Distilled wisdom from approximately five years of battling markets as a retail trader. Classified most often in the category of ‘brilliant advice you won’t follow’ based on my experience, we all view ourselves as considerably above average. All of these points could be expanded on but represent a minimal guide to reality as I experienced it.
1) Equity swings are brutal for your emotional health : you have to work out how to “game” your emotions so you can focus on your “average” day and making that better and not thinking +/- 2 standard deviation days are normal.
2) Escape velocity is difficult to achieve : to make a living you really need a large multiple of a normal salary just for your trading stake. The cost of living can eat away at your capital base.
3) Reasonable expectations : Warren Buffet does 22% p/a. Will you do better? And how consistently? Funds management is a very different thing to retail trading.
4) It takes years, not months : Just like chess mastery, to get to a high level in trading, the journey is measured in years and not months. Might your time be better invested in another area of income generation?
5) The education industry is dangerous : The skill to recognize sharks can only be gained by swimming with them long enough until you notice your own blood in the water (or words to the effect)
6) Opportunity cost can be significant : While you are engaging in this anti-social activity, you could be contributing to society in a more meaningful way than just a “liquidity provider” in the capital markets.
7) You can lose your respect for money : When your equity swings are daily in the thousands of dollars range it is a simple thing to lose discipline in matters such as daily budgeting. Why bother to look after saving a few dollars at the shopping center when it might be less than the brokerage on your next trade?
8> Variable reinforcement activities can lead to addiction : Beware of signs of addiction.
9) You can never truly win unless you have a finish line : Every day places you closer to ruin, unless you know when to walk away from the heat, it will eventually burn you.
10) Sometimes a zero sum game is good : As often the case, trading represents a negative sum game.