Before I ask my question, a little background about myself. I'm a graduate student enrolled in a clinical psychology doctoral as well as an MBA program. I plan to hit the ground running trading the markets after graduating (sole-prop). I will primarily trade a handful of Nasdaq stocks with a scalping/daytrading style. To raise sufficient capital, I have two colleagues (their pretty loaded financially) that are willing to drop some money in my hands to put to good use. They said that they'd give me 20 grand a piece and informed me that if I make it happen for them great, if I lose it all, ah shit it, that's life. I'm thinking that I will offer them some kind of incentive for giving their money to an inexperienced trader. Something along the lines of giving them 100% of the net profit after tax for 6 months based on their share of my trading account and then take a 15% cut of their share of the money for managing their money after the six months. Does this sound about right or am I dreaming?
Why not just save up $5k yourself, open an account at a prop firm, keep all of your profits and not risk ruining friendships?
Thanks for your wisdom as it is greatly appreciated. Your other posts are equally as informative. If I have any questions about rolling bills and smoking em, I'll pm you.
Honestly Scotch, it really isn't as easy as dedicating a year or two to learn it and then suddenly you can't move for money. A couple of things: 1) If you are going to be self taught IT WILL take you longer. Like someone else said, perhaps going to a prop firm (and not bringing any money to the table) would be the best idea. 2) You will lose money, whether you believe it or not, when you start out. You may throw in some crackers when you first start but anyone who has made a bundle had to lose a bundle to figure out what it was they were doing right/wrong. I'd love someone to show me an excpetion to this rule- I bet even they count themselves fortunate. If you want proof of this, just read Market Wizards. 3) Even if your pals are happy to give you the money no-strings, the emotional weight you will feel (assuming you are a human being) when you think about the faith they have put in you, will have an effect on your decisions- at least to begin with. Sincerely, there are people who never figure out how to make money consistently playing this game, certainly not to the extent where they are starting up a Private Jets collection. I see tradingas a bit like playing golf- play enough and you will continue to get better but only a select few are good enough to turn pro..... and your average pro is struggling.... then fewer still turn up on the sports channel. Give it a go, for sure, but only an idiot starts thinking about the money before they know how the hell to make it. Figure it out yourself but be wary that this isn't 'free money'. Don't take too much to heart what is said on this forum either (not trying to wipe out my credibility here!) as you can't know how good/experienced these guys are.
OK .... I will say something that you need to hear and that you should already know given your doctorate path ....... Many Phd's believe that their studies somehow make them invincible and that they can pick up anything without too much effort. ...... which is why they are not always the first choice in hiring decisions outside their discipline. Trading is not easy. I know of very few people - even those with multiple Phd's - that have succeed at trading immediately, i.e. less than 1 year. Thus, you have this problem. Moreover, you are undercapitalized - 40K. Take your friends money only if they are truly "throwing you a bone." That is they are helping you out knowing that you may lose their money and , that the loss is no problem. Of course if they are funding you then they believe you are "trainable" and can learn. 40K is enough to start to learn but not really enough to have an ongoing successful trading business - odds are that with 40K to start it will take at least a year and most probably two to three years to make enough from this to live on and build your trading account. If you have no direct experience in day to day trading then keep all of this in mind .....
40K, hmm 6 months return if any = 10% - 4k 15% = $600 20% - 8k 15% = $1200 30% - 12k 15% =$1800 So IF you kick but you will make $300/month this is excluding commissions and overhead. so, i think you are smoking something.
Whenever there is math I have to get involved. Attached is a spreadsheet, the % of profit column is what I (a 3 month trader) have produced so far this month each day on my day trades, not impressive #'s by any means. When you factor in margin and my measily #'s, you'll see that in 9 trades he would be up nearly 10%. On the bottom is a 6 month schedule of the overall return he would get if he produced 9 trades a month just like the trades I did this month. Now imagine if he did 18 trades a month instead of 9! I think he's ok trading with 40k. I would personally never use other people's money, because once I see the returns I would want to keep them for myself, that's why I use my own money, but to each his own. Accountant
Some more information about myself and situation. Not only will I be trading my colleague's money, I will be putting up 15k myself. After market hours, I will be working part-time to add money to my trading account (I am guessing that I can obtain about $900 a week). Yes, in the realm of things, this doesn't make my me capitalized by any means. Thankfully, and I truly am, my wife will be supporting us financially. And one other note, these colleagues are just that, colleagues. We know each and have worked with each other. I wouldn't call them my friends and they wouldn't call me their friend. A few comments about prior posts. Yes, I will consider a prop firm and look more into the training they can provide me. Of course learning from others that have made it in the business as well as those who haven't is valuable. I'm leery of the bad rep some of these prop firms have for themselves, but I admit my sample size is small and my information about them is limited. I noticed a recent thread about what prop firms provide the best training and hope to keep my eye on it to see what others are saying. let it run, with being a rookie in anything you do, i agree completely, their will be struggles to get to where you want to be and even when you are there, you must likely will struggle to stay there. Yes, you may be a right in my idiotic thinking about making money, but my thoughts about money stem from my strategy and my time and dedication to developing a system that works for me. I know that I am a tad on the yellow side in terms of trading skills, but I'm willing to learn and willing to roll with the punches while attempting to avoid the knockout blow. part systems, I hear ya on your concern about having an advanced degree and believing that I am invincible. I know some of these people and it's all too sad. You really can't have a conversation with them without them trying to prove they are smarter than you. I know that I am not invincible, I plan on losing money on my journey to becoming a trader, and I'm okay with this. Between classes and projects, I am glued to the market. I have a system that I developed and tweaked over the year that has been profitable (yes, I know it's paper trading and it doesn't really count nor does it guarantee that I will be profitable with real money on the line). I believe that I will be able to handle the emotions of trading with money on the line. In my training, I was taught how to deal with my emotions, both as a professional working with clients and as a human being in general. I believe these skills will generalize to trading. I'm not saying the strong emotions of fear or greed will not be there, but I think I will be able to identify them and cope with them effectively. thanks for the posts...keep them coming. if any of the new information I have provided in this post changes your perspective let me know. scotch