My background: "traded for a living" 2000 to 2004; stocks, options, futures... In the end that tuition was expensive... Back to the workforce... Kept trading stock options for a few years on the side, looking for sharp one day moves in stocks with follow through, self sustaining but on balance not particularly profitable... Lost interest... Got back into futures a few years later scalping the overnight currency markets, ended up taking a few large losses & once again lost interest reasoning it was a foolish exercise... Then I got serious once more, deciding that since I had kept following the markets all these years, sometimes more distant, sometimes with interest, I did have quite some experience and surely I could put together a rational way of trading for a living. Fast forward approx one year & yes, I am profitable. The workforce is not an option for me, this is my occupation for life now. I have been through all the stages required to learn to trade profitably, and have learned the skills required to make it. I think very few of us have this, simply because the investment required, both in time and financially is simply out of reach to most people (that need an income in the first place), and add to that the fact that few and far between are the personalities that are apt to learn those lessons and implement them in a disciplined fashion. To the thousands of newbies or wishful thinking readers that will inevitably read this thread, I have a few words for you. Why do you think that you can outwit the markets? Statistically, you will most likely fail (if your goal is to trade for a living). The learning curve is more of a war of attrition. Will you learn what it takes before your capital runs out? Probably not. On top of that, you need to be able to deal with the fact that your returns are negative for some extended time when you need income! 1. ALWAYS have risk control of the absolute kind, whether by hedging, or trading long options (risk limited to premium paid). Stocks can go to zero virtually overnight. Futures positions can destroy you overnight. Stops could not be triggered under a variety of very possible circumstances. Your broker WILL disappoint you one day in this regard. 2. PATIENCE is what makes you money. You have to wait for the trades with overwhelming odds in your favor, the way you see it. Anything else is a fool's bet. Forget about making money every day, you are not an employee, you are a business owner, not every day is profitable. If you expect positive days or weeks, you will destroy yourself by way of demoralization. This I am particularly prone to, due to my perfectionist personality, and it is a weakness I constantly have to grapple with. 3. Let your profits run. That is one of the hardest things to master. I strongly recommend you read the auto biography of Jesse Livermore. BTW he ends up broke when he blows his brains out :eek: 4. Think in terms of statistics, not dollars. It's all about the odds. There are many similarities to gambling. The only way to beat the house (with small capital relative to desired outcome) is to plunge when the time is right. 5. Don't pick up pennies in front of bulldozers, that is for the more informed than you. 6. "Systems" don't work and don't listen to "gurus", they are failed traders. Your education should not come from a website or teacher but rather from a well rounded understanding of the financial markets and fundamental principles of the business world (particularly so for stocks). There is an academic aspect to this but understanding the markets sufficiently to "game" the outcomes takes years of hands on experience. But I digress, the one thing that is particular about my style is that I do use tremendous leverage in the sense that I use futures contracts and options. This is out of necessity because I really started (the last time) with very little capital. Conservative strategies are not an option for me, out of necessity. Still, my goal is to build up capital but as of the last year I have only generated the requisite income to sustain my (rather meager) lifestyle. ... And that brings us to the substance of this post: I do find myself constantly battling with myself in that I question my own ability. It seems there is an aspect of brinkmanship at all times as the performance I require of myself is on the order of 25% of my capital per month, and preferably 100%. I just can't help but tell myself this is foolish. Yet I am succeeding albeit with fits and starts, it is not at all a constant stream. Yes I am a plunger. I measure my returns in the stock options in multiples of my wager, on the order of 10x to 20x being a successful trade, and of 100x uncommon but very real, granted on much smaller stakes. I find that I am exceptionally good at "gaming" the macro (futures) markets for sharp moves and at predicting outcomes, but I also find that I am mostly unable to capitalize on it, mainly due to my intolerance of risk (I get stopped out or exit very quickly). If I had the fortitude to put on swing trades in futures, I would be wildly profitable in these markets, but I don't. Over the last year on balance I am neutral to slightly down on the futures side, and wildly profitable on the options side. So my question to the community here is this: Do you think that I am just a yahoo that will inevitably go down in flames? Or do you know of others with my style that have shown long term durability?
Are you expecting a 25%-100% return a month based on your total liquid net worth? What kind of Drawdowns are you experiencing in percentage terms on a monthly basis?
+1000 In regards to your question, significantly drop your expectations regarding your expected returns and increase the capital required for you to pay your bills. It is impossible to trade for a living out of the same funds required to pay your bills. The two must be separate. However, your "Top 6" list is spot on.
I like most of the post....and to your question. Plungers can do very well even over the long term, but you are already showing signs of not being plunger enough (if that makes sense.) The best plungers I have seen (if you can call them that) are usually very good at running their winners, even adding to them aggressively (hence they dont get stopped out quickly, OR they are very adept at attacking the same trade a number of times).The best plungers are rarely seen as the opportunities are rare.....this does not sound like what you are doing. eg; a guy we knew used to come in and say- this week I am an FX trader....wait for what he was looking for, hit it numerous times in size, get out when the move was done and disappear. Next time he appeared he was a bond trader. What he did in the meantime who knew. If you are good at the options stick to it (probably as you know you have limited downside despite, stops, brokers best interests and gaps hence you can handle them. Plus there is the added convexity (=extra leverage when right)). Why bother with the futures unless scale will be an issue? The other thing, is that while the massive leverage is all well and good, it will also be your downfall when/if you dont take a loss, have a big gap, multiple losses, a loss of mojo when needed - whatever. Why not have 2 accounts - a normal, boring one, and a plunging account.... (Personally I have always been too conservative to be a plunger, but it works for me.)