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What it Takes to Trade Full Time

“Your trading goal is up to you. You can certainly become a full-time trader. That is probably possible within a year to 18 months. You can certainly take a million dollars out of the market, and you could reach the stage where you take a million dollars out of the market each year…

However, there are a number of questions that you will need to ask yourself…

How much do you love trading? How committed are you to being a full-time trader…? Are you willing to work 12-16 hours/day, six days per week, for the next five years? Are you willing to use at least four to six of those hours a day to start your trading business? Are you willing to spend another hour or two a day developing probably the most valuable skill you could ever have, self-knowledge?

Are you willing to give up most of your free time—at least until your trading business is off and running soundly? And are you willing to think about trading when your family is still enjoying the things that you used to do together? Will you do whatever it takes to be the best (including discipline and full responsibility for your results)? You would need to start by spending at least the first six months… looking at all your psychological patterns and developing ways to overcome any personal obstacles.

In addition, you will need another four to six months to develop a business plan that will be the basis of your trading business. Most people don’t treat trading like a business. And most businesses fail because people don’t plan.

Are you willing to learn a new way of thinking about the markets? This means thinking in terms of a reward-to-risk ratio, understanding that risk is what you lose when you lose in a trade, and understanding that position sizing is the core of how you’ll work to meet your profit targets. Most of what you have learned about the markets needs to be turned upside down, examined, and then thrown out as garbage. Could you handle it?”

–Van Tharp in Super Trader (2009)

Curtis Faith on Accountability

As mentioned yesterday in my post “Words to Profit By” (http://www.optionfanatic.com/2012/03/10/words-to-profit-by/), just because this may sound good does not make it relevant.  Give it some thought to see if it might apply to you:

“The idea that Rich had left out some key ideas was the easiest way for our paranoid Turtle to explain his inability to trade successfully during the program. This is a common problem in trading and in life. Many people blame their failure on others or on circumstances outside their control. They fail and then blame everyone but themselves. Inability to take responsibility for one’s own actions and their consequences is probably the single most significant factor leading to failure…

Trading is a good way to break that habit. In the end, it is only you and the markets. You cannot hide from the markets. If you trade well, over the long run you will see good results. If you trade poorly, over the long run you will lose money…

The bottom line is that you make the trades and you are responsible for the outcome. Don’t blame anyone else for giving you bad advice or withholding secrets from you. If you screw up and do something stupid, learn from that mistake, don’t pretend you didn’t make it. Then go figure out a way to avoid making that same mistake in the future…

Blaming others for your mistakes is a sure way to lose.”

–From Way of the Turtle (McGraw-Hill, 2007)

Words to Profit By

With today’s post, I am going to introduce a new category:  “Wisdom.”  I do a lot of reading and occasionally I come across a quote or passage that really rings true with me or seems to be of great significance.

Just because something sounds good does not mean it has any necessary relevance at all.   This is my grand disclaimer.  Some people make a habit of collecting “great quotes,” posting them, and including them in e-mail signatures.  Some people think just reflecting these “great quotes” makes them look all educated and brilliant.  I believe what makes you brilliant is not the “great quotes” themselves but critical evaluation to determine whether they can be applied to you or anyone else.

This echoes an interesting concept in the world of trading systems.  Upon first glance, many ideas for trading systems make good technical or fundamental sense.  When you backtest them, though, you’ll find their performance to be in the toilet.

Just because something sounds good does not mean it is actionable or will lead to consistent profitability.  We need to differentiate between the two in order to be successful traders.