That applies to me. The only other income I've received was from a clerking job for a trading firm, who themselves subsisted 100% on their trading profits. That said, I agree with Pabst. In trading you can get situations where you find an edge that makes excellent risk-adjusted profits. You can then really rake it in. A lot of people on the floor were like that - start with a borrowed 10 or 20k, and turn it into 6 figures plus in a short period of time. Or maybe you find a system or method that works great for the moment - e.g. SOES bandits in the early 90s, daytraders in 1998-2002 etc. Generally you find that these "free money" situations don't last for more than a few years. Ok so the floor lasted for over a century but even its time is now up. Trading is a competitive industry with a rapidly shifting set of rules, regulations, market environments and opportunities. There are low barriers and to entry, and you can easily find that your edge disappears due to competition or changing market environment, and either takes a while to come back or (more typically) doesn't come back at all. If trading is your sole source of income, and that income dries up as a result of a market change, then many people find it difficult to deal with. The real market survivors are those with the drive and focus to sweat out those situations and apply themselves to finding something new that works in the changed environment. They are the ones that stay as full-time traders for multiple years/decades, until they either make big bucks or get too old and tired to continue reinventing themselves. The rest find they simply aren't psychologically capable of doing this, and so they drift around for a while and eventually find themselves having to go back to conventional employment or self-employment. You would also be surprised at how little many high-earning traders actually managed to save. Taxes take their bite, and the rest of it gets pissed away on fast cars, powerboats, planes, women, booze, drugs, mansions and 2nd homes, the usual suspects. They assume the good times will continue to roll, and don't plan for the future when things will be different. And as Pabst mentions, if you lose your edge, a million in the bank doesn't pay you much in income. Luckily there are a few patterns of market behaviour that *never* go away - such as people's tendency to buy tops and sell bottoms due to greed/fear climaxes, or the occurence of secular bull or bear trends in various market sectors from time to time, or inefficiencies in very small-cap stocks, or "can't lose" Buffett-type value plays. However, these opportunities persist mainly because it is difficult to exploit them consistently and successfully - it IMO takes experience and psychological mastery, and/or extreme intensity of research to get good enough at those areas to make it your sole source of income. However, once you do, it will provide excellent returns for a very long time. So my advice is, if you find yourself with an edge, assume that it will disappear in a couple of years, and prepare accordingly. Try to study one of the methods mentioned above that is likely to persist. From 1999-2002, I was constantly expecting the easy money to dry up, so I worked at different methods that were totally uncorrelated to intraday stockmarket volatility, and kept my spending low so I could accumulate a decent capital base for the future. Each year I would look at my P&L and ask myself why I was bothering to do this extra work when things were so easy, but now it has paid dividends and I'm glad I did it. Contrast this with many people who hopped on the daytrading bandwagon, and did quite well, but now the market opportunities have gone in that sector, they don't know what to do. They are scanning the job ads, trying to work out the opportunity cost of not getting a $50-100k a year normal job, asking if the stress of trading is worth it etc. They are psychologically ready to give up. Meanwhile the survivors have already changed their game and are scoping out new hot sectors and methods to maintain their competitive edge. Andy Grove said this about the high technology industry, but it could just as well apply to trading - only the paranoid survive.
One of the best postings I have read in a long time! Pabst has a great post also. If you do not learn early on in life to save a good portion of your income from a job or trading, you will always be chasing the dollar. Saving a good portion (15 to 25 percent) of trading income and investing it in conservative investments is a must IMO once a person starts to exceed his/her income from a previous job. This side investment growth is the only way to have something to show for the times when your trading is in the zone and hitting on all cylinders. This is not an easy task and does require great discipline, but if carried out a trader will always have some financial options during a trading career. My Dad always said to me when I was younger, "pay yourself first...you did all the work!". To this day I always remember that message, and it makes even more sense the older I get (39 now). Chris
I've traded for 7 years, all profitable.....all as my only source of income/no other job. The true dedicated traders will always have the edge over part-timers...and will likely eat them for lunch. I agree that you have to have dedication to make it and save a ton too. I save 85-95% of my income. This means your standard of living will stay about the same but your bank acount will bulge when you really make some bucks. The best way to take a new leap is to work 2 jobs nearly fulltime for a while, then make an easy transition to the one that really works.
Try eating my lunch, I'll kick your ass. Yes, I'm "only" a part-timer. Trading is not the highest calling, it is a calling. I build, and wouldn't give it up for the world. Right now I have three apartment blocks and a hotel on the go. I love trading, but compared to my day job, its not big time. Look around you, all those buildings were built by someone, and now they are owned by someone. Do the math, how much a month do you think they are bringing in. That said, I love trading, plan to do it alot when I retire.
Yes, I own those blocks...seriously. Talk to me when you crack 7 figures. Yes, I do the math.......that's why I own them.......but still own them just for diversification, my trading %'s are 150-200 greater.
Apologies, but this is a personal pet peeve--- it's "poseur" not "poser", from the french. " One who affects a particular attribute, attitude, or identity to impress or influence others." The only dictionary that allows 'poser' as a synonym is WordNet 1.6, and, well, that's certainly not the OED. Regards, Laziz
whats the incentive to give away your system that you spent time and lots of money developing to some lazy newbie trader?? I dont see any. sure, maybe I'll help with some basic questions, but the real meat of the system or what stocks I trade, forget it !!!