Question to those of you who are full time system traders

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bf2
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Question to those of you who are full time system traders

Post by bf2 » Fri Mar 30, 2012 5:21 am

Question to people like AFJG, Sluggo to name but a few:

Have you ever made a net annual loss since you went 'live'? How did you deal with it - both emotionally and practically?

I know myself fairly well and I don't think I would handle that situation (if system trading were my only source of income) very well.

Yes, I'd have tested the system to death before going live, but the future is always unknown. World renowned system traders have bad year (or many bad years) with all their computing and research power - little guy like me is destined to have a rough ride too.

What - if any - insurance can you take out against the unknown?

Chelonia
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Post by Chelonia » Fri Mar 30, 2012 8:09 am

Sounds somewhat rude but your best insurance is: Don´t trade

bf2
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Post by bf2 » Fri Mar 30, 2012 8:52 am

Not rude at all - in fact very sound advice.

Paul King
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Post by Paul King » Fri Mar 30, 2012 8:54 am

I think you alluded to the answer to your own question when you included "(if system trading were my only source of income)" so a slightly more finessed addition to Chelonia's rather blunt (but accurate) answer would be:

Don't trade.... if system trading is your only source of income.

There are only a few ways to guarantee a certain trading income every month, quarter, or year: be very lucky, do something illegal, run a Ponzi scheme, be very lucky (yes that one is in there twice, "survivorship bias" anyone?)

My suggestion: Deal with paying your mortgage first via some other means, then look at ways of systematically generating a good risk-adjusted return in your trading account that doesn't require a monthly/quarterly/annual positive result or you're financially (or emotionally) screwed.

Paul

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Post by Toosday » Fri Mar 30, 2012 9:28 am

It all comes down to savings, expenses and risk management. I keep a reserve of living expenses of x years separate from my trading capital. The biggest component of being able to trade for a living is no debt, IMHO.

bf2
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Post by bf2 » Fri Mar 30, 2012 10:52 am

Thank you for your comments. I totally agree with your comment on debt and cost of living.

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Post by AFJ Garner » Fri Mar 30, 2012 12:48 pm

Ugh its such a difficult question. But I certainly agree on the debt free and expenses in the pocket recommendation. There can be such a lot of luck involved. I have traded for a living ever since leaving an investment bank back in 1992 but I was lucky enough to hit the internet boom, cashed in on the IPO bonanza and so built up capital in a relatively risk free way in a short period of time.

I think I am right in saying that early TF CTA's like Dunn and possibly JSH or John W Henry (owner of the Boston Red Sox) had reasonable sized backers or at least early investors and without these it would not make much sense - you need some good clients to live through the tough times. Look at Abraham's start - well as he has done, he came from a wealthy family and I would not imagine he started out on the breadline.

I have had some horrendous years in the past couple of decades but have survived in reasonable comfort so far. I'm not so sure I'd like to start out all over again.

As I have pointed out elsewhere it may be a mistake to concentrate on one form of trading; I have recently broadened right out again to include very short term trading of new issues and secondary offerings in world markets.

Moto moto
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Re: Question to those of you who are full time system trader

Post by Moto moto » Mon Apr 02, 2012 4:43 am

bf2 wrote:
What - if any - insurance can you take out against the unknown?
marry it. :)

Chris67
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Post by Chris67 » Mon Apr 02, 2012 5:38 am

YOU CANNOT TAKE OUT ANy insurance against the unknown - also you may put part of your money in trend following systems, some in short term systems, some in long term investments and some in long only equities - and still lose on all of them ?
My opinion would be to set up such that if you have a losing year or 2/3 you can handle it and deal with it - there is no other option

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Re: Question to those of you who are full time system trader

Post by rhc » Mon Apr 02, 2012 9:19 am

bf2 wrote: . . . . little guy like me is destined to have a rough ride too.
Part of the System traders edge is his/her ability to take the pain that others are not willing to take.
Somehow you will need to learn to embrace the pain, the doubts, the punishment and the "rough ride" that comes with this style of trading.
In short, you just gotta roll with the punches.
This is easier said than done of course as I’m currently finding out right now (in real time)

Good luck with it.

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Post by Johnedoe » Sat Jun 02, 2012 2:46 pm

First, don't quite your day job till you have built an adequate trading account.
Second, develop or acquire several systems with a solid edge for a long term and a shorter term system.

And last but not least trade your systems with DISCIPLINE, CONSISTENCY, and SOLID RISK MANAGEMENT.

just some thoughts..

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