For a $1000 profit over $3000 margin, you are getting about 30% return per week and more than 100% per month. What prevents you from increase your lot?
I guess I'm still a bit immature It's so tempting to just go into Boss's office and give him notice of my intent to resign Any good tips on how to tough it out for the rest of this year? I truly know that deep in my heart with about $100K, my entire life will be set from hereon out.... Maybe this temptation is in itself a sign that I'm not ready yet? I also keep making small mistakes at work - nothing serious but little typos in my spreadsheets but my Executive Director is 101% behind me in everything I do for the firm and he keeps complimenting me and thanking me for all my hard work on every project I do for him. To end the year with $100K in cash and start trading 2012 with 10X leverage on a $10K FX account - with $90K in the bank would be awesome! I want to travel the world and trade..... Any honest advice appreciated from those with more life-experience. Cheers!
Although I am trading professionally for a living now, I strongly recommend against following this path. The odds are stacked against you. If you must, I recommend you fullffill the following criteria before becoming a full time trader. 1. test your strategy out extensively using at least 6 months of actual trading data while maintaining your current employment 2. achieve a compounded annual return rate at least 3x that of your maximum draw down 3. have enough capital saved up to have 1 year of living expenses + 2x your maximum draw down during your test period 4. be able to honestly look yourself in the mirror and say, if you experienced a large drawdown your first month, and lost say 20k (or whatever is a large amount to you), you would still have the confidence in your strategy to brush it off, and continue as usual.
You said that were earning 10 to 15% per month and I think you said your current account is $50K. At this rate of return that means you would earn over 200% per year and so two years ago your account would have been less than $5K. So it seems you have not made this rate of return for very long otherwise your account would already be much larger. It's possible that you have had a breakthrough and will be able to achieve this rate of return forever and ever, but markets change, edges change, luck changes ... so you have to consider the possibility that you will not always make this rate of return. For that reason it makes sense to continue working and build up your account. In 1 year your account could be $150K, in two years $450K. For the cost of a year or two, if your rate of return continues you can insure yourself against losses or lack of profits and possibly set yourself up to be much wealthier. If your rate of return doesn't continue you will likely be much better able to withstand the losses or lack of profits and so be in a much better position than possibly out of money and a job. Regarding rates or return, the day traders I know can't (or won't) tell me their rates of return. It seems to me that experienced traders tend to have lower expectations for returns than less experienced traders, and that in itself says a lot. Also it seems people with larger accounts have more difficulty making the spectacular returns - I don't know of any hedge fund that regularly makes triple digit returns, and the ones that do so occasionally tend to have volatile swings in their returns. In any case this study: http://www.cxoadvisory.com/individual-investing/do-day-traders-make-money/ ... confirms that most day traders lose money, but also finds that exceptional traders made a daily rate of 62 basis points. That is on the order of 300+% per year. Exceptional returns are possible, but they aren't the norm.
doublet83 - thanks for the advice and kind comments. I've been trading for about 5 years now and have recently for about 1 year realized that I understand "good" trading a lot better now. dwpeters - your insights and feedback is very very thoughtful and I thank you very much for taking the time to respond with such a great honest note. I think you've persuaded me to stay working and trading full-time for at least the remainder of this year. I swing trade and thanks to my new Android phone, I am able to keep tabs on my positions while at work and exit during lunch if need be. To be honest, my job is not that bad -- not really challenging -- the only tough part is that I am not in a senior position as my last job but I guess I should be thankful just to have one. Before I got this job a year ago, I was dead broke. Considering joining the army to earn money and very suicidal so I guess I have to be mindful that this firm basically saved my life. I have to stop being a spoiled mid-30 year old brat and think about the future versus the present. 9 more months ain't all that bad I guess! My sincere thanks to you for helping bring some perspective to my predicament!
I would wager my entire trading account that at least 9 of the 10 traders you know aren't beating the broader indexes each year. I'm not trying to be cynical, but I've been trading long enough and have had enough contact with several of the supposed successful members of this forum to know that you can usually count on it being smoke and mirrors. That is the reason that most traders won't tell you their returns. There just aren't that many who make consistent money, and even those who do are generally overstating how good they really are. You need to re-read the article though. It states that 31 basis points is insufficient to cover trading costs, so even if we assume that at 32bp they become profitable, that takes the 62bp number down to 31 which is only just over 100% annual.
Please don't take this the wrong way, but given your comments I think you're going to end up looking for another day job within 2 years of quitting your current one. Your mentality isn't conducive to successful day trading over the long-term. What is really so bad about working your job and trading at the same time? Realize, that the trading acct value has almost nothing to do with whether you should quit your job. If your job is costing you more than it is making you each day, then you should quit. But even then, you might consider getting a job during the off hours that the markets are closed.
Exactly. And even in that case, we don't know whether that 62bp is really statistically significant. (I didn't actually read the paper, just the summary on the link above.) If you had 100 monkeys sitting in front of a computer hitting buy/sell once a day, without doubt a few will be two std dev ahead of the average. I'm not sure that's enough reason to invest with them, either. We should be questioning ourselves regularly: am I just a lucky monkey? As far as trading records and elitetrader... bottom line, I don't know why anyone who is consistently beating the market wouldn't want to trade other people's money. In any case, thousands of managers (presumably the best traders out there) are trying to do exactly that, and their results are publicly available through databases like BarclayHedge and IASG.
You need to re-read the article though. It states that 31 basis points is insufficient to cover trading costs, so even if we assume that at 32bp they become profitable, that takes the 62bp number down to 31 which is only just over 100% annual. [/QUOTE] You are right on this, and it is a big difference. As far as trading records and elitetrader... bottom line, I don't know why anyone who is consistently beating the market wouldn't want to trade other people's money. In any case, thousands of managers (presumably the best traders out there) are trying to do exactly that, and their results are publicly available through databases like BarclayHedge and IASG. I have a better edge trading a smaller account. I also have no desire to try to raise capital which requires skills that I am not strong in, or to deal with the legal complexities or costs of setting up a fund myself. I prefer to focus on trading.
Well, many of the absolute most successful traders aren't interested in OPM because they face scalability problems. It takes a couple years to get a good fund rolling along. During that time, their personal capital would've increased to the point that their strat has no more room for OPM. Example, I have two main strats. One produces exceptional returns, in the realms that most people think isn't possible. But returns begin to decrease after about $8MM and at about $30MM there might be idle cash just sitting in the account. My other strat produces about 30% annual, but can handle $300-500MM before I would start to notice liquidity issues. Subsequently, I would only be interested in managing OPM if using the latter. Also, when I say "absolute most successful traders" I'm talking about those consistently producing >200% annual. In a world of 10,000 traders, you might find about 10 of these individuals and maybe 1 will be able to manage more than $10MM and maintain similar performance.