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A Typical Day in Life as an Independent Trader

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Stock Market GameLast fall, Jim and I exchanged the introductory, get to know you, emails about the dangers of being an active trader.

More specifically, his semi-reluctant admission that he had day traded AIG for a quick profit caught my eye since the majority of personal finance bloggers consider active traders to be the blasphemers of the financial world. Thus began the (temporary) downward spiral of Jim’s blogging productivity after we exchanged multiple conversations about trading Yahoo, General Motors, and a few other stocks I suggested he should avoid.

Several days ago, Jim asked for a brief synopsis of what it’s like to be a fulltime trader. I hope you enjoy the post, but moreover, I hope that I convince you that becoming a professional trader is a horrible idea!

Never Admit to Being a Trader

Being a trader in today’s anti-Wall Street environment currently ranks somewhere between a shady criminal defense attorney and a circus employee with a pooper scooper.

Why?

Because the general public believes we’re the creeps that exacerbated the stock market crash of 2008. Even worse, some traders actually profited from the crash by shorting the market on the way down. So not only did traders help cause the problem, but we made money buying UltraShort ETFs that yielded double the normal return as the value of your Roth IRAs were chopped in half (mine included).

In other words, if you’re looking for a self-rewarding career where the court of public opinion values your services – look elsewhere.

What it’s Like Being a Trader

I would say that life as a trader, or at least my particular trading style, is analogous to an old quote about being a wartime pilot:

Hours and hours of sheer boredom punctuated by moments of stark panic. – Hanger Flying, Lt. Col Alfred J. D’Amario

I can’t imagine anything being more terrifying than war, and in no way am I suggesting that trading is analogous to going into battle, but the prolonged periods of doing prep work and having the patience to sit idle on the sidelines can be incredibly difficult. Once you make your move, the boredom quickly dissipates because it’s at that time your adrenal glands kick in because the roller coaster has just left the station.

Here is an example of the daily grind:

  • 0730hrs: Get up, get moving, flip on CNBC and/or Bloomberg to make sure the world didn’t come to an end between the hours of 0100hrs and 0730hrs. Take the dog for a walk and eat Cheerios at my desk.
  • 0930hrs: Sit on my hands for the first 30 minutes of trading. Absorb as much market action as possible. Allow the overnight news to be digested. Volatility is a double edged sword and cuts deep if swinging the wrong way.
  • 1000hrs: Maybe execute one or two trades. Immediately setup audio alerts and precautionary stop loss orders. If a stock hits a buy or sell price, I want to be alerted and protected ASAP. When I screw up, a Beavis & Butthead MP3 will automatically call me a “dumbass” for making a bad trade. This happens frequently.
  • 1230hrs: Walk the mutt again, nuke some leftovers, and go back to the monotony. Continue looking for newsworthy events or charts setting up for a move.
  • 1430hrs: Action picks up as the big money traders are back from lunch, out of their meetings, and settle in to make their final trades. Be prepared to sell positions if target prices were met, or the macroeconomic picture for the market as a whole appears bearish.
  • 1600hrs: Write down the trades in my logbook that were opened or closed out. Review what went right or wrong.

That’s about it. Probably not what you were expecting… right?

Unlike most active traders, I try to keep the number of open trades as low as possible so I can minimize the white noise as much as possible.

This is only part one of a three part series, here is part two, Tools of an Independent Trader, and part three, Precautionary Words from an Independent Trader

This guest post was written by Matt of SteadfastFinances.com. He is a full time, independent trader with some extra time on my hands!

(Photo: photophonic)

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16 Responses to “A Typical Day in Life as an Independent Trader”

  1. Kyle says:

    I am reading An American Hedge Fund right now by Timothy Sykes and it is amazing how well he portrays the high you get from trading. It outlines much the same routine you mentioned here. I think people are under the impression you can just sit down, click a few buttons and BAM! money appears in your account. They don’t really understand the amount of research that goes into making successful trades.

    Great Post. Thanks

    • Greyghost says:

      Hey Kyle,
      I actually have a signed edition of An American Hedge Fund in addition to Tim’s business card. It’s never been read as I bought another copy. Let me know if you’re interested in purchasing it from me.
      greyhat033@gmail.com

  2. Lily says:

    “I hope that I convince you that becoming a professional trader is a horrible idea!”

    Maybe that should be amended to read “professional independent trader”? After all, traders attached to broker-dealers are the people who make markets. Without them, there is no stock market. Some people might not think that’s a bad thing, but then firms won’t be able to raise capital, investors won’t be able to earn as high of returns, and the disconnect would horribly stifle economic growth.

  3. labelcd6 says:

    I am surprised to hear that somewhat “normal” people make a living this way. Does the American Hedge Fund book deal with this issue? I don’t care about thirty year old MBAs who live in Manhattan. I want to hear about the middle-aged family man living in Iowa who makes his living as a day-trader.

  4. Caitlin says:

    Should the “First time visitor?” box keep showing up for logged-in Barganeering members? If we have accounts, it’s certainly not our first time here! ;)

  5. Very interesting. I’m looking forward to the rest of this series.

  6. I am a recent college graduate searching for a job and get traders calling me all the time trying to recruit…

    I usually stop them one minute in and tell them I am not interested and I’ll pass the word along to my friends.

  7. No Debt Plan says:

    Interesting. I’m curious as to how much cash we’re talking here — I’m guessing a lot to be able to do it full time. Not sure if you’ll get into this in the next two parts of the series, but how did you decide to get started in full-time trading?

    That is, did you start with $1,000 and just get really lucky to grow your portfolio to a significant size, or did you slowly save money and decide, hey what the heck I’m got $100k, let’s make some noise.

    • Matt_SF says:

      It started with the double digit cash sum back in the late 90s.

      I also saved like mad (saved a dollar for every dollar I spent) and bought a few high growth stocks that did well. Companies that made products that everyone would want (or need) that had a high profit margin and dominated their market.

      A six digit account is needed unless you want to eat Raman noodles. :)

  8. Matt SF says:

    Thanks for posting the article Jim. Try to stay away from daytrading AIG and GM though… your good luck can’t last forever!

    @ labelcd6

    Quite a few independent traders live in out of the way places. I saw a report a few days ago with a commodities hedge fund trader who lived in South Dakota… planted wheat/corn in the early morning and traded in the afternoon.

  9. eric says:

    You’re right: sounds horrible! ;)

  10. thomas says:

    Yeah, Now try doing all that on the left coast! Market is open and I am just hitting Snooze.

    • Matt_SF says:

      I can’t imagine what it’s like to be 3 hours behind Wall Street. I’ve read bios of traders that work in SanFran who show up at the office at 4am.

      Not sure I would do it if that was the case.

  11. JERMONTE says:

    I trade, actively and I can tell you this guy is probably having a hard time making money. During my most recent active trading series from April 5,2010 to June 8, 2010, I netted 30.7% on my meager $15,000 capital. My day to day activity was little different from what is shown above. I will give my daily routine, including my fulltime day job as a truck dispatcher. Everything in Central time.

    1500 : Closing Bell : Start Trading Bot reports.
    1600 : Go to work PTSI – Pam Transport.
    2359 : Clock out Go home.
    0030 : Review Trading Reports.
    0200 : Take a nap.
    0300 : Pre Market Open.
    0300 – 0500 : Enter Open positions PreMarket.
    0500: Nap
    0830: Opening Bell
    1000 – 1200 : Close Positions and Deleverage
    1230: Nap
    1500: Closing Bell: Start Trading Bot.
    1600: Go to Work.
    ————–
    Every two months to three months I take a week break to review, modify, and updgrade methods. Not exciting, but the money does flow in and then flow out to bars, electronic stores, clothing boutiques, and aftermarket autoparts. Party Up even in the crash.


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