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Trading for an Income - Revisited

Trading for an Income - Revisited
by Ralph Russell, Nasdaq Real-time Signals Trader

In June of 2001 I did a 90 minute seminar for Zap Futures, Inc. in Chicago that outlined how we Trade for an Income. The seminar is archived at Zap Futures [Use link for On-line Seminars, then go to the Archives] on their website with full audio, and here: Trade for an Income.

We had numerous responses to that seminar from people that have quit their jobs, want to quit their jobs, or have no job, as to the possibility of making a steady reliable income from daytrading of futures contracts. I do not comment on trading of stocks or options as that is not my field of expertise.

In fact the very night of the seminar I received a phone call from a man that discussed having an account with as little as $1,500 in it and wanting to trade an obligation as large as the mini-Nasdaq 100 futures contract.

I can guarantee you it is not something I would consider with that amount of capital. I would get more for my money if it were in $5 bills and used to start a fire in a homeless camp for warmth.

We have been very successful in my opinion over the 14 months through November of the Nasdaq 100 service. We have been very successful in the calendar year of 2001 as we are profitable at about 200% of what we recommend as required capital of $15,000 to follow my recommendations offered on the DaytradersBulletin.com. Overall our profits from the beginning of the Nasdaq Real-time Signals are about 400%.

How Not to Start Daytrading Profitably

I also had e-mail from a Canadian school teacher who was the single father of two young boys. He said he had been paper trading and was very successful and wanted to quit his teaching job at which he had tenure, and go to daytrading, as it seemed, he explained, he could make more money by daytrading.

I asked him about his health benefits for himself and his boys. I asked him about his ability to stay focused on his trading with possible interruptions such as a sick child home from school. I asked him about drawdowns, as he said he only had about $10,000 to fund an account from which to make a living.

I asked him about flat markets with small range and little movement caused by low volatility, when it is difficult to take money from the markets. I asked him how long he had been paper trading?

I asked him if he realized the glasses or eyeballs he saw the screen with, would turn green when he got real money on the line?

I asked him if he realized he could not erase any action he took on the Internet to his broker whether his ISP was up or down and whether the Globex electronic system was running or down and the cash markets kept right on truckin' while he watched without any way of stopping a loss or taking a profit until the problem was solved and the system was back up. (This happened to me personally for almost an hour this very year and I was fortunate to get out with a small profit after the problem was fixed by the exchange.)

Anyway, I got a nice thank you from him and never heard from him again. I assume he is still teaching school and dreaming of greener grass on the other side of the fence. Which was a very intelligent decision on his part! Thank you!

Daytrading Realities

I have worked with traders, tried to teach traders, and have made 1000's of trades personally. It is a difficult way to make a living. If you have income from other sources, retirement income, or a working spouse and a few extra dollars you may become successful.

If you are using your last cash amount or your credit card advance or the second mortgage on the house you are a dead person financially before you begin. There is a saying that scared money causes the very event of which you are scared.

I have a good record personally. I have made money trading. I have made others money trading. During one event in my life I made a man $112,000 in seven weeks from his slightly less than $100,000 account.

I made a man and his wife $1000 a week for many, many weeks until we had an event where a severe mistake was made that reduced the capital by 40% in one day. That was the end of that typically undercapitalized venture.

I made a man with a $50,000 account $16,000 in six weeks and holding the account statements in his hand he told me, "No man alive could do that and trade that well." I was not able to produce those results in that account again for a full year: such is the power of the psychological belief system. The account balance was as it was that day one year later!

I have been daytrading for almost 20 years. It took me 10 years to even figure out how to quit losing most of the time. Statistically it is a known fact that a futures trader opens an account with $5,000 and is broke in four months. That is why they have sales people asking you to bring your account over to them. They are happy to take your money and rarely will explain the possibilty you will lose your entire account. Perhaps in my own case I am inept or something but I do not think so.

I commonly state that if someone wants to sit with me in my trading room and do what I tell him to do, I will make them wealthy in a very short period provided there is a sufficient trading account to start with. You cannot trade well if you are undercapitalized. Undercapitalization kills more new start-up businesses than any other single factor, and it is no different with daytrading.

You change as a trader. Your thinking process, your mood, your health, your opinion all change and that affects your daytrading. It may even badly affect trading on a longer term to the point of financial suicide. Mr. Druckenmiller who was George Soros' personal trader lost $10,000,000 (yes, $10 Million) in the fall of 1998 including his entire personal wealth, and he had been a successful trader for years.

The purpose of this article is not to keep you from trading or trying to trade. The purpose of this article is to make you realize how difficult it is to trade consistently successfully day in day out, week in week out, etc. It is a chore that few if any can do.

The more capital you have the better. The less dependent you are on your trading income the better. The more experience you have the better. The more research you have done the better.

Trading must become a ho-hum drag of boring repetition to become successful. Even then something will dump on your wheelbarrow and upset your applecart.

Markets are a mass of human emotion. Some participants are very bullish, some participants are very bearish, some participants are cold and neutral to either bull or bear and it is this person that has the best chance of winning. He has no obstacles in his or her path. Obstacles in this business are opinions whether yours or an outside advisor's!

Some participants have enough money and methods to move the markets as they wish for several minutes at a time. They sometimes use a procedure called "laddering" and believe me they can make you cover a long or a short with a pretty good loss at any time they implement this strategy. The purpose of this article is to challenge you to know what you are attempting to do.

We plan on continuing to offer the Nasdaq 100 futures contract in the Daytraders Bulletin Real-time Signal Service. We know and understand the problems with which we must deal on a daily basis. We know we will not make money every day, even when we may be correct in our analysis.

We also will continue our teaching seminars on Saturday's in our home in Florida to those that have a desire to learn about some of the methods we use in our personal trading as well as on the internet broadcasts. If you are interested in more information regarding my one-on-one seminars, please send me an e-mail of inquiry.

We do wish you the very best in your trading efforts and stand ready to assist you through our Real-time Signals services, through our teaching seminars, and though personal mentoring programs designed to solve your trading problems. Thanks a lot for being interested in our service or our other programs.