Advice Needed

Although according to this board I am a new member I have been frequenting this site for a few years, although I haven't made that many posts over the years. The reason for my pseudonym is that I would like impartial advice and not to be hindered by any previous posts I may have made.

So, the advice I need. I have just walked out of my job. It was a crappy job earning around £14,000pa. There was no future in this job, no promotion prospects no where to go. I am a Law graduate achieving a 2:1 which I believe means I have at least a fairly sound intelligence. I've been trading Forex for about 4 years just with a micro account while I 'learn the ropes' and take the journey of failure/success which I'm sure many of you have been on. The largest account up until now I've had has been £1000. Over the years I've probably lost close to £2000. Since January however I have seen a huge change in my trading, almost a light bulb moment where everything seems to come together. I am now extremely confident in my trading and believe I have a very very sound trading plan. I don't particularly want to go into this in too much detail as this is not the point of this post.

What I would like to hear are suggestions. I now currently have no job. I do however have my last £5000 in a savings account which I could fund my trading account with. I am a single 25 year old male living with a house mate. I have very small outgoings bill wise. To live on all I need to make is about £250 per week. Trading wise I cut my losses very early, on a £1000 account I trade at between 0.2 and 0.4 lots depending on how I view the set-up. I take half off at 20 points move my stop to b/e and then trail a stop manually, I must emphasise manually as I place my trailing stops.... including the initial stop on the market and not an arbitrary or hard stop. I don't believe in a R:R ratio as I find this limits my trading potential why only go for 1:1 or even 1:3? Typically my losses are around 20 -30 points and my winners are around 60-80+ My strike rate is about 72% mainly because I also tend to employ a SAR type strategy. At £2 a point this is more than enough to live on for someone in my position. Anyway I digress,

suffice to say.... I think I can make money from this now...... but...... it's my last £5000 I'm investing..... if I f**k this up I have no rent, no food, no broadband... nothing. It is a massive risk. I know the maxim, never trade with what you can't afford.... but..... sometimes you have to take a risk in life to get ahead right?

Well, if my winners were generally at least twice as big as my losers and sometimes four times as big, like yours, and my strike rate was 72%, like yours, I would not turn up for work tomorrow.

Im going to take the other side, I think being cautious is more prudent.

If some black swan happens tomorrow and you are on the wrong side of the trade, its more than just your account you will be losing.

I would say keep saving until you can comfortably lose all your money without it affecting your living conditions at all.

If you can make 5% per week on average ( maybe too optimistic? ) then that would cover your living costs. But, your account will always remain at 5k and your life situation won't improve.

What if you suffer drawdown yet need to dip into the account for living costs? That will reduce any returns and you could enter a vicious circle, ending up broke.

dmt257's post says a lot.

Your trading strategy sounds ok, BUT, you will find that your emotions while trading will drastically change now that you are trying to pay the bills, rather than just making some extra money.

There's nothing wrong with trading to pay the bills while you are actively looking for another job. In my opinion if you are using trading as a sole or primary means of income then you should have at a minimum 3 to 4 times what you currently have plus a few months of living expenses separate from your trading account to take the edge off initially.

Good Luck!

Peter

Agree with the posts above entirely.
Personally I would say a years living expenses plus trading account of £15K.
That provides a buffer to reduce pressure, which may affect your trading performance.

TBH, assuming your stats and strat hold up as you say, and no black swans / drawdown mess things up, £5K for trading and living expenses is cutting it very fine.
I would look for another job, then find a market that you can fit in around that job - asian session, U.S. mid session range scalping or U.S. close.

If you are confident of finding a job given the current job market, then maybe you can feel justified in taking the risk.
Also QE ending in the U.S. will spice up the volatility as well...

Hi JTP,
Welcome to the site.
I agree with the comments urging caution. At the very least, have a back up plan if everything goes pear shaped. If you lose all your capital, have no money for food and rent - you'll quickly wind up in debt. It happened to me as a young man not long after finishing uni. I had a job - but it was commission only - selling life insurance door to door, and I was a lousy salesman! Anyway, debt is something to be avoided at all costs, IMO. The other thing to consider is the gaping hole on your CV if you're forced to return to the jobs market. Putting down 'Trader' on your CV is fine if you're applying for a job like mine here at T2W, otherwise, I fear it will be a red flag in most company HR departments.

Having said all of the above, if you decide to go for it - best of luck - I hope it works out for you. You could start a journal here on T2W to record your journey - I'm sure it would be a most interesting read!
Tim.

Go for it...

Jack_The_Pipper said:

Since January however I have seen a huge change in my trading, almost a light bulb moment where everything seems to come together. I am now extremely confident in my trading and believe I have a very very sound trading plan. I don't particularly want to go into this in too much detail as this is not the point of this post.

Click to expand...

Since your eureka moment 3 months ago, what are you results?

Agree with all that is said although your trading stats sound quite good.

The psychology thing will be the clincher. For each trade you will be saying "That's X % of the rent i just lost" or "Ok, i didn't really want to eat next week anyway". Very scary for someone with little "emotional" experience.

I have a job that i can just about tolerate but even i say "how long did i have to work for the money i just gave to someone else on that trade? " You can't help it. This will decide it for you i think.

you don't have enough capital to be trading for a living, end of ! get another job and trade part-time until you have saved up a lot more.

On the one hand, in your posttion I think I'd trade small amounts with tight stops whilst looking for a job.
You can't afford to lose but if you can eke a small amount to help tide you over
without risking your pot then why not.
But its for the short term only. You'll need a bigger pot long term.

On the other hand, what worries me a bit is that you need to ask, - it might show some lack
of confidence in your abilities.

Normally I'd just say go for it, but a reality check is required before taking the plunge. You need to generate 12K from your 5K, whilst simultaneouly withdrawing funds for living expenses which severely diminishes your ability to compound position size.

I know noone here at T2W ever has a losing trade (other than me), but if you get hit by the sorts of misfortunes that I tend to suffer, then you might just have the odd losing or breakeven month, and that diminishes your capital even further which give you an even bigger mountain to climb.

I'm a great believer in the effects of random chance, and you might be the outlier who pulls it off, but the probabilities are not really on your side.

£5k isn't a lot to trade with but 72% strike rate while risking 20-30 pips for 60-80 pips is pretty awesome. Needless to say, more info is needed. How many trades in your average week? Have you back tested the strategy? If so, how long for? By the way, here are 10 equity curves based conservatively on the info you have provided to far... If you were compounding you'd probably be a millionaire by now!

sorry mate but its a terrible idea. I mean you need to make 20% a month just to support yourself.

Apply to join one of the prop firms and support yourself while on their courses if you want, but until then get another job.