Great post! I've been trading since 2013 and am now doing it for a living. I've made $6 million so far, enough for my wife and I to retire. I have a CAGR of 43% since I hit upon my current system almost eight years ago. Yes, it requires tons of research, a willingness to take very large risks, and hours in front of a computer screen. But I now spend only about ten to fifteen hours a week actually trading and logging my trades, with the rest of my time devoted to more healthful activities (including research). I think one of the secrets to my success may be that I hardly ever look at a chart. Maybe once a week, one stock--that's it. Technical analysis to me is like astrology--kind of fun but in the end useless. The recent price movement of a stock is one of the least important factors in my trading decisions. At any rate, I've grown to really like trading, and I can see myself keeping at it for years.
I've seen three bear markets. I trade only microcaps, and there were bear markets in microcaps in late 2018, early 2020, and 2022. In all three, the benchmark that I use went down over 20%. I remained fully invested.
Oh, I totally agree about the strong stomach and not being leveraged during a downturn. Right before the COVID crash I took out a large cash-out refi and plowed it all into stocks. A month or so later my portfolio was down 33% and I'd lost every single penny of my cash-out refi. I stuck to my guns and ended the year up 105%. But I currently only use about 10% leverage and cut that down to next to nothing in highly volatile periods. The thing about bear markets is that it's easy to get out when the going's tough, but it's impossible to time a good re-entry point. And most of the time, you get back in at the wrong time, and it would have been better not to get out at all. The idea that you can time the market is psychologically really pernicious and usually a real money-loser too. Maybe there are some folks who are good at it, but I know I never will be.
Patience is the most underrated element of trading.
A colleague and I ran a side-book that at its core was short FX Vol. We’d figure out where we’d be happy to be short, offer it out then let it be. On the corner of the floor was a small meeting area, and we nick-named it the “Short-Gamma Table”. Any time either of us though about trying to fiddle with the position or felt we were getting jimmy’ed into stopping out deltas, we’d retire to the Short-Gamma Table to read the FT Weekend Supplement. Worked a treat...
Always a battle and constant recalibration of quelling the mind, focus on what moves the needle, when or to not take action, and to find the equilibrium that works for now but never a perpetual wash, rinse, repeat.
I stumbled across your post by accident, I don't even trade, but do deep value investing, but this really was an enormously enjoyable and worthwhile read :)
There have been a couple of shows on trading you might like - Capital City (available on YouTube) from the 90s and more recently, Industry, available on iPlayer.
Great post! I've been trading since 2013 and am now doing it for a living. I've made $6 million so far, enough for my wife and I to retire. I have a CAGR of 43% since I hit upon my current system almost eight years ago. Yes, it requires tons of research, a willingness to take very large risks, and hours in front of a computer screen. But I now spend only about ten to fifteen hours a week actually trading and logging my trades, with the rest of my time devoted to more healthful activities (including research). I think one of the secrets to my success may be that I hardly ever look at a chart. Maybe once a week, one stock--that's it. Technical analysis to me is like astrology--kind of fun but in the end useless. The recent price movement of a stock is one of the least important factors in my trading decisions. At any rate, I've grown to really like trading, and I can see myself keeping at it for years.
You haven’t seen a real Bear Market yet. Hopefully you have a method to go to cash and/or short once we inevitably get another one.
I've seen three bear markets. I trade only microcaps, and there were bear markets in microcaps in late 2018, early 2020, and 2022. In all three, the benchmark that I use went down over 20%. I remained fully invested.
Ok, would you have survived a real 2008-style Bear market fully invested? Some people did, but you have to have a strong stomach and not be leveraged.
Oh, I totally agree about the strong stomach and not being leveraged during a downturn. Right before the COVID crash I took out a large cash-out refi and plowed it all into stocks. A month or so later my portfolio was down 33% and I'd lost every single penny of my cash-out refi. I stuck to my guns and ended the year up 105%. But I currently only use about 10% leverage and cut that down to next to nothing in highly volatile periods. The thing about bear markets is that it's easy to get out when the going's tough, but it's impossible to time a good re-entry point. And most of the time, you get back in at the wrong time, and it would have been better not to get out at all. The idea that you can time the market is psychologically really pernicious and usually a real money-loser too. Maybe there are some folks who are good at it, but I know I never will be.
JD:
To your point: As a young man, Warren Buffett returned to Omaha to lower the volume.
Reportedly, neighbors wondered about the dude in the bathrobe getting his newspaper as they pulled out of the driveway heading to work.
That worked well for him.
That and a couple of other things.
Patience is the most underrated element of trading.
A colleague and I ran a side-book that at its core was short FX Vol. We’d figure out where we’d be happy to be short, offer it out then let it be. On the corner of the floor was a small meeting area, and we nick-named it the “Short-Gamma Table”. Any time either of us though about trying to fiddle with the position or felt we were getting jimmy’ed into stopping out deltas, we’d retire to the Short-Gamma Table to read the FT Weekend Supplement. Worked a treat...
Always a battle and constant recalibration of quelling the mind, focus on what moves the needle, when or to not take action, and to find the equilibrium that works for now but never a perpetual wash, rinse, repeat.
🎯
I stumbled across your post by accident, I don't even trade, but do deep value investing, but this really was an enormously enjoyable and worthwhile read :)
I keep on coming back to this write-up. A1*
Great post. The realities of solo trading for a living aren’t too gratifying (at least not for most people).
There have been a couple of shows on trading you might like - Capital City (available on YouTube) from the 90s and more recently, Industry, available on iPlayer.
Per usual, right on the money