[Steve9]

There seems to be a few guys here trading. I thought it would be interesting to run this survey since trading could be an attractive "career" choice for those of us who want to become more location independent. Please ignore any questions that are to personal.

1. Is trading your main source of income?
2. Are you trading equities, bonds, forex, commodities, futures, options, CFDs, other?
3. How many years trading?
4. How old are you?
5. How many hours/years of study/experiene before you became "successful" at trading?
6. What is your % annual return since you started?
7. How much capital did you start with?
8. What techniques, strategies, methodologies do you use?
9. What trading educators/resources do you recommend eg. http://www.antonkreil.com
10. Any other comments?

[Hencredible Casanova]

(09-28-2013 10:06 PM)Steve9 Wrote:  

10. Any other comments?

[SeanBateman]

I've been doing this part time for about five years and losing money every year, mostly in futures. But in the course of losing money consistently I have gained a lot of experience and knowledge. The pros call your early losses paying tuition. That experience has been valuable and I am finally at the point of being able to make money in a way that is fairly stable and repeatable. It's hard to do anything with less than $10k in capital, and I have funded and then blown up an account that size multiple times ("blowing up" is trader speak for going broke). It is possible to be one of the outsiders who makes money without being employed by a bank or a hedge fund, but it is very hard and you have to be smart as fuck. For years all of my spare time has gone into learning how the market works on both a macro and super micro level, and all of my money has going into my trading account instead of a savings account. It's been intellectually satisfying and it's been worth it in terms of time and money, at least for me because I think it's very interesting stuff. And after suffering a lot of losses in the early years, I'll be able to quit my day job in 2014. So to all of my ex girlfriends who said I was wasting my time and that I should just have the normal goals of job promotions and a retirement plan like everyone else, I now say fuck you.

[JayJuanGee]

(09-29-2013 03:21 AM)SeanBateman Wrote:  

And after suffering a lot of losses in the early years, I'll be able to quit my day job in 2014. So to all of my ex girlfriends who said I was wasting my time and that I should just have the normal goals of job promotions and a retirement plan like everyone else, I now say fuck you.

SeanBateman: I am not trying to bust your balls, but really you gave hardly any details in your earlier post, especially when it comes down to questions like how much did you start with and how much are you making now from trades and how are you gonna be able to quit your job? You making $3,000 or $10,000 a month? Will be you able to maintain that consistently? How do you know?

I personally have only engaged in dollar cost averaging stock market index fund investments over about the past 13 years - though it has taken me quite a long time to build up to my current portfolio - which is largely in a 401k type account in index funds, and i am just continuing to let it build up - maybe another 20 years.. if I am lucky enough to live that long.

Right now, if I tried to draw on my account, i may be able to draw $1200 to $1500 a month and still maintain the principle - not enough to live off of, in my humble opinion... but if I am able to let it grow for 20 years without touching it (and even if I do not invest further into it), then it will very likely nearly triple in value ( so long as the whole US monetary system does not collapse - which is possible), which may be about $4,000 a month to draw only the interest, and since I will be 20 years older, I may be tempted to begin to draw on the principle as well, which would be probably drawing down at about $6,000 per month to include both interest and a reasonable portion of the principle.. that is if I can live that long and be able to enjoy drawing on that building portfolio.

My plan is certainly not a get rich quick theme, but instead considering a long term approach that may provide for a modest income to supplement other income sources.

[SeanBateman]

JayJuanGee,

I can make about $1k per month per $10k of capital in way that is scalable. I have $10k in capital right now and I think I can sustain sufficient capital growth on top of withdrawing living expenses once I have about $100k in capital. I focus on two things:

1 - Scalping EUR.USD

2 - Selling ES options

There are three major lessons I have learned that have formed my trading style. The first lesson is to not go for the home run. I enter positions with small profit targets and will take consistent small returns rather than inconsistent large returns. The second lesson is that I cannot predict the future. For example "I think the S&P will go up because of fill-in-the-blank" is not sufficient rationale to enter a position. If you don't have an information or technology edge that the average person doesn't have then you are just guessing, and guessing may work a few times but it won't work in the long run. And the third lesson is hedging. Trading is less about picking winners and more about protecting yourself from risk. I don't like stops because the bummer about stops is that they get triggered. There are hedge funs who specialize in "stop hunting," ramming orders through the market just to trigger your stop, because a lot of retail traders use them. You can flip this into a benefit by using targets instead of stops, so then the stop hunters are your friends because they trigger your targets. So rather than using stops to protect against risk I will hedge risk with either the underlying asset in the case of an option or a futures contract in the case of a currency pair. For example, even though the predictive ability MACD (moving average convergence/divergence) is low I will use MACD to enter a position where convergence is indicated with a close profit target and then enter a hedging position if the price goes against me, hold the hedge if the price continues to move away, and exit the hedge if the price comes back around towards the target. My technology edge comes from the execution of the entry/exit of the hedge position. I run algorithm driven execution of the hedge that can get a little ugly if the price zig zags too much through the price that I am trying to hedge at but if it moves through the price with some momentum it works well. I coded the algorithms in Java for my broker's API. It's far from a perfect or risk free system, but it works. I do all this with about 20x leverage, so it's full on in terms of risk and balls. A wrong move or a botched execution could do a lot of damage. But it's an intentional and understood amount of risk and I am comfortable with it.

As for dollar cost averaging an index like you mentioned, that is basically the opposite of what I have been trying to develop. What you are doing has the highest market correlation possible, whereas I want as close to zero market correlation as I can get. I want my system to perform consistently no matter what the market is doing, and this system does a pretty good job of that. I'm also not a fan of cost averaging a losing position. "Losers average losers" as Paul Tudor Jones says. But that is the traditional approach and there's nothing wrong with it. Putting all of your money into an S&P 500 ETF at 2x leverage for the last four years would have been a massive win, certainly better than my costly experiments and highly leveraged gambles. But will the winning streak in the S&P continue if/when the Fed starts to taper QE...? I guess we'll see... For what I'm doing it doesn't matter if the S&P goes up or down in the long term, which is the approach that makes sense to me but it's far more labor intensive.

[JayJuanGee]

(09-29-2013 07:58 PM)SeanBateman Wrote:  

JayJuanGee,

I can make about $1k per month per $10k of capital in way that is scalable. I have $10k in capital right now and I think I can sustain sufficient capital growth on top of withdrawing living expenses once I have about $100k in capital. I focus on two things:

I will tell you if you can consistently get anything more than 10% per year returns, you should be a rich MF - b/c you would be able to get all kinds of people wanting to invest with you.

Above you are talking about 120% annual returns, which maybe you can do some months, but I really doubt you have any ability to sustain those kinds of returns over years. Now, if you have only been in this business for a short period of time, then you do not have a very long track record, and overall the market has done pretty good all on its own in the past several years (though it has had a few mini-crashes, but fairly good returns in periods of recovery after 2008.

At this point, I would really like to get rich by giving you $300,000 to make me $300,000 by next year, but really I do not trust you, and i believe if I gave you my $300,000, I would be broke or nearly broke after a year. Sorry, but that is my level of confidence, at the moment.... b/c you are giving me numbers that are astronomically unreal and do not seem sustainable.

[DrugAdvisor]

@SeanBateman,

Not hating. But I have been where you are exactly right now before. I have busted my account more than 3 times trading options on their expiry week during earnings seasons, spreads, and condors.

After the third time, I thought to myself, why not build up a portfolio with a little less risk in case I am wrong. So I practiced dollar cost average on index funds (s&p) and Berkshire only. Whilst maintain 10% of the same account doing active trading. (I write covered calls and sell naked puts on index funds as well, but that's under my conservative section of portfolio). And you know what happened? My passive part of the portfolio outperformed big time over the past few years.

I'm not saying your way won't work, but u really don't have to put yourself through that proving yourself right, and lose money doing so.

[Steve9]

(09-29-2013 10:34 PM)DrugAdvisor Wrote:  

So I practiced dollar cost average on index funds (s&p) and Berkshire only.

@DrugAdvisor: This is smart and simple and will outperform most investors with zero effort.

For what its worth, Berkshire is my largest position and I believe it will continue to outperform the S&P 500.

If you are interested in a "mini-Berkshire" take a look at Markel (MKL), which operates in the same way as Berkshire, but could grow faster because it is very much smaller.

Also instead of investing in a standard S&P index fund, i suggest you look at the Rydex S&P Equal Weight ETF (RSP), which is the equal weight version of the S&P 500 and gets re-balanced quarterly.
This has outperformed the S&P 500 since 1978.

[SeanBateman]

All fair points. For the sake of a thought exercise, what about writing an ES call option and defending it by buying an ES contract if ES goes above the option strike price and closing the ES contract position if ES goes below the strike price? Basically trading theta. In my view it works if you have good execution on the ES contract, and is ideal when ES isn't range bound at the strike which increases entry/exit frequency (which cost spread and commission every time). So basically write an ES call, ES goes down and you don't hedge so you have theta, ES goes up and you do hedge so you have theta. Is there a flaw I'm not seeing in this?

[DrugAdvisor]

@SeanBateman

I think you're referring to calendar call? In theory trading it would work, but pricing the option correctly would be a challenge. Especially determining the intrinsic value. That said, I'm not familiar w options / futures hybrid trading. Just options / stocks.

[DrugAdvisor]

@Steve9

MKL, RSP, got it. Will check them out. Thanks for that.

They're both option able right?

[SeanBateman]

It's kind of similar but it's not a calendar spread, as that would be writing an option in the nearer term and buying one further in the future at the same strike price. What I described above is the naked selling of an option and hedging with the underlying asset (in this case an ES futures contract) only if the option goes in the money. I don't think it falls under the name of a traditional options structure because it would have to be actively traded, not just entered and held.

[Steve9]

(09-30-2013 01:43 AM)DrugAdvisor Wrote:  

@Steve9

MKL, RSP, got it. Will check them out. Thanks for that.

They're both option able right?

Correct

[TheBMan]

@SeanBateman - if you are trading futures I always prepared the /TF because you can trade in .1 increments instead of .25 like the ES. Higher leverage though so be careful.

[SeanBateman]

TheBMan,

Can you explain that? I'm not sure if I'm familiar with TF.