This past Sunday, Norman gave us Part 1 of "Becoming a Full Time Trader" and many of you enjoyed it, and helped with other Trader's Blog readers' comments, questions, and needs. We hope you'll enjoy Part 2 of Norman's series just as much. He as also just recorded a few 3 minute audio nuggets about trading discipline, which you can check out here.
===================================================================
Consider the following: if a trader is successful 65% of the time with an average profit of 6% per trade and losing trades are stopped out at 5% loss, then over 100 trades, there would be a cumulative annualized gain of over 26%. Real dollars would, of course, depend on the value of each trade. Another way to look at
it is if a trader averages just a 3% profit margin each month that translates into an annualized 36%.
Here's the big kicker...
If you make a deposit of $20,000; add $5,000 each year and can generate a 36% average annual return, the power of compounding profits would get you up to over $1,000,000 in less than 15 years compared to taking over 25 years at 12% average annual return. For those of you aspire to be lounging on your yacht, I know of some traders who consistently produce over 15% per month; yes over 180% annually! It can and does happen with more regularity than you would imagine. But if you plan to produce those kinds of profits, don’t expect to have many opportunities to dive off the side of the boat. At that level, trading can become a full time, high pressure business.
If you are a person who sees some middle ground in that your current job would allow you to keep an eye on your investments and have the freedom to trade actively without interfering with your job performance, then consider the following:
1) You will need to become an expert on trading the investment vehicle of your choice. There are several ways to do this. First, spend years reading and trading a paper account; this ability is a fantastic opportunity that is central to the learning process.
Brokerages realize that happy clients are winning clients and brokers not only can help educate but allow clients to trade their platforms on trades that include every aspect of trading except the money. It’s fantastic in that even if you spend several years trading phantom money, the experience and knowledge gained is incredible and your chances of becoming successful are greatly enhanced.
2) You can hire a trading mentor. This is becoming a popular but expensive option. However, it may be money well spent and the argument can be made that the shorter time to acquire the necessary knowledge to become a successful trader from an experienced trading mentor can more than offset the costs. It all depends on the level of commitment of the student. Because the internet and VOIP telephony has made location inconsequential, finding a mentor is probably the best choice - if you are serious. I say this because there is much more to becoming a successful trader than just technical information. For example, a trader needs to understand how to handle the pressures and uncertainties of the market. They need to understand how to lose and not have that affect their ego. They need to understand that discipline is essential and many people do not possess the ability to keep on track without a coach.
But How Long?
If you decide that becoming a successful trader may be a way for you to accomplish your financial and personal goals, I suggest that you find a qualified mentor. However, don’t quit your day job just yet. You will need at least several years to become prepared to trade - even on a part time basis. So look at least two years of study and mentoring before “going live”.
It’s not uncommon for a person to spend decades and hundreds of thousands of dollars in the pursuit of education and training to become a professional in any field. Most professionals become salaried employees and have limited incomes. As a trader, your potential income is unlimited. The sky is the limit.
But to think it’s just a matter of opening an account and using your innate intelligence to make money, you’d probably be better off collecting stuffed animals.
Once you make the commitment to put your toe in the water, realize that learning how to develop a skill that has unlimited financial potential is not easy and will take years to develop-just like any other profession. Indeed, becoming a trader is a long term proposition. First step in planning any long term journey is to develop a plan of how you want to get there. In fact, this first step is so important, that we will save the subject for another article.
Norman Hallett
TheDisciplinedTrader.com
Also here's the link again for my 3-Minute Audio Nuggets about Trading Discipline.
thanks to all responds and advise concerning my 2% day trading plans, i am paper trading for past mth. using $10g. today my paper acc. is $14.6g after loosing on all my trades 04/16 about $3.1g since i was not acctualy trading real $$$$$$ i was not using stop loss. those concerned about loosing my retirement money it is 7% of my 401k.i have a seperate retirement and ss app.4.3/mth. i am now living on 4g/mth. so i should be ok. thanks again for advise and concern. ONE LOVE, ONE PLANET RESPECT FOR ALL, LIFE IS WONDERFUL. DO A GOOD DEED TODAY TO A ANOTHER.IT IS GOOD TO SEE. LOVE U ALL.
Great article, really puts trading in proper perspective.
Yet, I can't help but wish it was as easy as Mr. E Jay has proposed. My advice to Mr ejay is as another writer proposed: start small, no more than 10K total. If he can actually implement his strategy then within 6 months his profits should be able to handsomely fund his account going forward. Yet as many of the writers have alluded, I think that Mr. ejay is in for a rude awakening. Furthermore, even though he proposes a 5% stop still he doesn't account for the drawdown on his performance. And every trader knows that you are bound to lose some time. Best wishes.
mr rae,
yes that is right. i am only want to show the situation was and get prepare for that. behind that is success story. because you interested, your own technique must be simple and stick to that technique. why? because the price up and down and if so many indicators, your brain can't work properly. we are not in the submarine that we can't look outside.
learn. people learned every pieces coming in. and you also same to me. i go through every indicators. that 's up to you to filtering all those make yours becomes so simple on the air not in submarine.
when it simple, easy to use and gives advantages to you. also link your fundamental analysis with technical analysis.
if i am saying wrong please forgives me.
Saunjat you are absolutely correct but it starts with a dream or vision
and a good plan and discipline and running different test on your plan and then execute and your pecentages will go up.
I would like to know more about forex day trading
Dear Jay,
You started counting your profit based on imagination that comes to all the traders when they start the trading and blow up all the money. Beleive me I lost 60K$ in one year in pursuit of recovering the the money I lost.
My advice to you, please read all technical tools like MACD, RSI, SLOW STOCHASTIC, FAST STOCHASTIC, CANDLE STICK, CHART ANALYSIS, PIVOT POINTS,AND MOST IMPORTANT ELLIOT WAVE PRINCIPLE AND ITS APPLICATIONs like Wave retracement for Price and Time. After acquiring knowledge of these tools and its working enter the market with say 5000 dollar and start earning 10 to 15 percent per month. By thIS time you WILL know your strength and weaknesses of your emotions and develop your personaility to suit day trading. The whole process may take not less than a year. Subsequetly you start trading on high investment. Straight away jumping into day trding is like jumping from Niagara to learn swiming.
My suggestion may not be acceptable But realise the fact that stock market is a gold mine and to dig the gold out of it you need to remove lot of dirt using sophsticated equipments and I listed few of them as above.
Now you decide whether you want to dig the gold using equipements or without it.
Hi JJ.
Would you be able to help as a mentor? Please Email me at be***@gm*.com
Wow, netting 15% per month? You and Norman Hallett's trader friends here are going to have almost a hundred billion dollars each within 10 years, starting from your meager $5000 accounts!
What's the point of even wasting the time required to set up and run a program like The Disciplined Trader, and charging $1300 for your program, if you're already making money hand over fist? The answer's obvious.
I had the same idea I will also be retiring in june an I have been paper trading and its working so far
mr rae,
when you say it works so far, you must know in trade there are two, a dreams and a reality. paper trade is a dream and a real trade is a reality. why? because there are a hard thing in converting from dream to reality. flaws..in human emotions. money is human emotions. it was in the "pressure game cage".
when people say some good methodology to you and you will appreciate it because that is telling AFTER know the market moves, after the games ending. there are different when telling BEFORE knowing the where the market goes..(peaks and valleys).
when you pull the trigger with real account, that is the real story will comes out. the real cool will comes out. the real emotion will comes out. on that time you will looking at the indicators like F1 races and all goes as not as you want. the indicators turn around like some wires was cut off. the oil gauge show difference, and you will start panic. some, at early stage. within one minute only. the story of "three stooges" comes out.
so now lets become realistic. so what you are going to do? the real money trading. are you dare to do it? every body can. sure. only not with their strong weapons.
if you select the wrong point, you will finish. if you not decide to push the trigger (for a long periods) you never convert dreams to reality...then how?
the answer: until you create your own real methodology that have passed the real money trading. that have been tested in the real money trading and you win continuously. that is your target. remember, i said your OWN methodology.
if i am saying wrong, forgives me.
We do forex day trading and we follow our own strategy. One thing we teach our student is the emotion. If control that then it will be very hard to be a successful trader.
E Jay,
I have been trading professionally for almost 15 years. The market has become far more complex since I began. Please don't throw away your hard earned money by attempting to compete against the pros without proper training.
Trading for a living is about becoming an elite performer. No different than trying to compete in athletics or in the performing arts. How many people do you know after retiring from their day jobs landed gigs on broadway?
Best,
Steve
Excellent post Norman, a dose of realism.
@ejay, if you actually manage that, then you will be truly a genial world class trader. Realistically, you're probably not that good... no offence! (Aside: you don't decide how much capital to commit to a trade like that, your position size is instead determined by the stop position and risk %/amount.)
It is far more likely however that you will crash and burn with such high expectations. Set yourself some more modest intermediate goals. You are in all likelihood setting yourself up for a massive bruising. Remember, you must stay in the game at all costs. There is a point of no return beyond which it's incredibly hard to recover from. If you lose e.g. 50% of your account, you need to make twice that (100%) just to get to break even! Lose 75% and you need to make 400% to break even. Etc. And, runs of losses happen, fact. If you have a run of (say) 10 losses, you need to be able to survive that. If your run of 10 losses equate to 10% of your account then it's easy to recover (make 11% and you're golden.) If however your run of 10 losses is 50% or more, then suddently things are not that simple. These risks are further amplified since you intend trading with retirement money. Trading money really should be risk money, money that you can write-off that won't affect your continued survival. So. Be careful, eh?
Remember Buffet's rules, which paraphrased is something like:
1) Don't lose money
2) see Rule 1
3) see Rule 1
A lot to consider here. It will take a lot of thought.
thanks
Jim
Good information. More than a little to consider here.
thanks
jim
@ e jay
Hahaha! good one.
Happy April Fool's Day 🙂
I have downloaded the 3 audios but I still cannot reproduce them to hear. Balwant
Hello dear sir
I am reza.heidari from iran
for my money run
i can to happy
Great point, Reza! Totally agree.
i am retiring in june, im planning to day trade from my retirement account $100k hoping to earn 2%/dy. using 10 stocks $10,000ea.i plan to buy stocks in an uptrends 30mins. after market open and close at days end, i will use a 5% stop loss. 2%/dy=$2,000, 1wk.=$10,000, 1 mth.=$40,000, 1yr.=$480,000. what do you think thank you. e jay
Dear Jay,
You are a genius !
Good luck !!... is my reinforcing advice for you.
Regards,
Nicolás
e-jay,
you must believe your strategies and analysis. make this two thing more upgraded to sustain your emotions the market pressure. market is changing and never easy as you mentions. the market is very pressure place. you must know:
1) the trend
2) the volatile
3) the distance
4) if it reversal, until what point
5) enter and exit
6) reduce pressure
so your strategies and analysis can anticipate all those above, because market moves not by fundamental alone, but also technical.
i hope you will success