I spent my Junior High days (grades 8 & 9) in a school in Halifax, Nova Scotia. One of the tracts we could take was Social Studies, which involved History, Geography, and Civics. For some reason I really enjoyed them and at the end of the year there was an award presented with the person with the highest scores in the three classes. I won it easily in my first year. In my second year I was far in the lead, but for some reason there was a final project I needed to do and just couldn't motivate myself to do it. The teacher supervising Social Studies went so far as to call my parents and I into school to talk about it. He explained that all I needed to do was pass something in and I'd lock in the award again, but for some reason I never did. When school awards were being announced, the Social Studies teacher announced in front of the assembly that there was a big surprise on who won the award, and proceeded to call out another students name. I was crushed.
I should have expected the outcome, but for some reason I hoped I'd still get the award. I don't know if I was testing the friendship I had with the teacher, or daring him, I don't know. I learned a hard lesson: Hope can only meet expectation if you're willing to actually put the hard work in, whether you feel like it or not. Hope without the work is hedging your bet on magic.
The statistics involving success in Day Trading is daunting. Most lose all of their money within the first 7 months. 90% lose 90% of their money in the first 90 days. 84% never become profitable. Some statistics suggest that these are in fact conservative numbers and that the actual figures are higher still. My brother Alex passed on a saying to me when I mentioned an interest in it. "Do you want to know how to make a million dollars day trading? Start with a billion.". There's a fascinating video of former Goldman Sachs and Lehman Brothers professional trader Anton Kreil speaking in front of a large group of prospective traders in London a few years ago.In it he's quite brutal about speaking to how the entire equity industry is structured to work to the disadvantage of retail traders. It's a must watch.
My purpose in this post is to establish how difficult day trading actually is, and to leverage expectations and establish that hope is magical thinking. The only way to survive to the point of even having a chance to make a career of this is to be very serious. But being serious isn't enough. Educating yourself is important. Having the right mental aptitude is important. Establishing sound methodologies and strategies and sticking to them is important.
So, what should my expectations be? Most sources tell me that IF I can survive the first 9-12 months, my hope (there's that word again), should be breaking even. That's right: The expectation is NOT to expect a net profit during the first year. As I explained in the previous post I should expect paper trading no less than 3-6 month just to get myself to the point where I can be ready to trade actual money. And even that that point, the chances of me breaking even through the rest of the year are not great. However, that nagging part of the back of my brain refuses to accept that judgment. I have to feel that if I'm reading the books and watching the videos and paper trading sufficiently that when the time comes that I actually start putting my money where my mouth is that at a minimum I should both survive against the odds and actually come out ahead, even if minimally, by the end of the first year.
Now that we've established that I cannot escape the influence of hope and may in fact be part of the 84% that are never profitable, let me continue to go down the rabbit hole of make believe and provide what my hopes and expectations are.
As suggested above, I want to do my due diligence with the books and videos. I want to do at least 100 trades in 3 months under a paper trading system (likely, TD Ameritrades thinkorswim platform). And by the end of the year I want to plan on an average of $100/day. If I break even, I'll take that as a victory in itself, considering the odds. Regardless, since my impression is those that survive the first year wind up averaging somewhere in the range of $50k/year, I want to make $200/day average be my goal for the second year ($50k/year). It's after that I feel with over a thousand trades to my name and two years of experience that I should start to see trading become more profitable for me. My goal in the 3rd and 4th year is to increase by $100/day what I'm averaging, such that by the end of my 4th year I make about $100k.
Are those figures realistic? Given the odds, of course not. However, if I thought I couldn't do it, I shouldn't be in the game. I shouldn't even be making the attempt if I listened to my brothers telling me not to do it. I shouldn't be picking up a book if I didn't think I could do what's needed to make myself profitable first, and then "profitable-enough" within a few years. I do not have delusions of Ferrari's or palatial mansions. I think for all but a tenth of one percent, those are pipe dreams. If it turns out I make real money, then bonus. In the meantime I'll put my nose to the grindstone and hope to eke out a living, thank you.
I should have expected the outcome, but for some reason I hoped I'd still get the award. I don't know if I was testing the friendship I had with the teacher, or daring him, I don't know. I learned a hard lesson: Hope can only meet expectation if you're willing to actually put the hard work in, whether you feel like it or not. Hope without the work is hedging your bet on magic.
The statistics involving success in Day Trading is daunting. Most lose all of their money within the first 7 months. 90% lose 90% of their money in the first 90 days. 84% never become profitable. Some statistics suggest that these are in fact conservative numbers and that the actual figures are higher still. My brother Alex passed on a saying to me when I mentioned an interest in it. "Do you want to know how to make a million dollars day trading? Start with a billion.". There's a fascinating video of former Goldman Sachs and Lehman Brothers professional trader Anton Kreil speaking in front of a large group of prospective traders in London a few years ago.In it he's quite brutal about speaking to how the entire equity industry is structured to work to the disadvantage of retail traders. It's a must watch.
My purpose in this post is to establish how difficult day trading actually is, and to leverage expectations and establish that hope is magical thinking. The only way to survive to the point of even having a chance to make a career of this is to be very serious. But being serious isn't enough. Educating yourself is important. Having the right mental aptitude is important. Establishing sound methodologies and strategies and sticking to them is important.
So, what should my expectations be? Most sources tell me that IF I can survive the first 9-12 months, my hope (there's that word again), should be breaking even. That's right: The expectation is NOT to expect a net profit during the first year. As I explained in the previous post I should expect paper trading no less than 3-6 month just to get myself to the point where I can be ready to trade actual money. And even that that point, the chances of me breaking even through the rest of the year are not great. However, that nagging part of the back of my brain refuses to accept that judgment. I have to feel that if I'm reading the books and watching the videos and paper trading sufficiently that when the time comes that I actually start putting my money where my mouth is that at a minimum I should both survive against the odds and actually come out ahead, even if minimally, by the end of the first year.
Now that we've established that I cannot escape the influence of hope and may in fact be part of the 84% that are never profitable, let me continue to go down the rabbit hole of make believe and provide what my hopes and expectations are.
As suggested above, I want to do my due diligence with the books and videos. I want to do at least 100 trades in 3 months under a paper trading system (likely, TD Ameritrades thinkorswim platform). And by the end of the year I want to plan on an average of $100/day. If I break even, I'll take that as a victory in itself, considering the odds. Regardless, since my impression is those that survive the first year wind up averaging somewhere in the range of $50k/year, I want to make $200/day average be my goal for the second year ($50k/year). It's after that I feel with over a thousand trades to my name and two years of experience that I should start to see trading become more profitable for me. My goal in the 3rd and 4th year is to increase by $100/day what I'm averaging, such that by the end of my 4th year I make about $100k.
Are those figures realistic? Given the odds, of course not. However, if I thought I couldn't do it, I shouldn't be in the game. I shouldn't even be making the attempt if I listened to my brothers telling me not to do it. I shouldn't be picking up a book if I didn't think I could do what's needed to make myself profitable first, and then "profitable-enough" within a few years. I do not have delusions of Ferrari's or palatial mansions. I think for all but a tenth of one percent, those are pipe dreams. If it turns out I make real money, then bonus. In the meantime I'll put my nose to the grindstone and hope to eke out a living, thank you.
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