Day Trader - money potential vs prep time compared to poker

[WiltOnTilt]

Like many i'm new to investing and day trading isn't something I'd ever want to try to do without knowing wtf I'm doing.

That said I'm interested in day trading or short term stock shuffling/trading.

I'm curious as to how you guys would compare time it takes to get your trading skills sharp enough to make say $200k/yr compared to how long it would take for your poker skills to get there.

It might be sort of an ambiguous question but basically I'm trying to figure out if learning trading is "worth it" or even feasible on your own. I have little investing experience and besides a couple books and watching the talking heads on CNBC. Obv this is way way insufficient.

I'm currently a MSNL online pro and I'm spending some time working on a website on the side as a new income stream. I'd like to know if diving into trading would be worth spending lots of time on as an alternative income stream when i get sick of poker or running bad.

Thanks for any thoughts.

KoW

[Fishhead24]

Do you have a BR of at the very least 35,000?

That is your first step.

[UrmaBlume]

If you look at a daily graph of almost any liguid equity future you will find that the distance between the absolute high and the absolute low of any six month period is less that 10% of the sum of the days' ranges.

More to the point for a day trader you will find that the sum of the intra-session volatility is almost always 2-5 times the daily range.

What that means is that if over a six month period you are skilled enough to capture only 2-5% of daily volatility (1/20th) then you will do better than a longer term trader who does the impossible by capturing 100% of 6 months' range.

Now with very effective and inexpensive software packages and commissions of only a few < $5 dollars per round turn per contract available to the public and half of that to those whose volume warrants leasing a seat almost anybody can enter this world.

At TradeStation for example you can open a futures trading account for $5k, the software is $99 per month and free if you make only 10 round turns in a month.

To Day trade the emini S&P which is the most widely traded equity derivative on the planet requires a day margin of $1K per contract with retail commission of around $2.40 per trade per contract. (I have no affiliation w/TradeStation except as a satisfied customer for over 2 decades)

The daily range in this contract ranges between 12-20 Points. Intra-session swings total 30-70 points. One point is equal to $50.

If you can learn enough to capture only 2 net points of the 30-70 points available daily, then you will earn $100 per day per contract and that doubles required trading margin every 10 trading days. The market is liquid enough to support trade of 500-1,000 contracts per trade on an inter-session basis.

If you can learn to trade 1 contract successfully then you can trade 100 or more buy just increasing your order.

All orders can be placed electonically without talking to anyone. Executions, stop losses and cancel replaces are instaneous.

The are many successful ways to day-trade these markets and many, many more that are not successful. Probably the ratio of successful traders is about the same as long-term successful poker players, about 5-8%.

One thing for sure is that NO poker player has ever or will every earn as much as 10% of what the most successful derivative traders earn and many feel that it is easier to learn trading than NLHE.

At the very worst with a little effort and $5K you can get a great exposure and a lot of practice in what is truely the Big Game.

No matter how good you are or who you are there is only so much to be made playing poker. No matter what that amount is, it is but a fraction of what can be made if you can capture 1/10th of the daily volatility in the equity and other derivative markets.

[WiltOnTilt]

[ QUOTE ]
Do you have a BR of at the very least 35,000?

That is your first step.

[/ QUOTE ]

yes, I could fairly easily commit 75-100k to day trading if I had the ability to make good money at it. That would still leave me with a decent 5/10nl bankroll (80 buyins or so).

Urma, that's a lot of very helpful information. Thanks for typing all that out. I'm going to try to digest everything you said I'm sure i'll be back with more questions.

[pig4bill]

Assuming you want to do it very badly and put in the work, and it's a LOT of work, it's possible. It depends on a lot of things, such as how much you start with. If you start with 20k and expect to be making 1000% a year, that's not reasonable. So you may spend several years just building your account up to the size where you don't have to make huge percentage profits to get 200k.

As for how long it will take, it depends. I've known guys that were some sort of savants and were consistently trading profitably in 3 months. I've also seen guys try for years and never get it. There's no guarantee that you will ever "get it". BTW it's very common to go busto 4 or 5 times over the period of a few years before you find the style that works for you.

[UrmaBlume]

If I can be of further assistance just let me know.

I live in Las Vegas and as you can see am quite into and enjoy disucssing what I think is the greatest opportunity for thinking man, ever.

Your software experience might be very useful. Do you have experience with AI & Genetic algorithms as well as online db's?

If you do a search of my posts for the last month you will see several that contain graphs representing time frames that run from daily to sub 1-minute.

For my own trading I, with the help of some European programmers and math space cadets that I have been working with for years have built software that tracks the markets I trade in 12 different intra session time frames ranging from 405 minutes (the length of the day session) to sub 1-minute.

This software is not for sale or lease but stands as an example of how very inexpensive, raw financial data can be transferred into very valuable market information.

In the markets: Information = Equity. When you enter a trade you assume a certain equity, if the information that is the basis of the trade is good then, most likely, the equity in the trade will increase.

The best market information is data based and as far as short term trading goes everybody starts with the same basic piece of data; the tick/transaction.

I think of the tick as the atom of market information. The sub atomic particles of information that make up this atom are: price, time/date, volume, exchange, and whether the trade occurred on the bid or the asked.

These atoms/ticks are combined into molecules of information such as time/price/Volume bars. The information in a series of time/price/volume bars is then processed into trading signals, the finished product.

What that means is that for all short term technical traders the battle is one of data processing. Since everyone starts with the same data the trader with the most domain expertise and best processing will always lead the pack.

[kimchi]

There are many similarities between being a consitently successful at poker and trading.

Psychology plays an underrated yet hugely important aspect of both disciplines. I would say that if you're a successful poker player over the (very) long term, then you have a better than average chance to be successful at trading with a similar approach, study, and discipline.

[ QUOTE ]
I have little investing experience and besides a couple books and watching the talking heads on CNBC

[/ QUOTE ]

Check the sticky for books. Enjoy CNBC but don't get any ideas from that show (unless you fade them, perhaps). Those shows are ABOSOLUTE BOLLOX and can only hinder a trader's psychology.

[ QUOTE ]
I'm curious as to how you guys would compare time it takes to get your trading skills sharp enough to make say $200k/yr compared to how long it would take for your poker skills to get there.


[/ QUOTE ]

Your profits will be depend upon so many things. Assuming you are profitable, your account size will pretty much govern how much you can safely make. Making $200K on a $200K account is running pretty hot, whereas $200K on a $1billion account is not so exciting.

Some people suggest you make a 5-year plan, and hope to be profitable after the 5th year.
year 1&2 study: design your system/methology/paper trade
year 3: LOSE no more than 10% of your account
year 4: finish the year with no less than you started.
year 5: finish the year with 10% more than you started.

These are modest goals, yet reflect the realistic objectives of a rational newb trader.

The last thing I'll say is to avoid day trading. Once you are consitently profitable with longer term or position/swing trading, then you can think about day trading.

[WiltOnTilt]

Guys, great stuff. keep it coming.

Urma:

As far as my software experience goes, I was a programmer for 4 years or so prior to quitting to play poker full time. I don't have much experience with AI/Genetics but I don't think writing real time data analysis software would be out of my league or anything. However I'd have very little idea as to where i'd even start -- in terms of what variables need analyzing to trigger a buy/sell. I assume most of that information is proprietary and once people find what works they have no reason to give that info out?

Can you get reliable information on this stuff from books? I'm guessign there's probably a "standard" formula and people tweak it for what works in their sector? I know how much crap is out there for poker books/education/tv programming so I realize it's probably no different for a noob investor. Half the battle is just figuring out what/who to read/listen to.

Not to derail the thread to a cramer bashing session but I do enjoy watching cramer for education/entertainment value. While watching him I can't help but think he may be the phil hellmuth of investing -- it's hard to blame a noob poker player for buying a hellmuth book or dvd, how would they know any better? That's the type of thing I'm most scared of when studying the markets/investing/trading as i'm sure the signal:noise ratio is as bad or worse as poker.

kimichi:

wow I had no idea that the horizon was so far away. certainly i'm not so delusional to think that i could be up and running making mega bucks in 6 months, but 5 years is a long time. Would you consider that 5 years working 40-hour weeks on studying/learning ? I could earmark a good amount of time as a poker pro (more than the avg joe) but even 40 hours per week is prob something I couldn't swing.

All:

Are there trader/investing "coaches" ? One thing that helped me in poker was hiring a poker coach after my first year to get me thinking beyond ABC poker. I have the feeling there are probably investing/trading ABCs that everyone knows... but are there coaches/services that help you get beyond that or is it all about experience?

Thanks again for everyones replies and time.

KoW

[pig4bill]

[ QUOTE ]
kimichi:

wow I had no idea that the horizon was so far away. certainly i'm not so delusional to think that i could be up and running making mega bucks in 6 months, but 5 years is a long time. Would you consider that 5 years working 40-hour weeks on studying/learning ? I could earmark a good amount of time as a poker pro (more than the avg joe) but even 40 hours per week is prob something I couldn't swing.

[/ QUOTE ]

I'll throw in my 4 cents. If you're not counting time watching the market, probably. I think I spent generally an hour or two before the open and 2 hours after the close, on the day's trading. Then 2 or 3 hours in the evening reading and going over charts. One thing to consider is where you live. The market opens at 6:30 a.m. west coast time. You pretty much need to be up and at 'em by 5 a.m.

[ QUOTE ]
All:

Are there trader/investing "coaches" ? One thing that helped me in poker was hiring a poker coach after my first year to get me thinking beyond ABC poker. I have the feeling there are probably investing/trading ABCs that everyone knows... but are there coaches/services that help you get beyond that or is it all about experience?

Thanks again for everyones replies and time.

KoW

[/ QUOTE ]

Yes, there are, and using them are almost mandatory. There are various training camps you can go to, and pay chatrooms and websites that teach as well as give stock picks. There are so many different approaches you can use, and you'll have to find the one(s) that fit you the best. The best way is to find a mentor or two, but that can be difficult.

The other thing that should be mentioned is tilt. It's very easy to get caught in a position that you know you should be bailing out of but you still don't do it. All the paper trading in the world won't prepare you for that.

[whyherro]

Chances are you probably won't ever make 200k a year doing either. There's just not many people who make 200k a year playing poker. While there are day traders who make much more than that its really difficult to discern what percentage of them are just really lucky, since the spectrum of all possible trading performances is huge. Without some sort of informational advantage or really, really unique intelligence and skill I really don't think daytrading is profitable beyond simple risk/return for the average investor.