I'm a 22 year old kid. In Dallas, Texas. With a better-than-average paying job. I make around 45k per year and have a take home income of about 2700 dollars per month. I do not owe rent, or any car payment. My monthly expenses truly equal = 0$. However, around 500 seems to always fly out the window towards beer, or a poker table. My goal is to retire. Tommorrow. I'm still a college sophomore and I'm a full-time student alongside my full-time employment. I'd like to build my initial capital from scratch and start earning returns to further strengthen my "nest egg." See, I have it pictured in my mind that I might be able to aggressively invest for the next 5-10 years in hopes of building enough wealth so that I wouldn't have to work if I could avoid it. By not work, I mean stay out of some damn office with a bunch of miserable corporate slaves just clawing at their skulls from 8am monday morning untill the final minutes of friday afternoon. I'm not cut out for that type of lifestlye and I would love to be able to volunteer my time, or work in a field that I'm truly passionate about....that might not pay very much. Obviously, my question is...How would everyone here, given they were in my situation, go about accomplishing that goal? Like I said, I could save/invest/stuff in a mattress about 2k per month and I'm looking to build enough capital to provide some type of monthly gains in order to sustain a modest lifestlye.
I haven't made it yet but I'll try to make a few observations from what I've learned so far. First, the whole debate about whether you should do fundamental or technical analysis. I eventually learned that in 20 contests that lasted 1 year in the World Cup Trading Championships, only a few fundamentalists have been able to finish among the winners. The advantage of trade setups using technical analysis is that you have an idea where you want to get in, where you want to get out to cut your losses, and where you want to get out to take your profits. This means less uncertainty so less nervousness which comes from more confidence from knowing what you want to do. However, looking at some fundamentals might at least give you an idea on why the price is heading where itâs going. And looking at the news might tell you if you should avoid a situation. In general, short term trading decisions can be made with technical analysis. Second, I read in a tiny book by David Stendhal that you only need to be right 35% of the time when using a trend-following strategy but you need to be right 60% of the time with a contrarian strategy. When it comes to choosing whether to be a contrarian or trend-follower, itâs a matter of interpretation on how you want to define it. In Oliver Velezâ swing trading method, you could wait to buy a dip during an uptrend for example. Well, thatâs like fading (means going in the opposite direction) a short term downward move while respecting the overall uptrend. Some people insists you should get in before a move really starts. Again, it seems hard for me to define exactly whether this would be called anticipating or reacting. Once you see a setup has formed, you can get in in anticipation of a move but if you wait for the move to start, I guess you could call that reacting. I donât know if this paragraph was of any use, but anyway. I also learned that I should maybe have been more âaggressiveâ in learning more and being persistent a few years ago. I mean at some point, I told myself something like: âIf Iâm not making money at it, I donât have the justification to spend time reading more.â Well, I wasted years being âhalf-interestedâ in it while I could have learned a whole lot more. I also decided after being out of the markets for a long time that this time I should make an effort to take it âseriouslyâ this time. This means making a checklist of technical indicators to watch, looking at several time frames, writing down my trades in a trading log, writing down a trading plan (not completed yet), actually learn how to use the trading platform I use, looking at the stock traderâs almanac for seasonality, watching the financial news, manage my trades (money management), take an emotional break if Iâm on a roller coaster... What I mean by money management is risking only a certain amount on every trade. That doesnât mean I would put a total of 2% in one trade (if thatâs what I define as my risk), I mean I could put maybe 30% of my money in one position but only risk 2% of my total in any one trade. When it comes to real-world trading and finding out what you feel comfortable with, I found options were ruining my trading. This is because the bid-ask spread (slippage) is so large in most options that I got to a point where I hesitated in getting and getting out. For this reason, I decided if I wanted to make the transition from stocks to a more leveraged trading vehicle, Iâd have to go for futures or Forex. (Thereâs still some problems in Forex as you can read in âGetting Started in Currency Tradingâ by Micheal Duane Archer.) Another thing, according to Victor Sperandeo, you need lots of liquidity and volatility to make big money. And the gold markets for example, has that. Lately, Iâve been interested in books on trade setups using technical analysis. If I would list books in order of difficulty, this is how I would start: âThe Complete Guide to Investing in Short Term Tradingâ by Alan Northcott (to learn the basics), âSwing Tradingâ by Oliver Velez (booklet with DVD), âMastering the Tradeâ by John Carter then âThe Master Swing Traderâ by Alan Farley. Thereâs a lot more books I could name but this might be an OK introduction. The only way I could think of to make a lot of money quickly though is a method I havenât really tried. That would be to wait for a counter-intuitive move after bad news (stock going up for several days after declining on significant bad news). Then wait for the stock to do a so-called âtest-and-failureâ (it cannot surpass itâs previous high). Once that happens, youâd have a chance at buying put options. But, like I said, options were too weird for me so I wouldnât consider them for my own trading unless it was a real small percentage of my money. And one final thing. I used to read real slow. Even when I fell on unemployment insurance several months ago, I tried making myself read all day but was caught up in chat rooms and video games. Finally after like 3 months, I started reading 10 pages a day. That was all that I could read. Then I started reading with a stopwatch where I would read a paragraph real fast to get a glimpse of what was there then Iâd read the paragraph again slowly to understand. With that method, I was able to get up to 40 pages a day. In the last two days, I âspeed-readâ âGetting Started in Currency Tradingâ in 2 days. That doesnât mean that I understood everything but itâs the fastest Iâve ever read in my life. I havenât started trading again, but in the following months I might be a lot closer to where I wanted to be than Iâve ever been. I know some people find out eventually they donât want to trade. And some people even quit when theyâre doing well because they canât take the pressure anymore. I decided months ago I really missed the markets. And for me, that totally changed my focus and the way I see trading.
There are no free lunches in this world. Unless you win the lottery, you will have to work hard to have success financially. Its very easy to make one successful trade, its very difficult and time consuming to repeat the success time and again. The game is just set up that way. It always appears as easy money after the fact but the experience and knowledge necessary to be successful in the trading/investing world does not come easy. Maybe if you put in 10 years of learning and immersing yourself in the markets, you could then retire after you put in another 10 years of applying knowledge? Or maybe it will take more time? The bottom line is, don't look for shortcuts. There are none. If you want to be a huge success, you will have to sacrifice and focus.
You don't sound like you want to be a trader. You are probably better off checking with a financial planner. $2,000 X 12 months X 5 Years = $120,000 $2,000 X 12 months 10 Years = $240,000 But that assumes you want to live with your parents the next 10 years which you probably don't and they do not want you there the next 10 years either. I use to work with a guy who lived with his parents and he was up in his 30's and saved 50% of what he made. You usually end up hooking up with some girl and then you downfall will begin. She will want to get a place and so on and so on.
You need to balance your desire to trade against the fact that it is believed 95% of new leveraged traders lose their trading capital. And regardless of your drive, desire, knowledge or anything else, the same percentages apply to you. You are 95% likely to spend years and tens of thousands before giving up, much poorer and frustrated for the experience You also need to realize that most of those 5% break even or make a modest amount You also need to realize that most of those who make a living or do well are in some way involved in the industry, past or present. With this in mind, the advice you get will probably be consistent with these percentages. 95-99% of it will be crap, even if it sounds good. For example, Mister "Technical Analysis therefore is what wins contests, not fundamentals." Technical Analysis will rob you of years and dollars before you realize it does not really work. If you are not willing to put in the thousands of hours of screen time to learn how prices move ("price action"), you are in serious trouble. In other words, you are much likelier to do better staying in your job, maxing out your IRA annually and avoiding trading, and only doing it when you have a LOT of SPARE capital, and not spending your lunch money. 5-10 years from now, you may look back and realize the truth of this.
I am very interested in the fact that you find both technical analysis and price action to not work in the long run. I get it you base your trading on other factors? Ie. trying to exploit the microstructure of the markets, or looking for arbitrage opportunites, etc.? In the back of my head, I have always thought that technical analysis was a fine way of conditioning people to behave in a herd-like manner. Kind of like religion.
Don't get addicted to gambling as that is the downfall of all traders. Traders who have a gambling problem must leave the market===QUIT. technical analysis for short term trading like intra-day works for me. technical analysis doesn't work for long term investing. investing requires both t.a. and fundamentals....daytrading or swing trading only needs technical analysis. 95% of these leveraged traders are not professionals and can't trade.
I met and know a person who is accomplishing what you describe with a few caveats. He played poker at the beginning of college to pay his way. At some point, he got interested in trading as his mother was doing. By 21 years of age he had made the switch from poker to trading and he had a roughed out business plan from then to retirement based upon his progress. He graduated and along the way helped several others and he contributed editiing to the folks he was learning with. What he describes retirement as, is this: having sufficient managed capital (managed by others) so he can spend his time doing anything he wishes and according to the lifestyle he has planned for. The total process for him from scratch to retirement is under 6 years starting with a pile of poker winnings. The first year was watching his mom and deciding to keep playing poker and not spend the summer learning to trade. In the second year he began fairly passively but did get acquainted with others along the way. His mom did some intros. then a couple of buddies joined with him in getting interested. He switched and began learning intensely and not making any false moves. The crossover between poker and trading came fairly soon. At some point he and his freinds set up a trading location associated with the University campus proximity. He graduated a year ago and he plans on retirement two years after graduation. What made him such a natural was his mental orientation. His mom did not have a CW orientation either nor do any of his buddies. as and if you read tradezones postings, you get to see how failure works for most people. And you get to see what success means in tradezones terms. He feels that those who do make it probably can't retire in a few years and have everything taken care of for the rest of their lives. It is hard to explain what the CW trap is but traderzones does paint a picture of what CW may make possible for just a few people. What is also true is that it is all there for the taking, though. It is all there and available. The bridge that is walked across is building what is needed to do it. The above example represents just that as it was done. You, at this point, are an assessor of what is out there beyond you and traderzones. There are many many assessors; they come and go. Mediocracy apparently prevails among the successful as compared to what is offered and not taken. Tomorrow in NYC a few people will gather and look at a person in front of them who took the offer for a few years. They will be in the MSFT building and they will be looking at a lot of other assessors. And then they will all go home and be as before. It is all there for you. It is all available. Assess it like everyone else does. Then what are you going to do?