Trader Q&A's

[Sharky]

For those who haven't already read Helen's Q&A session with T2W, this is a new section of the site that is accessible from the front page, in which we ask our regular members a range of questions which covers such things as starting out, trading in theory and practice, trading tools, experiences, success and failures, and advice. With the intention of getting a real insight into the background of how they trade, and we hope to supplement this with an ongoing journal of their everyday life.

This week, Mark aka FTSE Beater, a regular contributer to the site who will be familiar to many is in the hot seat. Mark who swing trades the S&P 500 stocks with Deal4Free Spreadbet, really emphasis' the need for sound money management by employing techniques such as a 3:1 Reward/Risk ratio on any trade he makes. Many thanks for taking time out to answer our questions.

If you'd like to be featured in on Trader Q&A and/or Journal section, or are willing to be interviewed by T2W, please email us at [email protected].

You can read FTSE's Q&A Here!.

If you'd like to express any thoughts or comments about any of our Trader Q&A's, please feel free to add them to this thread. I'm sure those featured will be more than happy to respond.

Sharky.

 

[FTSE Beater]

Hi all.

If you'd like to express any thoughts or comments about any of our Trader Q&A's, please feel free to add them to this thread. I'm sure those featured will be more than happy to respond.

I just wanted to say that I'm happy to answer any questions anyone has.

In advance, I would like to answer the question that will no doubt be coming from Britney Spears. The answer is yes I'm free this weekend

 

[minikoi]

has anyone had experience of signalwatch.com. nirvana. their various packages, of software.do they give good guiding signals.?

 

[hjk]

Hi there FTSE-beater
Could I ask what kind of returns you have made in the past few years?
You say in your interview that you "don't have £25k".
So starting with say 20k, to make a half decent living you have to make 100% return per year. But even if you do, which would be extremely impressive in itself, a job as a chartered accountant trainee would pay at least £30k with a very good qualification at the end of it.
What would you say was the capitalisation of the average trader here on T2W?
After trading full time for 2 years would you rate yourself as an 'expert'?

Keep up the good work
hjk

 

[FTSE Beater]

Hi Hjk

I've only been trading full-time for the last 6 months. In which time the account has grown from £1000 to £3000. The next question is how I can live on £2000 in 6 month's, well I'm still living at home and I have cut down my social life, to allow me to start a career as a trader.

Your right to say that a chartered accountant can earn £30k+ a year, in return for a daily commute into London and a 9 to 7 job (appartently they work long hours) that's after the 3+ years of hard study, and it is hard study

All being well, after 3 years of study/working on the markets, I should be earning a good wage from what I'm doing. It is a complete lifestyle change, but a very worthwhile one in my situation

What would you say was the capitalisation of the average trader here on T2W?

This is a hard question and it is all relative. I've meet traders who have £100k+ trading accounts and I can tell that the chances are they willl lose a large proportion of that. I've meet a trader who has had under £100 in an account and with great skill has turned it into an account that provides a good wage.

Would I say I was an expert. Not really. In my view there is a very limited number of expert traders in the world. After all an expert would have an understanding of every aspect of trading from Fundimentals to Level 2 and everything in between. I know I'm in the top 10% of traders, because I make money, but I don't intend to become the 0.001% of traders who are the elite experts.

HTH

 

[hjk]

Well i suppose it is commendable that you are in effect working for below minimum wage whilst you begin your career but even if you double your money every year after 3 years you will still have only £24k, that's assuming £0 living expenses and no cost of computers/systems etc. And turning £1k into £2k is significantly easier than turming £10k into £20k (although it shouldn't be). In those 3 years you could have earned £45k in any old office job, or around £100k as a trainee accountant. I guess you have already done these kind of sums and have obviously decided what you want to do, but somehow I still get the impression you are paying alot for your 'lifestyle choice'. Ultimately what I think I am saying is that money management, risk control, risk/reward ratios etc etc are all very good and vital, but if you don't have the necessary capitalisation to begin with you will always be struggling along, and I assume you don't want to live at your parent's place for ever?

If £100k of capital is at the top end of the range I am surprised it is so low.

Finally why shouldn't/couldn't you "intend to become the 0.001% of traders who are the elite experts"? You don't want to make as much money as them?

HJK

 

[options]

FB, I'm surprised at you.
You will gravitate towards being in the 0.001% as you progress, simply through a desire to digest information about trading.

You still have the passion for trading after getting past the boring stages, and sorry to say that there are a lot of people who are members on here who will give up at the first hurdle.

Oh, and Britney says she can't make it this weekend. She's over at my place. (Wants to know about the bulls and the bears.)

Hjk... Not a tax man are you?

Options.

 

[hjk]

Hi 'Options'
A T*x man ???!!! Yeuch, no! I can't even bear to type the word!

Just intrigued by how/why others have gotten into this 'business/lifestyle choice' and whether they are likely to stand the pace.

HJ

 

[FTSE Beater]

Hi Hjk and Options

Doh! I'm working below the minium wage. Must talk to myself about that It's true to say that based on my level of capitalisation, the chances are that I shouldn't make it.

If instead of saying turning £10k into £20k in a year. I would say with a 10k account, you should (as a professional trader) be able to make £500 a week (which is a good wage to me).

Even if the account doesn't pay enough to make a good wage, then there is the option to go back to work in the mornings and trade the US markets of an evening - but that would mean giving up my golf

Why not the top 0.001% - I wouldn't say you have to be an expert to earn the most money. If it happens naturally then great, but I'm going spend my time trading rather than studying every area.

...and Options, can you tell Britney that shes missed her chance now

 

[hjk]

£500/wk from £10,000 i.e. 0.05% return/wk SOUNDS reasonable, I'm sure you have made similar percentage returns many times before. So £500 times 50wks in the year (couple off for good behaviour) equals £25k. Wonderful!!.........NOT!....no, no ,no......
Now you are saying you are planning to more than TRIPLE your money every year!
These short term money targets are a pretty sure fire way to failure. Firstly you are concentrating on the money which will always detrimentally effect your trading.
Secondly if you do triple your money you will automatically be in the 0.0001% of elite traders!
And lastly, anyway £25k is an ok wage, not one I could live on.
HJK

 

[options]

Some people can get by on £100 per week, some people need £3000 per week. Depends on what your circumstances are and if you are full/part or a now and again trader.

You yourself may start with a £50,000 trading account. Who knows... who cares...

And turning £1000 into £2000 is harder than turning £10,000 into £20,000.

Options.

 

[hjk]

Sure, of course peoples' long term requirements/ambitions are all different but my point is you must have a suitable capital base to make those ambitions realistic. If FTSE-beater is aiming for £25k profit a year I will be extemely impressed if he can do it starting with only £10k. (If he can I can get him plenty of money to manage).

If '1k into 2k' is harder than '10k into 20k' then you are saying the more you have the easier it is. I will just have to disagree with you on that one. Of course it is easier to make 1k profit starting from 10k rather than starting from 1k, but to double your money i think it is always easier to start with less.

 

[hjk]

To expand on why I think turning '1k into 2k' is easier than '10k into 20k', my reasoning (as well as my practical experience) is thus:
Firstly I think we can all agree that maintaining a detached/unemotional frame of mind is the most beneficial to good trading.
In theory it should make no difference whether you start with 1k or 10k or 1 million (as along as you don't move the markets by the size of you participation).
What is most important is having the right postion size that you are comfortable with from a money management AND psychological point of view. (Most people trade outside thier comfort zones in both these areas).
Everybody starts small, so lets say starting with 1k a trader's position size is 1 lot on our imaginary future's contract. His stop loss is, say, 5% so he is out if he loses £50 and he makes maybe £125 on winning trades (a favourable 1:2.5 risk:reward ratio). Let's also assume a favourable 50:50 win:lose rate. He is comfortable with that and sleeps easy at nights knowing he can only lose £50 per trade. So that in theory after only 14 trades in this (unlikely) scenario he has doubled his money!
Now his great aunt dies and he inherits an extra £8k. He has 10k to trade with and a quick calculation tells him he has to do 10 lots of imaginary futures per trade to maintain his 'doubling up' methodology. But now suddenly he must live with losing £500 per trade, instead of just £50 yesterday, just two losing trades and that's £1k gone! his original stake just a few trades ago! Can you honestly say that his emotional state would not be tipped into negativity at this outcome? And a bad emotional state will lead to bad trading.
The point being he was happy with the idea of only losing £50 of £1000 but not happy to lose £500 of £10k even though they are the same percentage-wise, it is only human to do so.
In Mark Douglas's book there is a good section about allowing yourself psychologically to accept bigger absolute wins/loses even though the percentage is the same/smaller.

What do you think?

 

[Henry]

---
Just intrigued by how/why others have gotten into this 'business/lifestyle choice' and whether they are likely to stand the pace.
---

Depends what you want out of life - money is not necessarily the only way to achieve the lifestyle you desire. Personally I gave up a well paid job in IT to trade full time. I'm living off savings, and have arranged my money management system in such a way as to ensure I can survive for a year no matter how badly I trade. This in itself gives me goals to work to, similar to FBs.

In order to do this I've effectively taken a "pay cut" of around 75%. So fewer holidays, and I take more notice of the special offers in the supermarket - but from my point of view it's well worth it to be rid of the train journeys, office politics, and a career I feel I'd taken as far as I could. Now I'm doing something I really enjoy, get to work from home which suits me, and I'm loving every minute of it; can't put a price on that.

Interesting thread...

H.

 

[FTSE Beater]

Hi HJK

I can understand what your saying, doubling your money in a year shouldn't be possible, but as with any business - it can grow quicker than logically possible. I stronger believe (rightly or wrongly - time will tell) that you don't need a huge trading account to make a good living.

Now what we class as a good living I believe is different. I'm happy to only have £100 a month to spend on what I want. You now have a good idea of why I'm single

With regards to doubling your money. I know what you mean when you say it's harder to lose £500 than £50 psychologically, even if the %'s are the same. That comes down to what you feel comfortable with.


Hi Henry

It sounds like your in a very familier position to me, and it sounds like your enjoying life more. Do you feel that you can make a good living from trading?

 

[sifts2win]

Well I loved all that,
You guys just about covered my life for the last 4 years. I hate to agree with hjk but my personal experience proves him to be the one living , unfortunately, in the real world.
I agree with all the sentiments about lifestyle choice,etc. Existing (and that's what it is) on £10k pa. After 25 yrs at work I took £34k redundancy and decided to become a star trader and live on yachts for the rest of my life. I may be stupid, dim, a slow learner, whatever but I did all the study, invested the cash, doubled, tripled, even made 600% on one stock and lived off the profits for the last 3 of the last 4 years ploughing some back into software, seminars, etc. The money ran out last year and from making returns of 145% in one year I haven't made a cent for 2 years. I've sat in front of my pc forever, stopped playing golf 'cos I couldn't afford it, no holidays let alone yachts, cars and crumpet and my social life is almost zero. I have probably absorbed tons of stuff and in order to survive my account is now tiny and I trade small and rarely now. Of course I still want to trade and one day I will be a great trader making a very good living but now its survival time. I have just accepted a job with loads of mixed feelings about 'failing' as a trader and hearing all those voices reminding me I was mad and 'it can't be done' etc.
Hjk's sums are right. I kidded myself too that I could make £1000 per week trading Dow futures with a £2k account and I've been full time for 4/5 years !
I'm not out to burst anyone's bubble. No-one wants it as much as me. Its bloody hard and you will have to start with a sizeable sum
and have a fantastic trading ability/system to make a comparable living to a chartered acct.
I hope you can FTSE Beater and likewise you can trade my house if u can do it !
Regards

 

[Henry]

Hi FB, yes I strongly believe it's possible to make a living from trading.

As long as you have the desire and absolute commitment, I think most people could probably do anything they wanted, but most people either don't believe in themselves enough to go for it, or are over confident and have unrealistic expectations.

To regularly see people acheiving things they never thought they could, watch Faking It every Wednesday night on Channel 4 - always a source of inspiration I find! Of course, becoming a trader takes a lot more than a new haircut and knowing the lingo, but it shows that commitment pays dividends.

Nothing personal sifts2win, but my own expectations are not to be buying yachts and Ferraris this time next year, but to be able to make a consistent profit. It doesn't really matter to me at this stage how much that profit is, just that I can get to the stage where on average I'm making more that I'm losing. That's not to say I dont have longer term goals, but I am trying to be realistic about how long it takes to get to a half decent standard in this game. The longer I can survive, the more chance I have of becoming a good trader.

Just because more people fail at this than make it, doesn't mean I'm not going to give it my best shot. I'd rather try, fail, and know I tried, than not even bother and then always wonder...

H.

 

[hjk]

FTSE-B
Well you have very modest needs/requirements, and there is the old adage about the road to happiness is earning one penny more per month than what you spend, and the road to misery is spending one penny more per month than what you earn. But how long can this last? You are a young guy (from your interview), do you have a fallback plan/experience/qualifications of one kind or another (like Henry does)? is £100/mth really enough? (you live in London, you know what rent/property prices are like, do you know how much even a 'low-maintenance' girlfriend costs? ). In theory it is great to make living and have a 'relaxed' lifestyle starting with £10k-odd but in reality you are always too close to being wiped out, around 10-20 bad trades away.
Sorry to sound like an old pessimistic grouch (I'm not actually that old) but it seems to me that you are still in the first enthusiastic flushes of early, easy sucess. You simply cannot extrapolate your recent small gains to forecast massive payoffs in the future, that is Enron-style accounting!
I am not trying to discourage you or anyone else from trading, that would be hypocritical of me for a start and in the markets I think the more the merrier. And 100% returns are possible (I've done it several times but then again I've also blown up a few times). But some sort of reality check is required. If you are really happy with £100/mth then being on the dole will get you over £200/mth guaranteed and you can just watch the markets, paper trade and play golf to your hearts content.

I'm all for the 'alternative' lifestyle (have been living it for over 5yrs) but I also believe the saying that 'to know the market you must first know yourself' and I sure didn't know who I was in my twenties! If you do then I'm quite envious.

Sorry 'Options', I'm with FTSE-B, the more I think about it you are just wrong about it being easier to 'double your money' starting with more.

 

[Morris]

My pennuth (for what it's worth).

I trade full time, and I make pretty consistent profits (Up on the week, the month, the quarter and the year at the moment).

But I trade smallish amounts, generally risk a small % of my trading equity (often less than 0.2%) and consisder the last 2 years to be mainly 'training'.

I know it will be a loooong time before my annual P&L ever approaches my previous income, but I have wanted to trade & been interested in the trading game for many years. Even worked on a (bond) trading desk for a while.

I feel that each person has to approach trading at his/her own pace - if you are happy making £50 per day, than who cares if others baost of their four/five digit gains ?

The best attribute for a trader is independence of mind.

Just my thoughts,

Mo

 

[sifts2win]

Hi Henry,
Hear hear !
I'm the proof of the pudding. My goals were tongue in cheek and I'm in for the long haul too. I've nearly given up more times than I care to think about and slowly I improve every trade I make and I've made thousands !
My point was only that for those who aspire to be professional traders, you need gallons of patience and discipline, some luck and enough cash to live on if that's all you do. Some will get there sooner than others but the sums need to be done and no-one over 21 can really expect to live for free can they ? Eventually you'll either overtrade in a state of blind panic or get impatient and fiddle with a winning system and spoil it for the sake of more money, sooner. Its just human nature.
Unless of course you're a genius !
Mike