Trading is not a game of exacts. Perfectionists need not apply. Markets are made up of many irration...
Becoming a Full-Time Trader
08/10/2012 4:29 pm EST
Formerly a doctor, trader Al Brooks discusses how he made the transition to trading full time and what pitfalls he thinks traders should watch out for in the beginning.
A lot of people think about quitting their jobs and becoming
traders. I'm talking today with someone who did just that, Al
Brooks. Now Al, you had a medical career as I understand it before you
went into trading. How did you decide to make that switch?
When I was at medical school at the University of Chicago, I had thoughts that maybe I should be downtown at the "Merc" or the Board of Trade. And throughout medical school I just kept wondering, you know, am I doing the right thing, and I decided I'm going to stick with medicine.
So I did that for about ten years, and then when I started having kids I decided to start to trade, and I actually started trading the month of the crash in 1987. Back then I was trading pretty aggressively, and I shorted thirteen S&P futures contracts—which each S&P futures contract is five e-minis—so it would be like shorting whatever that is, 65 e-mini contracts. That was the morning of the crash and I had to go to work-I had a full surgery schedule-and I closed out all of my contracts, drove to work, and heard that the stock market ended up down over 500 points. That day if I held my contracts, I would have made $400,000 on that day in my first month of trading. I probably would have screwed up the trading, because I was a beginner, but it made me think that yeah, I can make money as a trader.
You know, it's difficult to figure out how to transition. I think anyone starting trading is going to lose money for several years. You're looking for a career that pays a lot of money. Everyone trading wants to make a lot of money. You're competing against extremely smart people, and it is essentially a zero-sum game. So you're trying to take money from really smart people who are trying to take money from you, and when you start out they're going to win. You're going to lose money, but if you have the discipline, you're careful, you learn how to be objective, you try not to be greedy, you use stops, and you use profit targets—I believe it's something that you can do.
But I would start really small, be very humble, work very hard on discipline, and expect to lose for several years. And don't trade big. If you're starting to lose two or three trades in a row, have a set limit everyday where you're going to shut it down.
Should people transition into this in most cases, rather than outright quitting their jobs and believing they will have a successful trading career right away?
It depends. I think if a person has a big enough nest egg, they can quit their jobs and go right ahead. If they don't, I would transition. And in transitioning, either you can try to trade for an hour or two in the morning—and that's all you need. I have friends who only trade an hour a day, and they make a living doing it. But I would trade small and risk very little. I would trade high volume markets like the FAS or the FAZ, where you're not going to get slippage, but it trades the same as the major markets. It's a very good way to learn without much risk.
Great insights today. I'm sure a lot of people will appreciate this. Thank you so much, Al.
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