Bear with me on this one... Ultimately, as traders we are looking for risk/reward, managing our resources (including finite time) and risk... and making a profit. I have working both as a stockbroker, portfolio manager, in sales and also within the brokerage industry on behalf of platform on a journey of discovery which took a number of years. I found 1. Fraudulent educators (behaving much like carnival barkers or snake oil salesmen). 2. Arcades/prop shops (those that are still around) essentially pyramiding off of their traders (desk fees, commissions) as their business model. 3. Market makers (ahem..bucket-shops) whose business model is incentivized by you losing money. 4. Transfer of risk onto 'staff' members (self-employment is not employment unless you own equity in the company) and a promise of earnings does not pay the bills and is a risk-less promise to the person making it. 5. Big well-resourced HFT funds with huge advantages- essentially, cartels or monopolies within their spaces. 6. Aggressives sales practices - often defrauding the elderly, naive and weak. 7 Stock price manipulators (pink sheets, AIM anyone?) 8 Gambling addiction - destroying lives, relationships and net worths - some people need help. 9 Structural changes in the industry - including constant regulatory change 10 Automation - roboadvice and AI reducing the need for human trading (it is not 2009 but 2019 , traders are now programmers). 11 Less and less alpha- witness the decline in the HF industry. 12 Psychopathic managers - finance seems to attract them. 13 Indebted students being taken advantage of by employers I could go on...but the biggest statistic is the very very low chance of success (depending on which study you read, less than a fraction of 1% and, even there, you will probably make less money than a teacher or policeman). Don't forget that ROI means that you invest resources (including the precious commodity of your time) with an anticipation of reward. Investing in trade school certifications will give you a higher ROI over time at lower risk (particularly if you save early and use point 3 below). I applied analytical tools like the Carver Matrix or Game Theory then I researched/ looked at options like... 1. Own the house - become a market maker or retail broker. But the regulations (such as capital adequacy) have 'gamed out' the new entrants and protected the cartel. Increasing changes away from commission to fee models and transparency. 2. Use other people's money (heads we win, tails you lose). People forget that hedge fund managers don't pay out when performance is negative, they just reap the rewards when/if it is. Regulations also a barrier. However, usually you are undercapitalized and can't compete. A start-up hedge fund managing millions can make you less than a good tradesman. Less and less alpha. 3. Choose another investment game - the power of compounding ? (Remember Buffet's bet anyone?) Wealth management (using low cost ETFs etc) 4. Get a skill and charge a fee- I now have a fee-based business and my income grows steadily. Ultimately, unlimited upside and limited downside. 5. Get evil - create a training school for prospective traders, set up an offshore FX shop, fleece your 'employees',etc 6 etc I went with 3 & 4 with 2 kicking in in a year or two (specialising in very niche areas of the markets) once I have solid cashflow elsewhere. I remember the lyrics of a song ...'Suppose they gave a war and no-one came..'.? Isn't trading about analyzing the game itself? Prove me wrong guys...am I missing something?
Welcome to ET cityboy12. My 2 cents. #1: I think for those without true mentors, an educator can help provide a process but it is up to the trader to expand on that and make it work for them. #2: I'm not a fan of JBO type prop firms where you money is first loss-unless-they provide technology you can't get on your own. #3: IMO, MM are very important to depth and liquidity. Most would complain more if they did not exit as equity and options markets spread. #4: ?? #5: I'll revert to #3 and so, so what. We need them. #6: In the US, this is beauty much a thing of the past, but we still need to look out for those that might fall for these sales pitches. #7: IMO, stick with Listed stocks and stay away from OTC. #8: Trading for some does look like a gambling addiction. To me the sign is destructive behavior. And, the comment, "I need to make that money back" by playing bigger. #9: Not sure what to do with that. The law is the law. We have to adapt. #10: Most traders are still manual. Robo advisors just put together portfolio for those that prefer a programmed AI to do it for lower fees. For investing, I'd rather just buy the QQQ or SPY and manage risk with the size of my portfolio. AI are not smart enough yet and not enough time has passed to see if they are smarter yet. #11: It does get harder over time to find your edge, #12: I'll pass on that one. #13: ?? Not sure what that means, but many traders turn to trading early with little saving and debt. Not a good way to start. #1, #2 & #5-That would be nice but not open to all. #3-I agree for investing not trading. Investing is looking for the ROI while many traders are looking to make or supplement their living wage. #4- To mean this means having income outside trading or a plan B. I agree if that is what you said. Again, just my 2 Cents from someone that has been on the sellside, then buy side and now sell side since 1981.
Risks...Reward... You get in a car. You risks being in a car accident and being injured, killed, or sued. The reward....you get where you are going faster...most people take the risk to get the reward. The difference in trading is...the car don’t always get there faster and sometimes goes backwards. However, when it does go right....well it is “hello world”. Is it worth the chance? Each has to decide.
Fantastic post! I don’t try to earn an income from trading, I have a full time job, I now look at is as a hobby and something to develop over the years and I try to make as good % per year as I can. I trade end of day to keep my costs down. Day trading is fun with a bit of risk capital, especially when you use leverage and martingale strategies, but it’s very risky
I am a stockbroker , working for a small company. I would testify here , only people who made money in the markets are long term investors , I had customers who never sold a share , just kept adding for years , all the others fast money chasers got hammered in market downturns , trading effected my career big time , decades of trading i'm down and lost all my good trading clients.
Real simple- People who didn’t make it will say it can’t be done. People who are living well off trading will say it can be done. Just like any other high earning career, most wont make it and a small group will.
Yet what separates traders is the stories from riches to rags, like in no any other profession, you could loose it all ( most of it ), over night, like in here. ( Maybe spacex-x fourth lounch came close to this state ) Ofcourse one has to be completely blind to risk managment rules,. For actors or athletes it takes ,,a little bit" longer than for traders.
The amount of work involved is the difference. The ones who make it, are PHD's in Behavioral finance, with a minor in psychology, and a pass time of boxing, and gambling.... self taught. Thousands of hours, shed blood for years. Book smart people never get there, because they think it can be learned in books...that is not the case. To get from A to B is a massive undertaking. So yes, it is a sham for those who plan on not working much at it, which is 90% of people. These people... the 90%... they are the VIG, they are part of the ecosystem making it all survive and evolve....they are needed
Obviously known to experienced people on this board, but: The complexity of this space is huge and hard to navigate. You need to filter through the endless stuff (not every behavior can be called a method) that will lose you money, down to the leanest method that will work for you. Most people end up looking in the wrong places until they give up and become investors. Some never give up and stay perpetual losers. Fewer never give up and find a way that works for them. Since long term equity investing is a positive expectancy game (until the end of civilization as we know it approaches), it's really the #1 thing to get good at before (statistically) wasting time on trading. Dreams never die, though.