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How Different is Trading?


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How Different is Trading?

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  #1 (permalink)
 Fadi 
Luxembourg
 
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Hi Guys
I am having some difficulties understanding and explaining to a fellow friend how different trading is compared to a classical sales job. I am sure you will pull out a 1000 reason in a heartbeat, so here am I :-)

He is self-employed, works in import-export and buy and sell electronic equipment for a living.
He is looking to venture into equity trading being affected by the economical crisis these days; and came to me for technical advice (brokers, stocks, softwares, etc...) as he knows I have been doing that for long now.

During our conversation, I pulled out the psychological barrier, but just realized that he most probably faces those same emotions as we do... he didn't seem to give such an importance to what I was trying to say.
The essence of it, being that he trades electronic equipment while we trade pieces of companies to say the least; but the fear, the greed, the end of month pressure, time decays, economical crisis, human emotions and all the rest should be the same!

I don't have no clue as how it feels to work in sales and on ones own, as I have a proper full time job and only trade on the side for extra income. but is there any member in here doing both jobs or with some prior experience that could explain how the two differs? or probably not.

Why is it that there are more successful self-employed salespersons than there are traders? Or is it just an impression of mine?
And what is that component that differentiate the two if any?

Thanks in advance, and happy trading

Cheers
Fadi

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  #3 (permalink)
 RM99 
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The biggest difference between trading and a normal job is that in trading, you're livelihood is on the line with virtually every decision.

Although sales can be heavily performance dependent and you might not get a paycheck that week if you don't perform, you don't risk not only losing your paycheck for that week, but all your future paychecks as well.

Imagine in sales, if it were possible to not only lose a sale (or not land it) but when you lose the sale, YOU as the salesperson have to come up with the cash to cover the loss.

Imagine at the end of the week, if instead of not making any money, you owed money......

Sales is also closer to a direct effort relationship. In essence, the harder you work, there's a direct relationship to your performance. If you simply knock on more doors, over time, (your effectiveness notwithstanding) you'll get more sales.

Trading isn't something where you can just beat the market through hard work....hard work is important and necessary, but hard work alone won't mask incompetence in trading.

Trading requires a ton of different skills and attributes....none of which are enough to get results all by their lonesome.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #4 (permalink)
 vvhg 
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Just drop a big pack of something that looks like cocaine on his desk and tell him he has got 2 minutes until the cops arrive. Sit back and have a look how rational his reaction is...

vvhg

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  #5 (permalink)
 rani 
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vvhg View Post
Just drop a big pack of something that looks like cocaine on his desk and tell him he has got 2 minutes until the cops arrive. Sit back and have a look how rational his reaction is...

vvhg

That's a good one -

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  #6 (permalink)
 Patrick S 
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I am a business owner of an Air Conditioning company. I am fairly new to trading as I have only been at this for 5 years and I am just starting to earn consistant money these last 8 months.
You have pointed out some interesting similarities to sales and trading. I agree with you.
However I must remind you how personal this journey of becoming a trader is.
In our daily jobs there is black and white. things are much easier. We have standard operating procedures. We don't deal in probabilities.
My humble opinion: the mechanical act of trading is easy. It is the psychological portion of this journey that takes out 95% of the people who ever attempt it.
Money does some crazy things to people.

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  #7 (permalink)
 Fadi 
Luxembourg
 
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Thank you Patrick for your contribution.
It is that psychological difference that I kind of thought replicated to a classical sales job too... but I guess I am wrong.

My question is, if you have let's say bought a container of air conditioners at a given price; you obviously have a target resale price in mind for profit... same as we do with stocks.

But the uncertainties are there; and what if you don't find all the buyers you want in that month? What if you don't get your minimum return per month to survive? Will you do some discounts? Accept to sell at a loss?
What if the crisis is upon us, growth is slowing, people are not willing to invest in new units, and you find yourself stuck with a stock you can't liquidate?

Thinking of these points, I kind of relate to trading in the sense that we buy stock and shares here and there at a given price, and look to sell them back at a higher price... but the uncertainties are there, supply and demand and economical situations make it such that we probably are not reaching our desired target price, not making enough this month to cover our expenses, or simply a company in which we own shares is getting rotten and its value decaying and have to face the decision of selling at a loss or not.

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  #8 (permalink)
 gerimo 
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In my opinion, trading is absolutely diffrent than other jobs. Trading is the most similar to proffesional sports - as it describe Brett Steenbarger.

Trader is like proffesional athlet, basketball player, etc. You must practice every day and make lot of hard work and than, you have 1 minute, when you show your skills (in the case you are runner for 400m). Same in trading, 99% of time you sit before the screen, practice, hard working and than you trade a few minutes of this time.

We are what we repeatedly do. Excellence then, is not an act, but a habit.
Aristotle
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  #9 (permalink)
 dandxg 
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Trading is very different. I have spend almost 8 years in outside sales. In sales if you follow a certain formula, with some tweaks for each individual, you might be successful. Paul Tudor Jones has stated many times that if he gave all the rules to his method over 90% would fail. Lack of discipline, to attached to the money (me), doesn't fit their trading personality, etc. There are many way to make money trading, and even more for losing everything.

In sales I get a base salary, healthcare, paid vacation, in trading there is no base. You put yourself on the line with every trade. Ok you say, I do that with every sales appt. True, but if I bomb I still get paid by my employer, unless it happens to often and then they fire me. Even then I made money. You blow enough trades and you blow out, you BK, you are done.

In sales with this recession I can make 60-100k. In trading most make less than that and some maybe 5% make a lot more.

Finally in sales if I goof off my boss cracks down. In trading, you have wear all hats. Trader, tax planner, business manager, psychologist.

Its a flawed comparison that many make.

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  #10 (permalink)
 dario1 
Ontario, Canada
 
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Great thread Fadi, kudos!

Below is what M Daglas pointed out and I agree 100%


Quoting 

The principles of time, effort, and reward associated with most job situations simply do not apply with the markets. For example, many jobs offer an unchanging reward, regardless of effort, because of hourly wages or yearly salaries. For a trader, effort can be irrelevant, and there is virtually no relationship between time and reward. A trader can be stunned with a windfall profit in a matter of seconds for making one simple decision.



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  #11 (permalink)
 Fadi 
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dario1 View Post
Great thread Fadi, kudos!

Below is what M Daglas pointed out and I agree 100%

Thank you Dario

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  #12 (permalink)
cfdtrader
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I don't see much difference in your comparison for the simple reason that you mentioned he is "self-employed". The fact that he wakes up every morning needing to give all his best regardless of the situation or mood he is in in order to survive draws a parallel with full time trading for oneself.

Probably the main differences lie in your counter party! In sales you have a demand, need, or desire matched by a specific item (disregarding brand loyalty or product differentiation) the agreement you reach is often through compromise but underlying it all rests basic supply and demand and both parties stand to gain. Where as in trading your counter party will be doing the opposite to you.

In other words sales will generate a benefit to both parties greater than the input, where as trading is a zero sum game.

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  #13 (permalink)
 liquidcci 
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One difference between buying and selling other goods compared to trading equities or futures is shear speed. Even though like in many other business you are essentially buying something then reselling in trading the market prices are always changing second to second. So it is really a completely different animal than say an import export business. You can import some goods from Mexico and if you know your market have a reasonable expectation you can get x amount for it and that amount changes little day to day. In trading that x amount is changing constantly and may in a matter of seconds be lower than what you paid and for no apparent reason. Trading is really a game of probabilities and it's execution happens very fast and is never static. So in that sense you can transfer very little experience from an import export business into the execution of a trading business other than maybe a few general business principles that would apply to setting up any business.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #14 (permalink)
pepelucho
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I think what everyone is failing to mention is market knowledge.

I assume that your friend knows the market he works in with sales, he can make predictions about demand, supply, and prices and act on those.

The same is true with trading : ultimately what determines whether someone is successful or not in trading is whether or not they understand the market. It's actually worse, because the market tendencies for any particular instrument that can be traded will shift with time, it's not as static and slow moving as trading goods.

And that is the reason it can take several years for a trader to become successful, he may know all the tools and technicalities behind trading, but if he doesn't understand the market of if he doesn't understand the changing dynamic of the market, he will bust out.

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