Why do they do it?

[DionysusToast]

How about...

Trade 1:

You are a successful trader. Last year you made £260,000. (£5,000 each week on average) You earn a whole lot more than your university chums who all went into being Doctors and Lawyers. Everyone knows you are a success and you feel proud about that but you are also almost burnt out. You used to think that one day you would find a system, and then sit on a yacht with a laptop. Infact the first question you asked when you joined a trading firm early in your career was "Why is that guy at the back who makes £200k a week the first one in and the last one out??"

At any rate, you're earning well but you're working every hour watching the market because you realise that's what it takes. A day off? Yes, you took your Porsche for a spin down to the local Sainsburys last weekend. But you could only afford an hour because it was Non-Farm Payrolls later on and you need to feel the rhythm constantly when you are discretionary and not systematic.

Lately, your life has been a bit more stressful than usual and you struggle to stay constantly on the ball. You knew what you were letting yourself in for as soon as you realised that the professionals don't trade 5m pin bars when the RSI is at an extreme, with a nice little 2:1 R and a fixed stop loss in place - ad infinitum. Instead you know it requires constant focus, discipline, and decisiveness to make reactionary and discretionary decisions in the flow of a constantly changing price (and P&L)

The problem is, you haven't had any proper sleep for days (the new baby is crying all night) and you had a few losses last month. You usually never talk about losses but you were tired and you let these ones get to you and your wife started saying "what if it all went wrong one day..." when you told her.

Your three kids are at private school which is costing you £30k per term, the mortgage payments on your £2m house in Chiswick are about to get raised and your trader friends at JPMorgan think it's acceptable to do £1,900 on a bender at the weekend.

You think about all this but then you tell yourself, it shouldn't bother you because you have an edge, you've been profitable for 5 years straight now...you're a successful trader!!

Trade 2:

You are the guy above. You made it. But secretly you dream of cutting back, risking less and taking the pressure off a little. You are no longer 24 years old with your whole life ahead of you. You are late thirties now and you have responsibilities. Of course you are never going to stop trading. Why would you when you have a proven edge that works? But the risk is always there and you want to minimise that. At the same time you want your LIFE back. You don't want to be working all hours worrying about missing that one trade that might mean the difference between a winning and a losing month.

You figure you might be able to teach some people to do what you do. You actually quite like the thought of this. You weigh up the pros and cons. The cons are that it takes time to run a business like that and it also might affect your trading having to explain trades to others. The pros are that you get a supplemental income, risk free. Anyway, you try it out and you charge £150 per month for traders to shadow you. Before you know it, your skills speak for yourselves and you have 100 people in the room.

Now your Uni chums - they whisper to each other that you have lost your skills. And the last time you logged into T2W to do some marketing you found a post that said "those that can do, those that can't teach". It upset you a little. But then you check your bank at the end of the month and the £15,000 sitting in there cheers you up again. You are now making £180,000 a year.

You decide to start a website and you put all your informational material on it for those that can't spend all day in your trading room. A few months later you've got 212 people in there paying a further £99 a month. At the end of the year this has brought in £251,000 and combined with the room you're now getting on for making more each year than you made as a professional trader and taken absolutely zero risk to do so.

Your best friend that is the Director in a bank got a 20% wage increase last year. You took him out for a few drinks to celebrate, hardly daring to tell him that you got a 60% wage increase.

You still don't have much of a life, so you use some of your vast profits to pass all the maintenance onto a friend and then you start to sit back...Infact, you actually went out for dinner with your wife last week because your trading room shuts at the normal time of 5pm!!

Who is competent here?

Like trading, life is about risk versus reward.

Says the man who sleeps on the sofa next to his trading PC.

 

[pboyles]

I have to say vendors defending vendors isn't going to convince anyone.

 

[the hare]

I have to say vendors defending vendors isn't going to convince anyone.

They'll be forming a vendors union next

 

[trader_dante]

Says the man who sleeps on the sofa next to his trading PC.

LOL, I know...that essay above is not about me! I have no life whatsoever and I don't earn those sums of money for the privilege.

I'm just saying, all is not black and white.

The biggest mistake in thinking about trading is that "if you are a great trader you should be able to make millions".

People that think this are complete beginners.

 

[trader_dante]

I have to say vendors defending vendors isn't going to convince anyone.

If that is aimed at me, I'm not defending anyone.

I'm sure there are way more scammers than trustworthy vendors. I'd bet everything I own on that.

I'm just saying that blanket statements are for the ignorant.

I try not to fall in that category.

 

[Masquerade]

The biggest mistake in thinking about trading is that "if you are a great trader you should be able to make millions".

People that think this are complete beginners.

Educate us mere mortals why a great trader can't make large sums of money.

 

[DashRiprock]

Educate us mere mortals why a great trader can't make large sums of money.

do you even trade?

 

[Masquerade]

do you even trade?

No, I spend my life on T2W trying to sell courses. Why?

What's the answer to my question?

 

[DashRiprock]

do you even trade?

sorry i did not mean that in a nasty way

but you said things like "a trade either being wright or wrong and" and "nobody that coaches can be a good trader cos if they were they be on a yacht with babes instead of helping soemone else" and "all successful traders are millionaires" and really this is not what i have seen in trading at all

 

[BlackBison]

Educate us mere mortals why a great trader can't make large sums of money.

Lack of courage to handle huge equity swings?

If I inherited £10M tomorrow I would not hesitate to deposit it all and bet my usual 5-10% per trade. I have no qualms about taking large losers because I cannot stand to have a large edge and not really go for the jugular. I always have had the confidence to bounce back no matter what. Thats my personality, which is probably the exception not the rule.

Presupposing that you have a similarly good edge (which you most likely dont) could you say the same?

One things for sure, I know overly cautious traders like Dante or Dion certainly couldn't. Which is why they will never be making millions from trading. So they will be confined to the realms of pnl mediocrity, despite being good traders. Thats ok i guess, making £40k a year whilst sitting at home as your own boss is cool. Not everyone is willing to risk it all to try to become the next Soros..

 

[SanMiguel]

No, I spend my life on T2W trying to sell courses. Why?

What's the answer to my question?

I will give you 1/10th of the answer, you can find it on my vendors link. The rest can be found on my site www.givemeyomoney.com where you can check out my 100% success rate.

It's a capital allocation thing I reckon. Most don;t start off with large capital and or the emotional capital to trade well. There's nothing wrong with getting by trading once the dreams of millions are long gone

 

[DashRiprock]

Lack of courage to handle huge equity swings?
bet my usual 5-10% per trade.

I dont know how good your edge is but mate you must have balls of brass

 

[Masquerade]

Lack of courage to handle huge equity swings?

If I inherited £10M tomorrow I would not hesitate to deposit it all and bet my usual 5-10% per trade. I have no qualms about taking large losers because I cannot stand to have a large edge and not really go for the jugular. I always have had the confidence to bounce back no matter what. Thats my personality, which is probably the exception not the rule.

Presupposing that you have a similarly good edge (which you most likely dont) could you say the same?

One things for sure, I know overly cautious traders like Dante or Dion certainly couldn't. Which is why they will never be making millions from trading. So they will be confined to the realms of pnl mediocrity, despite being good traders. Thats ok i guess, making £40k a year whilst sitting at home as your own boss is cool. Not everyone is willing to risk it all to try to become the next Soros..

The statement in question was this:

'The biggest mistake in thinking about trading is that "if you are a great trader you should be able to make millions".

People that think this are complete beginners.'

If you are a great trader, you will be capable of turning small sums into large sums. All you will need is some time and patience. This is assuming the person is capable of detaching themselves from the money and a great trader will be able to, because even if they blow their account, they can get some money together and turn that into a large sum with a bit of time.

Turning £100k into £2m will be an easier task than turning £10m into £200m and this is obvious as trading is scaleable to a point but then it becomes a much more complex exercise.

Regarding your question to me: if I happened to stumble upon £10m, I wouldn't bother trading. What would be the point of it to me? £20m would not make more difference to my life than £10m. Neither would £30m, at this point we're talking about a stupid sum of money which would not be used for anything useful.

 

[DashRiprock]

The statement in question was this:

'The biggest mistake in thinking about trading is that "if you are a great trader you should be able to make millions".

People that think this are complete beginners.'

If you are a great trader, you will be capable of turning small sums into large sums. All you will need is some time and patience. This is assuming the person is capable of detaching themselves from the money and a great trader will be able to, because even if they blow their account, they can get some money together and turn that into a large sum with a bit of time.

Turning £100k into £2m will be an easier task than turning £10m into £200m and this is obvious as trading is scaleable to a point but then it becomes a much more complex exercise.

Regarding your question to me: if I happened to stumble upon £10m, I wouldn't bother trading. What would be the point of it to me? £20m would not make more difference to my life than £10m. Neither would £30m, at this point we're talking about a stupid sum of money which would not be used for anything useful.

yes there are some great traders who get small money and make big money (some just get lucky).

but there also great traders in banks who can work multiple sizeable orders in a fast market while talking to the salesmen who want impossible prices

or option market makers who can do sums and think so amazingly quickly it waskes your eyes water

and traders whos strategy is more about income generation than capital gains and they have exhausted the liquidity for their strategy

or traders who dont make amazin 1000% returns but have a pnl smoother than a babies bum.

 

[trader_dante]

Educate us mere mortals why a great trader can't make large sums of money.

Many great traders can make large sums of money but the blanket statement: "a great trader should be able to make millions" is ignorant.

There are so many reasons why this is the case that I would be here all day if I listed them.

Bison's point is not a bad one, I guess.

Here's another one: Liquidity.

My best mate in prop was one of the best traders I saw there. He made money almost every single day and he was one of the firms favoured traders because of that. However, he scalped the FTSE and his edge meant that for liquidity reasons he had a "glass ceiling" in the number of lots he could trade without pushing the market too far in order to be able to get in and out effectively for profit.

If you make £1,000 four days a week and lose £500 on the fifth day you are up £3,500 a week. Not bad at almost £170,000 per year but remember that compounding can't help him. So thats almost six years to make a million without factoring in withdrawing a good salary to live off. And that is knowing his market inside out and being what anyone would admit is an excellent trader.

And let's look at withdrawing while we are on the subject...

Let's presume you AVERAGE 100% per year. Most people might even turn their nose up at this (usually they are bragging about making 60% per week and trading 5 cents a point whilst averaging positions with no stop) but 100% a year is an incredible return. Most of the market wizards weren't getting anywhere near this.

Then start with a decent pot e.g. 20k that you ran up from nothing whilst doing your full time job. Then pay yourself a good yearly salary of lets say £40k to be conservative.

Let's do the math:

Year 1: £20k - £40k. (If you withdraw, you just zeroed your account. But lets cheat and say you maybe saved a buffer salary from your job so you withdraw nothing in the whole of your first year as a full time trader)

Year 2: £40k - £80k. You have to start withdrawing to live - that is after all why you trade. To make a living. Subtract £40k.

Year 3: £40k - £80k. You did it again...nice one. You earn a living from your trading. Subtract £40k...

Year 4: £40k...you see where I am going with this, yet?

And you better hope that you don't get a below average year. God forbid if you only make 90% you are really up sh*t creek. Your expenses outweigh your returns and your pot starts SHRINKING.

Is this guy a great trader? Yes .

Is this guy ever going to make millions? No.

When newbies say "great traders should be able to make millions" they are thinking about the theory not about the actual reality.

As usual I am trying to argue that not everything is black and white.

Yes, a great trader can make millions.

But there are plenty of great traders that WILL NEVER make millions.

That is as clear as day.

 

[Masquerade]

Liquidity: If a market's not liquid enough, trade more/trade different markets? It's pretty easy to move large chunks of money around on the FX markets. As I said before there's a ceiling with all these things but you have to get pretty high up before you have to start worrying about that.

As for these market wizards, I addressed that with the example of turning £100k into £2m and £10m into £200m. If you are trading with £20k and hope to make 100-200% that year you're wasting your time if you intend to take the money out. You would be better off becoming an accountant.

 

[trader_dante]

Liquidity: If a market's not liquid enough, trade more/trade different markets? It's pretty easy to move large chunks of money around on the FX markets. As I said before there's a ceiling with all these things but you have to get pretty high up before you have to start worrying about that.

OK. I will pass the info on. I'm sure he will agree with you. He has spent years studying the FTSE and knows the ins and outs of it like nothing I've ever seen. I'm sure he will find it a breath of fresh to just change his market completely and take loads of time out to learn the idiosyncracies of the next one.

As for these market wizards, I addressed that with the example of turning £100k into £2m and £10m into £200m. If you are trading with £20k and hope to make 100-200% that year you're wasting your time if you intend to take the money out. You would be better off becoming an accountant.

I agree. You would be better of getting a better paying job. But that doesn't take away from the fact that you could still be an excellent trader and unable to make millions because your capital wasn't enough when you got to the stage in your life/career where you needed to withdraw.

 

[Masquerade]

OK. I will pass the info on. I'm sure he will agree with you. He has spent years studying the FTSE and knows the ins and outs of it like nothing I've ever seen. I'm sure he will find it a breath of fresh to just change his market completely and take loads of time out to learn the idiosyncracies of the next one.

If he needs a coach i'll be happy to do it for a fee. If he can think about the real world and understand the impacts on various things then switching market shouldn't be such an issue.

 

[SanMiguel]

There is 1 alternative and you see a lot of Twitter traders do this, which is they mentor or publish their own journal logs to better their own trading. For example, you might mentor someone else to control certain aspects of your trading that you would like to do better at, eg discipline. These guys then get more interest and then start charging. Still goes back to what I was saying before in that it's not regulated and they have no qualifications per se but people are desperate to make money/make money back in this game they they'll hand over money to anyone in the hope they can.

 

[trader_dante]

If he needs a coach i'll be happy to do it for a fee. If he can think about the real world and understand the impacts on various things then switching market shouldn't be such an issue.

As new_trader would say. Unsubscribed! ;-)