1 post tagged “trading”

I am always very eager in understanding what's going on and how I can improve the system. The outcome is tens of business plans that are sitting on my hard drive. The only problem is my laziness to follow it through. Although, not to discredit myself completely, some of them were shelved when I realized that optimistic opportunity is few hundred thousand dollars (which is not bad given my current net worth, but what the hell).

So, recently I decided that I am going to follow through on some of the good ideas.

First one was trading account and doing active day trading. So, after reading 2 books - Mastering the Trade (from John Carter), How to make money in Stocks (from William O 'Neil) and approximately hundred articles on various strategies, I dived in.

From January till March, my highest peak was 20%+ equity and lowest was -40% equity. I absolutely loved it even though I have stopped doing it now.

I learnt about the markets and now, I understand what market is doing and what various terms mean. It gives an interesting perspective on how to do a top down evaluation of companies as well as get some high level idea on what moves the market, what are the forces behind the move.

It was a great learning experience as well as a realization, that its not for me.

The reason it is not suited for amateur trader like me:

1. It requires that you have a great risk appetite, which I don't have.
2. Active trading is all about speculation, no value creation. If you are successful, you cam make a whole lot of money but still you are not creating any value for anyone around you.
3. I had to spend 2-3 hr in morning and 1 hr in evening. With a day job, it can become daunting.
4. You are competing with professional traders (it is a zero sum game), who do it day after day and make a living off it. By simply sitting behind a computer and learning few gimmicks, you can't make money in long term. You need to go to the *well* and understand how parties interact with each other. What demand generates what kind of tick movement, pit noise etc and vice versa. If you don't understand various dynamics, you WILL loose money. Even though I was spending 3-4 hr/day, it requires much more to save equity from being eaten away by professionals.
5. I hate sitting behind computer for 10 hrs a day. I want to go out and meet customers, understand whats going on and why its going on. Thats why, I moved from engineering to product management and I don't see it becoming my full time profession.
6. I am interested in investing my energy in a long term venture where it creates a lot of value. Trading was started as a side thing and spending 4 hrs a day along with a day job does not leave any time for either doing 110% on job front or pursuing any other passion. To make it clear, I couldn't go for flying at all for 2 month period during trading. If you have a girl friend or wife, things can turn south really fast too.

Although, I quit at the lowest point of equity levels, I was still happy with the very expensive 2 month crash course. Why? Two reasons -

1. I moved off my butt and did something instead of another plan sitting on my hard drive
2. I have started flying again :-)

Take care,

Rajat Garg