Interesting question of when to quit. One thing to remember is that trading is essentially your own small business and you are the entrepreneur. Like any entrepreneur you are going to sometimes take risks which might seem crazy to others to keep things going when you are in a rough patch. I recall the Lions Coach, Woodward, who was a successful businessman at one point having to get a second mortgage on his house to keep his business going when it was struggling and he ended up making millions from it. Like all new businesses you shouldn't really expect to generate a positive cash flow for the first few years, but also like any new business one must realise the failure rate in the first few years is high. Having said that, I think it is crazy running up excessive debt to fund any lifestyle. When do you quit? I personally think you don't really know whether you'll be a success or not until you have traded everyday for 3 years (full-time not part-time). If you're still not making money then maybe you should consider giving it away. However, a lot also depends on your trading style. The more trades you make the quicker the learning curve should be in a sense as you are having more market experiences. That is why scalpers can generally begin to make money after 8-9 months, whereas if you are only making a few trades per day it is probably quite natural for it to take 2-3 years. Perhaps you should be quiting when you are not making any progess from a qualititative point of view and making the same mistakes over and over again and losing money? Something to consider.
Best post in this thread. Most realistic advice. I've went through the exact situation described back in October 2004. I buckled up, got a job on the side, flexible hours & great hourly rate. I still have it, it's my safety net against this crappy market which can turn great traders inside out. One of my good friends who helped me get out of my slump back in Oct-Nov has just had his worst month and is wondering whether he can have an edge in this market anymore. This is someone who has been extremely consistent & profitable ever since he started trading, about 3 years ago. The side job covers my bills, rent & bare expenses while my trading profits go in the bank, side investments & for other more luxurious spending . If my trading goes to sh*t along with this market, I can always step back and regroup without any financial shocks. I can also shift time from trading toward the job with extra shifts in order to adjust to a slower market. This actually allowed me to have a good May for the 11 full days I put into the market. But I think the most important factor is the mental protection against the tough environment. I'm not trading to pay rent & bills. Trading scared because of life's expenses is one huge handicap in tough times.
Agree with Nitro and Hydroblunt. I have taken a night job ( after a blow up) to support my trading/learning in the past. Taking on a night (poorly paid) job gave me a new insight. A true sense of not only the value of money but the value/s of one's self. To me personally, it was the final piece of the trading puzzle.
I don't think anyone should throw in the towel. If you think you need to, and are willing to give up, then trading isn't for you. It is my FIRM belief that anyone can make it in trading, what they need to do is find a trading style that fits their personality to become sucessful.
Yes, just about everyone has the ability to make it. However not everyone has the capital to survive long enough until they "get it". If you've blown through all your cash, tapped your credit cards and all your friends and family, work a night job and you're already living in a box, what would be your point of counsel to the person who says they just need to find the right style?
There's also such a thing as a "saturated market". When there's a mcdonalds on every corner of the street, sure some people will be able to more or less profitably run another new mcdonalds, if they try long and hard enough. But there will sure be better ways to make a lot of money!
I agree. That's why I think it is a good idea to "throw in the towel" as often as possible but never for good, always come back. For example if you have 50k of risk capital, throw in the towel every time you lose 5k - cut your losses. Get a job you'll hate just to motivate you to get it right next time around. Start trading again, if you blow thru another 5k then walk away again - and work on any issues you need to. Give it another shot, that way you don't blow thru your money in just one year or a couple of years. If you can't walk away or "throw in the towel" or cut your losses then you may be addicted to trading. An addiction is a very dangerous thing, it may very well destroy every part of your life - your money, health, relationships, etc..
You mention compulsive gambling. There are more traders addicted to the action than would care to admit. Unlike other forms of gambling, the trader thinks he is either investing or running a business. The gambling element and addiction creap up on the failing trader without them realising it. The constant winning and losing, highs and lows, the body gets addicted to the adrelenin and endorphins constantly being pumped through the system. The lack of action in other parts of a traders life make them feel hollow when they are out of the market. Then theres also the point of no return, youve spent years trading, lost large sums in the market and probably alot more in oppurtunity costs (giving up your day job or neglecting a promising if otherwise boring career). So you feel you cant quit, all that effort would be wasted. After all you spent all those years learning from your mistakes and going through all that pain. To just give up would mean all that was for nothing. I suppose life after (failed) trading for a lot of people is the same for the majority of people in life who have (monetary) dreams they work hard for and never attain (or attain and then lose), you join the ranks of lifes losers and your life from then on becomes a constant struggle.
That's interesting, you have any resources on this topic? I'm guessing studies were done on gamblers but have any been done on traders, particularly floor traders. You have a point otherwise, just like a bad trade, there needs to be a cut-off point somewhere. I disagree with some posters, not anyone can make it no matter the time & work put in. Some people are meant for it, most are not. So give yourself enough time to try it out but don't get married to it.