Hi guys - in need of your opinions. I'm thinking about quitting my current job soon and trade full-time. I'm 24, been working for 1.5 years at a finance firm, and make little under 60k per year. Right now I have $9000 and I just took out a loan of $11000 from lendingclub which is going to be deposited into my bank account in less than 4 business days (26% APR). My current plan is trade safe until I get to $30000 then start day-trading. I don't have experience daytrading with real money due to lack of capital but I think I'll be able to make make consistent returns while cutting my losses short. The reason I think i have a talent in trading is (haha..) my experience from virtual trading. Using $100,000 account with 2x margin ($200,000 buying power) I was able to consistently make at least 2% returns a day while keeping my losses to 1% a day. I participated in virtual stock competitions and finished first places. I developed my own trading style and later found out it was a mix of what people refer to as momentum trading and technical trading. I've also traded during college and used the profits to pay for rent, phone bills, living expenses, etc. Please note I had about $5000 at the time and I was able to make $1000 (~10% return a month due to leverage) in most months. This was under PDT restrictions. Due to the stupid PDT rule once I went under for a month and because I was paying bills, in the long run I lost money. But every year it's always positive a couple thousand, then slowly sliding down to end the year in the red after that "one month" of negative returns. I told one friend about my loan and while all he said was "I think that's too risky. Well, you might get lucky but don't do it again", his initial expression was "WTF is he crazy?". I understand what I'm doing is extremely risky, but I always thought I had a talent for trading and it came off as easy to make at a percent a day. I also never keep my trades overnight. Any thoughts on my stupidity? Should have asked for people's opinions before taking out my loan, but the dice is thrown...
Also keep in mind that you started trading and working during one of the biggest bull markets in history thanks to BUBBLE BEN BERNANKE ...YELLEN AND YOUR FED friends...they have provided every bit of this rally with worthless trillions to keep it propped up ...you haven't traded through a bear market yet so be careful because as old as this bull market is keep in mind bull markets are not forever and this one is in the late stages of being over sooner than later.
24% APR is very high. I would trade for a month, real-money. If you're up, continue. If you're down at the end of the month, pay back the entire loan, go back to work, and make the grubstake yourself. This is all just talk. What you're doing is compounding your losses by trading with a high-interest loan as seed capital. Say you lose the entire 11K - under normal trading conditions that would be a static and final loss. But because you financed that loss with a loan, even when the trade is closed out, you're still losing money in the form of interest (24% per year). Which makes your losing trades RUN against you. Cardinal sin in trading.
I have been very consistent with my believe that your should not trade for a living under capitalized. Starting with $20,000 is just too low to quit your job. Also, the rate you are paying, 26%, provides a very high hurdle to make money as most trader don't average 26% per year. Good luck, but I think you are making a mistake at this stage quitting a job to trade full time with that structure. One more think to consider. "Virtual Trading" is not real trading as there is no fear and greed. For a while many years ago, I played online poker with paper money and won 80% of the time. When I went to real money, I lost. Just not the same thing. Bob
my thought was this: I want to trade full-time and do nothing but trading until I die. I enjoy watching charts all day and got into trading not because you can make a lot of money from it, but because I was doing good virtually and thought I had a talent for it. However, I'm not planning on trading full-time if I am just going to be mediocre at it. I will have a family to support, a minimum lifestyle I want to maintain, etc., so I wanted to give myself a test to see whether I have real talent (which I believe I do) or if I'm just like the other 90%+ people who fail/don't make a lot of money from trading but thinks they are good anyway and keep on trading. I know 26% APR is ridiculous but this was my thought process: I can save up about $1000 a month to add to my trading account. $11,000 is 11 month of my life in my 20's and whether it's now or in 11 months, I'm going to try to get my account to $30,000 then start daytrading. I might succeed, but I might fail. The 26% APR is the price I'm paying to get answers 11 months in advance. I figured 26% APR was cheaper than 11 months in my prime 20's. If I am good, I can quit my job and trade full-time as I've always wanted; or if I suck or am performing just okay, then I'm going to forget about trading for a living and focus on my career to get promotions, raises, etc. I just can't get my head out of trading and watching charts and it's been affecting my career and my personal lifestyle. Everyone who knows me knows I'm addicted to trading so this would be my wake-up call.