What It Takes To Be In the 1%?

Who in their right mind would quit a six figure gig to pursue an advocation that only 1% of those that pursue it were successful?  Well, today marks the fourth anniversary of the day that I lost my mind. Yes, I miss the whining and dining of customers that I routinely did as a software salesperson.  As well as the sales conferences and golf outings.  That being said, I can count the number of Mondays I looked forward to in my corporate career. Now I can’t wait for Monday to come.

There were several articles floating around this weekend about day trading.  Henry Blodget, of internet bubble fame, said that day trading was the dumbest job ever.  He quoted research from a University Professor that stated

  • 80% of day traders in the study lost money (something that is very hard to do in a bull market)
  • Only 1% of day traders in the study were “predictably profitable.”

I don’t consider myself a day trader, but Blodget and the Professor would lump me into that bucket.   I am an active trader that earns my living by trading the market.  Am I “predictably profitable?”  What the hell does that mean?  The professor can predictably pick up his paycheck every week, because he has tenure.  That doesn’t exist in the real world.  A pink slip can arrive on your desk any day.

I have managed to maintain my same lifestyle over the past 4 years – as I did as a working stiff.  So, that is “predictably profitable” enough for me.  Statistics such as those above keep people stuck in cubicles and dreading Mondays.  Life is too short.  Pursue your passion – you may get lucky and find yourself in the one percent.

Note: The Time and Money Group is a “work in progress” founded by Michael K. Dawson to encourage people to pursue their dreams.  Its mantra is “Why trade time for money – when you can have both…”

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  • Congrats Michael. Feels good doesn't it?

  • Very well put, & insightful article. Gives one hope, not just to branch out, & pursue their passion blindly, but to do it, grabbing every necessary tool & helpful information, to get into the 5 percentile, looking at those in the 1% group. Very inspirational! Thanks for sharing your experience.

  • tamelarich

    Congrats and well done. I'm writing a book based on traders who've had success like yours. Will you agree to be interviewed? More info here http://tamelarich.com/2010/events/announcing-tr

  • Thanks, It feels better than good. It has been a great 4yrs. I wouldn't trade it for anything…

  • loved this post Michael – it's been a pleasure getting to 'know' you – as you know we have much in common – and it's great to hear how well it's working out for you. To many more interactions and mutual, ongoing success…

  • Thanks, I traded part-time for a long time before I jumped out here. I have my doubts about that 1% number. IMO, that number increases significantly if you have a plan and are properly capitalized.

  • Thanks, Sounds interesting. Let's talk about it….

  • Thanks – Chris, it has been a pleasure getting to know you as well. Social media is becoming another one of those – what did we do before it existed technologies. Looking forward to many more discussions with you in the future….

  • benzeen

    Retweets found me here Mike and it sounds like congrats are in order. I am in maybe in a similar situation to you four years ago- reasonably capitalized and doing well part time- like this way more then my real job. Do you have any books to recommend or posts dedicated to such topics to point me toward? Cheers,

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  • Bruce

    Glad you posted this Michael. I also left a 6 figure job in tech to more actively invest and have been doing so successfully for the past several years. I think all the articles floating around lump everyone into the day trade pot where it doesn't surprise me that losers far outweigh winners, although the 1% figure seems exaggerated. In my case, Iselects stocks to stay on board with as long as possible. Unfortunately the volatility in the market and my on-going fears of economic blow-ups and my natural paranoia forces me out of positions much sooner than I'd prefer triggering the most pernicious cost of doing business as an active investor….the confiscatory short term capital gains tax. There are so few offsets to this tax, unless I'm missing something, making this the most challenging of businesses.

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  • I need to put together a suggested reading list. In the mean time, take a look at one that Joe Fahmy put together. I have read several of the books on his list. http://bit.ly/dgyjZ8 Also, I have some pretty good articles on this site. Many of them are in the Absolute Must Read category. I have been slacking a little, so some of the most recent haven't been added to that category. Finally, a couple of years ago I compiled some of my best and put it in book format. The ebook version is available of the site http://bit.ly/c4oSyD

  • Unfortunately taxes are part of the game. Just make sure that you don't let the tax tail wag the dog. I got burnt in 1999 worrying about taxes. That problem was solved by the end of 2000 – when most of my gains were gone. The other thing that you can look in to is using mark to market accounting. That translates your cap gains into ordinary income. Take a look at some of the Green Trader Tax info. Looks like it has been upgraded for 2010. I have an older edition. http://bit.ly/cgjrQ

  • Bruce

    Michael, Thanks very much for the traders tax book recommendation. I just ordered it. Do you think, as a trader, I need to use a tax professional? I've always handled my own taxes. When I worked in the corporate world it was relatively straightforward and I could count on turbo tax. They seemed to transfer all my trading records and balance out the long-term vs short term gains. But now that I'm dedicated to investment income and my volume of trades have gone much higher I'm wondering if this is still the best way to handle things. I wonder if you or any other traders have suggestions or if they think a tax professional can really save you money if you're already halfway savvy in this area.

  • After reading the book, if you decide that you want to use Mark to Market – I suggest using a tax pro. MTM is complicated and if you screw it up you are screwed. I use Green. Be warned – they are not cheap….

  • Bruce

    Michael, Thanks very much for the traders tax book recommendation. I just ordered it. Do you think, as a trader, I need to use a tax professional? I've always handled my own taxes. When I worked in the corporate world it was relatively straightforward and I could count on turbo tax. They seemed to transfer all my trading records and balance out the long-term vs short term gains. But now that I'm dedicated to investment income and my volume of trades have gone much higher I'm wondering if this is still the best way to handle things. I wonder if you or any other traders have suggestions or if they think a tax professional can really save you money if you're already halfway savvy in this area.

  • After reading the book, if you decide that you want to use Mark to Market – I suggest using a tax pro. MTM is complicated and if you screw it up you are screwed. I use Green. Be warned – they are not cheap….

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