Tuesday, February 14, 2012

Becoming a full time trader

Here is an email that expresses a desire to switch from a stable job to full time trading.
QUOTE

Hi Sudarshan,
Currently working in a software company but wanted to switch to trading as a fulltime profession.
 
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Here is a brief info about my trading experience:
I started trading since oct, 2008. first time i lost lot of money and stepped back for a few months to analyse my mistakes and learned more by reading books and watching the market. Similarly I attempted 3 times, everytime the amount of loss came down. This time I am in profit :)
earlier I was trading in stock futures, this time I liked commodities. I started around june 2011 with 2lakhs of capital, and made about 1lakh profit by dec, 2011. everytime, my main objective was to avoid losses, and that worked well.
 everyday, I spend a few hours on analysing the market after i come back from office. I take a position if I find a good opportunity.
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Please share your thoughts on whether i am in a right position for a switch:
I've saved 1yr worth of living expenses and 10lakhs as capital. Do you think I need to save more? how much should it be approximately?
Any other advice you may want to share? 
 
UNQUOTE
My Notes:

I think you are well on the way to become a consistently profitable trader. You have the most essential requirement for successful trading - an aversion to losses. After your first attempt resulted in losses, you stepped back and studied. I hope the new traders reading this follow your example
Your switch from F&O to commodities is just a matter of tactics. Such moves will keep on coming during your trading career, it is not of importance.
Let me discuss your desire to switch from part time trading to a full time trader. As a full time trader, you will have more time to spend on research and analysis. You will also be completely focused on trading rather than on your current job. 
So, should you make the switch? Here are the drawbacks. Rs 10 lakhs in trading capital is not enough to create an income stream that will replace your current compensation from your job (whatever that amount is). You will need a lot of luck to earn enough to meet your expenses and Luck really should not be part of trading plans.
You really want to have the best of both the worlds. Continue with you present job and remain a part time trader. As your trading quality improves, you may consider increasing your volumes. Slowly!. 







15 comments:

Srinivas Patnaik said...

Thanks Sudarshan for your nicely put encouraging words.
I also make it a point to learn something new almost everyday. These days I am reading the book by Darrel Jobman. at the same time, following the videos on ino.com. Over the years, I've learned good enough, but still feel like I've just touched the iceberg, in terms of the skill and experience required for a full time trader.

" Rs 10 lakhs in trading capital is not enough to create an income stream that will replace your current compensation from your job (whatever that amount is). "
Assuming I may need around 40-50k per month after 1yr. Minimum how much should be the capital?

Hoping to reach my dream with the grace of learned people like you, can I tell you the trades I am making and would it be possible for you to share your thoughts on those? may not be immediately, after sometime whenever you are free. that'll help me by knowing what mistakes I am making.

pranav.kulkarni said...

Dear Sir,
Greetings to your son and wishing him happy married life!!!!
regards,
pranav kulkarni

Neeraj Malhotra said...

Thanks Srinivas and Mr. Sukhani for discussing the question which is on my mind for few years.

Like Srinivas, I have been seen losses throughout my trading tenure and have been learning how to minimize them off-late.

However yet to gain a handsome amount as done by Srinivas. Congrats!!!

I am taking up a training course this week which is based on EOD charts so no intraday business. My objective is to become a successful (read consistently profitable at least for 2-3 years) part-time trader first before switching as a full-time trader.

I also believe that I will need more than Rs. 10 Lacs as trading capital. I would rather prefer to have Rs. 20 Lacs as fixed deposit for a consistent interest income to cover the basic monthly expenses.

On top of that another 30 Lacs as trading capital, assuming that I should at least be able to get 20-30% annual return out of which I would prefer to take partial amount as salary (depending on needs) and rest should be added to the trading capital.

Thanks again.
-Neeraj

Rajat said...

Thanks for your insight Sir,

Just a query since Trading is a serious Job, is it feasiable for someone to carry on as a part time trader along with Job, as Job also requires full time and devotion.

My question comes suppose I have taken a position and gets busy with a job in some meeting and during that my stop loss gets triggered or might be something has effected the market where the whole scenario changes what should one do at that time.

Sir since the type of independence trading offers we are bound to get attracted to it even I have the same view to start on my own, might be do the same later part of my life, but would need your insight if we can do Part Time trading along with Job.

Thanks,

Rajat

Srinivas Patnaik said...

You can definitely do part time trading, in fact that's what I do.
I moved to commodities, because the market remains open till late in the night, and most of the action happens after evening. That way, throughout the day I focus on my job, and from the evening I do trading.
There will always be some unexpected news, which will turnaround the market, that's when stoploss becomes useful. That scenario would be there even if you are trading fulltime.
For sure, you can't do day trading part time, without breaking yourself. The best approach is swing trading.
In any case, it's difficult to avoid checking the price of stock/commodity throughout the day, if you have some open position.

Technotrader said...

Thanks for starting a good subject. I have been trading since last two years and from one year in Futures as it gives large amount of money. I started as always with a loss of 60K and now in profit of Rs 90K plus. I am planning to be a full time stock market trader in next two years (thats maximum time).
Sir, I wish to know what type of scanners you people use to get right time entry on a breakout or breakdown? As you know entry at the right time can give you 2 to 3% more returns than trading on next day. Ex. Breakout of Jain before two days, Fortis today etc.
Thanks as always sir

Nilesh Deshpande said...

Sir,

Yet again a NR7 day at the top of an up-trend. Some people say the candle stick pattern resembles what is known as "bearish harami".

Would like to know your opinion on this formation.

Nilesh Deshpande

rohit said...

Do not even think about it, I lost Rs 550000 recently and have decided to stop trading, we have to be like a chameleon, which is not poss for everyone, I made a profit of 900000 lost all of it plus capital, I started trading because was unsuccesful in investing, bought supposedely good stocks recomended by so called experts for long term, subex, punj lloyd, rcomm, Reliance, Guj nre coke, s-kumar, tanla sol, etc by ambreesh baliga, good stocks after 15% corr in market and even then lost more than 50 % of my money, the family atmosphere is also not good. Very few ppl can be like Mr sukhani, to give you one eg, Jessy Livermore one of the greatest trader, lost and gained his wealth several times and eventually commited suicide, I am no retail investore have given 8 yrs to trading but this is not for me, I spoke to so many big businessmen they give more imp to business because they have some control over it, on trading you have no control, what if you are long and suddenly greece defaults and iran attacks U.S. and israel.. gone, mkts will tank 10% in one day... It is very volatile, I held some of the best companies but no results, eg bilt the biggest paper company of India, Rajen shah has a target of 40 for the last 4 yrs, it never goes above 25, My broker gave me best advice, he said if I could make money by trading why would I manage so many accounts, I would be sitting at home trading. I disagree that it is a science, because like in maths 2+2=4 and science 2h+02=2H2O, there are no formulas, all experts had a diff view during the current rally, and all said there will be a corr but there is no corr, in 2009 the election gap was never filled... In bear mkt we had relief rallies but in this move we had no corr??

rohit said...

Mr sukhani has given you the best advice, we cannot be him or rakesh jhunjhunwala or radhakrishna damani, or george soros point is eg you are an engineer so you have learnt by going to a college, followed a path you will get a job and lead a good life if you enhance your talents you grow both professionally and as a human being, here what happens with most ppl is either they lose all money or when things go your way you take big bets and lose all you have, even marc faber, says, that if he had put all his money in fixed deposits he would have done better, he regrets running after money all day long...and asks to lead a happy life. Mr Sukhani will agree that at the start even he might not have imagined that he will be so successful.

Atul Krishna said...

Dear Srinivas

My personal experienxce is that do not leave your job for trading.

I myself did so & tried hard to run my home from the income through trading using TA etc but failed & switched back to a regular salaried job.

Trading is a business & like all other business requires "capital base expansion" & if one fails in capital base expansion management, all is finished & over !!

managing capital base expansion is not a piece of cake for retailers like me.

Please note that all profits & loss in business including trading in stk mkt always remain notional & cyclic in nature.

So , in nut shell , Never quit your regular job as it runs your home & also supports your existence in stk or commodity mkt.

Regards
Atul Krishna
http://tapassya-manthan.blogspot.in/

Dinesh Rishi said...

Thanks Sir,

This post will help so many who
want to quit job and switch to trading.

If one has good job he should concentrate on work and can do
trading/investing with the help of
EOD chart.

I too quilted my Job to become
full time trader,cos when I entered
stock market it was in bull run.

I did made lots of money and thought if i get more time I will be able to make more money but I was wrong.

Till than I was not aware what is TA.

The crash made me learn TA which took long time.

Trading is nothing but Disciplined approach "Cutting your losses at the earliest and let profitable trade run till stopped out"

Srinivas Patnaik said...

@rohit,
I am sorry to know what all happened to you. I appreciate your opinion, It's always good to have counter arguments, as those will help attain clarity and come to a reasonable understanding.

my comments:
1. "we have to be like a chameleon" - sure you need to. you should not 'fall in love' with a stock just because someone reccommended it or your brother works in that company or for any other reason. get out of it, if it's not doing well.

2. There is no one who can guarrantee a price movement, whatever may be the expertise of the person. so, you should not blame trading/investing just because someone reccommended that and it didnt work out well.

3. how could you lose 50% of your money? you didnt put any stop-loss. did you risk your whole capital in a trade? these are all big mistakes.

4. family atmosphere will not be good, if you dont take care of your financials properly.

5. No one knows what will happen at the next moment, forget about tomorrow or next month or next year. Leave that decision to God. the market always overreacts to the news outside world. so you need to remain in constant touch of what's happening outside, as well as continue having a stop loss. and if such a thing happens as you suggested, maybe you should reverse your position and go short. these are just some of the tactics of trading. Every job requires a specific set of qualities, these are some of the qualities of trading.

6. Talking about Livermore, he made so many mistakes, he took it as gambling. he made $3million and $100million in 1907 and 1929 respectively. why did he started gambling again? If I got that much money, I'd put all that in fixed deposit and enjoy life :) and involve in some charity maybe.

7. Again, you trusted so much on the reccomendations by some experts. I never read anyone's recommendations, I do my own research, always.

Srinivas Patnaik said...

@Atul,
Well, I won't leave my job unless I get profits consistently and have enough money to run the home. If everything goes wrong (I hope not), then i'll go back to my job.


@Dinesh,
Seems like you were not prepared at all when you started trading full time.


In summary, here are my thoughts for all those who want to take up trading as a fulltime job:
1. You need to have a good nderstanding of technical analysis. Technical indicators dont guarrantee any price movement. They just try to explain the prevailing market sentiment. Ultimately, you need to judge your actions, whether to buy or sell, when, how much capital risk,what stop loss and so on.
2. understanding technical analysis, is just one part. The major thing is knowing how to apply. And that requires experience, lots of experience.
3. Before you start trading as a fulltime, make sure you have enough to support your family, and enough trading capital. Additionaly, you need to have a backup plan in case everything goes wrong.
4. Emotional aspects are equally important. never get too greedy, dont get emotional with a company or commodity. ultimately, it's just a business. why should you care if the stock is falling badly. In fact, i love bear markets, because that where you can make big money, safely :)
5. have something to distract you from trading everyday. I do yoga and meditation everyday, that helps a lot.
6. ultimately, if you dont enjoy trading, and want to do it solely to get rich quickly. Please help yourself by staying away. there are plenty of other ways to make money.
7. lastly, perseverance always pays off. if you really want something, keep trying, keep trying until you are successful.

so one must have a detailed strategy which includes a backup plan in case everything goes wrong, before taking any such big decisions in life. enough time must be spent on preparing the plan, so that nothing is missed out of it. while preparing the plan itself, you'll know whether to switch or not. And if you have done your due diligence for preparing your action plan perfectly, nothing can stop you from achieving what you want.


looks like I gave too much of gyan, i should stop now. enjoy...

nsrajeev said...

Hi Srinivas, I am currently at the same position you were in 2012. Please share your experience and have you switched full time trader and how are things professionally in trading. Thanks.

Regards,
Rajiv

CHETHAN B R said...

Can u suggest some books which might help