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So You Want To Trade For A Living: Monetizing Your Trading


If you have gotten this far in my series on trading full-time and are still intent on making the plunge, you are going to find one of the most frustrating things you will have to deal with is your income, or more specifically, the ebbs and flows of your income.

The goal of every good trader is, or should be, to make a consistent and steady return; something you can count on every week, or month, or quarter.  It’s a nice theory, something to strive for, but in the real world it’s pretty much like communism…only really works on paper.

You are going to have times when you make money, sometimes a lot of money (hopefully).  And you are going to have times when you lose money, sometimes a lot of money (hopefully not).  This back and forth can play havoc with you mind, causing you to lose focus, stray from your methodology, and ultimately undermine your ability to be profitable.  What you need is something that helps to normalize your income, that smooths out your equity curve, and this is where thinking of your trading as a business comes in.

First off let me say that I fully acknowledge that most traders at heart are mutants.  Mutants in the best mad scientist, comic book mogul, Howard Hughes-ian sense of the word.   Yeah, we give lip service to the whole “freedom” part of the story; how we can come and go as we please, decide when and how much to work, and trade on a beach from our laptop if we want to, but come on?  Why not just throw some princesses, fairy dust, and a pink unicorn named “Spirit” into this yarn while we are at it?

At the core of our freakish psyche we know why we really want to trade; so we don’t have to deal with customers, or employees, or bosses, or HR departments, or OSHA regulations.  We basically just want to sit in a room, by ourselves, and coin money without distraction, free to urinate in a Gatorade bottle at our desk if we wish.  And as beautiful and uplifting of an image as that seems, unless you are an extremely talented trader, it is just not a reasonable reality; or at least not one you can expect to achieve as a newbie full-time trader.

In a previous post in this series I mentioned that the most important thing that you could do in preparation for making the transition to being a full-time trader was to track your trading for an extended amount of time (minimum one year) and to be able to display your percentage return and drawdown in report form.  And here is why.

By treating your trading like a business, and by being able to show a track record of trading success, it opens up ways for you to monetize what you are already doing, with the goal of providing additional streams of revenue that will help stabilize your income, and give you piece of mind.  There are numerous was to do this, some of which I have listed below, starting with those that are the most intrusive to your trading and ending up with some which are very lightweight add-ons.

Running Money

A lot of retail traders don’t think about this option, and for good reason.  There are a variety of regulatory, legal, and structural issues involved in setting up what in essence is a hedge fund and these may be too complex and cost prohibitive for the average full-time retail trader to attempt, especially as a newbie.  However, if done correctly, the compensation may be worth the aggravation for the more adventurous of traders.  And it really just comes down to math.

If you have one hundred thousand of your own money to trade and you make twenty-percent in the first year you pocket twenty grand before commissions.  But if you are trading one million dollars of client’s money and make that same twenty percent, based on a normal two and twenty structure, (two percent of total assets as a management fee and twenty percent of profits as a performance fee), then your compensation for the year would be sixty thousand dollars. Ding, ding…..!!!  That’s two hundred percent more income than if you were just trading your own money.

And if you are really good, and make outsized returns for your clients, you can raise your fee structure to “two and thirty.”  And if you are really, really good; like Stevie Cohen good, you can raise your structure to the same as SAC Capital’s “three and fifty.”  Of course SAC has averaged a 30% annual return over the last twenty years and only had one losing year, but its nice to have something to shoot for.

This is a “heavyweight” way to monetize your trading.  It involves approaching high net worth individuals and “selling them” on your ability to bring them unusually high returns; which is why having a documentable history of your trading is so key.  This, in addition to giving them some feel for your performance, will show them your methodology, and their expected average drawdowns, all information that most serious investors will demand.

Trading Newsletter/Chat Room

You are already going to be doing charting and analysis for your personal trading, so why not make it available to others and charge a monthly fee?  A nightly newsletter showing set ups or potential trade candidates is a pretty simple way to do this.  This option is definitely much more lightweight than running money, although it will require you to manage your subscriber base and set up some sort of payment processing like PayPal.

Another option that can be either an add-on to your newsletter or offered as a standalone service is a trading chat room.  During the trading day you can allow subscribers to login and watch your live commentary and trading calls while you trade your own account.  You can choose the amount of back and forth interaction you have with your chat room participants based on your comfort level.  I’ve seen traders even run their chat rooms with audio or video chat, both of which can be muted if you need to bring the Gatorade bottle out.


Still a mutant?  Still want to just trade your own money?  I wish you the best of luck, but if you find that the swings in your P&L are making you uncomfortable, don’t be afraid to branch out just a bit and leverage what you are already doing to give yourself some financial piece of mind.

Previous – So You Want To Trade For A Living: How Much Money Do You Really Need?

So You Want To Trade For A Living: How Much Money Do You Really Need


How much money do you really need to begin trading for a living?

I’m not good at onomatopoeia but if I were, this would be the perfect place for me to insert the written version of a drum roll.  As the buzz grows louder and louder and the intensity, now palpable in your chest, reaches its near orgasmic conclusion, with a Wagnerian thunder-clap I would then reveal the long-awaited answer……

I have no friggin’ idea!

If you came to this post thinking that I was going to give you some “one size fits all” answer to that question you really need to leave.  I’m serious…leave!  Get the hell off my pages and delete this blog from your bookmarks, because your need for a quick and easy answer already reveals a flaw in your character that I guarantee will cause you to blow up your entire account within a matter of months, and I’m not going to take any responsibility for ruining your life.

[Note to self…..refrain from writing blog posts before you have had your morning caffeine.]

Determining the amount of money you need to start down the path of trading for a living is a complex process and one for which there are no shortcuts.  The biggest and most lethal mistake that traders make when they decide to go “full-time” is being undercapitalized.  It will be your “patient zero” of mistakes, from which all others will be spawned.

I wish I could make it easy and just give you a formula like….

 [ (Age of paternal grandmother at time of death) x (your current shoe size) ]  / the square root of the CPI = Amount need to trade full-time

….but that’s not how this works.  Fear not though, for just as there is a way to determine your correct position sizing by reverse engineering the process, we can do the same with this conundrum.

Quality of Life

First, let’s begin at the end, so ask yourself, “how much money do I need to make in order to support my desired quality of life?”  You will see that I have phrased this question in a very specific way.  It asks you to think.  To think about what your “desired” quality of life is.  This is key because depending on the stage and circumstances of your life, you may have some flexibility in this area that will help you to reach an acceptable answer to this question.

Are you early in your earning years, unmarried, with no children, mortgage, or student loans to service? Are you supporting a family and a debt structure, close enough to see the retirement train, still off in the distance, but definitely coming down the tracks?  Or are you somewhere in between those two examples? Wherever you are, you need to decide what you need to make in order to have piece of mind, financial stability, and ideally the ability to grow your net worth.

Once you have that number in place, then you have to determine what amount of capital is needed in order to generate that number based upon a reasonable return on a percentage basis.  If you have prepared for your move into full-time trading as I outlined in my previous post in this series, then you should already have a rough idea of what that percentage return will be on average.

The Pure Play

Let’s start with the most conservative and straightforward approach that assumes no leverage, meaning you open a margin account in order to have buying power returned immediately when a position is sold, but you don’t use that leverage.

So for example, if you have been averaging 20% return for the last five years, and you need to make $50,000 a year in order to support your desired quality of life, then the magic number for you is $250,000 of working capital.  But wait, there’s more.

Throw an extra 20% onto that number to give you some cushion….that makes it $300,000.  But there’s still more.

You need to have a minimum of one year’s expenses saved in order to start your new venture without the daily pressure of knowing that every one of your trades is being done  “to make the rent.”  Now you are up to $350,000.  This is fun isn’t it?

Sure, it’s a lot of money to some, but this scenario will give you the most piece of mind and ideally a longer runway in which to achieve consistent profitability.  This number will obviously change based upon what your actual average return has been and the amount of money you need for maintain your desired lifestyle.  Make 40% on a regular basis the number goes down, but if you need $100,000 to stay in pretzels and beer, then it goes up.

But What About Margin?

Many of you are saying to yourself, “Brian, what about the magical powers of margin?  Why do I need so much money when I can get 2x buying power for swings and 4x for day trading?”  Good question.  Let’s take a closer look at this bitch-goddess of trading.

There is no doubt that the proper use of margin can enable you to reduce the amount of capital you need to sustain your desired lifestyle, but….

In most cases you are about to go from the security and piece of mind of knowing that every two weeks you will be getting a paycheck to an environment where you may have a whole month where you don’t make any money.  Maybe even a whole quarter.  Even wackier than that, when was the last time you got your company paycheck and it said you actually owed them money?

The mental transition that goes along with starting to trade full-time can be perilous.  You think you know how you will handle it, but you really don’t until you get there.  Do you really want to start this, well let’s just be frank, risky venture, having to leverage up your account equity?  Margin can make you money fast, but if can lose you money even faster if it is not used correctly as part of a risk based methodology.

The ideal situation would be to go into full-time trading fully capitalized, and then once you have completely transitioned and become comfortable with your new career, only then begin increasing your use of leverage while freeing up and segregating your excess capital from your trading activities.

The Wing and a Prayer

But let’s just assume, in theory of course, that you think you are the next coming of Marty “Buzz” Schwartz, and are going to crush it right out of the gate.  You want to know the bare minimum that you would need to proceed, right?

There are traders that I personally know who support their desired lifestyle with only $5,000 in trading capital.  Yes, you read that right.  Five thousand measly dollars, but that is because they trade with a prop shop that gives them 10:1 leverage on their money.

And they day trade only, with the goal of chopping out between $800 and $1200 from the market on a daily basis.  With the markets open an average of 250 day per year they are shooting for $200,000-$300,000 annually.

But these are highly focused traders with a style they have perfected and are comfortable with.  They are like machines who don’t chase red herrings or the latest stock being profiled on CNBC.   Is that how you are currently trading?

If so, then by all means feel free to jump in short-stacked.  I would still highly recommend that you have a least one full year’s worth of money set aside, separate from your trading capital, and that you find a reputable shop who will give you the needed leverage.  Best of luck to you.

The Average Joe

In all honesty, this is the category that most are going to fall into; not having the ability or desire to do the full “Pure Play” but having at least enough common sense not to try to attempt the “Wing and a Prayer” option.  You are going to come in with a decent chunk of change, but you will probably have to use overnight or day trading margin on a semi-regular basis.  If that is you, then as much as I hate to do this to you, I am going to have to answer this blog post’s title question by revisiting previous questions.

Questions you need to ask yourself and honestly answer.

  • How much do I need/wish to make per year to live my desired quality of life?
  • How much reserves, separate from my trading funds, and do I need for piece of mind?
  • Am I comfortable/disciplined enough to use margin right out of the gate?
  • What trading style am  I most comfortable/successful with and what capital requirements does it necessitate?

And most importantly…..

  • What amount of money do I feel I need to start with to HONESTLY GIVE ME A FIGHTING CHANCE AT SUCCESS?

You will notice that I have overused the term “honestly” here in this section because everything thing else I am talking about doesn’t matter if you are not honest with yourself in determining not only you lifestyle and financial needs, but your trading ability and mental toughness.

Don’t get me wrong, I’m not saying that you must have no doubts, and believe 110% in your conviction that “everything will work out.”  Nothing in life is a sure thing, and I don’t want the normal question marks that are a part of every major life decision, from changing careers, to getting married, to having kids, to deter you, I just want to make sure you take this decision with your eyes wide open.

Additional Sources Of Revenue

But Uncle Brian is not going to leave you in a lurch here, without some (hopefully) new or different insight into how you can financially stack the odds in your favor when trying to become a full-time trader. After all, that is what you come her for I hope, not just an endless regurgitation of worn and weary platitudes, but real, practical, and relatable information on the markets, trading, and life!

Previous – So You Want To Trade For A Living: Making The Transition

Next – So You Want To Trade For A Living: Additional Sources Of Revenue

Three Keys To Your Survival

I just spent two hours searching three different Target stores in order to find an Angry Birds lunch pail for my four-year son.  He didn’t know what I was doing, nor did he ask for it.

Meanwhile, my wife is a mess, crying in the front room.  My seven-year old, never one to miss a chance to be dramatic, says it feels like her brother is “going away to college.”  And my son, well he has just been going about his day, playing Super Mario Brothers on his DS, running around in the back yard, and generally being a little boy, oblivious to the fact that tomorrow will be his first day of school.

It will be an interesting and contrasting day as it is also my grandmother’s 86th birthday.  With her longevity in mind, I look at my son’s face and I try to trace the line that goes from where he is now to where he will be in eighty-one years.  I want it to be clear, but it’s not.

I know he starts out with advantages that my four-year old grandmother could never have imagined. Born just two years before the original Black Monday, the one which ushered in the Great Depression and took twenty-five years to recover from, she grew up in a time when the hip kids stood in line for soup, not Iphones.

Six years after her birth a failed Austrian artist and architect who was laughed at by the elite of Germany’s Weimar Republic took power and began a process that a little over a decade later would end with 60 million dead, 2.5% of the world’s population at the time.

After the war she married, had children, and proceeded to build a life in the shadow of the Cold War and the perpetual threat of nuclear annihilation.

Yet here she is.  She survived and I dare say prospered.  She never gave up.  She never gave in.  She never “cracked.”

My son on the other hand is living in one of the greatest times in history.  A time when technology has changed our lives and connected us in a way that only the most outrageous of science fiction writers from the past could have imagined.  A time in which recent studies suggest that one-third of all babies born today will live to the age of one-hundred.

The time we are living in right now is so amazing that for the first time in recorded history the chances are that the next generation will NOT have it better than this current generation does.  Some have suggested that this is a terrible omen; something to be very worried about……but I think that it’s fucking awesome.

I mean think about it.  During the Middle Ages for example, as long as your children avoided the plague and made it to forty they were crushing you in terms of standard of living.  The bar was pretty goddamn low then, and though is has been raised exponentially since, you can’t expect it to continue that way infinitely Poindexter.  At some point the progress is harder to make because the bar is set so high.  It’s like trying to go faster than the speed of light, almost an impossibility.  Sure, some dork in a laboratory somewhere will argue how it is theoretically possible, but in the real world any improvement past warp one is inconsequential to the user experience.

Living in 2013 is so awesome that our kids may live ONLY as good as we do, which is why I have no worries about the macro issues for my son.  What I worry about are the micro issues.  The inner game. Because despite the great age that we live in, it seems as if more people these days are being driven to the breaking point than ever before.

More than just providing him with economic strength I want to provide him with mental strength, to prepare him to get through the “dark times” that we all experience.  To steel him against everything that life will throw at him, and get him through to the other side.  And yet I want to do it in a way in which he doesn’t lose his humanity in the process.  I don’t ever want him to “crack.”

The first person I ever knew who “cracked” was the father of one of my schoolmates, Hiromi Ogawa. One Friday night Hiromi’s father took a length of rope, walked down the street to the local middle school, and hung himself from a tree in back of the property.  Since it was the weekend, his body wasn’t found until early Monday morning when the janitor reported to work.

When news reached the playground later that day, my friends and I began to joke with each other….

“Hey, has anyone seen Hiromi’s dad?”

“Yeah, I saw him…..he was over at the school…..just hanging around.”

I forgot about that joke for almost thirty years, until I had my first child.  I have thought about it many times in the seven years since.  Even though I knew the joke was wrong at the time, I also instinctively knew that it was more than a joke.  It was in the way we told it too loud.  Repeated it too often.  And laughed at it too hard.  Even factoring in the braggadocio of young, insensitive, pre-adolescent boys, we told it with the flippancy and disregard of someone who was going out of their way not to care.

But we had to “not care,” because to act otherwise meant admitting that it Mr. Ogawa’s actions frightened us.  That we did not understand them.  That it in some dark recess of our minds it was POSSIBLE for that to happen to us….or someone we loved. To crack!

Telling that joke was our form of “whistling past the graveyard.”

I’ve never felt that I wanted to crack, but I know those who have.  I don’t know what, if anything, I could have done to help them had I been more prescient, but if it was possible to turn back the clock and somehow imbue them with certain traits to inoculate themselves against breaking, the top three I would choose are the same I hope to impart to my son.

It starts with humor.  You’ve got to have it.  Sarcastic, self-deprecating, dry, highbrow, lowbrow, blue, dark, hyperbolic, sophomoric, caustic, slapstick, deadpan humor.  It’s probably the one character trait that I don’t how you survive without.  Socrates said that an unexamined life is not worth living; but I assert that neither is an unlaughed at life.

You’ve also got to have a purpose.  Macro or micro, world-changing or sock changing, purpose has to be a part of your everyday life.  It’s what drives you forward and gives your life meaning.  It can come from raising your children or raising people’s consciousness, but it has to come from numerous and varied things.  The reason so many people die not too long after retirement is because they assign all the purpose in their life to their job, and once that’s gone, so is the meaning, as well as the will to go on.

And lastly, you have to practice gratitude.  Waking up each morning and taking a few minutes to think about what your are grateful for is a powerful way to stay grounded and happy.  Some days it is harder than others to find something to be grateful for, but if you look hard enough you can.  Kids, health, love, friends, a job, or a roof over your head are all obvious places to start, but gratitude does not have to be grandiose.  Many a times I have been grateful for things as simple as craft beer, good pizza, and the drum break in Tom Sawyer.

Ultimately it is nearly impossible for a person who is grateful towards life to massacre a schoolroom full of children or drop a pressure cooker bomb into the crowd at the Boston Marathon.

On top of that I would tell my son that you can never give up.  Never!  No matter what the circumstances, the challenge, or the dark clouds that lay ahead.  You can never let life break you.  You can’t let it make you R. Budd Dwyer.

Robert Budd Dwyer was the 30th Treasurer of the State of Pennsylvania, who after twenty years as a public servant was accused and ultimately convicted of having accepted bribes.

During the whole investigation and trial Dwyer professed his innocence vigorously, totally denying any wrongdoing, and in the process turning down a plea deal from Federal prosecutors that would have let him off with minimal jail time.  Even after his conviction, while awaiting sentencing, he continued to serve as Treasurer, and even wrote to President Reagan seeking a presidential pardon.  As his sentencing date approached, running out of options, and facing a possible 55-year sentence, Dwyer called a press conference, which was televised live, and began by saying…

“I thank the Good Lord for giving me 47 years of exciting challenges, stimulating experiences, many happy occasions, and, most of all, the finest wife and children a man could ever desire. Now my life has changed, for no apparent reason.”

He continued on with a brief but eloquent speech detailing the miscarriage of justice that had been served upon him, and imploring those who believed in him to fight on to clear his name.  He then called to three of his staffers and gave each one an envelope.  Then he picked up a manila envelope and pulled from it a Smith & Wesson .357 Magnum.

As the real purpose of this press conference became evident to those in the room, friends and co-workers began to plead with him to put the gun down.  Dwyer, a gentleman to the end, spoke directly to those gathered saying….

“Please, please leave the room if this will…if this will affect you.”

Then motioning to those who tried to approach warned….

“Don’t, don’t, don’t, this will hurt someone.”

And with that he placed the barrel of the gun in his mouth and blew the fucking back of his head out against the wall.

Twenty years later a documentary about his life entitled Honest Man: The Life of R. Budd Dwyer premiered at the Carmel Art & Film Festival.  In that documentary, William T. Smith, the man whose testimony convicted Dwyer revealed that he gave false testimony under oath in exchange for a more lenient sentence.

I don’t know why Mr. Ogawa did what he did.  Could he have soldiered through and been among us today.  Who knows?

I know why Budd Dwyer did what he did, and that if he had been able to hang in there he might have ended up being a free and vindicated man.

And I know that three women who spent over a decade in a hell I can’t imagine, with no reason whatsoever to go on, refused to crack, and came out the other side just barely two weeks ago.

Anyway, my son starts school tomorrow.

Make sure to check out my new book  Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).

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So You Want To Trade For A Living: Making The Transition


There he is.  That piece of human garbage in a suit.  The sound of his voice causes the hair to stand up on the back of your neck and the smell of his closeout special aftershave makes you want to vomit, even on the mornings when you didn’t spend the previous night drowning your sorrows at a local watering hole.

And now he is coming your way.

As he approaches your desk, ready to ask about some redundant sales report or wishing to schedule a time to “discuss” your latest performance review, you decide that you can’t take it anymore, and that’s it… snap! Standing up and yelling at him for all to hear, you inform your soon to be ex-boss that you have had it with his pedantic rules and procedures, that he and the company as a whole have never valued you as you deserved and that you are through–consider this your resignation.

And with that you grab your personalized coffee mug and mouse pad and walk out the door, free at last, and ready begin your new career trading for a living.

Despite the poetic justice and dramatics of the above scene, that is exactly the wrong way to make the transition.  The decision to trade full-time and the transition from your current job or profession has to be planned out well in advance in order to give you the best chance at succeeding in your new endeavor.  In fact that preparation should begin not just months, but years ahead of time.

Ready, Set, Uh…….

Hopefully, it goes without saying that you should already have been trading, and trading successfully, for some time before you quit your job.  How long? Five years minimum. Wha….wha…..WHAT..???  Yes, I know that I just popped a lot of eager beaver bubbles out there, but there is a logic to that time frame.

Think of starting to trade full-time like starting a new relationship.  Say you meet what you think is the love of your life and after only two weeks of dating you head out to Vegas and get hitched.  Chances are you’re going to find out over time that you have incompatibilities with your partner, at least one of which will probably be deal a breaker, causing your marriage to end, and end badly.

But what if you were to give the relationship more time before the nuptials?  Time to experience the ups and downs that new couples inevitably have and to see if you could adapt to them, survive them, and ultimately create a relationship that will flourish no matter what is thrown at it?  It’s the same concept with trading for a living. Five years gives you enough time to experience different types of markets, to see if you can adapt and evolve your trading as they change, and stay profitable in the process.

One of the mistakes that thousands of people made in the late 90’s was to assume that because they had been trading profitably for a couple of years that they were ready to make the move to full-time trading. What they didn’t realize was that they had only been profitable because the market was in the middle of a massive bull move.  When that move ended in 2000 those new full-time traders did not know what to do because they had never seen this “new” type of trading environment.   Eventually, the vast majority of them lost all their money and had to go back to their day jobs

Location, Location, Location

Another thing you want to think about ahead of time is where you are going to trade; at home or at an office.  Now I know this seems like a no-brainer to most, the assumption being that because of advances in technology trading out of your house is the answer; but you want to think long and hard about this. Sure, a home office saves money and affords you the added bonus of being able to roll out of bed and start your trading day unshaven and in pajamas, but there can be some major drawbacks to this arrangement.

Trading on your own means you are your own boss; nobody tells you when to start working or when to stop, and if you are someone who needs structure, this can be a problem.  I remember my first month of college, when I realized that unlike in high school, nobody cared if I showed up or not; it was completely up to me to create my own structure in order to make sure I got to class on time, studied the appropriate number of hours, and showed up for exams.  And for me it wasn’t long until I was cutting class, missing tests, and ultimately dropping out.

Having an office to go to every morning forces you to get up, take a shower, put some clothes on, and mentally get in the mood of “going to work,” which is what you may need in order to stay sharp and focused in your trading.  Going to an office also eliminates the issue of being interrupted by kids, your spouse, solicitors, the phone, the gardeners who are cutting the neighbor’s tree down, and a host of other distractions.

And trust me, if you are married and/or have kids, don’t fool yourself into thinking that you can just go into your home office, shut the door, and act as if you are not home. They know you are in there, and you’ll be interrupted “just for a second,” on numerous occasions during the trading day, one of which will surely coincide with the next flash-crash.

If you live alone, distractions don’t bother you, and you don’t have a problem saying “no,” then definitely give trading from home a try, but if not, you can usually lease an individual private office for $300-$600 per month, which might be the best investment you ever make towards you trading career.

Track You Trading History

Another important thing that you must do to prepare for your move into full-time trading is to begin journaling, logging, and auditing your trades.  Every day after the market is closed you should be reviewing each and every one of your trades and creating a spreadsheet that includes entry/exit prices, profit/loss, both in dollars and percent, percentage of overall capital used, and notes relating to each specific trade. Then based on those numbers you should generate an overview report which can easily display your percent return and drawdown for any given period of time.

This process has a number of benefits and it is crucial for two reason that you have at least a years worth of your trading history documented (though the more history you have the better).  First off it will tell you if there is consistency and method to your trading, something you may think you already have, but may be shocked to learn you don’t when the raw numbers are reviewed.  Second, it will help you when it comes to deciding how much money you will need to start, something I will cover in more depth in the next post in this series.

Your First 30 Days

Let’s assume that you have done all your preparation, decided on your location, and (gracefully) exited from your job on a Friday afternoon.  You are now free to pursue your dreams and begin trading full-time, so what is the first thing you should do when the opening bell rings on Monday morning?  The answer is nothing, because you are not going to be at your trading desk.  You are going to be far away from the markets, ideally doing something you have always wanted to do but never had the time to.

Look, chances are that the job you just left barely three days before was one that required you to work a full eight hours.  In fact in today’s fast paced world you might have worked ten, twelve, or fourteen hours per day.  Maybe even six days a week. And all those hours were probably filled to the brim with phone calls, emails, presentations, meetings, seminars, webinars, and any number of other things that make up the corporate world today.  You have been conditioned for years, perhaps decades to always be doing something.  Go, go, go….don’t let one hour, one minute go to waste.

Once that bell rings your instinct will be to “do something.”  You won’t feel right if you aren’t “doing something” at all times.  But that is not what trading is about.  Most successful traders spend the majority of their time “sitting on their hands” not trading.

You are going to need some time to decompress and learn the art of “not doing something” and that is going to take some time.  The best thing to do once you’ve quit your job is to take the next two weeks off. Do anything you want, just don’t watch the markets, and try to relax.

When you return then spend the next two weeks just watching the markets.  Don’t trade, just watch. Learn how it actually feels to “not trade” while the market is open. Use that time to figure out what you will be doing in between the times you are trading, such as reviewing charts, creating scans, or communicating with other traders.

Previous – So You Want To Trade For A Living: An Introduction

Up Next – So You Want To Trade For A Living: How Much Money Do You Really Need?

So You Want To Trade For A Living: An Introduction


“How much money can I reasonably expect to make from trading full-time?”

“Do you know anyone who is making a living trading full-time?”

“Who do you know that I can talk to that can prove that they are making money trading full-time?”

These were the questions I was being peppered with on two separate, successive phone calls recently. One was from a gentleman whose day job was in financial services, but had been trading part-time for thirteen years.  He was tired of the “rat race” as he put it and was working up the nerve to follow his dream and trade for a living full-time.

The other was from a young man who called me asking a question regarding real estate, having thought I was an active agent (I have a license but have never used it), and once realizing his mistake, inquired as to what in fact I did do.  I was tempted to give my pat answer, “I work in an ice cream shop,” but his voice sounded very sincere and enthusiastic and I decided that I would divulge the truth.

The first question I asked myself after I put the phone down was, “why don’t more (hot) women call me about trading?” but I digress…

The second thing that came to mind was how peculiar it was that two different people, at opposite ends of age, career, and experience were both asking essentially the same questions.  There was a difference in the tone of the questions; the first caller inquiring with an uneasy insistence, a slight quality of desperation in his voice, and the second, greener of the two, with a lively and somewhat naive curiosity.  But the questions were the same.

Out of the all the questions I get asked in bars or airports,  meet-ups or seminars, on social media or at social gatherings, the most frequent one is some derivation of the ones these two callers asked, in essence, “Is it possible for me to trade for a living?”  I have spent a lot of time thinking about the answers to this question, and not in an abstract sense.  I am very familiar with the pros and cons and potential pitfalls of this endeavor.  After selling my company in early 2005 I spent nearly four years doing just that, trading for a living, until I stopped in order to co-found Ditto Trade.

Trading for a living is the ultimate fantasy for anybody who has ever invested their own money in the market; it’s the musician’s version of being a rock star, the scribe’s version of being a best seller, bringing with it the potential financial freedoms of both, the difference with trading is that your success is not determined by the fickle tastes of your fan base; it is all within your power.

Perhaps the allure is best summed up by something Eric Bolling wrote a few years back in a piece entitled The Benefits of Trading….

I am lucky to have spent a career trading so that I can find the busy market and trade it. I can trade from my office, my beach house and even my car. I don’t have to be in Manhattan to work.

I can trade from Miami, Spain or wherever the phone and Internet work. It is a gift given to me and I appreciate it every day. I respect it and that keeps me a viable trader.

That is the reason it is so important to be able to trade. Look, I am no smarter than most of you readers. I just made the decision to learn how to trade and just do it.

Sure there are bumps in the road and the trading landscape changes daily. But with diligent homework, a desire to make it work and a definitive fear of losing, almost anyone can make a career out of trading — anyone with the discipline to cut a losing trade that is.

My goal in this series is to inform you of what I know and what I lived, what I did right and what I did terribly wrong, so that you can, with complete lucidity and of your own volition, decide if taking this step is right for you.  I am approaching it from the point of view of a retail trader, which is what I, and what most of the people who read this blog are. That doesn’t mean that you can’t eventually end up running the Goldman Sachs trading floor or your own eponymous hedge fund, but I want to speak in terms of people who want to start with making a living first.

What I will not be doing in this series is telling how to become a successful trader; there is enough information, free or otherwise, out there that deals with that topic (including about 400+ posts on this very blog), and frankly, at the end of the day that is a job that ultimately you can only do yourself.

I would love to get your feedback and/or questions on this series so feel free to leave them in the comments section below.

Up Next – So You Want To Trade For A Living: Making The Transition

The Most Effective Way To Review Charts

This post originally appeared on

Most traders use charts as part of their methodology to determine when to enter or exit trades.

We think of charts as being very objective, built on price and volume, technical data that is not open to interpretation. But no matter how much we try to convince ourselves of that, we have to understand and acknowledge that charts are ultimately a visual media, and as with everything that we use our eyes to analyze, there are ways that our perceptions can be altered.

Take for example this 5-minute chart of Cree Inc. ($CREE) from earlier this week.


In a “post-opportunity” analysis it looks like a very clear set up, one that we surely would have taken if seen in real-time.


$CREE gaps ups, pulls back slightly, and then rockets up to a resistance area. Price pulls back in and forms a nice green hammer right off the 20-period exponential moving average (ema) and above the opening range high (based on the first 15 minutes that the market is open). That hammer provides a good risk/reward entry with a reasonable target of the morning pivot high.


But let’s look at that same chart at the moment that the green hammer formed and with a little bit more back data.


Now the trade doesn’t seem so obvious. The pullback seems steeper and there is no clear reason to assume it would make it to the morning pivot high.


Let’s look at another example, also from earlier this week, in Coach, Inc. ($COH)



$COH gaps up and gets rejected at a daily resistance level. Price pulls back, but then reverses and makes a strong run back to that same resistance level, pausing to print a tight inside bar, before breaking out and running to new highs.

Once again, after the opportunity that tight inside bar looks like a no-brainer, creating an optimal risk/reward entry that of course all of us would have taken if caught in real-time.


Now let’s look at the same chart but at the time of possible entry.


That chart doesn’t look so obvious. Price is extended from the 9-ema and 20-ema and it appears as if the daily resistance has stopped its progress for a second time, creating a potential intraday double top.


These examples show how important it is to review charts not only from an end- of-day viewpoint, but from one that is contemporaneous to the time of the potential trade. It also illustrates how important it is to have objective criteria to get you in and out of positions so that you don’t get fooled by the differing perspectives charts can show depending on the time and amount of data being used.

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Drugs And Trading

I’ve never done an illegal drug in my life.

No pot, tea, weed, Mary Jane…

No uppers, downers, bennies, dexies, black beauties, yellow jackets……

No crack, boom, ice, POW…..

I haven’t even done coke…….

Don’t get me wrong, I understand why people do drugs.  Usually they want to alter their reality, even if it is just for a little while.  To forget about their job, the bills, bad break-ups, missed opportunities, children who never call them, parents who never loved them, shame, disappointment, war, or the cancer that is slowly eating their body up from the inside out.

My abstention in this area is not due to a pious desire to take some sort of moral high ground; looking down and judging those of “lesser character.”   In fact I myself have been known to take proactive steps to alter my reality from time to time, the only difference being that a magical mixture of hops, barley, and artisanal spring water constitute the vice of my choice.  No, I have failed to “partake” in these substances that I feel should be legalized and regulated for two simple reasons; one based on fear and one based on pragmatism.

In my early 20’s it seemed like everyone I knew had snorted a line at some point, usually off a stripper’s ass in Vegas.  Now believe me, I have nothing against strippers, but my fear was that I would snort my first ever line, ass based or not, and immediately do a “Len Bias.”

My second fear was that I would like it.  Like it a whole bunch.  I don’t have an addictive personality, but at times I can get hyper-focused on certain things.  Sometimes those things are good and sometimes those things are bad; or let’s just say, not productive.  The idea that my life would begin to revolve around figuring out how and where to get my next “bump” seemed like a real and terrifying possibility to me.  It’s the same reason I never got into computer gaming or knitting.  Of course that doesn’t mean I don’t have experience with drugs.

On three separate occasions I have I have journeyed into that Valhalla of drugs known as Amsterdam.  One of those times didn’t count as I was with my wife who doesn’t even drink (lucky me, huh?).  But on two other occasions I was there with friends who liked to dip their toes into some of the substances that the town is famous for.

On the first occasion I traveled there with my ganga-loving friend who was on a quest to find the best pot the town could offer.  He wasn’t intimidated in the least, having dual citizenship in two of the best growing areas of the world; California and Hawaii.  He smoked skunk like other people smoked cigarettes and on his twice yearly trips to the islands would always return with exotic sounding strains like Maui Wowie, Kona Gold, or Pakalolo, any of which would place him into a “chill session,” as he liked to refer to it, when smoked.

As we scurried down the back streets and alleyways searching for what was rumored to be the best “brown cafe” in the city, a tattered copy of “Lonely Planet Amsterdam” as our only guide, I could hear the excitement building in his voice as he kept asking at each successive storefront, “is it this one?  Is it this one?”  When we finally found our desired location, we entered and waded through the crowd of locals, navigating the smoky haze until we reached the “bar” at the back of the room.  Even a novice like me knew that the menu, the scale, and the microscope on the counter meant this place was the real deal.

Two library style oak filing cabinets stood behind the counter; each drawer filled with different types of pot, all nicely categorized and bundled up in plastic bags.  It was clear from the glazed look on my buddy’s face that he judged himself to have found the mother-lode of bud-dom, a virtual cornucopia of weed.  If there was a Disneyland for stoners, this was it.

“And you are sure this is all legal?” he asked.

“Absolutely,” I replied, and it was “game on.”

Two hours later I found him curled up in the corner of a porn shop in the middle of the red light district.

“They’re after me man, THEY…..ARE…. AFTER…..ME!”

“Who’s after you?” I asked.

“The cops!  The Dutch cops!  Two of them followed me down the street.  They had machine guns and they were coming up right behind me.  They almost got me but I ducked in here and lost them.”

By this time the matronly looking middle-aged lady who ran the shop had come over to see what all the commotion was about.  As she spied my glassy-eyed friend huddled between the bestiality videos and the inflatable vaginas, furtively trying to suck the last bits of life out of a now fully extinguished joint, she gave me a look that I’m pretty sure translated to “great, another Yank who can’t handle his drugs!”

My friend who was normally cool, and chill, and oh so laid back when he smoked was now a sweaty paranoid mess.  His reality had definitely been “altered.”

My second visit to the land of windmills and wooden shoes was with another friend, this one less into the “organic” types of recreational products, but more so the “chemical” based ones.  Which made it even more surprising to me when he decided that he had to try mushrooms.

After leaving the “Shroom Shop” (yes, that was the name of the place), with a small baggy, the contents of which had been hand selected by the shop’s owner and guaranteed to “make him see colors,” we sat down at an outdoor cafe.  I ordered a rather high-capacity glass of beer but my buddy opted for a screwdriver, explaining to me using what I can best describe as “druggie science” how the acids in the orange juice would break down the mushrooms more completely, giving him a longer and more intense trip.  Yeah……Woodstock man!

In Bill Cosby’s famous comedy special “Himself” he talks about asking a cocaine user what it is about the drug that is so great.  The response is that it “intensifies your personality.”  To which Cosby asks, “but what if you are an asshole?”  My friend was not an asshole, but not unlike me, he has that gear in reserve if he ever needs to pull it out.  The shrooms, along with the effects of the orange juice I was led to believe, now began intensifying that part of his personality, much to the chagrin of a way too sober moi.

Everything suddenly became super important and deep to him.  The street signs, the pebbles in the road, the sound of a passing car’s motor, or the way I was breathing weren’t just normal everyday objects, sounds, or actions; no, instead they were complex and multi-leveled, necessitating a penetrating and probing intellect, of which he apparently felt he currently possessed, in order to decipher their hidden and mystical meaning.

This went on for the rest of the day and well into the night.  At one point we decided to go to one of those avant-garde euro discos that Amsterdam is famous for, and upon entering were confronted with artistic renditions of headless and skinless cow torsos hanging from the ceiling high above the dance floor.  My still tripping and now intensely annoying friend stared straight up at them and then stunned, turned his beady eyes to mine and said in a shaky voice….

“Dude, I am freaking out.  I’m seeing bloody cow bodies coming out of the ceiling.”

In my forty-five years on this planet it is a rare occasion where I have missed out on an opportunity to gently shiv or turn the screws on someone who though I love them, deserved at that moment to be fucked with.  This, to my eternal regret, was one of those moments.  The reactionary nice-guy-buddy-pal inside of me without thinking responded….

“Hey man relax.  There ARE bloody cow bodies coming out of the ceiling!”

Perhaps even after his extended run of “assholishness” I just felt that his reality had already been altered enough for one day.

In the world of trading we are constantly bombarded with things that have the potential to alter our reality.  Breaking news, earnings reports, company calls, analysts comments, macro politics, fundamentals, P/E ratios and any number of financial “drugs” are there for the taking.  Each one in their own subtle way has the ability to change our perception, manage our expectations, lower our discipline, and send us down the path to financial ruin.

Because the only reality that there is in the markets is price.  Price doesn’t exist in different strains, it has no “colors” associated with it, and drinking orange juice won’t change it.  Price is that objective antithesis to all the Carlos Castaneda cum Don Juan type subjectivity that surrounds you each day.  Price tells you to sell a stock even though the company’s CEO is on CNBC bragging about forward earnings and how his company is “poised for tremendous growth.”

Life requires us to temporarily alter our reality at times.   The act in itself is a necessity, a survival tactic if you will.  Sometimes all it takes is a good book, a great meal, or the embrace of a child to get to that better place, that altered state.  Or sometimes it’s a darker, more intense course of action that you need to take as Sam Kinison famously illustrated when he said to his annoying, soon to be ex-girlfriend, “I come home at night and have to drink a six-pack of Heineken to keep from cutting your fucking head off and sticking it in the camera bag.”

But either way, the market allows for no such luxury.  All mental bongs,  lines, and shrooms have to be done away with.   There is no debate, no philosophical differences, nor any moral issues to weigh.  Price is the only reality and you must obey it dogmatically any time you have money at risk.

Make sure to check out my free eBook Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).


Why not subscribe to for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

In Case You Want To Feel Insignificant

Okay, I admit it….I like space photography.  Something about it is so calm and relaxing and gives your Earthly problems a bit of perspective.

Check out this fantastic new photograph of one of space’s most iconic formations, the Horsehead Nebula, taken by the Hubble Space Telescope.

Hubble Telescope Snaps Stunning Nebula Photo for 23rd Birthday (

Make sure to check out my free eBook Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).


Why not subscribe to for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

This Stock Could Go Up 1200%

This post originally appeared on

Everybody is looking to find a stock that they can get a big return on. Well, what if I told you that I know of one that could potentially yield you a “twelve-bagger?”

That’s right–this stock could go up as much as 1200% from its current price.
This company seems to have all the right stuff, earning twice as much profit per dollar as the U.S. average for other companies in its field. Its product is considered the highest quality and is more desirable than its competitors.


This company is massively undervalued, and it not just me that thinks this. In fact I am basing this on the comments of industry experts quoted in Bloomberg no less.

Timothy Parker, who oversees $8.5 billion in stock at T. Rowe Price Group says in the article that the company’s product is “the bees knees” and Bloomberg itself says that based on similar median earning on other buyout deals in the same space, this company’s stock could fetch as much as $192.00 a share.

Here’s more from the Bloomberg article:

“It’s really an obvious takeout candidate, especially after the CEO resigned,” said Eric Green, a Philadelphia-based fund manager at Penn Capital Management, which oversees $6.5 billion….

While J. Christopher Haberlin, an analyst at Davenport, estimates the company may fetch between $185 and $215 a share, David Beard, an analyst at Iberia Capital Partners LLC, pegs a takeover at about $160 a share.

(it) was also one of more than 40 companies that Bloomberg identified in March that met the acquisition criteria Warren Buffett listed in his annual letter to shareholders. Buffett typically prefers “simple” businesses with pretax profit exceeding $75 million, “consistent” earning power, and “good” returns on equity while employing little or no debt, according to his report to Berkshire Hathaway Inc. (BRK/A) shareholders.

“Now is a good time to sell the company because of the near-record prices for met coal, strong global demand and constricted global supply,” said Davenport’s Haberlin, who’s based in Richmond, Virginia. “The assets have more value now than ever.”

The company should sell because it “now lacks the strong leadership needed,” which is “weighing on the share price,” Audley Capital, which owns 900,000 shares, or about 1.5 percent of the company, said in a July 17 letter to the board.

Walter Energy could fetch $240 a share in a takeover, based on the 2012 earnings multiple that Peabody Energy Corp. ($BTU) and ArcelorMittal are offering for Macarthur Coal Ltd. ($MCC), the letter said. That would be double Walter Energy’s closing price of $119.64 yesterday.

Wow…..So many experts with so much solid fundamental information on Walter Engergy ($WLT). I mean Bloomberg wouldn’t print this if these guys didn’t know what they were talking about, right?


Here is a current chart of $WLT.


This chart starts on July 1, 2011, the day the Bloomberg article from which the above info was taken was published, when $WLT was trading at $121.00 per share. Today it is $19.00 per share.


I have pounded to the table for years now on how you cannot rely on “experts” and you cannot use fundamental data or “stories” to trade and invest in the markets. Fundamentals are not objective and “experts” usually have an agenda. This example in $WLT, and there are hundreds of others like it, shows you why, in order to be a successful in the markets, you need to do your own work, focus on the technicals, and just tune all this other junk out.

How To Correctly Size Your Positions For Daytrading

This coming Thursday the 18th at 10:00am PDT I am going to host what I hope is the first of many “flash webinars.”  What is a flash-webinar….well I don’t really know since I just made the name up, but the concept is to have a concise, focused, mini-webinar on a single trading subject.  This week it is going to be “How To Correctly Size Your Positions For Daytrading.”

The webinar is free and I’m not going to try to sell you anything, but it is limited to the first one-hundred people who register.  You can do that by clicking the link below.

Register to attend the flash-seminar “How To Correctly Size Your Positions For Daytrading.”

The webinar should run 20-30 minutes and there will be a Q&A at the end.  I look forward to seeing you there.

Make sure to check out my free eBook Trading:The Best Of The Best-Top Trading Tips For Our Times  (just click the banner below).


Why not subscribe to for free  Via E-mail or Via RSS and follow me on StockTwits and Twitter?

What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in). Check out “The Best Of bclund” to get started.

Click here to “Like” the bclund Facebook page.

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About Brian Lund

About Brian Lund

Great father. Good friend. Decent writer. Lacking husband. Solid drummer. Sometimes funny. Often A-hole. Terrible poker player. Too smart. Punk rock. Work in an ice cream shop.

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