take the leap and make it as a full-time trader. My current situation is not sustainable like I mentioned in the original post. I see three things happening and all involves change in my job situation:

1) Work full-time and continue like now until end of March, quit my job and then start trading full-time. I will have savings for 2-4 months.

2) Reduce my working days by two or three, giving me two or three days for full-time trading. Would allow me to sustain a living for quite a while, since I would almost make it on my salary alone. Some savings will help the ends meet.

3) Work 5 days a week, but only 6,5 hours per day, allowing me to start trading (although a little rushed and not allowing to much preparation) 30 minutes after the open. This will give the highest income, but it will still be pretty stressful.

If I do fail miserably and lose 50% (my cut-off point), I will humbly resign for now, knowing that I gave it my best. Knowing myself, I will probably not give up completely on the dream, but I will change focus on my career and find something else that I love doing and which pays. It might even involve going back to school this fall. Trading would then be a part-time commitment that will add to my lifestyle and not take from it.

I`m just not going to spend more years like I`ve spent my past three years chasing a dream, sitting home on countless weekends reading and studying all weekend, working intense hours, rejecting girlfriends, neglecting family, social life, etc, just to find out 5 years down the road that that I missed out on life.

In my opinion, the stake is not very high for me. Low risk and high reward. That`s the trades we`re supposed to go for, yes? If not, I will cut my losses and look for opportunity elsewhere.

Thanks for reading!

Best regards,

Laissez Faire
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