A Fund vs. Your Own Money

I wonder how many actual full time professional at home traders exist? Not counting those with prop firms or wealth from other sources--- I bet this number is exceedingly small and those who actually do it may live like the Unabomber. Would like to see examples otherwise. surf

 

This is something I have been saying for a while. A person can be a good salesman with a basic understanding of conservative risk management and do quite well. But a pretty good trader who cannot sell has no chance.

I am a slightly autistic geek with no social skills, so becoming an institutional trader or fund manager is not an option. My choices are working stiff or self-financed trader. I have chosen the latter as long as I can stay above the Unibomber lifestyle.

 

I know when they invented globex, I couldn't have survived if I didn't live out in the stix. I could have never competed with a Chicago floor trader. You probably paid more for your parking space than I paid for my whole house. The only thing that kept me alive was low expenses, and you have to go out into the country to find that. Yes, it was sort of a unibomber existence, except we did actually need electricity and an internet connection.

Sometimes you decided how hungry you were based on what the market did that day

the big thing was when you got a full point on one contract, then you knew the electricity bill was paid

 

Yeah, imagine what it's like now--- competing with HFT and all---

 

it's important to know what your limitations are

I can get away with a few things an HFT trader can't

but I don't try to beat them at their own game

to each his own I always say

you leave me alone and I'll be more than happy to leave you alone

what was that the man said? "Good luck with your business, especially as to how it doesn't interfere with mine."

 

I agree with most of your post, but 20% ROI per year is... well, very low for the retail trader not constrained with the liquidity issues. Maybe OK if you have a really large account and only position trade so that it doesn't take much of your time. But trading every day for that amount on a relatively small account (even $500K I consider that) doesn't make much sense to me.

 

no, but over time, if you are wise, the trading account becomes less and less of your total net worth

wouldn't it be nice if we could all get rich just trading?

but then again, wouldn't it be nice if you could get rich being an electrician or a plumber?

 

I keep personal trading account as small as possible to maintain the position size I want. But even in the case of more conservative risk-management day-trading surely offers significantly more than 20% ROI for a retail trader. Very time consuming activity though and not scalable to really big money. Over time in the perspective of say 10 years I'd also likely prefer to have 20% ROI but check the market just a couple of times a day briefly and compensate the low ROI with trading size.

 

you trade. It's just a job. Sometimes you make more than your friends with real jobs. Sometimes you make less. But each month you follow the same sound investrment practices. Doesn't matter if you are a trader or have a real job. The idea is to put away something so you can live off of it in your old age.

other than one time, I've never made big money. Just slowly consistently made slightly more than a living.

But I must admit, that one time certainly shortened up my retirement horizon.

 

Hi Hoofhearted,

There are other reasons to try to score an asset allocation related to other areas but Cornixforex hit on the main reason related to risk profile in the following post.

Hi Bowgett,

Yes but being trained and surrounded by mentors and gaining experience in a professional hedge fund also with being “forced” to trade responsibly due to risk limits means unless you are just terrible at trading blowing up thus career risk is minimized.

Also if trading just isn’t for you there are usually other career paths available in sales, administration, middle office, RM, IT etc.

I have personally never blown up but have faced several pretty scary drawdowns but due to training and good risk management came out of them and what doesn’t kill you makes you stronger.

When I look in the mirror I have to admit to myself that the odds a pretty good that if I didn’t have the training, experience, mentors, knowledge and most important the risk limits I worked under at professional institutions I would have blown up at least once in my career.

Hi opt789,

I have never seen such a research report; is it possible that you have a link?

I suspect it is really difficult to get adequate data to confirm one way or the other.

I personally have never met a guy that has made himself a multi millionaire from just trading his own money out of his house so I suspect an academic wanting to find enough of those guys so he has a big enough sample size to confirm his hypothesis is going to have a tough search ahead of him?

Antidotal evidence: I do know I am a lot more aggressive with my own money than I am with OPM.

Hi marketsurfer,

I believe the same as you that traders who became self made multi millionaires trading out of their house with their own capital are very rare.

BTW what do you mean by prop firms ? I asked this earlier in the thread.

Are you referring to working at a hedge fund or do you refer to a broker that provides market access and/or capital to generate commissions?

I think over twenty years overseas has made my knowledge of the current “trading lingo” stateside pretty out of date.

Hi rwk,

Why do you believe this?

I believe that most guys with a great edge but no selling skills just find someone to do the selling for them. In most cases I know in real life the trader didn’t even need to find a salesman since his FCM did it for him i.e. introduced him to the professional asset allocator world.

This is a pretty accurate description of the majority of the guys that own and/or trade in the hedge fund/CTA business. This is exactly the type of guy the professional asset allocators expect to see in trading and research when they do due diligence on a potential asset allocation and is in no way a disadvantage.

Put the numbers on the board, explain your edge and why it is scalable and can be reproduced going forward and then pass a professional due diligence and it doesn’t matter if you are the Rain Man you will most likely get the allocation.

Hi oldtime,

Very nice but isn’t this a realistic goal rather than pie in the sky?

If you really do have the edge/talent and use OPM to leverage your edge/talent not only should you be able to become rich you should be able to do so in a pretty sweet time frame.

Hi cornixforex,

Why not try to turn your edge into a scalable methodology so you can go after the free call option of an asset allocation?

Isn’t that risk/reward profile attractive to you?

Cheers Sandman