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Risk and Uncertainty
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Risk and Uncertainty

  #1 (permalink)
Trading Apprentice
portland me usa
 
Futures Experience: None
Platform: TDA/TOS, Schwab
Favorite Futures: stocks, ETFs
 
Posts: 17 since Jun 2011
Thanks: 54 given, 18 received

Risk and Uncertainty

I figured I'd put some thoughts down publicly. I'm not going to talk about setups or indicators or how to predict the market. Instead I'm going to put down some thoughts on the challenges of making a living as a professional trader.

After years of work I find myself in disbelief that this could actually be happening for me. I start thinking that if I scale this up to 5 contracts I'd be making a very nice living, I could save up my profits and put them into more passive investments such as renting real estate while continuing to trade for income. But these ideas are scaring the crap out of me, and I become filled with doubts and fears. The stability of a regular paycheck, which once seemed like selling myself short, now seems so safe and comfortable.

How is it that you can want something so badly and once it begins to happen, start coming up with reasons to walk away from it? It reminds me of a job I had in my early 20's, there was a guy I worked with who had a huge crush on a girl who worked there. He eventually asked her out and they were seeing each other for maybe a month when he abruptly broke up with her. He told her that she was too good for him and he just couldn't handle being with her, so had to break it off.

Is this what I'm doing to myself now?

I'm single, no kids. I ran a small business for 11 years and when that ran out of gas I thought trading would be my next career, and that I wouldn't have to go work "for the man". But now I'm filled with doubts, scared to death by the uncertainty.

It's so easy to think that you want to trade for a living, especially while you have a regular income. All the education out there is done via static hindsight charts and it really does get you thinking how hard can this be? Just point, click, and voila - instant money! How can you not get pumped up after seeing stuff like that? In truth, nothing could have prepared me for the realities of this business. This is nothing like what I expected it would be. There are no exhilarating fist-pumps as I watch my account grow, instead it's a daily grind where the outcome is always unknown, and where I have nothing to lean on but an admittedly weak sense of trust that these patterns will continue to "work" profitably over time.

Sometimes my mind comes up with catastrophic thoughts. What happens if I lose my touch? What happens if I am unable to trade for some personal/emotional reason? What happens if some new kind of HFT changes everything? What do I do if at some point in the future any of those things happen and I have to find a job after being out of the workforce for some time? Maybe this really is a rich man's passtime after all?

It's so hard to know which is the right thing to do. I'm still in my 30's so am young enough that I could go back to school and get a degree in something else, and reboot my life that way. Maybe I could become a CPA, or go into healthcare. Or maybe learn a trade like plumbing or electrical. So much safer, so much more secure. To decide on trading would mean putting all else aside.... that's a big leap of faith. But choosing one of the safer routes would mean giving up on active trading. Whatever I do, I have to be all-in.

This truly is a solitary path to walk. Trying to make it in a business where 99% fail, risking your time and energy on something that may only lose money, avoiding the misdirection of snake-oil salesmen and pretenders, doing something no one in your life believes is possible... it is indeed a lonely road. Just something I'm struggling with, and felt like putting out there.

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  #2 (permalink)
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  #3 (permalink)
Elite Member
Austin, TX
 
Futures Experience: Master
Platform: ninjatrader, r-trader
Favorite Futures: CL, NG, TF, NQ, YM, GC, ES
 
liquidcci's Avatar
 
Posts: 862 since Jun 2011
Thanks: 609 given, 1,051 received


@pinetree Yep, it is a tough walk. Consider coming up with a side business that can be done while you trade. Easier said than done but making a paycheck from trading even if what you are doing is working is mentally difficult. If trading is going to be your sole income then just make sure you are well capitalized so if things did go bad you have enough capital to make a transition into something else.

On the plus side being single with no kids means your trading decisions only affect you. So you can take on more risk than someone with many mouths to feed.

Here are some thoughts in a post I put down about the amount it can take to trade fulltime. This is not perfect as each persons situation is different but it takes more $$ than most people realize to develop into a consistent living trading. https://futures.io/psychology-money-management/19301-300k-start-fulltime-trading-business.html

"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."

Last edited by liquidcci; August 27th, 2012 at 05:51 PM.
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  #4 (permalink)
Site Administrator
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  #5 (permalink)
Trading Apprentice
portland me usa
 
Futures Experience: None
Platform: TDA/TOS, Schwab
Favorite Futures: stocks, ETFs
 
Posts: 17 since Jun 2011
Thanks: 54 given, 18 received

The best analogy I can come up with is trading with some other source of income is like walking on a balance beam with cushions on the ground below you, and doing it without any other income is doing the same thing except without the cushions.

I was reading Gary's journal and he talks about working long hours and flying all around the country to work on projects... and still finding time to be a successful day trader. I wish I could juggle the two but I know I couldn't pull it off. There's no way I'd be able to keep the focus required for daytrading if I had that much going on.

When I used to think of proper capitalization I only considered the size of the trading account. I figured once I can make money trading nothing else will matter. But it does matter, a lot. Now that I have no other income it's a different ballgame. I never took into account how much additional capital would be needed in reserve for psychological comfort level.

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  #6 (permalink)
Membership Revoked
Ontario, Canada
 
Futures Experience: None
Platform: NT
Broker/Data: IB
Favorite Futures: gold
 
dario1's Avatar
 
Posts: 405 since Jan 2012
Thanks: 62 given, 52 received

By reading your post I don't think you're ready (mentally) for day trading. You should start with education first, but not from the point of money making in mid but from simple curiosity -- be like a child who just want to explore the new environment and if you will become successful with observing and learning money will come to you as a bonus.





pinetree View Post
I figured I'd put some thoughts down publicly. I'm not going to talk about setups or indicators or how to predict the market. Instead I'm going to put down some thoughts on the challenges of making a living as a professional trader.

After years of work I find myself in disbelief that this could actually be happening for me. I start thinking that if I scale this up to 5 contracts I'd be making a very nice living, I could save up my profits and put them into more passive investments such as renting real estate while continuing to trade for income. But these ideas are scaring the crap out of me, and I become filled with doubts and fears. The stability of a regular paycheck, which once seemed like selling myself short, now seems so safe and comfortable.

How is it that you can want something so badly and once it begins to happen, start coming up with reasons to walk away from it? It reminds me of a job I had in my early 20's, there was a guy I worked with who had a huge crush on a girl who worked there. He eventually asked her out and they were seeing each other for maybe a month when he abruptly broke up with her. He told her that she was too good for him and he just couldn't handle being with her, so had to break it off.

Is this what I'm doing to myself now?

I'm single, no kids. I ran a small business for 11 years and when that ran out of gas I thought trading would be my next career, and that I wouldn't have to go work "for the man". But now I'm filled with doubts, scared to death by the uncertainty.

It's so easy to think that you want to trade for a living, especially while you have a regular income. All the education out there is done via static hindsight charts and it really does get you thinking how hard can this be? Just point, click, and voila - instant money! How can you not get pumped up after seeing stuff like that? In truth, nothing could have prepared me for the realities of this business. This is nothing like what I expected it would be. There are no exhilarating fist-pumps as I watch my account grow, instead it's a daily grind where the outcome is always unknown, and where I have nothing to lean on but an admittedly weak sense of trust that these patterns will continue to "work" profitably over time.

Sometimes my mind comes up with catastrophic thoughts. What happens if I lose my touch? What happens if I am unable to trade for some personal/emotional reason? What happens if some new kind of HFT changes everything? What do I do if at some point in the future any of those things happen and I have to find a job after being out of the workforce for some time? Maybe this really is a rich man's passtime after all?

It's so hard to know which is the right thing to do. I'm still in my 30's so am young enough that I could go back to school and get a degree in something else, and reboot my life that way. Maybe I could become a CPA, or go into healthcare. Or maybe learn a trade like plumbing or electrical. So much safer, so much more secure. To decide on trading would mean putting all else aside.... that's a big leap of faith. But choosing one of the safer routes would mean giving up on active trading. Whatever I do, I have to be all-in.

This truly is a solitary path to walk. Trying to make it in a business where 99% fail, risking your time and energy on something that may only lose money, avoiding the misdirection of snake-oil salesmen and pretenders, doing something no one in your life believes is possible... it is indeed a lonely road. Just something I'm struggling with, and felt like putting out there.


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  #7 (permalink)
Elite Member
desert CA
 
Futures Experience: Intermediate
Platform: NT7, TOS
Broker/Data: AMP/wCQG, TDA
Favorite Futures: CL,YM
 
Posts: 2,027 since Jul 2011
Thanks: 2,211 given, 1,551 received

Thanks for sharing those candid thoughts about trading. I have the same fears about trading in the future. It may be trading could be finished someday soon as true liquidity keeps drying up. Joe Dinapoli - Finacial Armageddon - part 1 of 5 - YouTube ; And electronic trading completely having taking over. Floored: Into The Pit - Epic Trader Movie! - YouTube ;The "gold rush" of trading may be over. the 80's and 90's have been cleaned out. HFT and electronic trading has taken over since 2009. And there always seems to be some social shadow element of trading as a business of "thievery" and "gambling" . To most people, it's no different than the "1%"'s financial shenanigans ( until they learn how to it themselves, lol) . Yet, ironically, most middle-class households have had been involved in some form of investing or trading. Every other neighbor in one's block could be trading secretly in closed door rooms and one would never know it. It does not help that supposed formerly reputable institutions (MFGlobal, PFGBest) of trading (particularly futures) have been recently caught in despicable outright fraud and cheating of the "rules" of the financial industry. Not to mention all the insider trading and most politicians taking advantage of it. Maybe retail short selling could be banned ,effectively ending trading by the citizenry, due to a "financial armageddon", dollar crises, etc. as world governments try to clean up the mess from all the collapses.

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