My biggest error was shifting to full-time trading too soon

I believe many readers will empathize with this issue because in my role as a mentor, most people that come to me are lured to trading with the same attitude I once had:

I hate my job! I want to quit and become a full-time trader!

This is, in my experience, one of the wrong ways to embrace the uncertain path to consistent trading. Even this week I confronted the same attitude, which has various degrees of madness:

• I have a job I enjoy, that I chose, and it pays the bills…but I’d like to spend more time with my family.
• I have a job that I like, but cannot stand office politics…and so I am looking to become a trader and just tell everyone off.
• I’ve got a job that I enjoy, but it’s not paying all my bills and I need a supplementary income. So I’ll trade and make the extra cash I need.
• I’ve got a job I hate…it pays the bills but I’d really like to trade instead.
• I don’t have a job, and it’s hard to envision any future unless I can trade well.

What people do not understand is that their day job is what is paying for their trading addiction, and what is offering them the opportunity to explore trading in the first place. 

So a bit more humility is necessary (I didn't have it back when I made my mistake), but here's my story to consider.

When I set out to trade:

• I had experience in the sector, having been a sales trader and technical analyst
• I had issued successful proprietary intraday trading signals for clients
• I had personally helped various clients stay out of trouble

So on the surface it seemed like I had good chances right?

Wrong!

I was young, a tad arrogant, and totally underestimated the psychological impact of attempting to pull a salary from the market on a budget.  Please don’t think I was totally out of my mind. I very distinctly recall my feelings from back then.  There was one week in August when I was assisting one of our High Net Worth clients. I was feeding him trade ideas (which he was trading in a very leveraged way) and we were working well together and made something like 20% in a couple of weeks.

Yet I can tell you that each time I executed his trade – which was ultimately the clients’ responsibility, and it was his own capital at risk – I was quite tense in the stomach. Why was I uber-tense?

• I knew very well I did not have a robust, backtested method
• I knew very well that bad trade ideas on my part would reflect poorly on the firm
• I knew there is always a component of luck in trading which I could not control
• I knew that at the end of the day, we were making decisions based on my best guess

But I did have a decent feel for the market; I very much respected our clients’ capital and treated it like my own (which is why after all these years some clients still seek me for advice). Moreover, I was very clear on which days I believed there was an opportunity and which days to stay flat.

But one feeling I also recall clearly, tended to appear after losing trades or during the days when there was nothing to do. I would say to myself “good thing I have a job and I don’t depend on trading”.

So there you have it. I had already understood everything there was to know about the perils of trading. And yet, I still made the cardinal mistake of attempting to pull a salary from the market on a budget. Why?

• Desire to prove myself worthy (of respect from peers & family perhaps?)
• Arrogance (“where 90% fail, I will make it!”)
• Job insecurity (“I only make XYZ and will never save enough to buy a house with a pool”)
• Being convinced that, if I had the time to dedicate to the market, I would be able to put my feelings of uneasiness (that appeared each time I entered a trade) to sleep.

Here’s what continued to happen for at least 2 years, each and every trade (and I made around 300 trades in the first 2 years so you can imagine what I went through):

I was on VERY fragile terrain…hence my VERY uncertain path towards consistent trading.

Learn from me…don’t make the same mistake. It’s really NOT worth it.

So what would I say to my former self, with the knowledge and experience that I’ve gained over all these years?

• Be disciplined and prove to yourself you can in fact trade profitably before leaving your day job.  I honestly tell this to anyone who approaches me for coaching. I personally know some very successful people that learned how to trade while having their own businesses and work commitments, that made it happen. Where there is a will, there is a way.  Two of my current coaching students are working full-time jobs and yet are equally successful in the markets. They have my total respect because they are avoiding one of my main mistakes.
• Be well diversified and do not depend on trading for your income. Period. What kind of diversification is possible, to people that are not born into a wealthy family? Simply, have a spouse or partner that has a steady income stream. Maintain your day job while learning how to trade. Attempt to help other people, perhaps as a freelancer on sites like UpWork, depending on your speciality. If you have the opportunity and some property, rent it out. Write a book…basically, think laterally and explore new ways to use your talents.
• Do not put a time limit on the learning curve. Personally, after the first 4 months I was at a point where I seriously doubted my capacity to trade (given all the pressure I was under) and I went back to full-time employment for a year. This also goes back to having diversified income streams. The better your personal situation is, the less stress and pressure you will be under.
• Stay healthy and fit. I sacrificed much of my physical and mental health in order to trade. Once again, it’s not worth it. Furthermore, studies have demonstrated how the brain is more capable of absorbing and digesting new information in a safe & secure environment. Not in a stressful and pressured environment.

Don’t think about trading as the Holy Grail that can solve all your problems. Most likely, if you don’t solve your problems first, the inherent uncertainty of trading the markets will only exacerbate them and slow you down even more.