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In college, I browsed the other trading forum (start with an e). I found it very interesting but the more I read the more I got discouraged.
It seemed there were very few long term traders posting on the forum.
Lots of people were like "I made losses for 2 years and I've been profitable for the past 3 months, now it's my career". Pretty sure those guys blew up after 3 months
The few strategies that were profitable seemed to fall in and out of making money. Lots of strategies work during bull markets do not work during bears. Market changes rythym a lot.
Now if you take 1000 newbies starting out, by sheer luck some will make a decent amount of money. But in the long run, it's the brokers that win.
What do you think?
Can you help answer these questions from other members on NexusFi?
Unlike that other forum which seems to encouraging troll and mud slinging you will find that there are a lot people here prepared to help you, if your prepared to help yourself.
I personally have been trading full time for almost 30 years, the last third of that for myself. So to answer the question "Is trading a legitimate career?" is very firmly Yes!. There are many hedge funds, proprietary trading firms and high frequency traders out there whose long term track records would support that as well.
But as you point out yourself, it's a very difficult to be successful and the failure rate is extremely high. I think it is highly unlikely that a new trader finds a 'strategy' and quickly is profitable. It's also true that in the long run the exchanges and brokers do win, but that doesn't mean no traders win also. Should also be pointed out that the traders that I know, that have been successful over the long term, are some of the hardest working people I know - the laptop on the beach dream is in my opinion definitely not legitimate.
My first question for you is: What do you mean by "career"? Do you mean trading strictly for yourself or becoming a CTA and trading for others? Those are two very different things. I was registered as a CTA in August, 1984 and I let my registration expire in November, 1998. I have recently come out of retirement on a very limited basis and trade for a very select few accounts under exemption from registration. Speaking for myself, it is much easier to trade successfully for others than to trade for myself. How can that be? The biggest difference is the consequences of trading. Trading for yourself, a loss comes out of your pocket. Trading for others, the loss just has to be made back before you can charge an incentive fee. That is not to say that I don't care about losing someone else's money. I do. But if I tell someone that I am going to manage their account using a certain system or plan, I am obligated to do as I say, come hell or high water. That obligation gives me the freedom to make trades that, emotionally, look to be sure losers. Those trades are often my best and quickest winners. I can say with absolute certainty that my system is better at picking trades than my emotions.
The answer to your question lies with you. How is your temperament? In your personal life, do you have a hard time admitting when you are wrong? Every time you take a loss, you are admitting you were wrong. If you have a hard time admitting you were wrong, you are going to be hesitant to use stops, especially after having your stops hit a few times and then having the market turn back around and going the direction of your original trade. It's foolish to trade without stops.
But when you are confident that you right, is it hard for you stick to your guns? First you've got to do your research. Be thorough enough to be completely confident in the system you use. Then you've got to realize that no system is perfect. You are going to have drawdowns. How big a drawdown can you take? Not just financially, but also emotionally. No system is perfect. When I do my research, I usually use several years of data. Of course, I look for profitability. But I pay special attention to drawdowns and number of consecutive losses. Always assume that the biggest drawdown will be exceeded sooner or later. Most consecutive losses too. After 5 or 6 losers in a row, how hard will it be to place your next order? It will be easier if you have total confidence in your research.
