Do I go for it ?

Salty,
I actually made a list last night in response to someone asking about my 1-2-1 coaching.
I normally sort out those whom I think are unlikely to succeed in my pre-coaching questions and then refuse to coach them - especially hard core gamblers.
I'll consider posting it here, but I'll send you the list later/tomorrow anyway.
Got to do the week's shopping now - tesco internet orders of course. Very strenuous - 10 minutes of mouse clicks and delivery tomorrow am 🙂
Richard
 
Hi LWB

Thanks for that. I too will apologise for being a bit over sensitive about this and reacting hastily. All behind me now 🙂

Anyhow, back on topic, maybe we could drawout a few scenarios here. Figures will be approx. and I will assume living costs of £1500 as this should be the same for all scenarios.

1. Borrow against the house
400K house with 50K mortgage
Add 50K to mortgage bringing total mortgage to 100k
Approx repayments for mortgage inc. insurance etc £700 at current interest rates
Cost of data feeds, internet connection etc. £200 per month
Minimum income required from trading excluding living costs is £900 per month
Total required per month is £2600 inc living costs and excluding tax
Add 35% for tax and NI ie. £910
Gross required income from trading is £3510
Targeted Return on Capital Employed (50k) is approx 7% per month

Upside is no moving costs and family stays in current house. Downside is very exposed to interest rate changes and a very high return from capital employed required. The real risk is that the interest rates are increased, the housing market corrects sharply and the trading fails to produce the required minimum required. This could produce a worst case for example of house now worth 250K (30% drop) with a 100K mortgage and no capital. Net assets now 150K.


2. Downsize the house
200K house with no mortgage
150K balance from sale of house
50K used to finance trading capital
20K set aside for one years living costs
Cash balance is 80K earning 3% per annum ie. £2400 per annum

Cost of data feeds, internet connection etc. £200 per month
Minimum income required from trading excluding living costs is £900 per month
Total required per month is £900 exc living costs for first year and excluding tax
Add 35% for tax and NI ie. £315
Gross required income from trading is £1215
Targeted Return on Capital Employed (50k) is approx 2.4% per month

Upside is no mortgage costs and no exposure to interest rate moves or housing market. As all costs are covered in the first year any gains can be retained in the trading account for the second year when living costs will be covered from the trading account. Downside is the requirement to move and the costs associated with this.

Worst case for this scenario is new house now worth 140K (30% drop). 80K in the bank. Net assets now worth 220K but no debt and no mortgage.

3. Do nothing
For this I will look only at the worst case for comparison.
House drops 30%. House worth 280K with 50K mortgage.
Net assets 230K

So, from an asset protection point of view my take would be to downsize. Beare in mind that the asset values are based on a probable worst case scenario it is possible that interest rates will not increase significantly and houses will maintain their current pricing. Personally, I think the housing market is due for a mjor correction. The turning point in the last downturn was the increase in interest rates. Rates increased over 50% from a base of 8-10% to a rate of 14-16%. Current rates of 4% only need to increase by 2% (ie. to 6 percent) to give us a relative increase of 50%. A 2% increase in base rates would see a 50% increase in mortgage charges with all the knock on effects on consumer spending and house prices. Negative equity for some is just round the corner.
 
Warning - long post !


A new day...10:00am (A treat - I am normally up by 6:30am)

The sun is shinning in Gods little corner of the North West and my garden is springing to life.The lounge is littered with toys (and one or two nappies).The kitchen looks its usual morning state and Mrs. H has already been out to to the Estate Agents to get some details of houses we could (if we chose) downsize too..
Life moves on - and so will we !

Strange how word gets around.I have received two calls from other Headhunters now (hearing what has happened,I guess) -offering me a job.Good salaries and commission plans,benefits packages, coupled with the crippling personal tax of that ever important BMW or Merc.All very flattering but as about appealing as a one2one with Hannibal Lector.Obviously I didn't turn them down on the spot and explained that I was taking a couple of weeks out to think..

Not sure I need to though - as Michael Caine said on Parkinson many months ago "This is your life,not a rehearsal".

So Mrs H. and I sit down at the Dinning room table to begin the sobering prospect of sorting out the finances.Armed with notepaper a calculator and pens we get too work.

Here comes the important bit

1. With some tweaking here and there and allowing a small amount for contingency we can stretch the 8k thats in the bank now for 4 months - basic expenditure and day to day living.

2. I have phoned the mortgage broker who has said that we can easily take 100k out of the house without any difficulty as we are on such a low 'loan to value' ratio..He did however suggest that I didn't say what the money was for - There is a good point in there.

I have no intention of extracting 100k though.Personally it's just too much and I am not comfortable with it.Cutting a long story my initial analysis suggests I should consider taking out 40k.Of this I will use 20k to trade and keep 20k in an 'ING' or similar high interest paying account for living off, only drawing out a salary per month -whilst obviously keeping as much in the account at one time as possible.

Given that we have 8k which we can stretch for 4 months the further 20k gives us another 8 months (I am allowing a contingency of 4k for any nasty or unexpected surprises).

This means that I/we will not have to be reliant on trading profits in any one month to pay the bills for at least one whole year and will allow the account to develop and grow naturally I can increase my position size incrementally and within my 'comfort levels' -trading objectively.

4.My 'Entry' Stop loss level will be set at 5k (trading account)and shall be 'trailed' in the early months to lock in some profit should this blow up in my face !

I have put together a business plan which needs more work but a shan't bore you all to death with this here.

Covering some of the other points and thoughts so kindly offered...

1.My initial interest in trading started 11 years ago when I was helping small charting software provider out by doing some PT telesales for them - that company is still around day and is called Updata - I was hooked then and have been ever since.Whenever I say a Price chart when reading the FT I was looking at Suppt/Resistance levels etc.

2.Socrates made an excellent observation on me on page 1 of this thread and he was right with regards to 'emotion in trading' - there is no place for it (I reg. with this site 12 months ago under the name 'Hopefull')..the enemy in my early trades was myself (Quote, Buk) - I could read the chart fairly well but kept tinkering with my trade and paid the price..As Rob De Niro discovered in 'Heat' (Classic movie) you lose the discipline and you pay the price..he was shot ! This was a a trading weakness that I have controlled considerably 'Forced awareness' is no pleasure - have I cracked it yet ?- I don't honestly know but my trading improved considerably when my account reached a level that meant it was nearly game over..and I didn't want that to happen so it was time to confront it.

3.Who knows where the housing market is going - In my area we have not really seen the rises of the South/East/West and there are a number of things underpinning prices right in my postcode now.Crash - possible. but unlikely. and the worst possible loss I am facing from this is c 35k plus any loss of income that I would have had as an 'employee'.

Any observations ???

H
 
hopefull,

Thanks for the update, nice to hear you are more optimistic.

One small point I didn't quite understand though, you say at the end that your worst possible loss is £35k. I assume this excludes any possible drop in house prices?

There's an article on The Motley Fool today you may find interesting. From a quick scan, I think they suggest property is overvalued by up to 40%.

Best of luck,

Mute.
 
good stuff H....all the very best with your endeavors, eye's wide open & all that!! 😀 😉
 
If property values do drop..and that wouldn't be any great suprise given the impending rises in interest rates and the massive increase in HPI over recent years I, like any other homeowner will be affected anyway.

I am not cliaming that this area will be immune to it but as I mnetioned there are a number of reasons why prices here may remain more stable.
 
The Sunday Times trader's name was John Urbanek and he seems to have sunk without trace.
Though googling his name still brings up articles that quote him as the way NOT to do it.

His articles were so funny/stupid I printed them out and still have them somewhere........
 
Ah yes.
Humility and a controlled ego are necessary to trade successfully......
My mind moves laterally and finds connections, so I always thought of him as being the Urban Redneck, but I couldn't remember his real name ;-)
 
Good Stuff Hopeful

You are certainly going in with your eyes as wide open as possible.

I am picking up on the fact that Traders tend to discount the media when it comes to forecasting the markets yet are happy to accept media hype about the property market (and there's loads, however on balance 70% is optomistic and 30% if pessimistic - Housebuilders Federation Stats)

I am new to Trading but have some knowledge of the property market. It is not just about Interest Rates it is also about affordability and 'no' I do not believe the two are necessarily the same. There are a number of options open to house purchasers to continue living where they are and not having to panic sell which is what causes a crash.

1) extend the length of the mortgage to keep the repayments the same - when interest rates come down again, reduce the time back down (this is how it works in France who have an enviable stable housing market).
2) pay interest only for a while
3) fix the rate for as long as possible NOW!

The Gvt is raking it in at the moment with Stamp Duty, Inheritance Tax and Affordable Housing levies put upon Developers. They want Developers to continue building as we are desperately short of houses, most MP's have got Buy-To-Let properties, most MP's are lawyers - these are just a few of the reasons why I think GB will put as much influence as poss into keeping the property market bouyant. I'm sure it will slow/pause but not crash.

Mortgages were different during the last Crash - there were many of those 'low interest start then high interest after' type mortgages and this caught many people out. Those mortgages have been banned now.

I'm optimistic!
 
Well, I believe this thread has quite naturally ran its course...and now the real work must begin.

1. Am I nervous ? - Yes
2. Am I excited ? - Yes
3. Do I posses the necessary skills and ability to make it as a full time trader ?...Only time will tell.
4. Can I live with myself if this doesn't work out - Yes
5. Can I live with it if I don't press ahead - yes..but there will be regrets and it is likely to always be in my system.

Time to take a break for a few days and on May 10th I begin this journey.


To each and everyone who shared a thought, experience or offered guidance I can only offer my sincerest thanks.

I hope that in the coming months I will also be a useful contributor to this site.

(Any newbie FX'ers out there should also consider popping in the FX Chat room,it's was a fantastic idea to launch it and can be damn good crack !...)

Finally - Yes, of course I will let you know how things are going - good,bad or indifferent.

H
 
Good luck , hopeful.

Let us know how you're getting on .

Oh, just one final thought. I agree with much of what's been said about 'cutting back' so as to lower your monthly outgoings - but keep your membership at the gym. You'll need to keep physically and mentally fit and work-outs are a great way of relieving stress (and agreesion). Just my 2p's worth.

Regards,
 
I've just spent the last hour reading this entire thread. Lots of good advice. I've been trading part time for about 3 years now and am considering going full time for many of the reasons stated above. As I trade on the Nasdaq and live in the UK I plan to get a part time job in the mornings so I can trade in the afternoons. You say that you have young children so this may not be an option but it's something to consider.

Good luck if you do decide to go for it.
 
Thx, Alphabet and good luck to you too.Sounds as though you have an excellent foundation to build upon there..Making the decision is the hardest part after that its just a case of getting on with it !


Well it's now over four months since I started this thread and I think in fairness I had already made my decision to 'go for it' anyway.Having lost my job and not caring much for my real alternatives it seemed the right thing to do (please bear in mind that I had been following FX initially in demo trading then trading a mini account for almost 1 year, screen watching 8 hours per day)..I was also very fortunate in having the full backing of my wife in this venture (without which it would have never gotten off the ground).

What has happened since May then ?

Well at this stage I am happier than I can remember being for many years ! I am doing something that I had wanted to do since my early 20's (now an ageing 35).

When I began back in May I had to make some radical changes though.Although I thought I was ready I was not.

The profits came but were not as consistent as I was happy with - so I did a full audit and pulled apart everything and I mean everything - entries,exits,limits,stops,trading times,RR,money management the whole lot and really examined my methods.

The conclusion for me was that there was simply too much of a discretionary element to my trading and if I was not completely in the right frame of mind to trade, I screwed up - i.e. seeing things that weren't there ! Quite frankly I was shocked - I had really believed I had a system but when I attempted to put it all down in black and white it had too many holes.

I solved this by truly devising a trading plan that I was comfortable with - almost zero discretion allowed on my part nowadays - In fact I am simply the monkey who enters the orders !

It has helped enormously and I now trade down an 'emotionless' corridor..very liberating I can tell you.I get neither excited by a big gain or disappointed by a loss - it all works out positive in the end anyway so why torture myself ?

I have complete belief in my system it is something that I have spent a great deal of time putting together..and if/when at some stage in the future it stops working I will simply devise another one...the key to the whole system ? - money management (that does not mean just limiting risk to 1-2% either..actually thats a very small part of things) - money management, ahh - the Holy Grail of trading.Why did it take me so long to grasp such a simple concept ?

Everybody has there own way of trading- I have found mine.It is something that has taken many hours of my time (often waking up in the middle of the night with an idea in mind then testing the hell out of it while the family slept - my wife thought I was going nuts !)

At this stage I am still building my trading bank and not having to draw a salary from it - so I am still in my honeymoon period.The bank is building well.I am compounding up / raising the number of contracts traded all within the business plan set out sometime ago and reviewed weekly.


There is a depth of information on this site Alphabet (I see this is your first post) and some very helpful people such as Buk,Newtron Bomb,bbMac,Bramble,tWalker,jpone,Skimbleshanks and a host of others have all helped me along this road and freely shared their thoughts and advice.

I am extremely grateful.

H
 
I'm SO pleased to hear it's going well. You deserve to give yourself a hearty slap on the back for what you've achieved so far!
 
Cheers Skim'

I trust all is well with you on the 'Dark Side' - and fwiw I am of a similar frame of mind nowadays.I can't remember the last time I used an indicator ..! Much simpler and cured from that fateful illness 'analysis paralysis'
 
Hopefull

Just re-read this thread again which I had forgotten I had contributed to if I'm honest. However, I'm glad I re read it because it's a great thread and I am sure many people will be very interested in your progress as they will be in very similar positions.

I am pleased things are going to plan for you.

Do continue to keep us updated as I, for one (of the "yet to take the plunge"), am genuinely interested in hearing your experiences.

Darren
 
hopefull
I'm glad to hear that you've emigrated to the dark side. I just hope you realise that it was a one-way ticket, and there's no going back - ever! LOL
 
😀 good stuff Hopefull, a pretty tough & sweaty road huh...but well worth the effort 😉

don't go bumping into too many obstacles on that 'dark' road....oh, and keep your carrot consumption topped up 😎 :cheesy:
 
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