I couldnt agree more, i can add you should also have a profitable track record before you quit especially if you have family+mortgage. Ideally two profitable years in a row. More if they were both bull market years. I would also say dont quit your job unless you know you can make atleast twice as much trading. Quitting a 100K job to make 100K a year day trading is not worth it, the joys of being free wont come close to making up for the loss in piece of mind.
Great posts by many. It was very hard for me to devote much time on trading after 10-12 hour day on the road. So I quit my tough but cushy job! I have saved up 3 years of living expense costs while working like a dog as a management consultant and also through some real estate deals. (By the way, I still work like a dog although at the comfort of my cozy home ) I started out 4.5 months ago and only fund my account with 26k or so to keep myself from getting suckered into any stupid "impulse trades." It's an up-and-down game for a while, so definitely having some capital saved up is a must. Luckily for me, I'm doing pretty well now and am consistently winning. Not a lot of money, but I am taking baby steps because all the small gains will equal to big gains. I'll be taking greater risks for bigger money only after I have tested and refined the system for at least 1 year. I relaxed for a while once I found my system, but now back in the groove, reading/checking out other options, such as automated trading system since I have a graduate degree in computer science. Finding the system that works is critical, and so is mastering the psychological aspect of this to successfully execute your system with a strict discipline. Patience is important. THERE IS JUST NO SHORTCUT IN THIS GAME. People making quick bucks will usually end up losing back because most of them win by gambling and luck can't carry them too far.
Tradewarrior, I hate to be a cynic here but when you say even the worst traders could have made 300 - 400% this week I have to worry. The best traders on Wallstreet are happy to make 20 - 30% a year. They are considered gods if they do this. Then you are looking at a market that has more competition than any other in the world and expect to take 500 bucks into running a hedgefund with OPM. This is just plain nuts. At least with 500 bucks you won't go broke if you bust your account. Sorry but you are going to have to have A LOT of skill and enough luck to win every lottery in the US to do this. I do wish you well, 4re
It's a poor business model in that the risk reward is not scalable. You must raise risk to make more money. Since it's only coincidence when you win or lose it builds no goodwill or residual value and can not be sold. John
hehehe its no concidence when you have a win rate of 60-70% with a high reward ratio. There is absolutly no concidence about it. The risk reward is the most scaleable around! Higher you risk, Higher your reward, Even in business, the bigger your company grows, the more office space, employees, people that have to support it, more advertising etc. I have to add: <b> consistency in business > consistency in trading</b> one of the huge benefits in business.
Good point on the scaleability front. I think an endeavor must be scaleable not only from a capital perspective, but also from the manpower front. The ideal business has the kind of infrastructure that supports smooth growth through manpower deployment into the business system. Employees work within systems, and you set up managers of systems as the business expand. Eventually, the owner can ween himself out of the day to day operations of the business. From a trading perspective, I think this can only be achieved if the trading is completely systemetized. If the trading business depends on 1 superstar trader's discretion, it'd be next to impossible to scale on the manpower front. So, if I wanted to start a true scaleable trading business, I can't depend on myself to be a trading superstar, I'd have to develop something that I can teach to almost anyone. What do you think?
Interesting point, IMO , espically about the scaling in manpower, The good thing about trading is, It takes the same one keystroke to buy 10 million dollars worth of equities, just as it takes to buy $25 worth of equities. Imagine trying to spend $10 million dollars in business *effectively* ... Not an easy task So manpower in trading is probably dedicated to assistants waiting for setups / research / getting into a better fill with good traders ? Automation cleans that issue up as well. Either that, or open up your own prop firm and employ traders and get a cut But I have to say, I don't think many prop shops are bigger then the biggest investors/traders icahn/ soros/ kovner , etc.
Trading is not scalable because the risk reward ratio doesn't go down. The only activity with trading that does that is operating a web site and charging for your knowledge. Running a trading web site can be sold too if you can figure out how to make the transition to someone else. John