Trading for a Living

[skimmy]

Just curious if anyone here actually trades for a living? I'm not talking about being an advisor or anything, but actually making your income from trading on the stock market. If so, are you doing it based on the recommendations of SSP or with your own research or how?

[investInYourself]

People who trade for a living belong to two categories:
1) Day traders
2) People who own dividend paying stocks

I find day trading requires great insight and is too risky if the food you put on your familiy's plate depends on it.

When you own dividend paying stocks, the company basically shares part of its earnings with its stockholders. You can live off this if you have a sizeable amount of shares.

So these approaches are not for everyone....if you are a newbie and an average Joe I suggest you save as much as you can, and you learn how to invest before you even think you can trade for a living...otherwise volatility might eat you alive.

[skimmy]

Oh I understand that trading for a living is not for everyone and obviously contains some significant risks. I have been trading stocks for about 10 years but nothing too intense and usually sticking to the less risky stuff. I found this site about a week ago and have been intrigued ever since. I was just curious if anyone on these forums is actually doing this for a living, and if so how.

[DCA]

Interesting question, do I trade for a living?  I do have a day job, my dividend paying stocks results in ~1/2 month salary per year, but my total return is currently at 2x my salary.

So I make more money on the stock market than I do from my day job.  Does that constitute trading for a living?

Historically, I have had about 20% return, invested in sleepy little safe stocks.  Re-examining things early in 2007 I decieded to add other strategies.  One of them was following SSP.

I have followed an evolutionary strategy.  Investing part of my portfolio in each strategy and then allocating more money to the winners and discarding the worst strategy each quarter.

Currently I am at 40% with SSP squeaking a little over %100 right now.

To do this (and I do not currently day trade) requires a certain amount of 'steel'.  I frequently see drops in the order of 1/4 a years salary in a day.  In one nine day period in Janurary I lost 2 1/2 years of salary.  On the up side, on one day between market open and finishing my coffee I made a years salary.

Some hard rules though: Never transfer money from a winning strategy to prop up a losing strategy.  Never invest to the limit of your margin.  (Oh, I did win on that one.  The stocks that I sold to cover in the Janurary drop, dropped after and I re-bought lower, but still I learned.)  Always sell your losers.  Never look back.  There is enough stress looking forward so do not dwell on what would have happened if you bought that stock or had not sold that other one.  Drops are generally faster than rises.  Know what you are going to do during a drop before it happens.

In terms of SSP it has a few areas of concern:  It does not filter for volume or insider ownership.

D

[DCA]

Experience helps.  I have lost large sums, but then made them back.  (You can see the same in the SSP chart)  It helps to figure out why the drop - Did some politician make a doom and gloom speach?, did the price at the pump just double?, did the CFO not return from vaction in Jamaica?  (it happened with one of my stock picks)

Recognize whether the cause is a blip in the market or a sell signal.

Smooth out you emotions - recognize that it is not profit until you can buy something nice with it.  (While my comparisions to salary are raw before tax data when I look at % return this is after taxes, commisions, margin interest.)

Back just before I started taking things more serious I read an article on Canada's futile savers.  According to this article most Canadian's are futile savers for retirement.  No mater how hard they save they never have enough saved at retirement to compensate for the resulting increased taxes and CPP/OAS claw-backs.  Reading this helped me accept risk.  If I fail I am scrapping by on CPP/OAS, if I do not try a higher risk I am only saving the government money.

D

[Victor]

DCA, nice post.

My rough patch was in November, when I had back-to-back -2.5% for three days, a slight bounce, and then down for four days, with the last down 5.8%.

Since then I've only had two days with a loss greater than 2% (June 10th was one such day).

I've tried to reduce volatility by applying various position sizing strategies.  I'm comfortable with the one I've got now, but it does mean I've got a fair amount of the portfolio in cash.

Since last August the gain is just over 25% with SSP.

In a previous post you had mentioned using quantitative methods to select stocks.  I do a fair bit of quant work on the risk mgmt. side of things and was wondering if you could share some of your quant thoughts.

Cheers,

Victor

[bryanmcn]

Try living through a $30,000 drop in one day! If you live through that and continue to trade you will be stronger with more "steel".
For some, $30k is not a big percentage of their portfolio so imagine losing 50% of your life savings in 6 month. ... and your not young!
Live to trade another day. After the dot com bubble burst in 2000 I lost 50% in about a year. I was on track to retire. I stopped trading for a year or so and read everything I could to get eductated. Now I trade regularly and have gained back all my losses and then some. SSP has definately helped. I treat all losses like tuition. Learn from them all. Emotion will hurt you only if you change your behavior because of them. And remember  .... cash IS a position.

[tuzo]

I treat all losses like tuition. Learn from them all. Emotion will hurt you only if you change your behavior because of them. And remember  .... cash IS a position.

One of the things I got out of the book, Way of the Turtle, was that losses are part of the cost of doing business.  Assuming your system has an edge (positive expectancy) then some picks will make money and some will lose money (you don't know ahead of time) but in the long run you will come out ahead.  All those losses are simply the cost you pay to make all that money.

[bryanmcn]

Totally agree. It seems we can make money even with a low % of success. In other words; you can do well even if only 30% of your stocks gain. Just make sure the gainers are big and the losses are small.

[Cameron]

I pair trade, and use some of SPP in a portion of my port.

[skimmy]

This has actually turned out to be an interesting conversation. Given that, I am still kind of curious if anyone is actually trading for a living without a true job as a source of income.

[cag]

Check out his web site to learn how to trade. www.dsgtradewise.com
You can basically use use any stock filtering system including Super Stock Picker to find trading cadidates, but the main thing you must have is a trading plan and the discipline to trade your plan. If you don't have one you are just gambling and you will eventually loose your trading capital. Trading for a living doesn't require that you day trade. In fact, most traders that consistently make money are swing traders or position traders. DSG Tradewise also has good support to help you get started. Other good books to read are by Dr. Elder eg. "Trading For a Living"  www.elder.com

[wm]

People who trade for a living belong to two categories:
1) Day traders
2) People who own dividend paying stocks

why so? what about those having a large enough portfolio that's worth dedicating 100% of their time but are not day traders and are not buying dividend stocks?