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Primary source of income: how many have made it?
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Primary source of income: how many have made it?

  #381 (permalink)
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jstnbrg View Post
Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.


These are excellent words. Everyone should read then read again.

"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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  #382 (permalink)
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bluemele View Post
IRA isn't bad, because you can just pay your 10% penalty if you need to dig in. If he continues down this path and it is 10 years of compounding without tax, that will far exceed the 10% penalty issue.

Good advice though and I have to find out, did you ever make it to Boulder??

@jstnbrg

The advice about pitfalls of success is some of the best advice I can contribute to this forum, given my lack of programming and mathematical skills and my questionable aptitude for screen based trading. And a young successful trader like @Firehawkaz27 is the perfect recipient. It's all first hand knowledge, either something that happened to me or to someone I know. As @tigertrader has said elsewhere, the unique perspective a floor trader of many years standing has is that we have known, known of, or worked with literally thousands of traders over the years.

I'm not a tax guy, but I agree, if he's trading in his IRA he gets the advantages of tax free compounding. However when the money comes out it will be taxed as ordinary income, instead of getting the 60/40 short term/long term treatment he gets now if he's trading futures or options. That's why I like the Roth: he gets 60/40 on the front end, tax free compounding, and no tax on the back end. But I don't know what the penalties are if he withdraws the money early.

About Boulder, not yet. We're rehabbing our summer home first, it's kind of a money pit. Then we have to sell our main house, which could take a while. Then we get to go.

"You don't need a weatherman to know which way the wind blows..."

Last edited by jstnbrg; September 8th, 2011 at 07:32 PM.
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  #383 (permalink)
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jstnbrg View Post
The advice about pitfalls of success is some of the best advice I can contribute to this forum, given my lack of programming and mathematical skills and my questionable aptitude for screen based trading. And a young successful trader like @Firehawkaz27 is the perfect recipient. It's all first hand knowledge, either something that happened to me or to someone I know. As @tigertrader has said elsewhere, the unique perspective a floor trader of many years standing has is that we have known, known of, or worked with literally thousands of traders over the years.

I'm not a tax guy, but I agree, if he's trading in his IRA he gets the advantages of tax free compounding. However when the money comes out it will be taxed as ordinary income, instead of getting the 60/40 short term/long term treatment he gets now if he's trading futures or options. That's why I like the Roth: he gets 60/40 on the front end, tax free compounding, and no tax on the back end. But I don't know what the penalties are if he withdraws the money early.

About Boulder, not yet. We're rehabbing our summer home first, it's kind of a money pit. Then we have to sell our main house, which could take a while. Then we get to go.

Agree, and I wasn't challenging you on 'first-hand' knowledge but more of a with compounding and how long he can go without a loss, then a ROTH would be ideal for such wealth creation with the 10% penalty. Even if it is a regular IRA, you most likely will have losses to offset any income generated, but I have only cashed out on a Roth, not the regular kind so not sure.

Thanks for the update.

Oh, and the best thing you can do is set up a Roth with an older family member (Father/Mother) and trade that account. (if you can trust them!!)

Then, when they pass away, you can draw with no penalties pretty much anytime. It is sort of an early retirement bonus...

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  #384 (permalink)
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bluemele View Post
Agree, and I wasn't challenging you on 'first-hand' knowledge but more of a with compounding and how long he can go without a loss, then a ROTH would be ideal for such wealth creation with the 10% penalty. Even if it is a regular IRA, you most likely will have losses to offset any income generated, but I have only cashed out on a Roth, not the regular kind so not sure.

Thanks for the update.

Oh, and the best thing you can do is set up a Roth with an older family member (Father/Mother) and trade that account. (if you can trust them!!)

Then, when they pass away, you can draw with no penalties pretty much anytime. It is sort of an early retirement bonus...

I didn't think I was being challenged.

You kind of lost me with this Roth strategy. Do you put your own money into a Roth in their name with yourself as beneficiary? It doesn't really matter to me right now because I'm too busy to trade anyway and trading a Roth in Sim won't generate any income. I haven't graduated to live trading yet. Is the Roth thing legal? I'm not much of one for bending the rules. And I'm starting to run short of older family members :-(

"You don't need a weatherman to know which way the wind blows..."
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  #385 (permalink)
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jstnbrg View Post
I didn't think I was being challenged.

You kind of lost me with this Roth strategy. Do you put your own money into a Roth in their name with yourself as beneficiary? It doesn't really matter to me right now because I'm too busy to trade anyway and trading a Roth in Sim won't generate any income. I haven't graduated to live trading yet. Is the Roth thing legal? I'm not much of one for bending the rules. And I'm starting to run short of older family members :-(

Yes, you can contribute to anothers Roth. But, it is essentially their Roth and they control it, but you can get a POA and set up control to manage trades through Entrust/Millennium etc..

Yes, it is legal. haha..

You still have to adhere to any mandatory withdrawals or whatever, but when they pass away, you as the beneficiary can pretty much choose your plan for withdrawals.

A friend/colleague of mine in RE does this with his mother and has set up others to do the same to invest in his REIT. Kind of an interesting concept and a great way to contribute to your folks retirement and make sure you get it when they are gone.

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  #386 (permalink)
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Firehawkaz27 View Post
Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

U talk like u are single.. Its hard to ignore the greatest marketing machine the world has ever know,, the USA. Saw a stat that 80% of the economy (the highest of anyone in the world) is based on consumerism in the USA.........Comon u need that 3 caret diamond in ur ear lob a 60k auto, and credit debt, no one lives on in their means its unamerican...
What really amazes me is that just a 10% imbalance (like unemployment) can crash the system,,, is this being over leveraged or what?

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  #387 (permalink)
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jstnbrg View Post
Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.

Well said!! Another pitfall of being a trader at home is the isolation. Sitting in front of monitor for 4 to 8 hours a day without seeing another person can be lonely and can cause depression for many people. Even with family, friends, chat rooms etc, you still need to be out among the living, so to speak. At the point I become a full time trader I will have a part time job or volunteer just for the human interaction.

I believe, knowing who you are and what you need to keep you sanity is a key element to becoming successful at this job.

SD

nosce te ipsum

You make your own opportunities in life.
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  #388 (permalink)
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Hi all,
Just signed up to the forum, and this is my first posting.
Hope it's in the right place.

As regards being succesful, in this business.. It requires many hours of screen time.
I probably have over 200,000 hours and counting, but after all that, I'm still learning something new.
I cannot afford to give up now, it's cost me so much in time, investment and family life, "However, this is what I want to do
for the rest of my life!"
:-)

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  #389 (permalink)
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Wow

You must be about 120 years old dude. 200,000 hours is 100 years of screen time every business day for 8 hours a day. Tell me your secret man...

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  #390 (permalink)
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Well spotted!!
I've added one "0" too many!

It's actually suppose to say 20,000.
Thanks for that.
:-)

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