Six years ago to this very day I walked away from corporate America to trade full time. As each anniversary day comes, I can’t help thinking back on March 31, 2006. Well over a year of preparation, planning and deep reflection went into that moment. After all, I was walking away from a great 6 figure job with significant responsibility and latitude. It wasn’t like I was leaving a dead end job that I hated.
We have all seen the statistics that claim that 90% of traders fail. Although I have never seen any data behind the claim – it is easy to accept as true. We all know many people who have been wiped out in the market, but very few who have been trading full-time for 5 years or more. That being said, I would still love to see the data. Who are these people? Did they work on Wall Street before venturing on their own? Were they capitalized sufficiently? How is success or failure being measured? A few weeks ago I received an email from a writer that was working on a story on people who lost their jobs or took a buyout and turned to trading instead of pursuing another job. I think my response may have surprised the writer.
I can’t recall anyone who has attempted to trade after losing their job in the last few years. As you know that was quite common in the late 90s. After the internet bubble many decided that their time would be better spent looking for a job. 2008 reinforced it for those that had forgotten. IMO, entering trading reactively (like after job loss) is asking for trouble. Trading full-time is very difficult. It requires a well thought out proactive plan for any hopes of success. Even with a plan it is still a difficult endeavor…
With all of my preparation and planning – it nearly all went out the window in the recession/depression of 2008. Like Mike Tyson says “everyone has a plan til they get punched in the mouth.”
Up until 2008, I was primarily as position trader / investor. I preferred thinking in terms of months instead of days or weeks. Some of my best trades have been 18 months or longer. To capture longer term moves you will have to suffer through some significant pull-backs. This works well when there is a guaranteed paycheck coming in, but sans paycheck it is a whole different ball game. I had thought through this scenario before resigning, but 2008 was 10X worst than any situation I had imagined. Fortunately I was well enough capitalized to survive, but emotionally I was a wreck. It was clear that changes were REQUIRED.
One way to control draw-downs is to reduce your time frame. A good swing trader can stay near their highs by thinking in terms singles or doubles instead of home runs and by only trading when the market is in a confirmed up trend. I have spoken about Mark Minervini’s seminar that I have taken to help with this style (here and here).
After I had taken the Minervini seminar in October 2010, the market made a nice move higher. It was easier to stick to my old strategies than to adopt the new ones I had learned. However, when the market turned back down in March – my old ways failed me once again. I had just lived through this in 2008. Clearly, it was time to either evolve as a trader or polish up my resume.
BTW, My resume still has dust on it.