Primary source of income: how many have made it?

mattz · December 2nd, 2010, 12:38 AM

Many here compare between business success and trading success. different animals.
Yes, success in all fields requires determination, drive and the willingness to learn, but the market is not forgiving as the business environment. In fact, I have a theory; Your biggest success characteristic that has drove you to success could be your biggest weakness in the trading world.

Engineers, think in system, a leads to b, always logical, not flexible in the market place.
Sales Guys, great with being persistent, a weakness of stubbornness and impatience in the market.
Accountants, used to procedure, lack the ability to adopt to new situations fast.
I am sure the above professions could become successful, and not trying to insult anyone, but I often thought how skill is not easily translated from one place to another(trading).

Think of Trump. Would he be a good trader with his ego? never. Yet, look at the guy!

For all beginner traders: Greed is relative. wanting 2 points, $200 per day is greed.
Don't think reward when you come to the market place, think of the execution your method.
Think where you want to stop and quit, not what would make you happy.

There is a complete transformation of psychology you need to go through, but I would leave that to others successful traders to share their story.

December 5th, 2010, 09:59 AM

I've got a friend who works at prominent trading companies in Sydney as a programmer. He says that these companies are jolly friendly places to work in with one problem. The newly retired guy comes in with his $400K payout ready to start his new career as a trader and 8 months later it's all gone. And it happens over and over again. He tells me that after a while some of his co-workers can't take it.
Another guy told me that in the market making companies where he was working, all clients are categorized as winners or losers. The losers are fine for the market making company but what they do with the winners is the company puts on a real trade to make up for what they have to pay to the winners. What percentage are losers? 90%. How many change category? None he said.
That's the bad news but now, the good news. I went on a bit of a campaign to find the winners and actual winners not just the hopeful. It wasn't easy but I did find some and what I saw was that there are guys who make an absolute fortune but from the second they crack it they go as silent as the tomb. Not a word, sometimes their friends don't even know what these guys actually do for a living. So, I'm pretty sure it's not all that bleak.

December 6th, 2010, 08:05 AM

It's not that bad. The percentages may be correct, however, I believe the proliferation of garbage systems and hype on the Internet is what has killed accounts. Greed and inexperience is a killer.
I literally have thousands and thousands of hours of screen time. This is not an easy business and it costs money to get an education. . . in losing trades and in genuine educational material and forums like Big Mike's!Do some make it right out of the gate? Yes. But they are few and far between. After three plus years of trading futures (prior I was an options trader) I finally had my first $10K month (not bragging! as to MANY futures traders 10K a month is mere pocket change - believe it. -- It is a fact of patience, a plan, and sweat!!! yet maintaing the plan takes mental discipline for sure) I came in several years ago looking for the golden goose and was I rudely awakened; but I had a passion for this and stuck with it. Now, will I make 10K every month? It would be nice, but no guarantees - however I know now I can be consistent because I "see" the same setups over, and over and over and now am not afraid to trade them.

Good Luck and Happy Trading

December 9th, 2010, 10:18 AM

Hi y'all.
I'm a new member of BM trading forum. I really liked this thread.
I spent some money on loosing trades and gave up trading a few years back. The reason I decided to quit was that I couldn't concentrate on my trading, I had other pretty complicated business to run as well. The trading business I tried to start was doomed to fail from the beginning. It was treated more like a hobby.
Like any business there is risk of loosing everything, I have been successful and then lost everything. Like a trading account. I still have 5 wonderful kids and a beautiful wife.
After rebuilding some funds and simtrading for a while I now feel ready and want to focus on trading alone. I feel pretty comfortable with TF. Trading with the trend, unless there is a big divergence at a confluence area. I'm also interested in developing methods for gap closing.
It's a risk of getting initial high costs when you start your trading business, but that is the initial risk in any business. You need to write down your business plan, but business plans are documents under constant development, so you need to work on it, improve it.
When you get too confident you might get a little bit lazy, this can will increase your costs of trading. When you're not focused, for any reason, you will probably do a bad job and increase the costs as well.
I have the benefit of watching the markets develop during the day and then enter the opening TF at 3.30 pm Swedish time. That gives me time for study, develop and test new ideas until the market opens. I will then trade between 1-2 hours depending on how the market moves.
I think it's like any other business, in many ways. If you want to earn a living from it, you need to live it.
I'm a good trader when I'm in the mood and focused.
I have this terrible cold so today I'm not trading.
In order to filter out the noise in the market you need to filter out the noise in your head.
I think we all can be good traders, if we are in the mood and focused.

Thank you Mike for this forum.

December 17th, 2010, 03:33 PM

Bobcat

4 ticks a day to financial freedom...

It is likely that most dreamers have punched numbers into a calculator or a spreadsheet and said if I can only get 4 ticks everyday, and double my account to $10K in less than 3 months. Then I could add another contract and get to $15 K by the end of month four, And then by the end of the year I could be making nearly $3K per day. All on just 4 ticks a day. I could get to a $million before the end of the second year. But I'm only dreaming, and I like to dream big.

Has anybody actually accomplished this task? Ok maybe not to a $Million, maybe $100K? It seems simple enough, its just not that easy to do.

Any takers?

That is exactly what I did and it's an approach that can work well if you tend to trade too frequently or lose self discipline once you're up money. After I adopted that method I went 6 1/2 years without a losing month, following 3 years struggling. I went from being a 5 lot trader in my pit to being a consistent 500 lot trader. My goal was 20 ticks/day ($312.50) trading 5 lots, or 4 ticks/day per contract. I was trading in a very low volatility contract. When I reached my goal, I left as soon as I closed out my position. It was an approach that psychologically allowed me to take only rock solid setups. And yes, my account did grow exponentially.

The reason I was trading 5 lots is that pit brokers don't want to trade with someone trading odd quantities; it messes up their count. (If you are filling 200 contracts in a fast market and someone wants to buy a 17 lot from you, it's easy to become confused about your count and over or under fill the order. You are personally on the hook for whatever losses occur). Sometimes if a market was running I would stay in a position beyond my goal, but once I hit the goal I became very protective of my profits. My unit of size was one contract/$2000 in my account (not a unit I would recommend to a trader starting out on the screen; I think you need at least $20,000 to even think about trading. I had people willing to back me if I needed help). In the course of that six years there were a few bumps along the road, mostly from withdrawing money from my account for a home renovation.

I've been off the floor for 8 years now, since trade has moved to the screen. I had some good periods on the screen before algorithmic high frequency trading became common, which I think happened in about 2004, but I've struggled since then and so have most of the guys I know with similar backgrounds to my own.

Trading with an easily attainable money goal is an approach I still favor. For me at least, it keeps me from getting too piggish or stretching for a high risk trade.

December 17th, 2010, 03:41 PM

webart

The figures come from brokers, actually the figures for those that make money for more than a year are 98%/2% according to a CBOT lecture I was listening too ... and they should know.

Yes, how it works, is the professional traders, get there money from the newbies, and there is a constant supply of newbies into the market convinced by the marketing of the educators (who also feed on the newbies) that they will be able to make a living using their $5000 account. The market works by offering Hope, but not delivering what was Hoped for, that is what keeps the market moving.

The problem with making a living out of it, is the amount of capital you really need to have to handle draw downs and to give yourself the leverage you need and that's assuming you know what your doing (which takes years). When your under capitalized you have scared money, so you run tight stops and make poor decisions.

If you can make 2% per month consistantly, then you are up there with the best traders.

And no, I don't make 100K per year from trading !

There are much easier ways to make money than from trading.

Professional traders do not make the bulk of their money fleecing newbies. They make their money taking the opposite side of hedgers' orders.

December 17th, 2010, 03:43 PM

Day Trading Fool

I keep hearing the 95/5 percentage of failing/successful traders used. This sounds reasonable to me.

I found myself wondering - how many on this forum have been able to make trading their primary source of income?

So - assuming that this ratio (5/95 = 1/19) is fairly constant at any given time, and assuming that members of futures.io (formerly BMT) forum are representative of the playing field as a whole, how about a little poll?

And realizing that people have varying measures of primary income - and a little bit of trivia for me personally, and if you don't mind sharing - how many make over $100k/year?

Here we go:

1. Is trading your primary source of income? (Yes or no)
2. Do you make over $100k/year in trading (Over, under, NA)
3. How long did you trade prior to making trading your primary source of income - or if not primary income yet, number of years trading? (Approx. # hours on screen)

1. Yes, for 24 years.
2. On average, over $100K
3. It took me three years to become consistent. See my previous reply.

December 17th, 2010, 04:37 PM

jungian

I do and DONT understand the fixation on account size. At the end it all boils down to "profitability/drawdown/trade opportunity/risk/money management".

For example:

Starting Account Size $5,000
Average trades per day = 10 to keep it simple

70% wins 30% losses

Average Loser 8 ticks
Average Winner 6 ticks.

Statistically on average the results would be as follows

1. Win 5
2. Win 6
3. Lose 8
4. Win 4
5. Lose 8
6. Win 6
7. Win 5
8. Lose 8
9. Win 6
10. Win 4

Thats a net win on average of 12 ticks per 10 trades.

Lets say half a tick ($5) of commission per trade and you have:

GROSS PROFIT: 12 Ticks
COMMISSIONS: 1/2tick x 10 trades = 5 ticks
NET PROFIT: 7 ticks

$70 net profit on an account of $5000 is 1.4% per day !

MORAL OF THE STORY:

Account size protects against the risk of ruin, and effects the number of contracts traded but has NOTHING to do with the Expectancy/Profitability of the strategy.

Your STRATEGY is what will dictate what your account size can be.

Obviously the sample size of 10 is very very small and does not represent the real life scenario of say 8 losers in a row.

So a drawdown of (8 x $80) = $640 is likely. But even in that case the drawdown on a $5,000 account is only 12.8% ( $640/$5000)

If you are netting on average 0.7 ticks per trade it would take you about 92 trades ($640 drawdown/ $7 per trade average win) to get back to even.

If the system generates 10 trades a day its about 2 weeks (10 trading days) to get back to even.

ACCOUNT SIZE MATTERS, don't get me wrong.

But telling people they need a $50,000 account is as crazy as telling someone they need one of those fire fighting helicopters with the giant bucket of water to fill a swimming pool.

A garden hose will do just fine. It just takes a bit longer

My 2 cents!
Jungian

"What's the best way to get a million dollars at the CBOT? Start with two million." Old joke on the floor, and true.

An account that is too large to begin with is in my opinion a handicap, because it gives you a false sense of security. However an account that is too small is also a handicap, for obvious reasons. The problem is that you need to pay for the heat and electricity and food, maybe the data feeds, etc. If you can live with Mom and trade in sim until you are adequately consistent, that is an ideal situation (as long as you and Mom can stand each other). Then you just need enough capital to avoid a string of losers that will wipe you out.

Some of the best traders I knew on the floor were badly undercapitalized and paid their dues trading in mini contracts at the old MidAm or in the Dow or Muni pits at the CBOT where you could lease a membership for $100/month. A friend of mine who over time became an absolute whale (in trading, not girth!) spent 4 years in the Midam before he graduated to the CBOT floor. On the other hand, I knew a guy who came from money who traded like a wild, immature asshole for years. I think eventually he may have made it, but his account size and his sense of entitlement handicapped him badly.

One thing you failed to mention is that after that drawdown of $640 your $5000 account is now only $4,360. To generalize, a 50% loss does not require a 50% gain to get back to breakeven, it requires a 100% gain on the capital remaining in your account.

December 17th, 2010, 04:47 PM

vegasfoster

First, there is a difference between making money from something and earning a living from something. I have rental properties that I make money from, but I earn a living from trading. Second, I would consider operating a trading website to be directly correlated to trading for a living. Third, regardless, things change. Fourth, I don't understand why people get pissed off or call Big Mike a sell out for possibly making money off this site. This is America, that's what we do here. Because the site is intended to help people he can never allow advertising? He can never charge a monthly fee? He had the ingenuity to create this site, he can do with it what he wants to. If he chooses not to, then he chooses not to, but people shouldn't be giving him crap for it either way.

This is the best site devoted to trading that I have found. I hope Big Mike is making money from it. The only way it would upset me was if Big Mike weren't being honest about his own results, i.e. sucking people into paying for the site based on a ginned up record. However I do not believe that is the case. Also, other successful traders post here regularly. I hope my posts will give people insight into how things look from the exchange floor (at least when the floor was relevant!).

December 17th, 2010, 05:19 PM

Slipknot511

Interesting. I'd like to know the stats for traders who stick with it for more than a certain period of time... like 5 years. That would also eliminate the ones who make an immediate windfall in a strong market, but get wiped out after a year or two when they learn that markets can also go down. (i.e. 1999). It seems that survival is the key to success. While I have wiped out many accounts, they were very small. It wasn't until I could not wipe it out that I decided to deposit enough money to get meaningful returns. Surprisingly it is so much harder to trade an undercapitalized account, that when you finally fund a real account, it seems easy by comparison.

While I do not have any absolute stats about failure rates, when I first came to the CBOT I was told that 80% of traders don't make it through the first year, but of those who do 80% wind up being able to make a living trading. Personally I think 80% is optimistic for both stats.

However in my experience the group of traders with the highest success rate is those who go to work for a proprietary trading group where they get capital, instruction, and support. Being undercapitalized is probably the biggest cause of failure, followed by trading "for the action" rather than as a business.

Primary source of income: how many have made it?

Discussion in Psychology and Money Management

Primary source of income: how many have made it?