I agree with your sentiment, but even comparing trading to running a typical business doesn't seem to do the market justice. I know a number of determined, hard-working entrepeneurs who've built multiple businesses from scratch who, after years and years in the market, still think of it essentially as some casino or easy road to quick riches. I mean, you'd think that being a successful businessman would be evidence of one having the acumen for what it takes to make money over the long run, but when it comes to the market sometimes all that business savvy and common sense just goes out the window. One guy who's been trading on and off for the past 10 years was last year still buying internet stocks right before earnings reports as his "method"; he guessed right the first few times (I think he only went long actually), then just recently blew up his account on a weak ebay number. Somehow, when it comes to the market, common sense about what it takes to be consistently profitable seems not very common at all. I'll be the first to admit spending many years under a delusion about what an edge consisted of. Looking back, I wish there were someone who'd just tell me, plain and simple, to stop what I was doing because it just flat out didn't make sense, that I didn't deserve to make or keep anything with the piece of crap "system" I called my edge, and that I needed to work and think far deeper than that to even have a chance of surviving. It would have saved me alot of time, effort, and dollars -- but I suppose the bottom line is you need to be convinced of things yourself for it to really sink in.
We talk all the time and I know why it is that he can make what he does. He has a much greater tolerance for risk than I do right now and he will really size in in the right situations. I may have 1000 shares and catch 40 cents and be somewhat happy, but he wont be happy unless he catches the same move with 6000 shares. He does take big hits here and there when he is wrong, but net/net he makes a ton more than me. And that really is what counts in the end. I know, that me and me alone, is what needs to be worked on. We see the same trade and believe the same results will occur but I cant bring myself to sizing up enough yet to take full advantage. For him, its no big deal. So while he is very open about how he trades and why he does certain things, actually aligning myself with his belief system is very very difficult. I guess the only way to get to that next level is to force myself to do things that feel uncomfortable for a greater good.
John Merchant ... Ian and Sylvia were great. Thanks for reminding me. Now I've got some nostalgic listening for the weekend
"Sharing stuff" is common, esp the advice that Steve received. Been shared for years. But losers don't listen . . .
In my experience of working with hundreds of traders, one answer is that traders don't take their trading seriously enough. They take a class and then start trading without really taking the time to learn their craft. What would the world be like if all professions did that: Brain Surgeons? Lawyers? Engineers? Airline Pilots? Stand-up comics? Chefs? You get the idea. It doesn't matter what the profession. If you don't take the time to study and learn and practice in your profession, you'll fail. All of the above put in a long time in either school, apprenticing, or on-the-job-training, but they put the time in. You rarely here them saying, "Hey! I took a course! Why can't I: "dissect a brain without someone dying?" "win a case?" "build a bridge that doesn't fall down?" "land a plane without crashing?" "make people laugh?" "make everything I cook taste good?"
Very good piece of advice. The key in this business is being selective. Most are not and that's one of the main reasons why they lose...
I agree with Daniel C. The main factor influencing the dollar amount of trading profits is the size of one's account / buying power. However many people ignore this and instead focus more on trading ability, risk management etc. Some traders set out to trade fulltime (only source of income) with a required rate of return of 20% plus (a function of buying power and desired income). They would make things much easier on themselves if they just saved up more so they could start with more buying power.
What's the difference between 'trading capital' and 'trading equity' ? If the original poster makes $1,200 a year on a $5,000 account, then that is a 24% return, and as another poster suggested, much better than the average fund manager. (Although the techniques used in a $5k account may not be scaleable).