Actually I am cynical and pessimistic by nature which probably works well for playing in the market. Bad years are good for the markets as they correct over-optimistic rates. It means you have to play the short market though which is not easy but you can go both ways. I didn't create the system and absolutely hate the fact that naked shorts are still legal but it makes it very easy to make money on a down market. When it is trending up you play the "correct" way. I would far prefer to just play in Bull markets but the Bears are out there and we figured out that being a Bear on Bearish days is pretty good as well. But, I don't like shorting and get pretty ancie when we are doing it so we try hard to stay only in positive stocks. I know it sounds ridiculous to make more than 100% a year (in fact we made 100% on our brokerage account in the first 3 moths this year) but that was corrected by betting heavy on Apple based on the excellent quarterly report and eating back a lot of that gain. So the 100% or ore rate depends on when you look. At year's end we are doing well and very happy Congress set the tax for investments at 15%. Apple is now is recovering quickly (obvious manipulation to drive down the NASDAQ for "other" reasons) but we don't like sitting idle with the money tied up and not playing. It makes one very nervous. I am not saying we are perfect and I don't know anyone who is but we have seen some pretty spectacular results. We have also seen some pretty disheartening losses. I recall in the first year numbers like $100 a day loss would result in panic on our parts. Now we shoulder off big numbers without even breaking a sweat. That is what time and experience yield, the ability to get past the emotions of poor decisions.
Both of us came out very badly from our respective divorces and we started building from scratch in 2005 (my ex is an attorney which was't fun). Given that we only had $125k cash then and another $150k in 401k accounts we have done very well. She sold her apartment in Moscow which we used to buy the million dollar townhome. We kept back $25k for an investment account. Now, our portfolio is beyond $1M, we live in a mortgage free home, have no loans at all except the 2 mortgages in the US which we hope to eliminate next year, so we must be doing something right.
But Day Trading is not for the feint of heart and yes, most fail miserably usually in the second year. My DW lost most of hers in the second year and we had to replace it with cash out of pocket to get back to the $25K lower limit. But, she only really lost her profit (we only added back $2k) and it was a hard and well learned lesson. But we never have used money we needed or planned to require later. We also never use the margin account having had a few margin calls that very bad second year. We also got busted for breaking the 3 day rule a couple of times so that was a tough time for us. But, it was also extremely educational.
There are 2 factors that drive the market and can ruin you quickly. Greed and Fear. If you can overcome these instinctive feelings then you can do well. Greed is trying to get that tiny bit more profit and losing everything you worked for. That is countered by setting reasonable goals like 1 or 2% on a transaction and being able to absorb a 2% loss but also getting out when it drops that much. That is very hard to do emotionally. Fear is the other force and is instinctive. Again, setting goals and having escape plans can overcome this. Stops don't work on high volatility stocks so you really need to be able to see the trends and have a zen like feel for what a given stock is doing. This takes a lot of time and experience. Playing high volumes can also serve to protect you giving you a way out quickly.
Markets are just tools for investors. One thing I hear frequently asked is "Does anyone on Wall Street actually contribute anything to the economy directly?". On the surface it appears to be no, but, it does serve to capitalize companies to give them much needed capital for expansion and operations so is extremely valuable to the US economy. But it is also a very high risk venture and in well regulated systems (such as put into place after 1929) it generally works well. Historically there are crashes in all markets and I believe that is a normal function of the free market concept. Many rules were put into place after 1929 to regulate the markets. However, recent changes have destabilized it enormously and you can't figure that into long term trends. The market today is essentially back to where is was pre-1929. Perhaps worse with algorithmic trading, failure to correctly oversee the markets, obvious manipulations (large investing houses working together to push or pull a given stock), hedge funds which didn't exist before, and financial instruments (derivatives) that are leveraging as much as 500% the value of stocks. None of that has been addressed and in fact has been abetted by the government (Corzine is still free and he stole $1.5B from customer accounts (sent to JP Organ who now can't find it
), lied to Congress [emails show this], and still hasn't been prosecuted nor is he likely to be). However, if one is astute and can see the trends they can do very well. I do not believe that the US economy will fail nor do I believe the markets will completely collapse. Someone always wins even in a crash. The money doesn't just disappear it goes somewhere. Why not to those who are savvy enough to trade well. Trading is not just for the extreme rich, although they do try hard to keep out individual investors. But $25K isn't that hard to come up with.
Letting passive traders such as mutual funds manage your accounts (same for 401K accounts) is just putting money in the pockets of those fund managers. Typically it is a 2.5% take on your entire account per year whether or not you actually made any profit so calculate that into the equation as well. I don't like people making money off my money which is why we moved into Day Trading. At least we are the only ones managing our own money. There is a big reason Congress created IRA's in the first place and it wasn't to make the investors rich. Mutual funds are very similar and they make obscene profits even when they lose money so I wouldn't trust them with my money. Just saying. Not criticizing but their interests are not always in line with their depositor's as evidenced by the last 4 years. I like having full control of my own money and we are able to make it work for us. At a minimum just having it in your own brokerage accounts you don't have to Day Trade. You can still do long term trades on your won using whatever algorithmic's suits you best. More or less that is what we are doing with our 401k accounts. When we begin to do the mandatory withdrawals from them we will get hit with the taxes but will likely put it into the brokerage accounts to work harder there. We haven't had to address that yet but it is coming soon.
