Full time trader reccomends

Syprik
 

Registered: Jan 2008
Posts: 248

 

05-15-13 07:08 AM

Had some hesitation posting this, but I guess if it motivates 1 or 2, why not. I truly adore this profession, and want other truly motivated persons to give it a fair shot. A superfluous wave of negative attitude has in some ways taken over this site. Perhaps small anecdotes like this will help off-set it. I wrote this on another finance forum (NP) I frequent, will just copy and paste here with some amendments for privacy/updates...

Perhaps my own trading timeline going from part-time retail to career professional will be slightly insightful (will keep it abbreviated):

I'm 31-35 yrs old. After wrapping up grad school (mech engineering @ top 5 univ, early 2000's), worked in respective field for ~3yrs. Had great interest in trading dating back to late undergrad yrs. Made a difficult decision to devote ~60% of 1st year salary to a capital trading block. Keep in mind I was a single bachelor, 23-25, no dependents, no mortgage, no significant overhead costs, ~$750 rent, car paid off, no school loans (tx to acad scholarship and generous parents). It was approximately $2000/month in living expenses year one. For ~1.5 of the first 2 yrs @ engineering position, almost every Mon-Thurs evening of work week I devoted 2-4hrs to educating myself & developing position trade ideas. Endless time wasted running into dead-ends, as I was beyond naive and lacked experience to know which way to run. I even spent time chasing momentum pump & dump plays at Raging Bull/Investors Hub. It required serious sacrifice to personal life. Around end of year 1, actively started to swing trade an initial ~$30k trading block magnified by 2x margin utilizing volatile US equity small & mid cap issues. Was able to monitor positions 3-5x times per day when @ work. From that initial stage of active trading, over the next 1.5yrs was able to increase the initial block by ~4.5x net. Brunt of return came from three stand-out stocks, including one OTCBB that went from $1.50 to $12. Never had more than 6 stocks in portfolio at one given time. Technical/fundamental mixed approach. With such a result, was able to convince and secure a $100k interest free loan from my father. The agreement entitled him to silently share a joint account with me to monitor my risk/positions, with the right he could pull his $100k at any point. My equity was first to take a drawdown hit. Over the next 10 months, increased the net capital yet another ~30% after a brief 10% draw-down.

Three months before submitting my resignation I finally became comfortable and convinced to go full-time. Another stipulation of the loan was I had to have a full-time "secure" salary, so 3-4 months after my resignation I was obliged to return the initial loan amount. With almost $200k free & clear trading capital, 1.5 years of "bare-bones" living expenses tucked away, and a healthy initial dose of trading experience, I began my journey. ~Eight years later, I'm now a small independent futures trading business that I'm confident would rank in top 10% of independent trader CME exchange members (capital size). Consider myself very fortunate, and could calmly retire tomorrow. Outside a relatively small block I manage for my wife and parents, trade zero opm. Contract out programming development work when needed (ie freelancer, fcm recommended parties, etc) and lease an IMM @ CME from time to time (depends on what type of strategies I plan to run, thus use 3 month lease terms). I have almost exclusively traded futures since mid-2006. RIMM, AAPL, and some dry bulk shippers were the only equities I touched through 2007. ES 90% of volume, 10yr/6E a very distant 2 & 3. I strictly trade the large futures contracts due to significant liquidity, leverage, most favorable tax structure, cost @ higher volume, market access (all in that order of importance).

You must not be afraid of leverage. Everyone talks about over-levering (yes, beyond critical), but not many discuss the silent killer after you have some experience under your belt: under-leverage. I'm a clean cut, relatively nerdy & passive persona, but one thing you really need in this business is brass balls & stamina to get through the daily grind. You hear it said in passing, it is not an exaggeration. If you don't have it inherently, be patient as it takes some time to build up. I'm not going to give an exact example, but say I had $500k in capital in 2007. In that era I would have taken $100k of that block, and swore it off as gone. Heavily levered it up (ex, $4k-5k capital/ES contract or ~2-2.25% fixed fraction). The remaining $400k used for far less risk position sizing. That early, calculated aggressiveness while I was trading well really helped moved the arrow forward. Now I use a very conservative fixed-fraction position sizing of around 0.2% per strategy as I'm esp keen on protection. Since late 2006, I'm strictly intra-day for 95+% of my volume. I deploy 5-6 active strategies for ES, roughly half momentum, half mean-revert. Each relatively small/conservative on their own, but when summed out end of month, very strong. I strongly discourage relying on 1-2 "bread n butter" methods. Fell into this trap plenty of times through-out my journey. Current winning ES trades average in the 8-10 tick range in present volatility. 2008/2009 was an incredibly large gift as the volatility catapulted my accounts to a different realm. So, ultimately there is no denying it: I had some good blind luck at the onset, fortunate circumstances not available to everyone, and timing. Another tremendous mental backstop is my wife is a clinical research engineer (manager) at a large medical device company. If I were to have a bad year, she could support us without blinking an eye.

Moral of this story: give yourself a fair shot by going in with a decent size capital block, hold reasonable expectations, and work your ass off. Going at it full-time with only $25k is reckless imo. Swinging that size block while you work full-time is the smart decision. I would wager too many think they can get this off the ground in a few years. Give yourself 3-5yrs to build the full-time block. If you are good, once you get to that 150-250k range via your after-work efforts, that first 1MM can come very quickly once full-time. Trust me, compounding/exponential growth is a sight to see, no rush to get there.

Best of luck.