Comment on Mr Consistent returning incredible returns

Madan commented on 05 Mar 2014, 03:53 PM


Your questions show the maturity in your thought process and i can tell you that you are in the right track. You are thinking in the right direction..way to go.

1. Good question. We can only do so much with the acct size right? If a trader can bring only a lac, so be it. He will have to slowly build it. Key is not to depend on the money coming out of trading. As you rightly said, psych would be different between 1 lac vs 1C account. But, everyone has a humble start.

2. There are two school of thoughts. a) Make enough money/returns before going fulltime. b) Get some experience and plunge into the water to see how it goes. Both have their pros and cons. The best situation is to have a some kind of backup money for monthly expenses and go full-time. This could mean an hefty bank account or passive income or spouse working. I remember going through Van Tharp’s ‘Peak performance course’ and he states that one needs to make enough returns trading part time before venturing into fulltime. I agree with him partially but very difficult to implement..lets say a traders monthly expense is 50K and he could bring only 5L to trading. So, to cover his expense, he is expected to make approx. 8L(before tax) from 5L..that’s 150% returns and i am not saying for a moment, that it is not doable. But very few people can do this and on top of that, there is also an urge to build the account size. This can put tremendous pressure on the trader’s psychology. So, when someone goes fulltime in trading, the biggest leg-pullers are the account size and the need to make money fast.

Bottomline – i would say trade part time but it is just delaying the inevitable. Eventually, the trader has to go fulltime to make this as a profession. Ideal scenario would be to have a decent trading acct (say 25L) and have 3 yrs of monthly expense stashed in FD or bonds. In this way, one can trade with peace(other vices of trading has to be handled anyways) and focus on trading properly rather than on making money.

3. When i moved from PT to FT, i was just breaking even. No loss/no gain. There were lot of struggles in the beginning and was breaking my rules left, right and center. Eventually, mkt taught that i need to be structured to survive. This is where Trading journal really helps. We can go back and see what has happened when we break rules. It’s an ongoing learning process and the understanding on why to follow rules will come over time. Self-realization has to happen.

4. It was not a smooth ride but well worth it. Please understand that it might take another 1000 words to type the experience but i see that you have the burning desire to understand what goes on in a trader’s mind at various stages 🙂 We can talk about this for hours but to type it in, i need to hire an assistant 🙂

5. As i said earlier, you need to have fall back money to take care of monthly expenses for atleast 3 yrs..can’t stress this enough.

Hope it helps.

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