57 replies to this topic

[geosing]

I read elsewhere a remark by Mark (OEXCHAOS) that significant amount of money is required to trade for a living. And that you have to manage money for others to make it all viable.

What is "significant amount" and what is "living"? If you have an extravagant lifestyle and have to indulge in conspicuous consumption, may be this is correct. However - I know several traders, who are able to trade for a living with a trading equity of $25k to $40K. Many of them make high 5 figures and a few make 6 figure annual incomes. (All of them trade emini futures).

It is certainly possible. I trade with about $20K in my account and trade 1 to 3 lots of eminis. I have graduated from a $10K account trading strictly 1 lots. I call myself a blue collar trader - everyday I go to work and at the end of the day, I have to punch the card and collect my wages. Most of the days I manage to do that. Some days, my employer spanks me and takes some money away. The equity stays the same because profits are removed on a weekly basis. Windfalls are removed the same day.

But ..bottom line is: it can be done. You don't have to be a rocket scientist or a Wall Street wizard. I do it everyday. I am an average Joe immigrant and came to this country with about $1000 in my pocket. Having said all that .... I could not succeed in trading for a living till I didn't have to trade for a living. If you are a small trader, it is difficult, if not impossible, to trade successfully, if the next meal has to come from trading profits. I found out first hand that scared money never wins. If losses become personal instead of just business expense, the mind games will nullify performance and the road to ruin is swift and inevitable.

This is where the difficulty arises. Unless one is born into a family of traders, the psychological stumbling blocks cost great deal of tuition money to overcome. One must have a stash of cash, alternate means of income or gainful profession before attempting to trade for a living.

Money Managers, of course, are very much needed. Not everyone can invest or trade the markets. But managing OPM requires skill sets which not all good traders possess. I consider myself a reasonably good trader, consistently profitable. But I cannot manage even my wife's IRA money. But managers who can trade for themselves and for others successfully are a rare breed .... kudos to Mark, Ike and others of that ilk.

I thought I would post this because many well-meaning professionals tried to dissuade me from embarking on this career. Had I listened, I wouldn't be having the fun I'm having as a trader, surviving foray into the markets day after day - but only if I wished to. Sorry for the long winded post...probably somewhat off-topic.

[Newman]

Geosing, I wholeheartedly agree.

[IndexTrader]

Good post. I agree with you. I believe you can trade successfully for a "living" with an amazingly small amount of money. These days for instance, the E-Mini SP can be traded intraday for $2k per contract. Some places use intraday margin of $500. With $25K in your account, you can trade $100K of stock during the day. This type of leverage means that if you're a good trader you can pull significant amounts of money out of the market over time. If you're a stock trader I don't think you can make with unless you meet the daytrades minimum equity which is $25K. More would be preferable. But I think an account of $50K would be ample for either stocks or futures IF you're a good trader. Like you I believe success has alot to do with psychology. If you're afraid to lose, it's tough to trade. Being afraid to lose comes with being undercapitalized. I think a trader with low overhead, and an account of say $50K can make a living if he's good at trading. IndexTrader

[IYB]

Geo, thanks for your excellent thoughts on this subject! I love reading your posts, and this one is a great example of just why that is... My "problem" is a relatively expensive lifestyle - I spend way into 6 digits every year, so that I have to keep working (running my biz) for a living until my trading accounts gets to critical mass...that is they get to roughly 10-20 times my annual expenditures...so that I can be sure that I can generate the income I need, plus keep the accounts growing, without feeling stress to generate trading profits. So my critical mass is around 3-5 million. Getting there, but for now it's mortgages by day, stocks by night....

[Gary Smith]

I once heard Jack Schwager wanted to write a book about your Average Joe trader who had been successfully trading for a living over a period of several years. The book never came to fruition because of a lack of *verifiable* applicants. The CFTC enforcement files are full of traders who claimed they succesfully traded for a living while in fact they were net losers. I couldn't disagree more with Index Trader, and especially on the small account. At one time years ago I offered a $500 bounty for anyone who could show they had been successful at daytrading stock index futures over a three year period - no takers. When I used to market a manual on daytrading the stock index futures, I spoke with literally thousands of daytraders. It's more myth and folklore that there's a bunch of traders out there succesfully daytrading the futures. Actually I did have one taker on my bounty. But of course, he could never come up with any documentation. Lot of big talkers out there who when push comes to shove never can produce any real money trading statements. He eventually drifted into selling an expensive daytrading course and advertised about how he successfully traded for a living. When the CFTC went to investigate, they discovered that in his real money trading account he had been a net loser for six straight years. You don't want to get me going on the S&P daytrade course vendors.

[*JB*]

Gary -

Since it's you, I'll hold some of my comments...except to say $500 wouldn't be worth my time to gather documentation...nor do I feel the need to prove anything to anyone. Also, I agree with most of what you said, so I'll deal with mostly that.

I especially agree there are probably FAR less those that do than those that say they do. There are a lot of big talkers...that is for sure!

With day trading the S&P, anyone who can do it on a consistent basis wouldn't waste their time trying to sell a program with all the marketing and the huge hassle such a business requires. Also, those would NEVER be the guys who the CFTC had any reason to consider...they aren't selling anything to the public.

But, I have to REALLY agree about daytrading vendors. Even (especially) the big name "traders" who write books inorder to sell their seminars are very suspect. (George Angel is one)

[hereclitus]

Great thread. As someone who aspires to do exactly that, I find the information useful. I don't know any traders personally who do it full-time and it is hard to get reliable info on this subject.

[NAV]

Geosing, Great post ! Reminds me of my undercapitalized days and the nervous trading i was doing then. Scared money never wins - it consumes itself !

[sagitarius_d]

JB, Gary, What do you think about Larry Williams..I have read some of his books, i test 3 of his systems and some of his moneymanagement rules..Some of the things in his books are really "gems" in my opinion..However why would one share these gems for the small price of a book?Be it 50 or 100 $?This is just 2 point in the ES )

[geosing]

I have some personal experience with a daytrading newsletter vendor, as I genuinely believed him to be a hot shot trader - he claimed to be one. I provided a lot of technical help in building web sites, programming backends and so forth. I discovered belatedly that what he was good at was marketing and desperately needed to sell subscriptions to support his lifestyle. I think most, if not all, of the course vendors fall in the same category. On the other hand, since I started this trading business, I have come to know a few who are consistently profitable. I don't think they are making any special claims and I doubt anyone could persuade them to turn over their brokerage accounts. Me included. I just focus on getting a few ticks off the bond market or 3 handles off S&P or 25 lousy Dow points. And will not recommend trading as a business unless they are financially independent already by some means or other. Or somebody with the tenacity of a Gary Smith or Jim Rogers.