Last month I turned 40. I have spent my life in equal thirds in Germany, New Zealand and the UK. Initially I qualified as a chartered accountant in NZ. But since the age of 25 I have always worked as a contractor, a freelancer or just independently in some form. I have tried and failed and tried and succeeded at quite a few things. I developed a habit of putting money to the side when the ‘sun was shining’, and that’s allowed me to get involved in various opportunities and to have a bankroll when needed.
Since August 2013 I have been trading full-time once again. In the two years since then, I have not made any profits from trading. I have not lost a lot either – I have approximately gotten to the point where I am breaking even or losing just a little from one month to another. I am not used to having to work so long without seeing success.
In this Member Profile, I want to get across my impression that I have found/am finding the journey to consistent trading profits incredibly difficult. Thus, my message is not an overly encouraging one (you have been warned!).
Trading – the early years (2003-2011)
Although interested in the Kiwi stock market as a teenager, it wasn’t until 2003 (in my late 20’s) that I properly started trading and had the first of many full-time trading phases. I began with US stock options – learned what I could on my own, and proceeded to blow up my $15k account in about nine months. After more accountancy work, and another six month full-time spread-betting stint in London at some point, I spent six months in Bangkok, again trading US stock options, trading from 9.00pm to 4.00am local time. This time I managed to keep my loss to just 5-10% of a $20k account.
Looking back to those trading periods now, I realize there were huge gaps in my trading knowledge and I should have approached things much more professionally. I never went on any courses – I just read books and learned online – but my time at the screen wasn’t spent productively either.
On returning to London from Asia, I lucked out scoring a trainee position with a successful independent options trader, who was a market-maker for Euribor options and I spent half a year with him, eleven hours a day, learning a tonne before hitting a plateau and deciding to follow up on some IT consultancy opportunities for an extended period.
Some months after the market-making stint, after reflecting on my various trading experiences, I concluded that I most likely did not have what it takes to be a profitable trader. As one does, what started as something little on the side of the IT work, I stumbled down the road to becoming a serious poker player which led to a reasonably profitable period of gambling professionally online and offline for several years. With that I learned the principles of expectancy and associated variance in results, gambling with an edge, bet sizing and risk/money management and I continued to build a bankroll. Certainly, that was one piece of the puzzle missing in my prior trading experiences.
I decided to return to the markets armed with this new understanding, this time trading FX – shared an office with a fellow T2W member, who steepened my learning curve. Adventures also included trying out a live trade room trading opening gaps in the US indices and, on my own, trading Sunday night FX gaps as well as a host of other technical strategies on the FX majors. After around 12-15 months of this and getting depressed after a big six week £20k losing streak, I returned to playing online poker and more IT work, this time in France.
Trading now (2013-present)
And then, when things were going really well for me on extracting money from online poker and charging good daily consulting rates, I confidently stopped both to plunge myself back into full-time trading. (Why!?)
I got myself a trading coach – who taught me some fundamental principles and ensured I continued making progress in the right direction. My coach also advised me to keep a blog – 500 blog posts later and I am still blogging! You can visit it here: George’s FX trading blog (it’s also linked in my signature). Blogging has been exceptionally helpful and has often kept me from giving up, and I constantly refer back to it and re-read my observations.
At the start of 2014, I joined forces with three other independent retail traders and we set up a small ‘no frills’ trading office in the city to create a better social and professional environment for our trading paths.
During this time I became tremendously detailed in my record-keeping, journaling trades, psychology assessments, blogging and monthly operations plans. From my new colleagues I learned about moving average systems and technical patterns, and had the opportunity to talk through and listen to both mine and their trading related issues. Our regular impromptu technical and psychology-related discussions can be very insightful.
Throughout the day I listen to a real-time squawk service which is gradually educating me about many fundamental market aspects and inter-relationships of the markets. Additionally, I read a lot about trading psychology and do a lot of self-reflection, which has opened up a can of worms for life generally!
I continued trading the markets from various technical angles. Worked on several strategies –strength and weakness, price action, technical patterns, key levels, round numbers and moving averages. I have been working very diligently, always trying to improve, trying to learn, trying to adjust. My markets revolved around major FX pairs, Oil, the DAX and lately the Emini and the US 10-Year Treasury Futures contracts. Most days I am at my desk at 7.00am and I remain there till about mid or late afternoon. Most of my trading is executed on the 5m timeframe, so I am definitely a day trader.
Minimising transaction costs is very important to me. But I will also change broker depending on the market I am trading, and I also value the availability of accurate historical data.
I am making a concerted effort in networking with other traders, and helping others where I can.
I believe I have a solid risk management plan and I stick to it very strictly. I have developed a reasonable understanding of transaction costs, expectancy, distribution of results and risk of ruin. Thus my money management and risk management are intact.
All of the above should be steps in the right direction. Hopefully this gives you an idea of how I spend my time.
As well as three live trading rooms, I have also tried numerous technical approaches on timeframes from 1-minute to dailies. It seems I have been exposed to many different trading styles, environments and markets and that I have invested a huge amount of time into my trading career.
All that said, to this point my only claim to fame is that I roughly break-even. I am still down at least £40k in trading results in my ‘career to date’ without providing for books, courses, computer costs and office rents – let alone the opportunity cost of playing poker or being a software specialist. If I measured my returns in units of risk, then I would have blown myself up at least 2-3 times by now. Trading small most of the time has protected my trading capital.
The latest twist in my trading career picked up momentum in the 2015 summer. A wealthy friend has asked me to work with his small trading team to create an automated strategy for two US futures markets, with the idea of eventually rolling it out to other markets. My friend was well aware that I was not producing profits for my own account, though he seemed to respect my poker successes, my work ethic and, probably most importantly, my sheer physical determination in our squash games. This latest stint is teaching me the importance of back-testing and automation.
My plan for the future is to somehow manage to survive and hang around long enough until a point where I make consistent profits and my trading capital is still sufficient enough to translate my trading edge into a reasonable yearly income (at least £100k) and to have the potential to still build my trading capital into several million pounds, so that I can be comfortable financially by the time I am 60 (in 2035) whilst also doing things I love aside from trading and having the time to do it.
Whatever it takes to get there. It’s very difficult to envisage, ahead of time, things that I need to learn next. It really has been more a matter of stumbling across things – with the insights from strategy automation and significant back-testing in recent months being a prime example.
The longer that I trade full-time the harder it becomes to return to other areas I have worked in over the past 20 years. And what if my trading capital should run out?
Trading is definitely not an easy road – particularly as there are no clear sign-posts as with accountancy, software consulting or even poker.
Tips to pass on
Don’t underestimate your transaction costs. Try to minimize them.
It’s incredibly hard work. There are few shortcuts.
Make sure you have enough trading capital to start with – to potentially make worthwhile, and to cover your costs!
Spend time on the psychology area. Understand yourself.
Work with others if you can. Don’t go at it alone.
Try as many different angles as you can. You never know where the next golden nugget is going to turn up.
If you can, in any way, join up with someone who is already doing it successfully (a good friend, a relative) then do it.
I know that overall my words are going to be discouraging – but I decided to express my honest views. I would not recommend people go into trading independently. Or at least be fully aware that it might take a lot more time, money, sweat and tears than one expects. But then maybe that is/was just my journey. Maybe yours will be different. My gut feel is that most people have much better odds of getting a good return on their time in other fields.
As for me, I am going to stick with it for now. Tough though it is, I do love the journey, and I have still got money in my pocket – and who knows, maybe I am going to be lucky and become one of those few profitable traders.
options-george has a blog that can be found Here