I've been reading up alot about trading and am interested in taking the plunge as a day trader. Currently the options I see are: 1. Join a prop firm that pays you salary - best and most difficult way of getting in. 2. Join a prop firm where you put up your own capital. This is what I'm leaning towards. I met with T3 Capital and they offer: - 95/5 payout - $5000 minimum to start - $90 a month data feed - Mentoring, which is to me the most important thing right now. I need to follow professionals so I can minimize my mistakes. 3. Start out on my own from scratch. What do you guys think is the best way to go? I'm earning a comfortable salary right now in engineering but I don't want to do this for the rest of my life. I figure if all else fails, I can always go back to it. Plus I have enough saved up to last me a year. I figure I can put up $40,000 into a trading account once I feel comfortable making steady consistent profits (hopefully within a year) but even at a 25% return rate that would mean I'm making $10,000 a year.
You need a business plan that addresses the following: 1. Do you have Tested strategies? These could be systematic and backtested, or discretionary and valid given certain expected outcomes that you have calculated in advance - say trading options on a given event.. (you're own or others) 2. Do you have enough trading Capital to ever grow it sufficiently to trade for a living at some point in the next 5 years? Also, you're going to lose money initially.. and even when things are going in your favor you need capital that you can deploy and not be fearful about losing it. So keep your day job. 3. Does the data on the above 2 questions provide for a timeframe to successfully handle the negative possibilities associated with the questions? You need to determine how much time its going to take to create the strategies or become sufficiently component in various time frames to trade. I would initially pick a longer term Market to trade or pick an after hours / 24 hr Market if you plan on watching the screen. What's your personality? Engineers tend to be methodical and specific and good with numbers, so you would probably want to start with systems trading using stocks or futures. Trend following systems or the like are longer term and give you the flexibility to place at open limit orders and sell at the close so you can keep your day job.. I'd say those are the only 3 issues. Obviously the Market may supply other contingencies that work against you if you are overleveraged or not expecting certain outcomes. Also, if you let you're own greed, other psychology or some naive expectations get in the way, things may not transpire as well as expected. But they could, and that would be nice. Good luck
1. I have yet to develop a trading strategy, but that is the next step. I was hoping joining a prop firm would help me develop a working strategy faster and help me minimize my mistakes earlier. 2. My plan was to use $5000 to start at the aforementioned prop firm for the first 3 months (the probationary period) simply to learn and to gain experience. Afterwards, I can put in another $45,000 and with a 10:1 leverage I would have a buying power of approximately $500,000. Hopefully I can make $300-$500 a day on average (after commissions). Does that seem reasonable? 3. If my trading strategy fails, I should know within the first 3 months without losing significant capital (before I put in $45k). I do feel more comfortable with trend following systems. I am methodical and specific like you said but I do understand that the market doesn't always "make sense" the same way an engineering equation does. Thank you for taking the time to respond to my post.
I've done all three things over a period of 9 years and started out in the same place as you. #3 is the worst option, unless you've gone through #1 and #2. #1 and #2 kind of depend on your background and education. Re: #2...Professionals around help, but there's a difference between learning an existing edge and learning the ways of the market itself. I'm not trying to come across as some kind of Yoda or wise-man. I'm just trying to suggest that there's a certain way to think that assists in analyzing why an edge is really an edge, and that's what took me the longest to learn. More importantly, a self-funded prop shop setup might leave you with pros who don't have an interest in teaching you the truth about the markets. A mentor has to actually take an interest in you, on some level or another. Generally speaking, no one cares about you making money unless they can make money off of you somehow. Also, for whatever reason, there are a lot of bogus mentors out there. I've seen them, I've followed them, and I've lost money listening to them. Re: #1, this was by far the hardest thing for me to accomplish and took a lot of time and a lot of education. Send out a few resumes, see what you can get. If no one shows an interest, start with #2. If you don't work harder trading than you did at engineering, then you're doing something wrong. Engineering problems are challenging, but engineering jobs tend to not stretch your mind the way the market will. There are so many ups and downs in this profession, there's no way I could convey what my heart's been through in this industry through a posting. So, best of luck to you.
You'd be foolish to dump your current career path until you've exhausted all avenues for educating yourself on trading while you're working. You may not like what you're into right now, but even your worst day at present is nothing compared to losing your savings when you enter the market unprepared. If you do decide to take on trading full time, you want to be as knowledgable as you can before you begin. Read everything you can, understanding that you will be looking to build a background of knowledge. Don't expect to find 'secrets'. And 90% of what you read will be either repetition or just plan wrong. Your best investment is a good software package for backtesting, which you can work with on your off-time. It will help build your skills and put you on a firmer track before you place your bets. And keep in mind that the path to profitability is not days, weeks or months, but often years. If ever. No different than any other business.
Your current occupation, engineering, is a practice of knowledge and skills you acquired with education and experience. The occupation you aspire to, trading, requires talent that a tiny percentage of people will ever master. Think about it ... how many engineers, doctors, and lawyers have you personally met in your life? Probably many, or at least several. Now, how many professional traders have you met in your life? Probably none.
Dude. Don't do it. I am engineer too. Had a good friend who quit a WELL PAYING JOB... because he thought he could make it, day trading. Under the illusion that he could make even more, be his own boss... He lost it all. TWICE. There is no future in trading as a 'career' (over a 25, 30 year period). Not one case who has made it, that long. Not one. It can consume your life, in the most horrible way. Constantly looking at your computer screen, 24x7... futures trade overnight. As soon as you get that big drawn down... suddenly, sex with your wife/boyfriend... time with your kids - none of that will matter. "Gotta get back to even." You'll turn into a fat slob, always at your computer. Change your job, or career if you're not happy. I only dabble in options as a hobby... and let me tell you... I get nervous as a titmouse when the market starts moving against my positions. It ruins your day... That third Friday of the month... seems like years away. I've been able to fight my way out of some pretty bad situations... but good lord would this SUCK as a primary job... Do it as a hobby, but nothing else. As a career... Don't do it dude. Don't do it.
This is worth quoting again. Trading is SUICIDE in the worst form. Trading as it has been done by all/most doesn't have a positive statistical edge. And by the time your realize it, it is TOO LATE and you're done.
I actually know a few. One started out as an engineer and now trades on the Mercantile Exchange specializing in cotton. He's doing really well. Another is a friend who trades for a prop firm but gets paid salary. She's been doing okay I think. Is it unreasonable to average $500 a day using $500,000 capital? The prop firm I met today offers 10:1 leverage. I figure I'd put in $50,000 once I'm comfortable with a steady profitable trading strategy.