Trading For A Living – What To Expect
“Start with the end in mind” – have you heard that one? Probably pretty good advice.
So what’s it like? That is, after you’ve gone through the learning curve, have your emotions in check, and are trading a system with an edge?
Let’s delve into what trading is really like, so you’ll know whether you want to take that first step toward becoming a trader.
I’ll present a mash up of what my days are like, and what many of my trading friends’s days are like. Most of the traders I’m thinking of here are futures traders, so our days tend to revolve around the CME market.
First of all, I think every single one of the traders I know well, trade from home. None go to an office to trade. Of course, I’m sure in the wide wide world, lots do – I’m just not close personal friends with any of them. I do know a handful of folks who at one time or another traded in a prop firm’s office, but they all ended up later trading at home.
So that’s the first thing to consider. You’ll be “working from home.” Some people like it, some don’t. There are things to love about it, things to hate about it.
The commute is easy.
Most of my trading buddies have a separate office in their home for trading. I used to, but don’t now – I trade from a desk in the master suite.
Computer setups vary. I used to have several computers, with several monitors on each, back in the 90s. I did frenetic (stock) trading back then, and needed to keep an eye on a lot of software – at one point, I had 10 monitors doing one or another thing throughout the trading day. It seems like most of the traders I know now have some story like that to tell, about how they set things up in the past. Nowadays, I just have a trading PC with two monitors & and a laptop with one monitor. Of all my trading buddies, I’m the only one who does this, but I like to keep my trading platform on one PC, and all my personal stuff on another PC. I have an Olympic size fear of thinking I’m typing into a Facebook chat window, when I’m really telling my broker’s trading application to buy 5000 ES contracts.
Almost all my trading buddies take the “vibe” of their work space very seriously. It seems like cliche to say that everyone needs a happy work space, and it is. But for traders, it’s an enormously larger concern than for most folks. When you make a mistake trading, it can cost you, easily, thousands of dollars. I’ve done it. Every single one of my trading buddies has done it. Minimizing distractions is really important, as is doing what it takes to make sure you’re in the right frame of mind. My own setup will very much less than ideal in that respect, so I do want to fix that.
My day starts with getting my daughter up & dressed & dropped off at school.
My first trading signals can potentially start at 9:30 US eastern, so I’m up & at the computer by around 8:55. I don’t watch CNBC, or CNN, or any news outlets of any sort. I don’t read any pre-market reports. I’d say maybe half my trading buddies do, but I’m not sure why. I try not to pay attention to anything that doesn’t influence my trading decisions.
I scan the markets, make sure my software is running correctly, make sure my order entry windows are set to the right expiry months, and make sure my stops & targets & order quantities are correct. I grab a big bottle of cold water, and start watching my software do its thing.
At 9:30 US eastern, I’m engaged. I potentially get triggers at 9:30, about 10:00, 10:30, and others at random times throughout the day. The way I trade, I place my stop and target orders as OCO orders when I place the entry. So, I actually don’t necessarily have to watch my trades progress, but I almost always do. My goal is to ignore my trades once I’m entered, until my time stops, which for almost every system I have, is 4:15p US eastern.
All my buddies keep an eye on their trades once they’re entered. I do have acquaintances who don’t, and have met a lot of people who automate things entirely. But, representative or not, my small circle of trading buddies do tend to watch their trades.
The trading day lasts from 9:30 to 4:15. I try to very casually watch my trading screens, so I’m free to do whatever else I’d like, which these days, is mainly blogging. I pick up my daughter at 2:40. It’s a small miracle that it works out that none of my systems will enter a trade during the time I drive to pick her up – just a lucky coincidence. If there were a conflict, I think I have her find her own way home.
I’m not “where I want to be” with regard to how I spend my regular trading hours. I have a huge shortcoming, in that I am compulsively drawn to the screens & have a yearning to watch every little price movement while a trade is on. I think I’m somewhat addicted to the emotional roller coaster of watching a trade progress. This, in my mind, is all very much a bad thing. I firmly believe that I’m typically “damaged goods” emotionally, during the regular trading hours, because of this.
Within my circle of trading buddies, there is a huge range in what they do during regular trading hours. Honestly, most goof off.
When the markets close, I take a few minutes to decompress, especially if it was a particularly good or bad day. In years past, it was harder, but these days, worse case, even after a stupendously horrible trading day, I’m even tempered & calm within 30 minutes.
Outside regular trading hours, I put in an average of probably 2 1/2 hours, doing additional software coding, constantly improving my systems & working on new ones. This time is spent catch-as-catch can, depending on what the family’s social calendar is like that day.
Of my close trading buddies, it seems, most have the same issue as I – that is, they do their research & coding in the off hours, and mainly just watch their trading screens during the regular trading hours. I think this really limits myself, and I’m working on being more emotionally detached, and hence more productive, during the regular trading hours.
So there, you have it, a typical day in the life of a at-home independent futures trader. About 6 hours watching the screens and 2 1/2 hours doing software development of new systems. All at home. Done properly, it should all be low stress, but for me, at this point in time, all the regular trading hours are a bit stressful. Also, if I had my head together, I should be able to do my software coding during the regular market hours. I think I work fewer hours than most of my trading buddies, but that’s just a hunch.
In terms of the riches that the trading life is supposed to generate, I’m not sure what to say. You need to trade a system that has a real edge obviously, but, in my experience, the financial success of the traders I know, isn’t so much determined by how good their systems’ edges are. It’s more a function of A, leverage, and B, luck.
Re: leverage – The leverage inherent with the emini futures, to me, “feels” about right – I typically trade 1 contract per about $15,000 in my account, for example, when trading the ES emini. My ES trading buddies probably average one contract per, I’d guess, $7500. So clearly my buddies can and typically do make a lot more money than me. Leverage, overall, is a huge, HUGE issue, that deserves much much treatment, so I won’t try to fully discuss it here. The point here, is just simply that if you want to make more money for a given size trading account, leverage (with all its pitfalls) is usually, for most traders, the pivotal issue.
Re: luck – the naked truth is, luck matters. Bad luck comes in many flavors, in trading. You can start using a system the day it starts a huge draw down. You can have to go pick up you sick kid from school, the very hour your system triggers with the most profitable trade of the year. You can change brokerage accounts at just the wrong time, and miss a huge string of winners. You can be in a draw down, start questioning your system, and decide to pause trading for a while, right before the system has a ripping series of winning trades. Your internet connection can go down at just the wrong time. All these things cost you money, and they all feel like bad luck. But, you ask – what about good luck? Yes, of course, take each of the examples of bad luck above & turn it around, and you’ve got an instance of good luck that puts more money in your pocket. And, theoretically, if you trade enough times, ( . . . theoretically . . . ) you should experience good luck about as much as you experience bad luck. But whichever happens to be happening to you at the time, the impact on your earnings is very real, and sometimes very large. If you got a group of seasoned traders together & asked them to tell about their trailing quarters earnings, every one of them will have a story about luck. Luck is huge.
In terms of actual money made at the end of the year, I can’t say that I know exact figures for even a single one of my successful trading buddies, so I only know anecdotes. Every one of them drives nice cars. Every one of them lives in a really, really nice place. Most came from an engineering background, and every one of them would laugh at the thought of going back to a corporate job in engineering. Again, this is for successful traders who have lived through the learning curve (not beginning traders.)
A few words about stress are probably in order. On this, I should probably only reference myself. For me, the stress in the trading lifestyle is pretty significant.
There is stress, as a given trade unfolds. Once you’re in a trade, assuming you have hard targets and stops, the outcome is completely out of your control. Completely outside of your control. On a full size trade, you’ll either make a few thousand, or lose a few thousand, and it’s Completely Outside Your Control. That’s, fundamentally, a situation that is going to generate stress. Yes, of course, with time, it becomes much much easier. But, for me at least, there is always some stress. So (again, for ME), stress is part of what I expect in the trading lifestyle.
There is also stress, living through draw – downs. For me, this stress is probably an order of magnitude greater than the stress I feel during any one individual trade. And it’s a more insidious, damaging stress. It’d take a book chapter to discuss this properly, so I’ll stick to a Reader’s Digest condensed version here. When your trading results are not in line with what your system predicts, and when it’s performing at the lower end of predicted profitability, you’ll doubt the system. You’ll doubt yourself. You’ll wonder why the universe hates you. You’ll lose your confidence. All of this is very stressful. And it’s an unavoidable part of the trading lifestyle.
Hope this helps.
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