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Hi
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> From: TRaffertu@xxxxxxx
> To: ramon@xxxxxxxxx
> Subject: Re: GEN - Lifestyles of the Rich & Famous Real Traders
> Date: Thursday, November 06, 1997 9:19 AM
>
> Hi Ramon,
>
> Thanks for your response. I would like very much to hear how
you
> made the change to full time trading. Good and bad experiences, changes
in
> your life, etc.
My change to full-time trading was abrupt and with hindsight a mistake.
I sold my legal practice and decided that trading was the thing to do.
Spent 6 months studying the mkts and then hopped into it. Made all the
mistakes everyone does and created a few of my own. I would not want
to tell you the money I lost. If I had it to all over again I would do
things differently.
I believe there are 4 stages to trading professionally:
1 stop losing
2 start winning consistently: 5 to 10% return pa on capital.
3 learn there is a trade off between returns and risk of ruin
- this determines the level of return: 10% - 30% is normal
for this stage.
4 flair, if any, for trading determines the next level of return:
greater than 30% consistently achieved is possible.
> On the technical side I am interested in how much capital
>reserve
> is required (for living, not trading), outside office vs. home office,
> incorporating, tax ramifications (USA), books and tools you have found
> usefull, etc.
Cannot comment on USA tax laws.
So far as reserves are concerned, it would depend on what stage you have
reached. I would not give up my day job until stage 3. At that stage,
I would want 12 months of living expenses set aside and/or a part-time job
to ease financial pressures.
So far as a home office is concerned - it did not work for me. What worked
was sharing a low rent office with a couple of budding professionals until
I could afford buying an office of my own.
The problem I had with a home office was I had no place where I could
shut the door and "leave the office".
Books and Tools:
So far as tools are concerned, I have written an article on:
http://www.realtraders.com
Go to "trading secrets" and my shelf. It's entitled "Wyckoff,
Steidlmayer.." or words to that effect.
Books are difficult as I am voracious reader. Some of the more
current ones I have found useful are:
* Market Wizards I and II
* The Disciplined Trader
* The Way of the Samurai Trader
* The chapter on Money Management in
"Winner Takes All"
Also:
"any book on Wyckoff's ideas"
"any book on Steidlmayer's ideas"
"most books written by and about the old masters" -
especially Bernard Barauch
> In general I am looking for advice that would make the
>transition
> smoother from those who have gone before. Thanks again for your intrest.
The best advice I can give you is:
1 be patient and know you can trade profitably before you make
the change;
2 ensure your financial capital is adequate - I would budget for a
20% return, of which no more than 50% is available for living expenses.
Have at least 12 months living expenses set aside when you begin and
as little as possible in fixed commitments. If possible have a part-time
occupation that does not take up too much time and provides
some measure of assistance to your cash flow.
3 have a life outside trading or in "new age" jargon, have a balanced
life.
4 if you are in a relationship ensure your partner is 200% supportive or
work out a solution so she is supportive. Trading is stressful enough
without additional pressures.
5 Develop some tools for stress release: meditation, aerobic exercise etc
6 Never stop learning - once we learn to discipline ourselves, you need
tools that have an edge over the other players; you can be sure that the
best ones out there are continuing to adapt and research.
7 Finally have realistic expectations. The great thing about trading is the
compound effect on your net wealth. If you can compound 15-20% pa
you'll be wealthy in time.
I believe that the most common reasons for failure after poor
capitalization are unrealistic expectations and taking too greater risk
relative to capital base, knowledge and experience.
I have posted this on RT at your request.
regards
ray
R Barros
101/25 Market Street
Sydney NSW 2000
Australia
e-mail: ramon@xxxxxxxxx
tel: 61 2 92673470
fax: 61 2 92673478
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