Thursday, December 25, 2008

Special Christmas Post - My Gifts to You

I've said in the past I'd never want my children (or their future spouses) to become traders. The probability of success is simply too small and the pain is usually too great. However, if they made up their minds on their own and asked for my help, I'd take a deep breath and do whatever I could to support their efforts.

So it's in that spirit that I offer the following modest Christmas gift nuggets to those looking over my shoulder and who have already made their own decisions to pursue this crazy business:

1. Become self-sufficient and ignore what the screaming hype-driven world is telling you. In the Christmas spirit, I won't start my chatroom and advisory service bashing. Yet suffice it to say if you're looking for someone else to tell you what to do or confirm your thoughts -- especially in real-time -- it's either already too late or will result in an unsevered umbilical cord that becomes harder to cut over time ... and quite possibly linked to the wrong host. Remember, those confirming "experts" have their way of trading, often won't risk his/her own capital anyway, and/or carry their own emotional "baggage" as we all do.

I find it interesting that we all learned how to breathe on our own with nothing other than a spank. So shouldn't we simply prepare to get spanked and learn how to "breathe this business" without a paying for a useless ventilator? Yes, it may result in more short-run pain, although that's arguable. I frankly only care about the long run and want to put trading profits into my own pocket.

2. Develop a feel for the market. I read over and over again that "you can't trade based on feel". Bulls##t. The reason you hear that is it's hard to sell books, advisory services, and chatroom subscriptions that way. Develop a feel for the market's pulse, and then use the indicators simply as confirmations. Remember that scene in M*A*S*H where Hawkeye was blindfolded after an eye injury and still found the perforation by simply using his intuition and senses? That really pissed Frank off if I recall.

Is it hard and time-consuming? You bet. You think this year was easy?? Or asked another way, How bad do you really want it?"

3. Find some way, some how, to have a non-trading income to pay the bills. Yes, I have one and it's completely non-market related. And yes, it makes a world of difference. Primary options include (1) spousal or significant other income, (2) a side job that doesn't "materially" interfere with market time (there will always be some interference, so the benefit of the income has to outweigh the cost of interference), and (3) income on past investments. Yet there are many innovative ways to go about it. Find it. Find that annuity stream.

4. Fully immerse yourself. Yes, I may have gone overboard this year and I'll likely never push myself again as hard as I did. Yet there's a reason for the results. If you really want to do this right, live, sleep, and dream the business. Again, how bad do you want it?

5. Remember it's all about "time", which is all trading income or losses really buy or spend. The only thing I really accomplished this year is I bought about 15 years of income at a decent standard of living. Time to spend as I choose. Nothing more. Have a loss this week? Big deal, so you're a week younger. And more importantly, likely a week smarter.

I had two choices after incurring the largest single-day loss of my career in early October: Whine and cry; or use the market information to my advantage. I chose the latter, pressed the newfound advantage hard, and within 4 days the wound had fully healed. Then, within a few weeks, it turned out that what some may have viewed as a devastating loss simply was forming the necessary foundation for a record month. Had I not been hit as hard, I probably wouldn't have noticed the new screaming market data.

6. It's also all about probability. Probability that you're on your game. Probability that the pattern will pay. Probability that you're in the right place at the right time. Probability that the guru will be right (sorry, couldn't resist), and probability that after a decade of work, the Bamboo will finally break the surface.

I don't normally give advice in this diary. Then again, I suppose this really isn't advice. It's simply a few of the ingredients I've used in cooking this year's Christmas feast.

So perhaps we're safe.


MertTo said...

Hi Don,

First of all congratulations. I do not only mean about the end goal you achieved but also the means you used to get there.

I have been watching your blog for the last couple of months and I not only enjoy reading your story but learn a lot about trading as a wanna-be-trader.

Secondly, if you do not mind I'd like to ask a question about tax situation: Can you please give some tips about what the best approach to handle your taxes as a trader? I understand it highly depends on other aspects of your financial situation but still very curious about the options a trader has.
Thanks in advance, Merry Christmas and Happy New Year.
Good luck with your new goal too!


Don Miller said...

Hi Mert and thanks.

Regarding taxes, it really does depend on individual circumstances, including whether one is trading for a business, trading futures vs. equities, trading a self-directed IRA, etc.

Green & Company ( ... who I've used in the past and have no affiliation) provides a pretty good overview for trader tax issues.


MertTo said...

Thanks Don, will check