First of all, I would like to thank all of you at SMB for the work you do and the content you provide. I have not found a better source out there for actionable, instructive lessons on trading, and God knows I have searched through a lot of content on the internet the past couple of years. I first learned about SMB after picking up a copy of One Good Trade, which I bought along with three or four other trading books on one of my many trips to Amazon. I tend to read several books at once, but after I began OGT, I did something quite rare for me: I put the other books away and read OGT cover to cover over the course of a weekend. I have not touched those other books since, and can now include OGT as one of a very select group of works on trading that has had a lasting effect on me, along with Jack Schwager’s first two Market Wizards books.
I then discovered the SMB blog and Stocktwits videos. If One Good Trade piqued my interest in prop trading, then these lessons have pushed me to the brink of what can only be called a healthy obsession. It is all I can think about now. Each Monday, Wednesday, and Friday I cannot wait until my lunch break so I can watch the “Live From the Trading Floor” videos, which I then rewatch once I get home. And therein lies my problem. I work full-time at a full service broker/dealer in risk management down here in Florida, but all I want to do is trade. It’s gotten to the point where I am basically putting in the minimal effort in my job, which is a salaried position with no possibility for performance bonuses. That really bothers me too, since I’m a big Atlas Shrugged fan and strongly believe that productive achievement is man’s noblest and greatest activity. I have played sports all of my life and am very competitive, and I long to be in a position again where I am competing and working hard each day to better myself. Unfortunately, I’m afraid my current job is doing its best to extinguish the fire that burns inside of me. I spend a great portion of the day reading trading blogs, looking at charts, and learning as much as I can about trading and trading psychology. The problem is that I do not have many opportunities to take action and practice what I have learned. As a registered rep in my firm, I’m not allowed to have an outside account and our commissions are ridiculously exorbitant. A round trip would cost me $70. This has resulted in me just sticking my money in ETFs and trading very sparingly and on a very long term basis. I did get permission to have an outside forex account, but I am not allowed to trade during the day so I am forced to be an end of day trader. However, I know in One Good Trade, Bella talks about how traders find ways to trade, so I am doing my best to overcome these obstacles. I do subscribe to a trading simulator which has real past data, and over the past couple of months I have spent basically my entire evenings and weekends day trading on the simulator. I know it’s not the same as having real money on the line, but I find myself improving, and watching Steve’s “Live From the Trading Floor” videos has really helped me as well.
I really want to make the jump to becoming a professional trader. I love this industry, but I’ve seen enough of the brokerage side of the business to know I do not want to do that, and the trading done on my firm’s trading desk is not the kind of trading I want to do. It seems prop trading or trading my own account are the only ways I can really do what I want to do, which is just trade all day and do research and exercises to help improve my trading. I love the pure meritocracy of it all, which gives anyone the chance to potentially prosper, be it the Ivy Leaguer or the state school alum such as myself. I’m not really sure what my goal of this message is, but from what I’ve read and seen from you guys, you all seem to be down to Earth and very generous with your time. ….
I do not currently have sufficient capital to strike out on my own and make a living, so a prop firm seems to be my only option. Is there anything else you can recommend that I do to help myself prepare for what has become my dream job?
Sorry for the lengthy message, but thanks for all the help you have given me via your book, blog, and videos, and I thank you in advance for any help you can give me on my inquiry above. Take care.
Bella Responds:
I get five emails like this a week.
There is a very real learning curve for new traders. The longer you give yourself to survive the learning curve the better your chance of success. If you are not prepared emotionally and financially to survive this learning curve then you may run into that wall of trading failure.
Your passion is clear from your email. You are doing excellent work working on your trading game. The markets are not going anywhere. They will be here in a few years. Perhaps you should continue working on your trading game and improving your financial situation. Put yourself in the best position financially, emotionally and with improved trading skill development before you start your career as a pro trader.
A prop firm will help its hardest working traders who show promise financially. But your risk/reward is significantly better if you are best prepared before you start.
What would you do if you were him?
Mike Bellafiore
Author, One Good Trade
31 Comments on “Is Passion Enough?”
I was in same situation. I just jumped in, now I’m trading in prop firm. But I have someone, who understands it, and who is able to help me financially all the way during my learning curve.
I’m stuck in a very similar situation ( interning at an engineering firm full-time, reading blogs all day, trading FX during Tokyo in the evenings), and I understand the frustration it brings. If you truly love it, keep doing everything you possibly can to better yourself as a trader. It may be a slow, difficult process but think about how you would feel if you completely gave up your dream instead. I think that empty feeling would be tougher to swallow than your current situation. In the mean time, prepare yourself as best as you can so if you do get a shot at prop trading, you are in a position to be successful. Maybe try trading London FX before work (if your job allows) for some additional experience. I wish you good luck and I hope you get the opportunity to do what you love.
I’m reading a lot of excuses.
Personally, I would open a simulator account with a realistic dollar sum (say $10k) to build a trading track record. Sure it isn’t real money, but circumvents the outside account issue. Find a reputable broker like ThinkOrSwim and you can access that anywhere anytime (via the web, smartphone, ipad, etc) so that shouldn’t be an excuse.Also, forex and futures trade outside of the 9:30-4 hrs so you could be building your technical analysis and execution skills when you are not at work so that shouldn’t be an excuse either.
No sufficient capital to do it alone? Sure, this is understandable for an early career aspirant. My advice would be to cut expenses AND pick up some side jobs to maximize your savings. Also, track and budget your cash flow so you know when the time is right to strike out on your own. Alternatively, there are firms that match contributions to trading capital but that is risky.
To the aspiring trader:
If you truly love it, you will get there as all humans who have ever dreamed, achieved reality. I’ve read hundreds of trading/finance books and they were my mentors having been self-taught. I pulled pieces out of each book that helped me become who I am. Simply ready a ‘few’ books won’t get you where you need to be. You have the passion, but lack the knowledge, live experience, risk/money management, psychological/emotional experiences, and other elements. Many people wish to jump in right away, but are you really truly and honestly…”ready”? Probably not. Make some sacrifices, far and wide, and read more, gain more knowledge, trade the forex and put some of that knowledge into practice, gain some experience, develop some kind of consistency with your limited situation (most of us have come from some kind of limitation) and you should be ready to start off in full-time trading. The passion is really important because it definitely shows how you prioritize trading, but you should still be committed to your present source of income due to the multi-month learning curve associated with trading. Do your day job and trade in the evening and see if you have the balls and discipline to do this full-time. Only time will tell.
I have the same energy to become a prop trader. I am a bank manager and I constantly look at charts and the markets all day long. Bella is right about the financial situation you need to be in in order to trade. I want to jump right in, but I have a wife and two kids I have to make sure are taken care of. I have about 3 months worth of salary saved, but that is not enough to take the plunge. Keep working on saving money and keep trading to build your foundation. I have been working on trading ideas for a few years now, and even though I cannot trade full time I will continue to apply my methods via real markets in small amounts or a simulator. Don’t let the dream die. Have patience and your time will come. I feel I could make it as a full time trader, but the time is just not right yet.
Only time will tell.
If his/her passion translates to dedication, putting in long hours, and willingness you will survive the shakeouts the aspiring trader will be fine.
As the author of the letter in this blog post, I’d first like to think Bella for reading, responding, and posting it. Thanks for the good advice and motivation from all who have commented as well. I don’t want it to sound like I’m making excuses. I do have some obstacles due to being Series 7 licensed and restricted by my firm, but I won’t let them stand in my way. I am trading on a simulator and trade forex as much as I can with live money even though I’m more of an equity guy, and have read more than “a few” trading books. I have also taken and passed the level one exam for the Chartered Market Technician and plan to sit the next exam in the Fall. I am also very frugal and adhere to a budget in order to maximize my savings. The biggest key will be to save sufficient capital in order to survive the lengthy learning curve that Bella has mentioned.
Maybe someone at SMB or anyone else familiar with prop firms can answer this: how favorably is longer-term, live trading looked upon by intraday firms? If I can show good risk-management and high-probability trades, could that translate to intraday trading? I use these same skills when I’m daytrading on the simulator.
I am in a similar situation. I work at a RIA so I’m able to check the markets and my account for most of the day. I do not have a large capital base but I have been working on building it. A budget has been working wonders for me. I allow 30% of my salary to go into my brokerage account every month. Also, I found trading vehicles that fit my personality and lifestyle. I focus on income options trades on my real account but also paper swing trade S&P e-mini futures. My strategies allow me to simply monitor my positions and make good returns. This is a win/win for me! I stay connected with Twitter, StockTwits, my Google Reader, and document my thoughts on my personal blog. I do not have a wife and kids to care for but I do have a girlfriend. I also play indoor soccer two nights a week after work, practice with my outdoor soccer team three nights a week after work, play games Sunday mornings, and study for my CFA exam.
My point is this: you’re busy and don’t have enough capital but with patience and a proper time and money budget will take you a long way. Also, maybe day trading is not your thing right now, heck, I thought it was my thing until I found other strategies. Explore, find a strategy that makes you happy and fits your life.
I am in a similar situation. I work at a RIA so I’m able to check the markets and my account for most of the day. I do not have a large capital base but I have been working on building it. A budget has been working wonders for me. I allow 30% of my salary to go into my brokerage account every month. Also, I found trading vehicles that fit my personality and lifestyle. I focus on income options trades on my real account but also paper swing trade S&P e-mini futures. My strategies allow me to simply monitor my positions and make good returns. This is a win/win for me! I stay connected with Twitter, StockTwits, my Google Reader, and document my thoughts on my personal blog. I do not have a wife and kids to care for but I do have a girlfriend. I also play indoor soccer two nights a week after work, practice with my outdoor soccer team three nights a week after work, play games Sunday mornings, and study for my CFA exam.
My point is this: you’re busy and don’t have enough capital but with patience and a proper time and money budget will take you a long way. Also, maybe day trading is not your thing right now, heck, I thought it was my thing until I found other strategies. Explore, find a strategy that makes you happy and fits your life.
It sounds to me like you are off to a great start. I would highly recommend finding a group (meetup.com is very good for this) of traders in which you can share ideas/knowledge and critic trades with. This should help you shorten the learning curve and help you enter better risk/reward trades.
Best of luck!
1. Keep building that Grub Steak for live trading by keeping and performing the best you can at the present job.
2. Keep working the Simulators and only take the best trade setups you are highly skilled at. This will build the Sim account” ‘real Grub Steak capital while becoming even more proficient, capapble and confident at new trade setups.
3. Trade those Sims until you are a consistent winner first day after day then week after week then month after month. If you really feel ready to trade live then open an account(there are ways). Since you are partial to Equities then I suggest trading on the daily and hourly time frames as this will let you keep the day job.
Good trading…I say good trading because over time you will not need good luck.
I guess many of us were in same position, how to get to full time trading proffesion. You are stuck in something that you don’t like but have to do it to pay the bills, on the other hand you would love to trade but don’t know where to start.
First on reading book. There is point in your trading career when reading more books will not bring better results. Reading books on TA over and over again will not make you better trader, they all come with more or less same thing. Books that one should read are for example books from Dr.Brett Steenbarger and similar, books on trading psychology.
Many people here saying trade on simulator, but trading that way can easily push you not to be honest to yourself, you don’t take signal on time or you don’t close position etc. I would recommend putting some small capital and trade live. Make small bets, trade small and try to be break even trader. Your position is difficult because you are not allowed to trade during your day. But there are market around the world. So you can wake up early and trade European markets, or stay late and trade Asian markets.
As Bella pointed there is learning curve for traders, when you know how to trade, finding new pattern or set-up to trade different market will not be so difficult.
“Where there’s a will there’s a way”
Good luck
To Andrew The InvestorGator and everyone else who wants to trade full time.
I have been trading full time for 2 years and six months. The first 2 years can be best described as ” IN CONSISTENT’ as they were spent mostly in trying to find system along with a host of other things. Last 6 months have been nothing but pure joy both financially and intellectually.
I spent about $9k on education- including SMB remote 6 weeks training program. As Bella and every other honest trader and educator always tell – you have to find your niche and style.
For me it all came together after reading Mark Fisher book ( before this book , I read about 75 books on trading) “The Logical Trader”. Mark Fisher book is the only book I am aware of which gets you hit the ground running. New traders like me like to read books like “Market Wizards” etc.. which are not much help in terms of execution. “Market Wizards” types of books are excellent once a trader have traded for 3,000 hours with success to understand whats being taught about in the book.
My suggestion to all the new trades will be to get Mark Fisher book and then practice his simple system in SIM account for at least 500 hours. Once you get successful then go LIVE. I can be reached at hdf1998 @697c4a249d6844ec1c96e7a026005f1c:disqus hotmail.com, if anyone has questions. Another point which I did not factor in that it takes about 5,000 hours of screen time to make a dent on a consistent basis. Maybe I am slow but thats what it took for me to turn the corner.
Tariq Malik,
Boston, MA
I forgot to mention that while on SIMULATOR- trade and treat i’st like a real account. Plus another sign that a trader is far away from successful trading if he or she is relying on indicators for execution.
For intraday trading support and resistance should be the only thing on a trader screen.
Jim Daltons books are excellent in terms of getting an understanding of Market Structure but I trade with Mark Fisher system.
Good Luck
Thanks for the advice. It helps to hear from someone who is actually trading full time. Like many traders, I spent the first year of my trading education trying to find the “perfect” indicator. After losing money and figuring out that it didn’t exist, I now solely use support/resistance and trend lines along with volume.
I will check out some of the books you mentioned too. My bookshelf and iPad are full with them, and as another commenter said, after a while the marginal benefit of reading them tends to significantly decline, but if the Fisher book helped you, then I will check it out. I like the Market Wizards type books because they’re more motivational than instructional. I don’t expect to learn all the nuts and bolts from books since they cannot take the place of actual trading.
What you can’t mention One Good Trade as well? 🙂
What you can’t mention One Good Trade as well? 🙂
Mark Fisher is no ordinary trader and educator. He was the youngest pit trader at the age of 17, traded at full speed while graduating from Wharton with honors and now runs one of the most successful clearing/brokerage firms along with his prop firm.
In his forward to Mr. Fisher book Paul Tudor Jones ” There was no one better and there never will be anyone as good as Mark Fisher when it comes to smelling an order that a pit broker has in his hand”.
I wish, I had come to know about Mark Fisher book 2 years ago and my learning curve would have been cut in half.
As I said in my previous note, book is just a starting point and one has put in about 500 hours in SIM account to refine and get all the subtle execution points down cold as outlined in the book.
Another advice, stay away from chat rooms where live trades are called etc. They are addictive and of little use. It’s OK to spend a month or two in a room to learn some basics. After that if one is still hanging around- he/she is basically fooling around.
Good Luck
I just assumed everyone knows about ” One Good Trade”. A master piece from a master trader. Direct from the trenches. Unlike most authors of trading books who can not trade to save their life out of a wet paper bag Mr. Bellafiore practice and teaches the craft every day. He is a trader first and everything else after that.
I would use globalization to my advantage. Trade in another time zone if you have a full time job. I am living in Europe, have a full time job and in the evening I’m trading the US. (Wall St. closes at 10pm our time). Maybe Asia could work for you. Use a global platform like IB (though this might be an issue with your current employer.)
And in terms of books: I don’t think you need to read many (besides OGT of course 🙂 ) Invest the time in doing your own research, test strategies and observe the markets. There is so much to be learnt by just watching them. Is BTW also a good exercise to train your patience b/c you need to be able to NOT push the button.
My 2 cts
Oh, another point (sorry, I’m in a chatty mood today 🙂 ): take your time (but that’s what Bella said). I’m doing this swing trading thing for four years besides my main job and I feel I start to get a handle on this. I recently estimated that I put around 5,000 hours into this project so far. K. Ericsson concluded that you need 10,000 to achieve excellence (http://bit.ly/bfZdOZ).
A great post that reflects REALITY and some great comments to back it up.
Here is my 2 cents worth having worked as a trader at an investment bank and then went out on my own:
i) Have money saved to last you 4 to 6 months. You MUST budget for this. In your budget account for 0% income from your trading. Until you have this money saved or borrowed, don’t go out on your own. It will effect everything you do and the way you trade. This is probably the biggest piece of advice I can give.
ii) Have money saved to trade with. Keep it small to begin with and expect 0 income from this. Making money consistently will take time. Your goal is not to make money but the process. Seriously.
iii) Decide what kind of trader you want to be. Given your restrictions, it sounds like you are more interested in being a swing trader (or cannot intraday trade). Thus, you must realise that almost 95% of the setups and techniques espoused by Bella etc just are not applicable for you. Unfortunate but true. Devise your own trading plan that works around your current situation. Don’t try to be a jack of all trades i.e. day trading and swing and longer term etc as u will confuse yourself. I would stick to one market whether equities or FX but not all of them.
People have talked here about passion, drive, doing everything you can etc. That’s fine and true to an extent. More practically, have a plan about the kind of money you need to live off for a 4 to 6 month period and then you will be setup to go. Realistically, EVERYTHING you learn will be when you go out on your own no matter how much reading and simulation you do. I believe this is what Bella meant when he talks about putting yourself emotionally and financially in the position.
Good Luck
Thanks
Austin
Most important words by Austin
“Given your restrictions, it sounds like you are more interested in being a swing trader (or cannot intraday trade). Thus, you must realise that almost 95% of the setups and techniques espoused by Bella etc just are not applicable for you”.
I will also add unless a trader has been trained in a professional prop. firm environment to find fresh new trading ideas everyday ( if trading stocks), I found it much easier to trade futures and within futures trade Crude Oil as Mrak Fisher system is best suited for instruments which are VOLATILE and have liquidity.
Tariq Malik
Boston, MA
A word about Simulation.
Another way to look at the benefits of SIMULATION is to think why Kobe Bryant of Lakers is famous for practice? Just like he just does not show up at a game and start playing, neither should traders.
After loosing a game to Miami Heat as rest of the team left for L.A, Kobe stayed behind and practiced his craft right after the loosing game.
Why it was important for him to practice right away? My guess is it may have something to do with ideas being fresh in mind. Is it possible that Kobe got new ideas for his game? I doubt it. He just wanted to reaffirm his old ideas and fine tune his execution.
If one of the best players in the game has to fine tunes his that ELUSIVE feel of the game, makes me wonder how much we mortals have to practice to keep that ELUSIVE feel of trading at its best.
Tariq Malik
Boston, MA
More good points. However, in response to iii), I am more interested in being an intraday trader, but my restrictions prevent me from doing it with equities. I’ve tried it with forex in the Asia session, but the volume and moves just don’t seem to provide the same kind of setups I see with equities. In forex, you have only a few pairs that are actively traded enough to trade short-term, and if there are no promising setups, then you do a lot of sitting on your hands, which doesn’t really help me practice. There are many, many more active equities, so you can find higher-probability setups more often, which allows for more practice. Also, in my two years of trading forex, it seems support and resistance lines get taken out way more often than what I see in equities. The whipsaws kill in the Asia session.
A word about practice.
I think this topic need more clarification from me. I use ThinkorSwim platform. They have a feature called ON DEMAND. Basically, a trader can pick up any trading day over last 3 years and it repeats that day in terms of price, time and sales along with what rest of the market was doing on that particular day. I trade crude oil futures. As an example, I will pick up January 12th, 2011, March 22nd etc.. randomly and trade. Some weeks, I will go 5 consecutive days in a week to pick up market structure for the week etc.
If one can not execute his/her set ups per his/her system during these sessions, thats all one need to know before giving their money away.
And in terms of trading equities, Steve Cohen of SAC capital points out that one of the problem with traders is that one day they are trading Apple and next day Potash etc..In his firm every trader is an expert in his/her domain.
This is not to say that other way is not profitable. Traders at SMB and T3 live do this every day. But for that to be successful on a day in day out basis one has to be part of a professional team. Trading equities from home just happen to be more difficult. With all the other challenges, why make it more difficult?
Good Luck,
Tariq Malik
Boston, MA
The thinkorswim feature seems to be similar to what I use. It has real, past data tick by tick. I go into a day in the past where I don’t remember how the market finished and trade various stocks. A lot of times I go through past SMB blogs to see if a certain security was mentioned as being in play on a specific day. That way I know I am trading an active stock.
I know it’s not exactly the same as trading live with real money, but I don’t know how to get the same kind of practice without it. I can also fast forward through slow periods so I can get more practice trading against the levels where I would actually be entering/exiting positions. I’ll check out thinkorswim’s platform though since I don’t like the order entry system in the one I use.
Wow I thought I was the only one in that situation! Good to know I’m not and see everyone giving advice.
Completely agree re FX here in Asia. I am a trader in Sydney and found the same problems with short term trading FX i.e lack of volatility. FX moves are driven primarily in Europe and US- fact.
Thus, I quickly moved on to focus on better vehicles i.e. equity index futures and the results have been great. This was my point about finding the right method and vehicle for you. Are you restricted in equity index products? If not, have you thought about perhaps trading the Australian equity market which is the first to open? Might keep you awake too late but it is a great day trading market.
I often post setups and thoughts on Asian equity futures at my blog here if you are interested:
http://swingtradersedge.blogspot.com/
Thanks
4-6 months and a small trading stake? I strongly disagree that you can be successful that way. I don’t mean to be a Debbie Downer but let’s say you start making some money net (make sure you keep track of commission costs in your simulator… they can be significant, I would use $0.01 round trip per share) after 4 months, which would be an excellent start… if you only have 2 months left of living expenses you are going to have to really be very consistent with excellent returns to make a living. I’d say you need more like 12 months of living expenses and a 100k account minimum with even more being better.
It’s all about the eventual odds of success. Everyone says it’s about surviving the learning curve (because it’s true), and no matter how much practicing you do on simulator, there will be one once you start trading real money. The more money you have and less pressure you are under to be successful every day-week the better your chances of success.
If you have to pay rent out of your trading profits on a regular basis, that’s really tough on your psychology. I trade from home and try to make sure I have enough in a no-risk, highly liquid account to last me the full year at the start of every year so that the trading profits can build and I don’t have to worry about being profitable in the short-term… though you will never be able to avoid the stress of needing to make money eventually, that just comes with the territory.
Like I said, I don’t mean to be negative, just trying to be realistic and not have you throw away savings without a good chance of success
Just finished reading the whole topic and comments ; thank you very much to all participants, it was a high-quality read. Much appreciated.