Taylorm:
As a Canadian trader I thought you might be interested in some of my
answers to your questions given that our markets have not rebounded
with near the strength the US markets have...
I'd like to discuss what things need to be considered, such as:
* Ways to gradually make the transition?
* Other people's experiences who have already done this.
Great question. I had been EOD (end-of-day) trading for years.
Initially I lost money, like most do, but I survived and learned
how to make money. I made it all back, but I knew there was more to
be made. I desperately wanted to trade full-time, but I didn't have
enough capital to quit my regular job. So...I compromised. In
April, 1998 I switched my working hours from 9-5 p.m. to 1-9 p.m.
I know not everyone will have this option, but I was fortunate enough
to have this flexibility. I live within Mountain Standard Time, so I
only miss about 1 hour of market activity per day, the last hour.
What do you think happened after the switch? I lost every g*d d*mn
penny of profit I had made before the hours' switch! And more.
I couldn't believe it. I mean...how can one EOD trade profitably and
not day-trade profitably??? Well, the short answer is VERY EASILY.
I had no idea that the transition would be that difficult. There
were days where I felt so lucky not to have quit my job
outright. It took me until September, 1998 (after the meltdown) to
wake up and smell the coffee. To my credit I knew from EOD trading
that stop-losses are one's only hope in surviving. Anyway, I'm proud
to say that I was able to get my sh!t together and make it all back
by the end of 1998. In 1999 I'm well into the money.
I guess the whole point of the above two paragraphs is to emphasize
a couple of things...
1. If you can make a gradual transition I think it's in your best
interests. This will give you time to learn (while you fall on
your ass) how different AND how difficult day-trading actually is.
Given the (lack of) performance of the CDN markets relative to the
US markets, I feel my experience has been that much more rich. You
know the old phrase - "Don't confuse brains with a bull market".
2. Given that I miss the last hour of trading, I've learned to
confine most of my trades to the morning. If I can't give a trade
my full attention I won't even bother. I can't even imagine
trading now without watching the action.
* What goals to set in order to determine whether to go back to work.
Although I still work, my goal is to match my current income.
However, I want to be able to do this in ANY type of market
environment, bull or bear market. To do this there is no question
that you have to learn how to short sell. The concept of trading
for a living is hard enough, but doing it with half the tools of
professionals is begging for failure. Maybe I'm a little cynical
given the trouncing that commodities, and hence many CDN equities,
have taken but I just cannot see how one can make money
consistently trading solely from the long side.
* Impact of existing constraints (or lackthereof)
(Mortgage, family, existing debt, current age, etc.)
I'm 30 with no mortgage, no children, and no debt. I would think
each of these is almost like a risk factor...the more you have the
more likely you are to fail at day-trading. Perhaps someone else
can prove me wrong.
* Amount of capital needed
Ask yourself two things...
1. What level of return can I make on my portfolio consistently?
2. How much income do I need?
For example, if I can make a 20% ROI in any given year and under any
market conditions, and if I need 40k to live on, then I need 200k
in my account. The trick here is not fooling yourself into thinking
you can make 20% under any market conditions. I think you need cold
hard trading statistics of your own to verify that decision. The
current bull market has been the most powerful ever. I think it's
fooling a lot of people into believing that they can do this for a
living.
* Dealing with other people's reactions (Are you NUTS?!?!)
Good question. Let's put it this way: if you really want to
do it, it won't and shouldn't matter what other people think.
That includes other traders, brokers, analysts, CEOs, CNBC
guests, etc. You are on your own in the most defining
way possible.
I hope this wasn't too long, but I've followed this thread for
awhile and felt like contributing. Hopefully someone will
benefit from it.
Cheers.
WN |
