# The hidden costs of a full time private trader



## skc (3 April 2013)

On this forum you often hear people wanting to turn into a full time trader. They are attracted to the lifestyle on offer but also the financial rewards through compounding trading profits at a high annual rate. However, the reality can be very different. I've worked an example using John, the aspiring full time trader...

John is currently a full time salary man earning a $80k package per annum. He's saved up $250k of trading capital and has developed a system that returns 25-30% per year. So he's thinking... $250k x 25-30% = $62.5 to 75k which is a bit lower than his current income, but his salary income will only be growing at inflation of say 2.5%, whereas his trading income can compound at 25-30% p.a. So he will be making much more money by becoming a trader... Right?

The answer may surprise you (it surprised me a lot!)


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## skc (3 April 2013)

If John stays a salary man...

Key assumptions. Inflation and income growth = 2.5%. Investment return on capital = 8%. Super contribution = 9% of salary. Super return = 5%. Annual living expense $35k growing at annual inflation. All surplus cash re-invested.

In year 0, John's earning a $80k package, while making $20k from his $250k capital. After paying tax and living expenses, he has $31.7k available for further investments. 

By year 10, John would be earning $102k in salary, $52.8k from investment capital (which has grown to $660k) and has accumulated almost $90k in super.

By year 25, the numbers are $148k in salary, $108k from investment capital (which has grown to $1.84m) and $370k in super. His total asset would be ~$2.2m.


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## skc (3 April 2013)

If John becomes a private trader and makes 25% p.a. for the next 30 years...

Key assumptions. Inflation = 2.5%. Trading return on capital = 25%. 4-week leave adjustment per year on trading return (to account for holidays and sick leave). Super contribution = 0%. Annual living expense $35k growing at annual inflation. Deductible expense = $3k per annum (growing at inflation). All surplus cash applied to trading capital. 

In year 0, John made a trading income $58k. After paying tax and living expenses, he has $13.4k available to add to trading capital.

By year 10, John would make a trading income of $107k and has surplus cash of $41k to add to his trading capital (which has grown to $465k). He has $0 in super.

By year 25, the numbers are $450k in trading income, $192k from investment capital (which has grown to $1.8m) and $0k in super. He would have total assets ~$1.8m.


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## skc (3 April 2013)

Here are the results in graph format.







And here's the shocking reality... 
*
It took 18 years for Trader-John's after tax income to catch up with Salaryman-John, and 30 years to have the same total asset... despite making 25% return each year for 25 years.*


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## skc (3 April 2013)

So here are the 4 hiddens costs to a private trader.

*1. Cost of capital* - If you've saved up some capital, the alternate is to invest it. This compounds in itself and your salary income provides further free cashflow to add to this investment capital every year. This effect is huge over the long term even though the annual investment return is low (the example only assumed 8%). This is the real opportunity cost of trading.

*2. Drag by tax and expense *- You might make 25% trading return, but the tax man takes a large cut and you need food and have bills to pay. In this example, the actual rate of compounding for Trader John was only 5.35% in the first year. You will compound much slower than you thought/hoped.

*3. Holidays and sickness *- Salary income usually comes with 4 weeks of annual leave and 10 days of sick leave. Trade for yourself and you get none of that. You have no income when you get sick. You take a holiday and your annual return suffers. The example assumed Trader John doesn't trade for 4 weeks every year. This reduced his trading income from 25% to 23% p.a.

*4. No automatic payrises *- Most jobs enjoy payrises every now and then as income is adjusted to catch up with inflation. And if you are in a professional capacity, chances are your salary rise should go up much faster than inflation as you gain more skills and seniority. There is no such thing in trading. You have to increase every cent of income by yourself. In deed, inflation undermines you further as your living expenses increase every year without commensurate increase in income. 

So if you are thinking of giving up your day job and become a full time trader, make sure you take all these into account, and ask yourself if you'd be better off in 5, 15 or 30 years time!


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## inyaface (3 April 2013)

Wow, quite informative indeed.

Thank you a lot skc.

I've got started mainly because my position was redundant, so it wasn't really an option for me and it was a nice way to make money while I am still unemployed. Makes me want to go back looking a bit harder in the job market


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## tech/a (3 April 2013)

Cup half empty

Throw in a few underperforming years
Then throw in a few negative years.

Cup half full

Throw in a few out performing years
Throw in a few outlier home run years.

It's a good post SKC

But like any business you can play with what ifs
All day. It's just a cash-flow analysis.
Any business can be likened to trading simply in a business
Sence.
Many fail
Some succeed ,some dominate , and some grow from 
One man organisations to monoliths ( hedge funds ),

Its up to the entrepenerial and business skill of the 
Business owner to firstly succeed and ultimately
Grow his business. 
There will be a vast difference in results. 

You'll also note that many very very good traders have other sources
Of income SOROS,WILLIAMS,SHWAGGER to name a few.


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## pavilion103 (3 April 2013)

Interesting read. Thanks for the effort of putting that together.

My first thought is that it depends on:
1) your desires and passions - are you trying to maximize your net worth or do you value freedom more?
2) how many hours do you have to spend on trading per week to make that money? 

If its only a couple of hours a day or less placing trades at night and flicking through charts (because you'd hope you'd  be a very very good trader if you left your job) then why work an extra 40-50 hours a week which is most of your week, if you don't have to?  It's a lifestyle choice.

Questions I'd ask myself:

1) how much do you enjoy your job?
2) what level of income (after expenses) do you need to enjoy the lifestyle you desire?
3) what is the opportunity cost of working? What would you do in your spare time? Is it worth it to YOU.

IMO it would be a different scenario is you had to spend 8 hours a day trading. Unless you really really enjoyed that more than your job (I'd find it boring I think) then I wouldn't stop working.

Another option is part time work. Anything from 2-4 days a week. Creates a more free lifestyle with some stable income coming in to contribute the the trading account which will compound nicely over the years.

Just my thoughts.


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## craft (3 April 2013)

A wonderful post SKC. 

The dream meets reality.

Opportunity costs, not between work and trading but how I approach the market is basically my major consideration. 

I left work to trade full time and was probably never game to look back to see if it was the right move on an opportunity cost basis. But opportunity costs loomed large in my journey.

Some really important things I discovered (that apply to me)

Trading full time is really boring and isolating and takes as much time if not more than any other job.  You can pick your hours, but end of the day you have to be present mentally and most likely physically (especially short term trading) to make the coin.  

Trading was not scaleable. I could make a good return on X but I could not maintain that return as my balance grew. 

I became  more aware of the opportunity costs through general knowledge and those costs grew because I couldn’t personally scale my trading. 

After a few years of trading my goal changed – I wanted my money to work for me – Not me work for the money.  Assessing the opportunity cost I realised that I didn’t need to lift the return on all my funds by much to trounce whatever I could do with only a portion of the funds whist basically ignoring the rest.  

My  solution was to push out the holding period length to get the scalability  – I went the whole hog to trade business trends. That was my choice because I had discovered my real passion was analysing the underlying businesses and it also offered the most lifestyle benefits, tax mitigation and risk mitigation in handing over a robust cash flow to the family if anything happens to me.


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## skc (3 April 2013)

pavilion103 said:


> If its only a couple of hours a day or less placing trades at night and flicking through charts (because you'd hope you'd  be a very very good trader if you left your job) then why work an extra 40-50 hours a week which is most of your week, if you don't have to?  It's a lifestyle choice.




I don't believe it is realistic to expect anything less than full time equivalent hours if you are a private trader using your own capital... you may get by in a trending market doing breakouts for a few years, but when the market start to behave different you will need to find different strategies nice and quick, and you need to make up those losses incurred during the phase when the strategy didn't work for you.

And when you start to scale up and deal with more meaningful sizes - those odd 15R trades on the specie will only add 3% to your return as opposed to 30% because the liquidity simply isn't there. And with bigger size, you will start to micro manage your trades and orders to make sure you get reasonable fills. It's actually harder and much time consuming than I'd expect.

Trading for yourself is a workstyle choice with some minor lifestyle benefits. But don't expect to see it in hours worked.



craft said:


> Trading full time is really boring and isolating and takes as much time if not more than any other job.  You can pick your hours, but end of the day you have to be present mentally and most likely physically (especially short term trading) to make the coin.
> 
> Trading was not scaleable. I could make a good return on X but I could not maintain that return as my balance grew.




Well put. The interesting aspect of opportunity cost is that, if you have a high level of trading skill, you'd likely have a high level of ability to understand the market. Yet the higher your ability to understand the market, chances are your opportunity costs would be higher as well. You sort of chase your tail a little bit in that sense

The issue of scalability is a difficult one but, all else being equal, the shorter your trading timeframe and the smaller the move you are trying to capture, the more difficult it is to scale up. A $250k account is a breeze to manage. At 10x that it's a completely different beast.

Back to the analysis...

Remember what is presented is simply a model to highlight the "hidden costs" that aspiring traders may not have thought about. Change some assumptions around starting capital, relative returns and living expenses and you'd get very different results. And like Tech/A said, a few good years at the start of the journey may see you do financially better in 2 years rather than 18 years.

Anyhow... I will talk about how to deal with these issues in my next post (when I have time).


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## CanOz (3 April 2013)

Great post, as usual SKC. 


CanOz


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## pixel (3 April 2013)

Great post, skc;

... and a very timely warning especially to those falling for the promise of easy money from a couple of hours' work.

I would also put a damper on the expectation of 25% profit p.a. While it is possible for some, the sad reality would suggest that the majority of traders struggle to achieve those results *consistently*. There will be years when "John" will have to access his capital to pay the bills. And it will be scant consolation that there won't be any tax to pay in such years.


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## tech/a (3 April 2013)

*Tax is the killer.*


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## 5oclock (3 April 2013)

Great posts SKC (and others), your efforts are appreciated.


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## Klogg (3 April 2013)

Great post! But I do have a question - at what amount of capital does John end up 'better off' financially if he were to opt for the trading option. Given his salary is a fixed amount and his trading returns are proportionate to his starting capital, there's got to be a point where the result is very different.

(Sorry, I'm being extremely lazy and not doing the math)


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## Julia (3 April 2013)

An interesting exercise, skc, and thank you for doing it.

Such an assessment perhaps isn't always just going to be about the respective financial outcomes.
Certainly that's the main focus for people in the process of acquiring a reasonable level of financial security, but that achieved, imo the focus needs to shift more to what offers a less stressful (and therefore more healthy?) lifestyle.

I'd be interested to know who, when working out a life plan, sets a financial target and is prepared to ease off somewhat when that's reached?


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## sinner (3 April 2013)

Yep.

Just like the ratio between returns and volatility (RaR/Sharpe) there is also a ratio between returns and cortisol. If I can have 80% of the returns with 10% of the stress, I will (and do) take it.


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## skc (4 April 2013)

tech/a said:


> *Tax is the killer.*




Tax is not the killer. You pay tax on salary and investment income much the same way you pay tax on trading returns. In fact, in the first year Trader-John had an effective tax rate of 16.2% while Salary-John paid 23.1%. 

With trading there's actually a chance to structure yourself to be more tax effective but that's beyond the scope of this exercise.

The killer is the much lower compounding rate of Trader-John vs Salaryman-John. In year 0, Salary-John essentially compounded at 12.7% vs Trader-John at 5.3%. The causes for that are the 4 hidden costs of which tax is actually not a difference maker. 



Klogg said:


> Great post! But I do have a question - at what amount of capital does John end up 'better off' financially if he were to opt for the trading option. Given his salary is a fixed amount and his trading returns are proportionate to his starting capital, there's got to be a point where the result is very different.
> 
> (Sorry, I'm being extremely lazy and not doing the math)




At ~$400k and all other variables being the same, Trader-John will be better off after 1 year.

Alternatively, if Trade-John goes for 30% return he'd be better off by around year 5.



Julia said:


> An interesting exercise, skc, and thank you for doing it.
> 
> Such an assessment perhaps isn't always just going to be about the respective financial outcomes.
> Certainly that's the main focus for people in the process of acquiring a reasonable level of financial security, but that achieved, imo the focus needs to shift more to what offers a less stressful (and therefore more healthy?) lifestyle.
> ...




Obviously we can't analyse life decisions on a spreadsheet (not all the time anyway). And this is not a life plan... it's simply a numerical model to highlight what may otherwise be neglected when one is considering the financial aspects of his/her decision.

To be honest had I stuck with my old profession rather than be a trader for the past 5 years, I'd be on a much higher income now (Assuming the normal speed of progression / promotion). But the stress and workload demand of that profession means that I would also have had multiple burnouts and probably be in terrible health. I also wouldn't be able to see and play with my two young kids everyday and feed them dinner at 5:30pm (I rarely finish work before 8pm in that job). That alone is worth $millions.


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## Garpal Gumnut (4 April 2013)

This is a very good thread.

I traded in a falling market, quite aggressively, buying and selling, on chart signals, often foregoing divies for my signals.

I only trade long.

I borrowed from St.George about $40000, with a similar of my own funds. My interest prepaid from memory was $3800 or thereabouts.

I had a reasonable expectancy on my trades, don't ask details, not my corner.

I had ten wins and two losses.

I made $4200 or thereabouts and about $500 on divies.

It was hard work. 

I learnt heaps from it, on trading, margin trading and the zen of being in the game.

You do not only need to look at stocks but also at your margin, expectancy, costs, stops and targets.

It has helped me with my SMSF trading which is longer term.

Was it worth it?

Yes.

Did I make a huge profit?

No.

But I made a small profit in a bear.

It is very very difficult unless you catch a bull run, and I mean a bull run for 2 ears or more to make a quid from being a full time trader.

Trust this is useful.

gg


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## chops_a_must (4 April 2013)

Great thread.

It does assume an either/ or, which is probably not necessarily correct.

If you have an occupation that supports you being able to trade for much of the time, then it could be a winner.

But a nice point of discussion nonetheless. At the end of the day, the message is the same: continue to grow your capital by all means (legally) possible.


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## Julia (4 April 2013)

pavilion103 said:


> My first thought is that it depends on:
> 1) your desires and passions - are you trying to maximize your net worth or do you value freedom more?



That's why I raised the question of  is there a target (whether in employment or as a trader) the achievement of which will indicate an easing off of effort.



> Questions I'd ask myself:
> 
> 1) how much do you enjoy your job?
> 2) what level of income (after expenses) do you need to enjoy the lifestyle you desire?
> 3) what is the opportunity cost of working? What would you do in your spare time? Is it worth it to YOU.



+1.



pixel said:


> I would also put a damper on the expectation of 25% profit p.a. While it is possible for some, the sad reality would suggest that the majority of traders struggle to achieve those results *consistently*. There will be years when "John" will have to access his capital to pay the bills. And it will be scant consolation that there won't be any tax to pay in such years.



Agree.



sinner said:


> Yep.
> 
> Just like the ratio between returns and volatility (RaR/Sharpe) there is also a ratio between returns and cortisol. If I can have 80% of the returns with 10% of the stress, I will (and do) take it.






skc said:


> Obviously we can't analyse life decisions on a spreadsheet (not all the time anyway). And this is not a life plan... it's simply a numerical model to highlight what may otherwise be neglected when one is considering the financial aspects of his/her decision.
> 
> To be honest had I stuck with my old profession rather than be a trader for the past 5 years, I'd be on a much higher income now (Assuming the normal speed of progression / promotion). But the stress and workload demand of that profession means that I would also have had multiple burnouts and probably be in terrible health. I also wouldn't be able to see and play with my two young kids everyday and feed them dinner at 5:30pm (I rarely finish work before 8pm in that job). That alone is worth $millions.



With your second paragraph you have exactly made my point, i.e. that any mathematical calculation alone is only part of a decision to choose employment or trading.
For some the stress will be much greater in the competitive corporate environment and for others it will greater having the responsibility of generating your own living.  As someone who burned out via ever increasing demands of the job, imo the greatest salary package in the world isn't worth having if the stress ruins your life.


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## CanOz (4 April 2013)

Julia said:


> the greatest salary package in the world isn't worth having if the stress ruins your life.






Stress is a killer....money isn't everything.

I'm enjoying my life now, living every minute. Before i was just highly paid slave.

CanOz


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## skc (4 April 2013)

skc said:


> Anyhow... I will talk about how to deal with these issues in my next post (when I have time).




OK. I don't want to this thread to go into too much about stress vs money vs what's more important in life. Not saying they are not important, but the purpose of this thread is to help an aspiring full-time trader make the right decision on the financial aspect only.

So we've seen how Trader-John will not be financially better off for a long time comapred to Salaryman-John. The primary reason being that, the rate of compounding is substantially below the "headline" 25% p.a. return due to the hidden costs. This can be expressed below.

Free Cash For Compounding (FCFC) = (Starting capital x annual % return) - Leave and sickness adjustment - tax - living expense. 

Let's look at each component in isolation on how one can increase the Free Cash For Compounding (FCFC)

*- Starting capital and annual % return*- This has a direct linear relationship with FCFC. You can increase starting capital with loan (margin loan, home equity), using leveraged products (CFD, options, futures) or use strategies that are more capital efficient (e.g. day trading futures is more capital efficient than say holding a large stock portfolio over months). But with any of these you are likely to increase risks proportionally. Another way to improve annual % return is to increase the frequency of compounding. Increasing your trade size just a bit after every profitable trade will see your account grow faster in terms of annual % return.

*- Leave and sickness adjustment* - This one is simple. Don't take holidays and don't get sick. Especially in the first years. You might be able to time your holiday to coincide with quiet periods of your trading. E.g. if you trade the Chinese market then you can take time off around their Oct national holiday week. The other issue on holidays revolve around your trading strategy. In general, the longer your holding period, the longer it takes you to get ready before the holiday, and get set again after your holiday. So a 2-week holiday may actually need a low activity week before the break and another low activity week afterwards as you build your portfolio of positions back up again.

*- Tax* - I dont' want to go into too much details here on tax. For income <$120k the benefits of any structuring is minimal. If you have a spouse with no income, then trading a joint account would be a possible way to split the income for tax purpose. But as always check with your tax accountant.

*- Expense* - You often read that you should treat trading as a business. And when you are in the business of private trading, your personal living expense is your business expense. So you need to keep those under control especially in the first years in order to boost your FCFC. It means reduce or defer big ticket purchases, get a new 0% interest balance transfer credit card (so you get a free loan) etc.

There are obviously other things that will help a private trader achieve better financial outcomes. The simplest one is to have a working partner with a second income who could significantly reduce the tax and expense drag. 

Anyway... it is important to remember that, everything said here is based on the premise that John is already a competent trader and he has the necessary skills to manage his risks and make consistent profits over the long term. Without this, nothing mentioned above applies to you and it doesn't matter how the financials compare.


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## Azharr (8 April 2013)

well it goes the same as a business owner no?



skc said:


> So here are the 4 hiddens costs to a private trader.
> 
> *1. Cost of capital* - If you've saved up some capital, the alternate is to invest it. This compounds in itself and your salary income provides further free cashflow to add to this investment capital every year. This effect is huge over the long term even though the annual investment return is low (the example only assumed 8%). This is the real opportunity cost of trading.
> 
> ...


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## skc (8 April 2013)

Azharr said:


> well it goes the same as a business owner no?




Of course. 

The purpose of this thread is to temper the expectations of aspiring full time traders on how much they can compound year on year based on a headline return %. If they go into trading ignoring these course they are setting themselves up for disappointment... just like any other business owners who don't think comprehensively about their costs.


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## Huskar (8 April 2013)

skc said:


> The issue of scalability is a difficult one but, all else being equal, the shorter your trading timeframe and the smaller the move you are trying to capture, the more difficult it is to scale up. A $250k account is a breeze to manage. At 10x that it's a completely different beast.




Apologies if this a bit off topic but your and Craft's views on scaleability puzzle me - and surely scaleability is key. 

I can understand why this would be a problem if dealing with micro micro caps and on tiny liquidity, but my opinion is that the beauty of the stock market is that the analysis behind the decision to buy/sell 1 share is the same as buying/selling 100, 1000, 1 million shares. Once you develop an approach/method/system then compounding very much works in your favour.

Thanks for (another) great thread SKC.


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## prawn_86 (8 April 2013)

Huskar said:


> I can understand why this would be a problem if dealing with micro micro caps and on tiny liquidity, but my opinion is that the beauty of the stock market is that the analysis behind the decision to buy/sell 1 share is the same as buying/selling 100, 1000, 1 million shares. Once you develop an approach/method/system then compounding very much works in your favour.




Staying stock specific, if you buy 1m of almost any stock you are going to move the market and take out the higher levels, which in turn will affect the market of that stock.

That is why you constantly see bots buying and selling small parcels, so as not to affect the market with large orders.


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## odds-on (8 April 2013)

Huskar said:


> Apologies if this a bit off topic but your and Craft's views on scaleability puzzle me - and surely scaleability is key.
> 
> I can understand why this would be a problem if dealing with micro micro caps and on tiny liquidity, but my opinion is that the beauty of the stock market is that the analysis behind the decision to buy/sell 1 share is the same as buying/selling 100, 1000, 1 million shares. Once you develop an approach/method/system then compounding very much works in your favour.
> 
> Thanks for (another) great thread SKC.




Return on capital is inversely proportional to the size of capital for a static skill level. Use Buffett as an example, he reckons he can get a 50% return on a $1million, and he gets 20% return on billions of dollars. I wonder what return he could get on $10k?

Just my


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## skc (8 April 2013)

Huskar said:


> Apologies if this a bit off topic but your and Craft's views on scaleability puzzle me - and surely scaleability is key.
> 
> I can understand why this would be a problem if dealing with micro micro caps and on tiny liquidity, but my opinion is that the beauty of the stock market is that the analysis behind the decision to buy/sell 1 share is the same as buying/selling 100, 1000, 1 million shares. Once you develop an approach/method/system then compounding very much works in your favour.
> 
> Thanks for (another) great thread SKC.




It depends on the instrument you trade how deep is the order book. Consider a share with 50,000 bid at $1.00 and 50,000 ask at $1.005.

If I am trading $5k per hand, I can cross the spread and buy 5000 @ $1.005, or I can be patient and put in a limit bid at $1 and wait and hope I get hit. The action of me putting 5000 at the bid will not prompt too much action as the order size is only small relative to what's already in the depth.

If I am trading $50k per hand and put 50,000 @ $1.00 in the bid, chances are a fair few of the $1.005 asks will get cancelled instantly and none of your bid will get hit before others front run you and take out all the remaining asks. Even if you try to buy 50,000 @ $1.005, you still won't get a complete fill. You will probably get 20-25k of shares filled before the rest of the ask orders are pulled as well. So to get 50,000 shares you probably get filled at $1.0075 average or something like that.

So that's up to 75 basis point difference in your fill price between a small $5k position and a moderate $50k position. On the exit it could be another 50-75 bps difference. That's a pretty substantial chunk of additional costs due to your scale... 

Now before you say that 50-150bps is nothing. I know some professional traders who's profit / turnover is only <50bps. Now imagine trying to get a $150k fill, or $500k fill.


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## Huskar (17 April 2013)

skc said:


> It depends on the instrument you trade how deep is the order book. Consider a share with 50,000 bid at $1.00 and 50,000 ask at $1.005.
> 
> If I am trading $5k per hand, I can cross the spread and buy 5000 @ $1.005, or I can be patient and put in a limit bid at $1 and wait and hope I get hit. The action of me putting 5000 at the bid will not prompt too much action as the order size is only small relative to what's already in the depth.
> 
> ...




Though isn't this just the mechanics of taking/exiting a position? If you can get a better fill by drip feeding it or whatever then you should do so (as Prawn points out you see small parcels going through all the time).The forest vs the trees etc.

This does not change your overall opinion/analysis on whether there is an opportunity. Of course liquidity will be a factor in whether the opportunity is taken but I would class this as a portfolio management issue.

Of course I am talking from a longer term perspective and understand that there are plenty of people who get their return from a couple of ticks. And so nothing I say contradicts your original statement about inverse correlation between position size and holding periods.

But for me, scaleability is one of the beauties of the market: I have a chance to buy/sell 1 position instead of buying/selling whole businesses. But the thought process is the same.

My


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## skc (17 April 2013)

Huskar said:


> Of course I am talking from a longer term perspective and understand that there are plenty of people who get their return from a couple of ticks. And so nothing I say contradicts your original statement about inverse correlation between position size and holding periods.




Yes, if you buy and hold longer than a few weeks, chances are scalability will affect you very little in most instruments. But I thought we are talking about trading all along.


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## RockSexton (5 August 2014)

American trader here .....

Just wanted to chime in and show my appreciation for this thread.  All new traders aspiring to do this for a living should be required to read it.

I myself switched to swing trading for the scale-ability factor.  After the first 2.5 years, I found day trading large sums of money into tight windows multiple times a day to be too much stress.


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## Superboot (13 August 2014)

Hi all,

Is there preferred type of system that would best support a move to full time trading? 

I trade 2 systems, a breakout system (more spec stocks) and a momentum system for my SMSF, however both might only be in the market for 50-70% of the time and provide inconsistent results depending on market conditions.

I would imagine a system that could be traded in most conditions and provide a regular return would be ideal. Any comments on what type of system others are using for this purpose? 

Cheers
Darcy


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## tech/a (26 August 2014)

> *Tax is not the killer.* You pay tax on salary and investment income much the same way you pay tax on trading returns. In fact, in the first year Trader-John had an effective tax rate of 16.2% while Salary-John paid 23.1%.




SKC
If you make profit you'll be asked to pay tax in advance.
If your a wage earner you wont.


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## Craton (26 August 2014)

tech/a said:


> SKC
> If you make profit you'll be asked to pay tax in advance.
> If your a wage earner you wont.




Used to be Provisional Tax but called PAYG now isn't?
Sorry, too lazy to use my Google Fu...


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## skc (26 August 2014)

Superboot said:


> I would imagine a system that could be traded in most conditions and provide a regular return would be ideal. Any comments on what type of system others are using for this purpose?




All else being equal... the shorter the timeframe and the more frequent your activity, the smoother your return and equity curve. 



tech/a said:


> SKC
> If you make profit you'll be asked to pay tax in advance.
> If your a wage earner you wont.




Not true. You will be asked to pay tax quarterly in arrears as you fill in your PAYG. 

The ATO defaults the PAYG installment based on last year's income. And if the trader didn't make as much that quarter, they can vary the amount to the actual P&L so they don't pay any extra tax.

A wage earner has tax (and super) taken out of the paycheque. So he/she pays tax monthly in arrears.


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## Value Hunter (29 September 2019)

SKC I would be curious as to how you are going as a full time trader now compared to 2014?


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## skc (3 October 2019)

Value Hunter said:


> SKC I would be curious as to how you are going as a full time trader now compared to 2014?




Hi Value Hunter. I am still trading full time and enjoying it. I am still learning new skills and improving my processes, tools and routines. I have good months and wasted months, but I absolutely don't have a linearly increasing return over a smooth line over the last 5 years. That's where theory meets practice I suppose.

Hope all the old (and new) hands here are well.


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## tinhat (3 October 2019)

skc said:


> Hi Value Hunter. I am still trading full time and enjoying it. I am still learning new skills and improving my processes, tools and routines. I have good months and wasted months, but I absolutely don't have a linearly increasing return over a smooth line over the last 5 years. That's where theory meets practice I suppose.
> 
> Hope all the old (and new) hands here are well.




skc, it has been obvious from reading your many posts over many years that you are a full time trader. There is no way I could do that. I aim to be an end of week active investor. That said you have given much wise counsel and comment on these fora (sometimes directed at correcting my thoughts) so I am glad to benefit from your experience and insight and also glad to see that so much screen time has not impacted upon your shiny coat.


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## barney (4 October 2019)

skc said:


> Hope all the old (and new) hands here are well.




Often wondered while flicking through some older posts if you were still at it @skc ….. Glad to see you are still kicking   You always added a great deal of professionalism to ASF with your postings ….. 

If you get the urge, I know many Punters would be keen to hear any of your trading anecdotes (slash wisdom) after so many years of punching the buy and sell buttons.  

Longevity in the Trading game is not an overly common phenomenon!  Well done!


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## Newt (14 October 2019)

Was so worried we’d lost you skc. Don’t stop sharing your insights please. They continue to inspire.


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