Is my goal realistic?

[tollbridge]

Dear ASF Members

Background

I'm obsessed with the sharemarket - I have been since the age of 14 when I completed the "Introduction to the Sharemarket Course" run by the Australian Stock Exchange. My lecturer was Roger Montgomery, who as most seasoned investors would know focuses on long term value based investing.

I left school at the age of 15 in order to pursue my passion, which in hindsight was not necessarily the smartest move I could have made. Never the less I've completed a Diploma of Business with the intention of moving on to study commerce at university. I've realised however that whilst an academic background has its advantages, it does not really focus on what I want to spend my career doing - trading stock full-time as a private trader.

I'm now 20 and after a few years of tossing around various career ideas in my head I keep coming back to my dream of spending each day following the S&P200 and analysing charts. For most people this may sound like a boring and mind numbingly dull occupation however I find it incredibly exciting and the idea of competing against professionals from the comfort of my own home office excites me.

Originally I was under the impression that the only way to profit from sharemarket was through taking a long term approach and investing in companies trading below their intrinsic value. Then as I researched further I discovered the wonderful yet risky world of derivatives. CFDs specifically excite me.

My Plan

At the present time I have very little capital to invest and I do not consider myself at all educated enough to place trades that I believe will have a high chance of profit. I have done some limited trading in the past and learnt that in order to succeed in this industry I need to spend some serious hours educating myself. I don’t plan on ever working in the finance industry and my job at the moment is completely unrelated to finance.

What I do possess is extreme determination and a burning desire to make my dream a reality. As most of you would know the world of finance is diverse and I have limited myself to spending time educating myself in the following fields:

• General Market Conditions
• Money and Risk Management
• Basic Fundamental Analysis
• Advanced Technical Analysis
• Trading Psychology

In my current line of work I’m putting away several hundred dollars a week into a high interest saving account. The majority of the friends I went to school with are studying four-year university degrees in their chosen fields. Before I put another cent into the sharemarket my plan is to spend four years spending every spare moment I have in researching, reading, analysing charts and paper trading.

My Goal

At the age of 25 I want to quit working for somebody else and seriously begin my trading career. At this stage I will have several years of education on my five chosen fields and a reasonable amount of capital. Using the five fields above is it reasonable to expect that I will have success in daily short term trading or am I chasing a dream that’ll ultimately end in disaster?

I do have time on my side and as I’ve stated I really do have a genuine passion for the financial markets. In fact it’s the only career in which I could view myself as working in for the rest of my life.

Advice

Can anybody on ASF give me some advice as to his or her opinion of my plan and goal? I currently subscribe to The Bull via RSS feeds, I have a subscription to the Australian Financial Review and will soon be subscribing to Nick Radge’s technical analysis service. I’m slowly building up a library of technical analysis texts and would appreciate any recommendations on what to buy next. I use Pro-TA charting software as well as WebIRESS for intra-day charting. I’ve also created my own website at for blogging what I have learnt throughout the day. Sky News Business, CNBC and Bloomberg are on my television for entertainment purposes.

It’s commonly quoted that 95% of traders loose money, I want to be in that 5% and would appreciate all comments and opinions.

Thank you in advance.

Alexander Pinnock

 

[Ashsaege]

I use to subscribe to Nick Rade, and highly reccomend it.

Between now and when you turn 25, you should clock up some serious hours of paper trading and develop your trading plan. That's what I'm doing while i study finance at uni. You can read a stack of books, subscribe to every newsletter etc. but it's the hours you put in to it that really counts. Do you want to be a person that depends on other people to place your trades?

There is a saying that to become a professional in an area requires 10,000 hours. It takes between 700-800 hours to speak conversational french, and around 2000 hours for Chinese. But to become a professional requires a considerable amount of more time.

A 3 year uni course (120 hours per subject) equals 2880 hours. You then spend the next 4 years working in that field and add 8000 hours (40 hr weeks).

If you apply yourself between now and when you turn 25, you might not be a pro, but well on your way.

 

[Synergy]

Before I put another cent into the sharemarket my plan is to spend four years spending every spare moment I have in researching, reading, analysing charts and paper trading.

At least you have a plan. It's hard to go too wrong too quickly if you have a good plan.

Personally I think you'll probably over educate yourself compared to the trading experience you have. There is a type of education that can only be gained by actually trading. Not just the trading its self, but the ideas behind the trading and the mental and also lifestyle aspect of it - especially as a full time trader. It is a mentally challenging way of life. There is no harm in reading and learning, but it's only one part of the education.


I don’t think there's any reason you can't achieve your goals, but the timeframe is maybe a little ambitious... If you want trading to provide all of your income, I'd suggest the capital you'll need might be more than you will have at 25 given your current situation. I'd also suggest that a year of trading is probably not enough experience to give up your day job. I'd be looking at 3 years of serious and profitable trading before giving up regular work. I've read somewhere that to switch to trading full time you should be making 3 times what you make from your day job. This is to compensate for variable returns and even negative years.

If I were you I’d be looking to work on trading ideas and properly backtest and forward test these ideas. Once you have a profitable method, paper trade it for a few months before trading it live. I believe somewhere around 20k is enough to make a reasonable start given that you have a pretty solid starting point knowledge wise. Others may disagree.

You may make some mistakes, but better to make them with 20k rather than 100k that you're trying to live off.

 

[So_Cynical]

Hey Alex...nice site and good luck with your ambitions, your passion and drive will take you a long way...is your goal realistic? probably. :dunno: i don't day trade so probably shouldn't comment, personally i cant see any big advantage to day trading over entering stocks with a more flexible, open ended attitude.

Also perhaps you should consider a more part time approach to your full time ambitions, i have a full time job with intermittent access to a PC at work, probably once a month ill see a bargain or have a sell go thru during the day and get online and place some orders...some weeks i make more money in my lunch break than i do actually working.

 

[trainspotter]

Dear tollbridge,

My Goal

At the age of 25 I want to quit working for somebody else and seriously begin my trading career. At this stage I will have several years of education on my five chosen fields and a reasonable amount of capital. Using the five fields above is it reasonable to expect that I will have success in daily short term trading or am I chasing a dream that’ll ultimately end in disaster?

I am now 42 years of age,

I quit going to school when I was 15 years of age and completely worked for myself after I realised no one was going to hand it to me on a golden platter. I had no capital behind me to make me work harder or smarter and everyone told me I would fail in every chosen vocation.

After five failed attempts I realised that chasing the dream made me more successfull as a disaster waiting for it to happen. My capital leftover made me more expectant that ultimately ended in a success that could end in a daily short term disaster.

I wish you the best of luck

Trainspotter

 

[ThingyMajiggy]

eat it, live it and breathe it. forget the site and blog, and probably the TA books. record everything yourself for yourself, come up with your own ideas and don't try and copy another traders methods/ways, 9 times out of 10 it won't work, anything you don't understand, google it until you do. try and find a friend or mentor who knows the markets inside out, can be a massive help and stare at the markets as much as you can, read whatever you want to read on weekends when markets are closed, and to be honest I'd stay away from forums, depending on how you can handle things, plenty of opinions and dick measuring going on, but there are some gems around too if you stay around long enough and look in the right places. Keep experimenting too, I don't think anyone can say/feel they are on top of it all, theres always something else to know or learn or witness, keep expanding.

worked for me, but thats just me....everyones different. Take from it what you will, I'm just saying a few things that have helped me. good luck, hope it works out for you.

 

[ENP]

How much capital do you hope to start with at 25 years old?

How much will your yearly living expenses be at 25?

Why don't you keep your day job and then trade the markets part time? You need money to live, I mean if it costs you $10-15k per year just to live, then if you start with 50k capital you will need to make that money back AFTER TAX which taking that into account is about a 40% ROI all year, every year just to pay the bills and buy food.

 

[TraderPro]

Hi Alexander,

From my observations it takes a "special" person with the right "mix" to succeed in the markets.

The right mix is a combination of many factors but generally they are about having the right personality, emotional and mental traits. You have to be resilient to market conditions.

Other factors include skills like being: analytical, systematic and possibly very good (or naturally good at) mathematics.

I used to follow a guy called Tim Sykes - of Wall Street Warrior fame, but I knew of him before that show. His success story is one in a million.

Good luck!

 

[adobee]

what about .. get a job trading for a company where you get big commissions.. loose someone elses money.. keep your own safe

 

[prawn_86]

what about .. get a job trading for a company where you get big commissions.. loose someone elses money.. keep your own safe

Thats the best way to do it

 

[tollbridge]

Wow! What a mix of opinions and ideas, that was exactly what I was looking for - thanks again for the time and effort you all put into your replies.

I am very independent and completely agree with the idea that one trading method may not work for another. Personality and lifestyle are certainly aspects that will affect anybody's trading success.

I will continue to keep my personal website and blog up to date if not just for the sake of recording my own findings and to track my own personal progress. If somebody copies it good for them - it'll only work in my favour anyway.

I will begin to spend more time analysing charts and watching the market as opposed to reading piles of books each week. I'm determined to find my own strategy and I'm sure this will develop and improve over time as I gain experience.

Thanks again

Alexander

 

[professor_frink]

For a beginners plan it definitely isn't a bad one.

Some questions that may help:

Firstly, why the website? It's quite well done by the way, just not sure on how that's going to be anything but a distraction

What I do possess is extreme determination and a burning desire to make my dream a reality. As most of you would know the world of finance is diverse and I have limited myself to spending time educating myself in the following fields:

* General Market Conditions
* Money and Risk Management
* Basic Fundamental Analysis
* Advanced Technical Analysis
* Trading Psychology

How exactly are you going about this? What exactly are you trying to quantify when you talk about general market conditions and how are you going about recording this for future review and evaluation?

When you are talking about basic fundamental analysis, are you talking macro or micro?

What exactly is "advanced" technical analysis? There's really not a whole lot to it to be perfectly honest.

Trading Psychology is mostly nonsense, and only worthy of extensive investigation if you find yourself in a position where you can't exploit any edge you have. Would recommend reading all of Brett Steenbarger's books, and trawl through his blog(http://traderfeed.blogspot.com/) for a good overview in this area.

It’s commonly quoted that.....

Common knowledge has a habit of being commonly wrong in the market. IMHO the first sign of progression beyond the novice level comes when the first reaction to anything you read, or told is "common knowledge" is one of healthy skepticism.

 

[skc]

Wow! What a mix of opinions and ideas, that was exactly what I was looking for - thanks again for the time and effort you all put into your replies.

I am very independent and completely agree with the idea that one trading method may not work for another. Personality and lifestyle are certainly aspects that will affect anybody's trading success.

I will continue to keep my personal website and blog up to date if not just for the sake of recording my own findings and to track my own personal progress. If somebody copies it good for them - it'll only work in my favour anyway.

I will begin to spend more time analysing charts and watching the market as opposed to reading piles of books each week. I'm determined to find my own strategy and I'm sure this will develop and improve over time as I gain experience.

Thanks again

Alexander

I concur with most here that you should keep a job and earn more capital before taking the plunge to trade full time. If you can get a job in a related field then even better.

I often hear market promotors / educators saying that trading can be learnt by everyone... but I completely disagree and just like many professions there are some people who aren't designed to be successful in trading. Desire and determination are neccessary but not sufficient for success.

Then again - what's the point of life if you don't have a go at what you love?! Just make sure you have something to fall back on. Some skill, trade, rich parents, inheritance - whatever. Trade from a position of financial strength instead of financial need and the psychology part will be much easier.

In terms of trading strategy...remember what is a trading strategy. It's a belief in how the market operates that is tested historically to demonstrate a measureable edge. Sounds cliche but it's an important concept imo. Too many people buy fancy TA programs and come up with models that have 15 variables - without asking themselves what is the underlying belief behind that. Always step back to think about that when you bury yourself in TA books.

Good luck with your venture.
Nice website btw...

 

[Julia]

How much capital do you hope to start with at 25 years old?

How much will your yearly living expenses be at 25?

Why don't you keep your day job and then trade the markets part time? You need money to live, I mean if it costs you $10-15k per year just to live, then if you start with 50k capital you will need to make that money back AFTER TAX which taking that into account is about a 40% ROI all year, every year just to pay the bills and buy food.

Tollbridge, I sent you a PM along the same lines as the above.
No one else has actually addressed these basic points.

You are high on passion but give no information about how much you might need to live on.

We have no idea if at 25 you might still be single, living with parents who require you to pay no board, or maybe married with a couple of kids, non-working partner, and a huge mortgage.

Obviously the two very different situations - plus all sorts of additional variations - are going to require very different incomes.
And if you've put those dollars you've saved into the deposit for a house, or gone travelling for a while, etc etc., your capital base for your trading might well be inadequate.

I'd be focusing a bit less on all the passion (and I echo Professor Frink's questions about what some of your statements actually mean) and a bit more on the purely practical questions of how much capital you intend to have and the income you propose to derive from it.