Trading for your income

hey everyone – im new here and have been reading some of the threads for the last few days –

my story, to give this post some context
ive some experience, having traded online with comsec. a few yrs ago - with mixed success – im familiar with basic concepts like trendline - channel / range trading – retracements – pulls backs – corrections – watching volume – stop loss – trailing stop loss – short term trading – long term investing - and tools like moving averages etc

forex and asx
ive been practice trading at www.fxoanda.com -
some of you might be interested to know Oanda offers the use of a very good free platform – on their server – linked to the real market – unlimited practice for as long as you like – you have a practice account and make can make buy and sell orders that follow the real market, and itll keep track of your profit and loss - and access to a users forum just like this one to discuss ideas. The currency markets run 24/7 not counting weekends – so you can practice whenever it suits your schedule.

Despite my months of practice, ive learnt a few things – but still not good at it, so i decided to look at home, at the asx again.


The present –
Im at retirement age - facing retrenchment sometime in the next 3 – 6 mnths – when I will have a comfortable amount for a trading account, but not enough to retire –

Trading has to work – otherwise ill be broke in a few years and too old for someone to employ.

But I really don’t have confidence in myself yet being able to do this successfully – so I was thinking of using a service – or an individual who is confident and successful with their system, who it would only be fair to pay to guide me, while I still need it.

Im gonna need income - and id like to be able to do more for my kids, now in their 20’s, before I leave this planet – anyone on the forum who is a parent, will know what I mean .

Have been browsing a few sites out there like share select – smtr trader ( Glen as you know contributes to this forum ) and I like glens smrt trader site – and the chartist – nick radge – who also contributes to this forum – he did a thread currently active, on trading with volume – in fact I found out about these guys through links on this forum.


conclusion
So that’s my story – trading’s gotta work, otherwise I’m up the creek without a paddle ! I started thinking about options trading last night too – I don’t fully understand them and id definitely seek advice!

By the way, anyone live in or near Bris ?

the email address ive set up for trading related stuff – is blueskytrader@hotmail.com

thanks for listening everyone

Hi blueskytrader,

Have you considered investing through a Managed Fund? They offer income fund.

I see you are very worried about losing money and that stress can cause that you make the wrong decisions when trading. I personally wouldn't trade under those circunstances.

Warren

If you live in Brisbane then you are 2 hours from Nicks place,I would make an appointment and talk to the guy.

You can contact him through Reefcap if you like.

He has training course, both live and over the net, he has been trading for a Loooooong time, he can share a lot of experience with you.

I am not sure on what it would cost, but he sure has been there, done that ...............

Agree, Nick's the man. At the very least, read his latest book.

Hi Blueskytrader

It's true that some people make a living successfully from trading. But one must carefully consider the following:

Trading is not an ATM machine. It is a negative sum game where, on the whole, the proficient minority make money at the expense of the less experienced majority. Proficiency can take some time to develop.

Of course everybody trades with the intention of profit, but setting theoretical or unrealistic targets, especially if one begins undercapitalized, can create real stress. It's generally better to take the approach of trading a proven system correctly and methodically, and additionally focus on managing risk. One can not control the markets; the best one can do is ride the trends that are on offer. If the trends last long enough, on average, to overcome costs, then profits will occur as a matter of course.

One must learn to accept frequent losses. Even the very best systems encounter periods of drawdown. Moreover, income from trading is likely to be inconsistent, especially whenever the market changes character, which it frequently does without notice. As an example, two of the best (UK-developed) black box systems being sold on the Internet (both are advertising returns of 200%+ p.a. across track records of 3-4 years) have win rates of only 47% and 48% respectively, and both have encountered drawdowns in excess of 50%. In one case, the period of negative income extended for 6 months (March to Sept 2004).

It's important not to put money at risk – or even worse, borrow money – that you can't afford to lose. As the old adage says "scared money never wins". It is all too easy to underestimate the psychological element, especially if one is playing for uncomfortably high stakes. When anxiety sets in, it is near impossible not to let one's discipline slip, and make mistakes. Having a thoroughly proven system makes it easier to maintain faith in one's approach, especially during a prolonged losing streak.

Trading as one's sole or primary income source creates additional pressure, to overtrade. When market conditions are less than ideal, one can be tempted to trade lower probability setups, in the hope of attaining income. One has to somehow workaround the inconsistency of the income, while nonetheless paying household bills on a regular basis. Obviously these payments deplete one's potential trading capital.

Let me finish where I began: it's true that some people make a living successfully from trading. However, be aware that it is not necessarily an easy road.

All the best
David

Very wise words David. If I can add one other benchmark. If you want to trade full time, the profits must be 3x what you earn in a salaried role. So if you earned $50,000 in your place of employment, I beleive that unless you can make $150,000 you should most likely no trade. I say this because the reward must over-compensate for the risks, and those risk are not just financial but health related as well.

Just to add...apart from factors already mentioned, trading for a living can largely be a function of the amount of capital you have.

How much is enough? The more the better and we're talking 6 figure sums.

Some trade with much less, but this is only possible with leverage shorter time frames and EXPERIENCE.

I was in much the same boat, having injured myself out of my profession. I also started between the Tech crash and 9/11, and I think it was a great advantage. Why? I think the worse time to start trading is in a rampant bull market. The bear is a much better educator

Cheers

Hi blueskytrader

:iagree: 100% with hanover.

I think anyone thinking of just jumping into trading without much research/preparation should have "Less than 10% of traders make a profit to any significant extent in the long run." tattood on the back of their hands so they can see it everytime they punch in their buy/sell orders.

Without rehashing hanover's post and what has been posted in other similar threads, imo it would be well worth putting in the time and effort to develop and write down a trading plan which includes your objectives, what sectors/stocks etc you will trade, what criteria/strategy (technical, fundamental or both) you will use to determine entry/exit points, risk management strategies (stop losses etc etc), how you will monitor and measure the performance of your trading (bench marking) and whatever other items would be applicable to you.

I would also recommend paper trading and fine tuning your plan/strategies until it generates your objectives before commiting real funds.

Now obviously doing all of the above will not guarantee being profitable in the long run, but imo it greatly improves your chances of being in the 10% of traders who succeed in the long run.

hope this helps

bullmarket

This line that only 10% of traders make money is everwhere but where are the statistics? Is it one of the GRUMPHS under the child's bed?

It's oft said and it might be true but is it mythic? Is it like the line the Jesus was god - oft said but where's the proof.

Is the line 'only 10% of traders survive' used as a cautionary leaver - a reverse motivator - whether it is true or not.

Mrs Mallins said:

This line that only 10% of traders make money is everwhere but where are the statistics? Is it one of the GRUMPHS under the child's bed?

It's oft said and it might be true but is it mythic? Is it like the line the Jesus was god - oft said but where's the proof.

Is the line 'only 10% of traders survive' used as a cautionary leaver - a reverse motivator - whether it is true or not.

Click to expand...

If we are talking traders (not investors) I'd say it is true, and I believe someone did do the statistics once.

I believe the reason is that most people become involved as traders during rampant bull markets, and they make money despite themselves. When the bear eventually gatecrashes the party, these people are totally unprepared, believing the market will turn up again soon...they are like a roo in the headlights....an accident waiting to happen.

Cheers

Hi mrs M

I have never seen any statistics but I've read the 10% is based on anecdotal evidence.

Given that the overwhelming majority of the working population rely on a primary income other than from day trading suggests to me the 10% figure is very likely close to the mark.

The way I look at is, if making a 'decent' profit in the long run from trading was easy then the overwelming majority of the population, if not everybody, would be sitting at home infront of their pc's punching in buy/sell orders all day.

Regarding proof for the existence of God, I believe he exists but each to their own on that matter....I won't be continuing with the reasons why in this thread as it's obviously not the right place.

I suppose those who don't believe there is a God are hoping they are right because eternity is a long time to be suffering in 'hell' or wherever for getting it wrong in the relatively miniscule timeframe of about 80 yrs on average we spend in this life.

cheers

bullmarket

Mrs Mallins said:

This line that only 10% of traders make money is everwhere but where are the statistics? Is it one of the GRUMPHS under the child's bed?

It's oft said and it might be true but is it mythic? Is it like the line the Jesus was god - oft said but where's the proof.

Is the line 'only 10% of traders survive' used as a cautionary leaver - a reverse motivator - whether it is true or not.

Click to expand...

One study I found here I'm sure there are more.I havent read it yet so could say they found 100% winning traders.

I hope so.

http://www.nuff.ox.ac.uk/users/murphya/Active Traders.pdf

No reason why you couldn't do pretty well if you had a real system and most importantly a professional poker players mindset.

Don't you just love Joker Poker and the strategies and tips the professional player - commentor uses in various situations?

Cheers
Happytrader

bullmarket said:

Hi mrs M

I have never seen any statistics but I've read the 10% is based on anecdotal evidence.

Given that the overwhelming majority of the working population rely on a primary income other than from day trading suggests to me the 10% figure is very likely close to the mark.

The way I look at is, if making a 'decent' profit in the long run from trading was easy then the overwelming majority of the population, if not everybody, would be sitting at home infront of their pc's punching in buy/sell orders all day.

bullmarket

Click to expand...

Hmmm, I think it is way more than 10%. And I think the reason why others dont do share trading is because it is an unknown to them. My brother cannot believe I trade shares, nor did my father! Too risky they say!!!!So I havent told him just how much I have invested or it would blow his little sox off
If I can make the profit I am making after only 2 years trading (and it is above the all ords growth for last year) then honestly, I'd say at least 25% of people can.

Hi prospector

no problem...but if you are only using the last 2-3 years market returns then I think that is misleading, especially to newbies. I posted a chart in another thread yesterday which showed that XAO had grown ~9.5%pa compound on average from 1991. But even with that average growth many would have lost money overall for all sorts of reasons, trying to beat the market during that period.

I'm also assuming that 10% figure is based on a rolling 5-10 period if not longer

To be honest, if anyone has lost money overall in the stock market with its stellar run since March 2003 then it appears to me they have serious flaws in their trading and/or investment strategy. Going forward from here I feel there are too many potential geo-political and global economic storm clouds brewing to think the same returns of the last 2-3 years are likely to re-occur in the forseeable future.

But even at your 25% that is only 1 in 4 make a decent profit. The other 3 in 4 do not, so the odds are still significantly stacked against the unprepared, unresearched trader imo.

I think a high % of failures is due to newbies seeing the spectacular run of the market of say the last 2-3 years and think it is easy to simply jump on and make money when in reality it isn't. There will always be exceptions to the general line of thought and maybe you are an exception, so good luck to you and I hope you continue to do well.

Imo, it is generally far riskier now for a trader just starting out than it was back in mid 2003.

But as I said in an earlier post, if someone puts in the time and effort to put together a plan and paper trade to test it then their chances (without any guarantees) in being in the 10% that succeed in the long run are significantly improved.

cheers

bullmarket

I will not quit my day job.

What I would suggest is to get a program that has training mode, so We can set the chart to go few years back and hide the remaining bar chart, and test our entry / exit strategy

bullmarket said:

Hi mrs M

I have never seen any statistics but I've read the 10% is based on anecdotal evidence.

Given that the overwhelming majority of the working population rely on a primary income other than from day trading suggests to me the 10% figure is very likely close to the mark.

The way I look at is, if making a 'decent' profit in the long run from trading was easy then the overwelming majority of the population, if not everybody, would be sitting at home infront of their pc's punching in buy/sell orders all day.

Regarding proof for the existence of God, I believe he exists but each to their own on that matter....I won't be continuing with the reasons why in this thread as it's obviously not the right place.

I suppose those who don't believe there is a God are hoping they are right because eternity is a long time to be suffering in 'hell' or wherever for getting it wrong in the relatively miniscule timeframe of about 80 yrs on average we spend in this life.

cheers

bullmarket

Click to expand...

bullmarket

If you are looking for a discussion about God, the devil,etc etc, try:

https://www.aussiestockforums.com/forums/showthread.php?t=2319


Julia

hi Julia,

no thanks....I'm already convinced He exists

I was only throwing my in in reply to Mrs M's earlier query.

cheers

bullmarket

happytrader said:

No reason why you couldn't do pretty well if you had a real system and most importantly a professional poker players mindset.

Don't you just love Joker Poker and the strategies and tips the professional player - commentor uses in various situations?

Cheers
Happytrader

Click to expand...

Its really no secret why the success rate for traders is so low. Its the failure to admit mistakes, take the loss and move on quickly. Works well in most other relationships as well. BTW thats no joke about that Joker Poker show either. Probably one of the best shows for watching mindset, risk and method in action.

Cheers
Happytrader