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Trading for a Living - Cliff Notes

  • #181
  • Jul 2, 2009 12:22pm Jul 2, 2009 12:22pm
Quoting FXSurfer
Thanks for the great thread!

Above is one of my favorite sentences of the thread so far.
Haha, yea I gotta join FXSurfer there, that sentence made me laugh. Kept repeating it to myself and chuckling...actually...I added to it:

"And if you dont follow the market it will come down hard on you like an elephant on a gnats ass"

Thanks for all this once more Mike.

Somebody (I think Fool) asked about how to become a trader-for-a-living, would be very interested to know.

I'm at it for just over 2 years now and my zeal and energy is ever growing. Sure I got my ups and downs but that's part of the process.
Put so much time into it that I even got into trouble losing my current job.
However my real problem is that I'm hopelessly undercapitalised and that I still need a bit of time to move from BE trading to consistent profit, though I'd say I began the transition already.

Then the only possibilites I see are that I either get investors interested in my skill and do it for myself or that I pitch myself up the road in the City of London (just 10 minutes walk away from where I live, wouldn't be bad for commuting to work)
But dunno if they'd take a by then 32-33 year old "self-taught" FX trader?

Whats your take on all this?
Be like a post stamp! Stick to it until you get there!
  • #182
  • Jul 2, 2009 12:58pm Jul 2, 2009 12:58pm
Quoting Mary Pippins
However my real problem is that I'm hopelessly undercapitalised and that I still need a bit of time to move from BE trading to consistent profit....
Trading conservatively with an overcapitalized account can not be stressed enough, imho.

The "big pip" fallacy is rampant on FF. If you trade on the highest probability setups you can afford to increase your position size and shorten your targets. I just made about $400 in the last 45 min shooting only 1/2 & -lot trades for nothing bigger than 8 pips, risking no more than 1% of the account per position. I'm looking forward to doing the same with 5, 10 & 20 lot positions. Just need to tighten up on the losses and I'll be a mogul in no time. You seem like a nice person & I like your handle so just hit me up in a few months and I can prolly spot you a loan.

Otherwise, trade some small stakes from friends & family?

Get a part-time job til you can adequately fund your account?

Be patient and careful, though & you can most likely make it on your own soon enough. Best of luck to you.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #183
  • Jul 2, 2009 1:47pm Jul 2, 2009 1:47pm
U can succeed In trading only

If u handle it as a serious intellectual pursuit. Emotional trading is lethal. To help ensure success, practice defensive money management. A good trader watches his capital carefully as a professional scuba diver watches his air supply....... dr elder
Attached File(s)
File Type: xls MONEY MANAGEMENT FOR MINI LOTS.xls   16 KB | 550 downloads
  • #184
  • Jul 2, 2009 2:28pm Jul 2, 2009 2:28pm
Mary Pippins,

I've seen the damage you can do in BRV's thread, and as you said yourself you seem to be making the transition to profitability already, my advice would be to look into prop(ietary) trading if you are interested in trading professionally but don't have the proper resume & network contacts to get into institutional trading (bulge/boutique banks, hedge funds, etc.).

A good track record is enough to get into many of these places, however you would want to avoid any places that require you to deposit your own funds-- preferably pay is salary + performance bonus, but it can differ depending on the firm. Some places are more heavy on the interview than others (Geneva trading is one off the top of my head that stresses a lot of probability theory in the interviews).

Also, I see you are lucky enough to live in London, there's lots of these places in the City. However, I don't think many places do prop trading in spot FX, more in equities, futures, & options, but personally I know I like trading because of trading, not because of what I am trading, so I assume this wouldn't be a huge issue for you either.

Here's a list of a few, to give you an idea of what to look for. By no means a complete list, I'm pretty sure London alone has far more prop firms than are listed on this page.

http://www.traderslog.com/proprietarytradingfirms.htm

edit: sorry for hijacking the thread a bit with this one.. just trying to help out
  • #185
  • Jul 2, 2009 2:40pm Jul 2, 2009 2:40pm
Quoting The Fool
...

Otherwise, trade some small stakes from friends & family?

Get a part-time job til you can adequately fund your account?

Be patient and careful, though & you can most likely make it on your own soon enough. Best of luck to you.
You want Stress? Try that one.
Only experienced, level minded Traders should Trade the hard earned funds of "Friends & Family".

Now;
Trading {cough cough} Funds for Strangers who don't know where you live, that's a whole different story. Right Bernie Mad...!
  • #186
  • Jul 2, 2009 4:05pm Jul 2, 2009 4:05pm
Quoting Bemac
You want Stress? Try that one.
Only experienced, level minded Traders should Trade the hard earned funds of "Friends & Family".

Now;
Trading {cough cough} Funds for Strangers who don't know where you live, that's a whole different story. Right Bernie Mad...!
What a quote.

Other peoples money is easy... manage your families money and you'll wish you didn't.

That's even if you when.

m
  • #187
  • Jul 2, 2009 4:38pm Jul 2, 2009 4:38pm
Quoting acumen
What a quote.

Other peoples money is easy... manage your families money and you'll wish you didn't.

That's even if you when.

m


Couldn't agree more! The extra pressure to succeed and not dissapoint is crazy.

Hindsight.... im not sure if i would of done it. But as we all know, hindsight is a wonderful and majestic beast which destroys the heart and soul of many traders.
Luck is where preparation meets opportunity.......
  • #188
  • Jul 3, 2009 2:35am Jul 3, 2009 2:35am
Hi,

Just a question for some of the expericenced pivot traders about the price action pattens that form around your levels. Which, if any do you look for and what significance do you place on them?
  • #189
  • Jul 3, 2009 3:27am Jul 3, 2009 3:27am
Quoting Siam
Hi,

Just a question for some of the expericenced pivot traders about the price action pattens that form around your levels. Which, if any do you look for and what significance do you place on them?
Have you read acumen's thread on Pivots, Psych-lines etc? The answer to your question lies in that thread, mate, with loads of examples from experienced traders.
Speaking for myself, I use Pivots, Psych-lines and a couple of ema's, using all of them, naturally enough, as support and resistance points. I base my decisions mainly on candlestick reversal patterns which occur at or around these points. Some of the strongest signals occur when a nice reversal pattern occurs on a confluence of a pivot or a psych-line and one of the ema's.
If you haven't already, read the info here: http://www.forexfactory.com/showthread.php?t=98028
Cheers
  • #190
  • Jul 3, 2009 4:06am Jul 3, 2009 4:06am
Quoting eyevoltage
Have you read acumen's thread on Pivots, Psych-lines etc?...
Thanks for the heads up.

More great info there.
  • #191
  • Jul 3, 2009 4:57am Jul 3, 2009 4:57am
Thanks for your answers guys!

Fool, you're right with the conservative approach, I dont really see any other sustainable way than building it up steadily rather than force it.

I agree with what the others say about trading with money from friends & family. I feel very weary about that one because it would be to close to home and risking the quality of my relationships with people important and dear to me for that is already a risk too high.
I dont think I'd be setting the right frame of mind for myself with that.
Also I prefer to keep business and private reasonably separate.
Having said that other people might have different comfort levels and/or rich parents who wouldn't be bothered much if they lost a little chunk of money.
However, thanks for your offer and who knows, I might knock on your door once I have something to show for.


kizofx,

Thanks for that one, couldn't agree more. Proper money management gotta be the basic tool of any trader, though a lot of people dont, especially beginners, seem to realise how important it really is.
Thanks for the calculator, funny enough I'm using something very similar to yours.

Hey smittens,

Yea, I learn(ed) a lot from Steve, kudos to him, and much of what Mike says here lines up with what I understand is good practice.
Went through quite a few "boom and bust cycles" and still learning but got a few ligh bulb moments out of it recently helping me shift my perspective and its getting there. Hard going sometimes but I enjoy it, so it's well worth it and gives me the energy to grind on.
Reading Mark Dougla's Trading in the Zone, haven't even gotten through the first quarter and it's already amazing. No wonder some call it the bible of trading psychology.

Thanks for the great tips, I will definitely start looking into prop trading, it's still a little early but its always good to plan the next steps well ahead, because a vision without a plan and action will only stay a dream.

Hi Bemac,

Yea couldnt agree with you more on the firends & family thing, you really gotta be seasoned, tried and tested to be able to take on such an emotional extra load.

Regarding: Mad Bernie...well nothing would happen between people in this world if there was no trust. Though there are ways to go on about it...dont know all the ins and outs of the Madoff case but I could imagine that some people, may be even some investors, did shut their eyes and saw only what hey wanted to see until this thing blew up...I'm sure we all know that one too well....but I digress.


Hi Mike, hope this is not diverting away too much from what you intended your thread to be, thought it still belongs to the "what it takes to trade for a living" subject.
Great thread, much appreciated and looking for ward to the next lessons.

...I'll go back to lurking in the background now
Attached File(s)
File Type: xls $ & £ Micro lot Calculators 1% Risk.xls   22 KB | 744 downloads
Be like a post stamp! Stick to it until you get there!
  • #192
  • Jul 3, 2009 9:47am Jul 3, 2009 9:47am
Quoting acumen
Lesson 1: Money Management

Simple: Risk no more than 2% on each trade.

Example:

I have an account with $1000.00

2% of $1000.00 is $20.

The stop loss on my system is 75.

The amont of risk/pip is 28 cents.

So – can you trade for a living if your initial capital is $1000?

Hint: NO
Well thats depend how much is the average salary in your country

If you can make a consistent 500 pips a day in the long run, i thinx you can make a living out of it LOL

But if its me, i will probably only need 50~100 pips a day because the average salary in my country is only $300/month,
and as intraday trader it should be possible to get at least 50 pips a day
  • #193
  • Jul 3, 2009 10:45am Jul 3, 2009 10:45am
Quoting The Fool
Trading conservatively with an overcapitalized account can not be stressed enough, imho.


Otherwise, trade some small stakes from friends & family?

Get a part-time job til you can adequately fund your account?

Be patient and careful, though & you can most likely make it on your own soon enough. Best of luck to you.

first sentence is good advice.

about trading 4 your family. people r funny animals. some can trade wonderfully with one's own money. or 4 banks or clients money. but when it comes 2 one's own relatives money. they will feel the added pressure and the fallout when you fail is horrendous. family ties will come under the most strigent test.
  • #194
  • Jul 4, 2009 6:23am Jul 4, 2009 6:23am
I look forward to reading your new thread. I've given up on the EUR/USD thread. I stick to Ak's, Bemac's, and now your's.

The noise level on the EUR thread was getting to high, so thank you for providing your insights here

I'll be watching from the background. Even if you don't hear from people remember WE DO APPRECIATE YOU!!!!
  • #195
  • Jul 4, 2009 8:47am Jul 4, 2009 8:47am
Quoting AdamN
Well thats depend how much is the average salary in your country

If you can make a consistent 500 pips a day in the long run, i thinx you can make a living out of it LOL

But if its me, i will probably only need 50~100 pips a day because the average salary in my country is only $300/month,
and as intraday trader it should be possible to get at least 50 pips a day
You would also need to account for inflation (and other costs) throughout the years.

For example, these are the declared figures of Venezuela's inflation and its real percentages (in general, about 10 points have to be added):

2009 40% (projected at the end of the year) (50% real, housing and electronics = 200% !!) average salary $800 basic cost of living $600 minimal wages $450
2008 30,9% (40,9% real) average salary $600 basic cost of living $500 minimal wages $400
2007 22,5% (32,5% real) average salary $400 basic cost of living $400 minimal wages $300
2006 17% (27% real) average salary $300 basic cost of living $300 minimal wages $250

All 2006 and part of 2007, I was indeed able to make a living out of a $1500 account with a relatively conservative trading approach. It is now totally out of order because steadily making a 20-30% monthly can be relatively easy to achieve, but the growing stress that's put on our minds with higher percentages needed leads to more mistakes or plain "trading paralysis". And we usually don't factor in the "small" costs involved nor the inflation previsions.

Overall banking costs represent around 5-10% of the profits withdrawn (it decreases of course if amounts are higher, on $500 they come near 20% !!)

Out of the normal operational costs of your trading business, are you calculating and factoring in these elements? (add to this the relative fluctuation of each one's account currency)

In the above case (and hoping it doesn 't keep growing over the next years), 4% of the total equity would have to be just re-added to the balance so the capital remains somewhat protected against future inflation.

If you produce 10% average monthly profits on a $10000 account, and intend to withdraw them all, about 1% of your basic equity are costs to also be added to the "needed minimum profit to make for the stability of the assets". Thus, you are decreasing the future value of your equity by about 5% every month. In about two years, it's all gone.

It would be mandatory to keep at least that 5% into the equity. Plus any percentage equivalent to projected average losses as lack of prevision would bring you back to square one, despite the capability of achieving an exponential growth. Even without much losses, proper capitalization is paramount.
  • #196
  • Jul 4, 2009 9:28am Jul 4, 2009 9:28am
Quoting doblece
You would also need to account for inflation (and other costs) throughout the years.

For example, these are the declared figures of Venezuela's inflation and its real percentages (in general, about 10 points have to be added):

2009 40% (projected at the end of the year) (50% real, housing and electronics = 200% !!) average salary $800...
Ah yes, i forgot about those things Thanx for the details

But since my country always had higher inflation than USA, that's why if we make USD money and then converted to our local currency we will always be fortunate
we will also be fortunate if we make Euro or Poundsterling ^_^
  • #197
  • Jul 4, 2009 9:44am Jul 4, 2009 9:44am
Quoting AdamN
Ah yes, i forgot about those things Thanx for the details

But since my country always had higher inflation than USA, that's why if we make USD money and then converted to our local currency we will always be fortunate
we will also be fortunate if we make Euro or Poundsterling ^_^
Indeed, because it's rate fluctuates proportionally... not in our case as the rate has been kept fixed since before 2006...
  • #198
  • Jul 4, 2009 9:58am Jul 4, 2009 9:58am
Quoting acumen
Lesson 1: Money Management

Simple: Risk no more than 2% on each trade.

Example:

I have an account with $1000.00

2% of $1000.00 is $20.

The stop loss on my system is 75.

The amont of risk/pip is 28 cents.

So – can you trade for a living if your initial capital is $1000?

Hint: NO
The answer is not "NO". The answer is find a system that has a stop loss that is less than 20 pips or just stop out at 20 or less. Then you can trade at least 1 mini lot. If you can increase your account by 2 percent or more per trading session, you are on your way. It's not as hard as you may think. Once you are 20 pip ahead you are done. The GBPUSD has an hourly range exceeding 20 pips most hours of the day.
  • #199
  • Jul 4, 2009 11:24am Jul 4, 2009 11:24am
Quoting gbppip
The answer is not "NO". The answer is find a system that has a stop loss that is less than 20 pips or just stop out at 20 or less. Then you can trade at least 1 mini lot. If you can increase your account by 2 percent or more per trading session, you are on your way. It's not as hard as you may think. Once you are 20 pip ahead you are done. The GBPUSD has an hourly range exceeding 20 pips most hours of the day.
Indeed it is possible but... a daily 2% is about 40% monthly (and only $400 on $1000). Independently of if that amount could be enough for a living where you live, how many sequential months could you guarantee a monthly 40% with stable consistency? It ain't that easy...
  • #200
  • Jul 4, 2009 3:33pm Jul 4, 2009 3:33pm
Quoting gbppip
... If you can increase your account by 2 percent or more per trading session, you are on your way. It's not as hard as you may think....
It's not as hard, but even harder than you think. You have to be consistent at it. We cycle through ups and downs in our trading just like price does in the pairs we trade. That personal trading curve is something interesting to watch.
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